Volkswagen of America, Inc. v. Bronsberg & Hughes Pontiac, Inc.

REPLY BRIEF re MOTION to Dismiss for Lack of Jurisdiction Wyoming Valley's Reply in Support of Motion to Dismiss or Stay Pending Adjudication of State Action

M.D. Pa.April 27, 2017

1 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA VOLKSWAGEN OF AMERICA, INC., Plaintiff, v. BRONSBERG & HUGHES PONTIAC, INC. Defendant : : : : : : : : : : 1:17-cv-010 -JEJ WYOMING VALLEY’S REPLY IN SUPPORT OF MOTION TO DISMISS OR STAY PENDING ADJUDICATION OF STATE ACTION Federal district courts have wide discretion to refrain from exercising jurisdiction in diversity cases seeking declaratory relief with regard to state-law controversies that would be better resolved elsewhere. This case presents a paradigmatic example of why that discretion is necessary. In this reply, Wyoming Valley focuses on why this Court should dismiss or stay this action under the brand of federal abstention that provides the most compelling fit with the circumstances here – the Wilton/Brillhart doctrine. Despite what Volkswagen asserts in its response, the Third Circuit’s March 28, 2017 decision in Rarick v. Federated Service Insurance Company, 852 F.3d 223 (3d Cir. 2017), does not eliminate the Court’s wide discretion to abstain from this action. For the reasons set forth below, abstention is proper and this Court should dismiss Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 1 of 13 2 this action or, at the very least, enter a stay pending the Board’s final determination of Wyoming Valley’s protest. I. The Court should abstain under Wilton/Brillhart. As Wyoming Valley explained in its opening brief (at p. 11), in diversity cases like this one, “a district court’s decision to exercise jurisdiction under the Federal Declaratory Judgment Act is discretionary, not compulsory.” Ironshore Specialty Ins. Co. v. Haines & Kibblehouse, Inc., 3 F. Supp. 3d 303, 306-07 (M.D. Pa. 2014) (citing Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494 (1942)). The Wilton/Brillhart doctrine gives district courts broad discretion to abstain from declaratory judgment actions where another suit is pending in state court that presents the same issues. This case presents a classic circumstance for Wilton/Brillhart abstention. A. Abstention is still appropriate under Rarick. Contrary to what Volkswagen contends, the Third Circuit’s intervening decision in Rarick v. Federated Service Insurance Company, 852 F.3d 223, (3d Cir. 2017), does not change the result. Volkswagen relies on this intervening new authority to argue (at pp. 16-17) that abstention is inappropriate here because Volkswagen’s complaint is not confined to a request for declaratory judgment, but also includes requests for non-declaratory relief. Volkswagen is wrong. Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 2 of 13 3 To be sure, Wyoming Valley demonstrated in its opening brief that, under the ‘heart of the matter’ (or ‘heart of the complaint’) test, which prevailed in this Circuit prior to Rarick, Volkswagen’s requests for non-declaratory relief were no obstacle to dismissing or staying this case. Volkwagen argues that Rarick moots this argument and, without any meaningful analysis, asserts that, under the new test, Wyoming Valley’s motion should be denied. What Volkswagen fails to reckon with is that the ‘heart of the matter’ test and the “independent claim” yield the same result in this case. (In fact, as one commentator recently observed, in any given case the independent claim test and the heart of the matter test are “likely” to yield similar conclusions.1) Under the “independent claim” test, the court “determines whether claims seeking legal relief are independent of claims for declaratory relief.” Rarick, 852 F.3d at 228. In Rarick, the court quoted the Seventh Circuit (which itself was quoting the Ninth Circuit) in explaining that, “[n]on-declaratory claims are ‘independent’ of a declaratory claim when they alone are sufficient to invoke the court’s subject matter jurisdiction and can be adjudicated without the requested 1 “Realistically, a court following the heart of the complaint rule and a court following the independent claim rule will likely reach similar conclusions, because if a case is truly about declaratory relief, then the claim for nondeclaratory relief is less likely to be independent, whereas a case that is about nondeclaratory relief at its core will likely have independent claims for that coercive relief.” Wm. Grayson Lambert, Unmixing the Mess: Resolving the Circuit Split Over the Brillhart/Wilton Doctrine and Mixed Complaints, 64 U. Kan. L. Rev. 793, 825 (April 2016). Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 3 of 13 4 declaratory relief.” Id. (quoting R.R. St. & Co., Inc. v. Vulcan Materials Co., 569 F.3d 711, 716-17 (7th Cir. 2009) (citing United Nat’l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1113 (9th Cir. 2001)). Given that courts within other circuits -- including the Ninth -- have been applying the independent claim test for years, see id., their reasoning about what makes a claim “dependent” on declaratory relief is instructive here. As a practical matter, such cases show that where a plaintiff’s ability to succeed on a declaratory claim is a necessary predicate to succeeding on the non-declaratory claims, the non-declaratory claims are not independent and cannot stave off abstention. An example is Great American Assurance Co. v. Discovery Property & Casualty Insurance Co., 779 F. Supp.2d 1158 (D. Mont. 2011), a decision by a trial court within the Ninth Circuit. There, the court was faced with a declaratory judgment action filed by one insurance company against another about who had primary coverage for liability arising from an accident. See id. at 1160. A parallel state case existed at the time of filing. See id. at 1161. Relying on Brillhart, 316 U.S. 491, the court decided sua sponte that the exercise of federal jurisdiction was inappropriate even though each party also sought money damages against the other. After examining the claims, the court reasoned that damages were only available to the extent the party prevailed on its declaratory judgment claim. As a Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 4 of 13 5 result, the existence of those “dependent” claims did not deprive the Court of discretion to abstain: Although [both parties] seek an award of money damages, their claims are viable only if they prevail in their claims for declaratory relief on the issue of coverage. A court does not forfeit its discretionary power where a request for monetary relief is wholly dependent on a favorable ruling on the claim for declaratory judgment. Id. at 1163. Other courts applying the independent claim test under similar circumstances employ the same reasoning:  St. Paul Fire & Marine Ins. Co. v. Nonprofits United, 91 Fed. Appx. 537, 538 (9th Cir. Jan. 8., 2004) (affirming order staying action due to pending state court action) (“Because St. Paul’s claim for equitable relief, indemnity, and contribution is contingent on a future finding that St. Paul is liable to Nonprofits in the pending state court proceeding, the cause of action is not ripe and is not ‘independent in the sense that it could be litigated in federal court even if no declaratory claim had been filed.’”) (quoting R&D Latex Corp., 242 F.3d at 1113).  Standard Fire Ins. Co. v. Olsen, 2010 WL 1689444, at *4 (N.D. Calif. April 26, 2010) (staying action pending resolution of state court litigation) (“Standard’s requests for monetary relief and specific performance necessarily require a predicate finding as to the obligations of Standard and Olsen under the policy. The resolution of Standard’s requests for specific performance and monetary relief thus are inextricably intertwined with, and dependent upon a declaration of coverage.”) (citations and quotations omitted).  Keown v. Tudor Ins. Co., 621 F. Supp.2d 1025, 1036 (D. Hawaii 2008) (“In the instant action, there are no claims independent of Plaintiff’s request for declarations of his rights under the subject policy. As part of his request for declaratory relief, Plaintiff seeks a declaration that Defendant is required to indemnify and defend him in the underlying action and must pay for his attorneys’ fees and costs associated with the same. However, this request for monetary relief is not independent; that is, it would not exist if the request Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 5 of 13 6 for declaratory relief dropped from the case. Indeed, plaintiff will only be entitled to a declaration that Defendant pay his fees and costs related to Defendant’s purported duty to defend and indemnify if he prevails on his other claims for declaratory relief. Without a declaration of rights under the subject policy, the request for a declaration that Defendant must pay for Plaintiff’s attorneys’ fees and costs incurred in defending against the underlying action could not exist alone. Therefore, despite the request for a declaration concerning monetary relief, the instant action is declaratory in nature and jurisdiction remains discretionary.”) (citations omitted). Here, too, Volkswagen’s requests for damages and injunctive relief are contingent on Volkswagen succeeding in its request for a declaration “that Wyoming Valley has materially breached [Volkswagen’s] right of first refusal” under the dealer agreement and the Pennsylvania statute. (Complaint ¶ 68, Dkt. 1) In other words, Volkswagen’s entitlement to non-declaratory relief is “wholly dependent” on Volkswagen achieving a favorable result on its request for a declaration. If the Court were to declare that Wyoming Valley was not in breach, then Volkswagen would have no basis for any relief whatsoever.2 Thus, contrary to what Volkswagen argues (at pp. 15-18), Volkswagen fails the independent claim test and Rarick is no obstacle to abstention here. 2 Furthermore, given that Wyoming Valley has not sold its Volkswagen dealership to a third party, how can Volkswagen credibly allege money damages? To the extent Volkswagen contends (as does its affiliate, Audi) that its attorneys’ fees amount to “damages,” that argument fails. Pennsylvania courts “adhere to a close application” of the American rule. Montgomery Ward & Co., Inc. v. Pacific Indemnity Co., 557 F.2d 51, 58-59 (3d Cir. 1977). That rule, which is followed “consistently” in Pennsylvania, holds that attorneys’ fees are not recoverable “absent an express statutory authorization, a clear agreement by the parties or some other established exception.” Merlino v. Delaware County, 728 A.2d 949, 951 (Pa. 1999) (emphasis added). Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 6 of 13 7 B. Considerations under Wilton/Brillhart weigh in favor of abstention. The conclusion that Rarick does not foreclose Wilton/Brillhart abstention in this case renders irrelevant a significant part of Volkswagen’s response. Relying on its erroneous conclusion about Rarick, Volkswagen ignores the factors that guide the Court’s broad discretion under Wilton/Brillhart and instead jumps into an inapposite discussion (at pp. 18-21) of the narrower and more stringent Colorado River test, a test that Wyoming Valley did not even discuss in its motion. This is not surprising, because the less onerous Wilton/Brillhart factors weigh in favor of abstention. 1. The existence of parallel proceedings favors abstention. For starters, “the existence of pending parallel state proceedings militates significantly in favor of declining jurisdiction, although it alone does not require doing so.” Nationwide Agribusiness Ins. Co. v. Sheriff, 2015 WL 365679 (Jan. 27, 2015) (quotations omitted) (emphasis in original). The proceedings here are indisputably parallel. The Board will necessarily address whether Volkswagen’s ROFR has been breached when it adjudicates Wyoming Valley’s claim that Volkswagen improperly exercised its ROFR and violated Pennsylvania law. (See Protest Petition, Dkt. 18-1 at p. 4) Volkswagen nevertheless complains that abstention is inappropriate because it cannot bring its (wholly dependent) claims for “damages” and injunctive relief Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 7 of 13 8 before the Board. Under the circumstances, this should present no obstacle. If Volkswagen prevails at the Board level, Wyoming Valley will be unable to sell Napleton its VW franchise, making injunctive relief irrelevant. As for damages, Volkswagen does not even appear to have a viable claim given that the only property subject to its ROFR has not been (and, unless Wyoming Valley wins its protest before the Board, may never be) transferred to Napleton. To the extent Volkswagen nevertheless contends that it is somehow “damaged” under such circumstances, it could return to this Court upon lifting of a stay (or otherwise file an appropriate lawsuit) -- assuming it is able to pursue such claim in good faith in light of Pennsylvania authority holding that attorneys’ fees are not recoverable as consequential damages.3 The bottom line is that the Court’s exercise of Wilton/Brillhart discretion should not be constrained by Volkswagen’s flimsy assertion that it has suffered unspecified “damages” that are entirely dependent on its prevailing on its request for declaratory relief. 2. The unsettled issues of state law presented here favor abstention. Also significant is the fact that the legal issues raised in this matter raise unsettled questions of state law. No federal interest exists in this diversity case. The 3 See Lewis v. Delp Family Powder Coatings, Inc., 2011 WL 1230207, at *6 (W.D. Pa. March 31, 2011) (citing cases). Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 8 of 13 9 Third Circuit has instructed district courts to be hesitant in exercising jurisdiction over declaratory judgment actions when the state law involved is close or unsettled. See State Auto Ins. Co. v. Summy, 234 F.3d 131, 135 (3d Cir. 2001). This dispute appears to present an issue of first impression under Pennsylvania law relating to the sale of multiple motor vehicle franchises and the exercise of a manufacturer right of first refusal. Nowhere does Volkswagen argue to the contrary. 3. The fact that Volkswagen filed first is irrelevant. Additionally, abstention is appropriate because Volkswagen’s efforts at forum shopping -- rushing to file this declaratory judgment action before it even bothered exercising its ROFR -- should not be rewarded. See Reifer v. Westport Ins. Corp., 751 F.3d 129, 146 (3d Cir. 2014) (instructing that district courts should consider whether a plaintiff is using a declaratory judgment action “as a method of procedural fencing or as a means to provide another forum in a race for res judicata”). The fact that Volkswagen filed this diversity action before Wyoming Valley filed its Board protest gives Volkswagen no traction. See Sheriff, 2015 WL 365679, at *5 (noting that Third Circuit has “explicitly stated” that it is “irrelevant” in considering abstention that a state action was filed after the federal action). (citing Summy, 234 F.3d at 136). Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 9 of 13 10 4. Volkswagen’s “bias” claim is baseless and does not forestall abstention. Volkswagen’s broad and unsupported claim of bias against this state-created agency does not constrain this Court’s discretion. The Board is “presumed to provide an adequate remedy,” and if Volkswagen finds itself aggrieved it can take the matter to the Pennsylvania courts. Kimberly-Clark Penn., LLC v. Delaware County Regional Water Quality Control Auth., 527 F. Supp.2d 430, 437 (E.D. Pa. 2007) (abstaining under Wilton/Brillhart doctrine in favor of administrative action and rejecting claim of agency bias) (“[Plaintiff] has no basis, at this time, for its claim of inherent bias. Administrative hearings are presumed to provide an adequate remedy. If [plaintiff] finds the administrative hearing was unfair or infirm, it has recourse to the Pennsylvania courts which are competent to decide the issue.”). (citation omitted). Moreover, by dismissing and disparaging the Board as “biased,” Volkwagen elides the fact that the Pennsylvania legislature created the Board through the Board of Vehicles Act as a specialized body to decide the type of dispute presented here. Among other things, the Act prohibits a manufacturer from unreasonably withholding consent to the sale of a franchise to a qualified buyer. See 63 P.S. § 818.12(b)(3). By granting the Board the power to administer and enforce the Act, 63 P.S. § 818.4(a)(4), the legislature necessarily concluded that the determination Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 10 of 13 11 of whether a manufacturer is unreasonably withholding consent is best committed to the Board’s expertise. The legislature ensured the Board would have the necessary expertise by requiring that it consist of individuals with the requisite experience across a cross- section of the industry (five years minimum for most positions). See 63 P.S. § 818.3(a) (seventeen member Board must include Commissioner of Professional and Occupational Affairs, Secretary of the Department of Transportation, and Attorney General’s Office’s Director of Consumer Protection or their designees; three new and three used vehicle dealers; a vehicle salesperson; and three members with no connection to vehicle business). Because Volkswagen is not a citizen of Pennsylvania, it was able to invoke this Court’s diversity jurisdiction. In all likelihood, most auto manufacturers are citizens of states other than Pennsylvania. In disputes within this state involving sales of dealerships, manufacturers are generally able to invoke this Court’s diversity jurisdiction. Absent the Court’s discretion to decline the exercise of such jurisdiction, manufacturers could circumvent the Board altogether in disputes of this sort. This is not what the Pennsylvania legislature contemplated in creating the Board. As such, the Court should abstain in favor of the Board proceeding. Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 11 of 13 12 CONCLUSION Volkswagen has not advanced a persuasive argument why this Court should exercise its discretion to hear this declaratory judgment action and its dependent claims for damages and injunctive relief despite (1) the existence of parallel state proceedings that (2) concern an unsettled matter of state law where (3) the circumstances suggest Volkswagen is engaged in forum shopping. Abstention is appropriate. As such, Wyoming Valley respectfully requests the Court grant its motion and enter an order dismissing this action or, in the alternative, staying this action pending a final determination of Wyoming Valley’s protest by the Board of Vehicles. Dated: April 27, 2017 Bronsberg & Hughes Pontiac, Inc. By: /s/ Jill C. Anderson One of its attorneys Charles O. Beckley, II David C. Gustman (pro hac vice) John G. Milakovic Jill C. Anderson (pro hac vice) Beckley & Madden, LLC Dylan Smith (pro hac vice) 212 N. Third Street Freeborn & Peters LLP P.O. Box. 11998 311 S. Wacker Drive, Ste. 3000 Harrisburg, PA 17108 Chicago, IL 60606 (717) 233-7691 (312) 360-6000 Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 12 of 13 13 Nicholas D. George/ID No. 207409 Dennis George/ID No. 39416 Arangio & George, LLP 2000 Market Street, Suite 1440 Philadelphia, PA 19103 Phone: (215) 567-1999 Jeffrey M. Scafaria /ID No. 73326 Scafaria Law, P.C. 2000 Market Street, Suite 1440 P.O. Box 30095 Philadelphia, PA 19103 Phone: (215) 800-1083 CERTIFICATE OF SERVICE The undersigned, an attorney, hereby certifies that on April 27, 2017, she caused a true and correct copy of the foregoing document to be filed via the Court’s Electronic Case Filing (ECF) system on counsel of record. /s/ Jill C. Anderson Case 1:17-cv-00010-JEJ Document 56 Filed 04/27/17 Page 13 of 13 Unpublished Opinions Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 1 of 26 St. Paul Fire &Marine Insurance Co. v. Nonprofits Untied, 91 Fed.Appx. S37 (2004) 9~ Fed.Appx. 537 This case was not selected for publication in the Federal Reporter. Not for Publication in West's Federal Reporter See Fed. Rule of Appellate Procedure 32.i generally governing citation of judicial decisions issued on or after Jan. i, 200. See also Ninth Circuit Rule 36-3. (Find CTA9 Rule 36-3) United States Court of Appeals, Ninth Circuit. ST. PAUL FIRE &MARINE INSURANCE COMPANY, a Minnesota corporation, Plaintiff—Appellant, Trade, Business, and Finance Insurer's claim for equitable relief, indemnity, and contribution was not ripe for adjudication, where claim was contingent on a future finding that it was liable in pending state court proceeding. 1 Cases that cite this headnote ~2~ Action ~, Actions in state and federal courts NONPROFITS UNITED, a California non-profit public benefits corporation; Aon Risk Services, Staying insurer's federal declaratory relief Inc., of Northern California Insurance Services, action pending due to a pending state court Defendants—Appellees. action between the parties was not abuse of discretion; stay avoided needless decisions of No. o2-1~i35. state law, forum shopping, and duplicative ~ litigation. Submitted Dec. 4, 2003.` The panel unanimously finds this case suitable for 1 Cases that cite this headnotedecision without oral argument. See Fed. R.App. P. 34(a)(2)~~)• ~ *537 Appeal from the. United States District Court for the Decided Jan. 8, 2004. Northern District of California, Phyllis J. Hamilton, District Judge, Presiding. Synopsis Background: Insurer appealed from order of the United States District Court for the Northern District of California, Phyllis J. Hamilton., J., staying its federal declaratory relief action due to a pending state court action between the parties. Holdings: The Court of Appeals held that: ~'~ insurer's claim for equitable relief, indemnity, and contribution was not ripe for adjudication, and ~2~ staying action was not abuse of discretion. Affirmed. West Headnotes (2) ~~~ Federal Courts Attorneys and Law Firms Paul E. Vallone, Ann. L. Strayer, Hinshaw and Culbertson, San Francisco, CA, Bethany K. Culp, Esq., Hinshaw & Culbertson, Minneapolis, MN, for Plaintiff—Appellant. Teresa Jenkins Main, John H. Banister, Esq., Bell, Rosenberg & Hughes LLP, Oakland, CA, Eric W. Schnurpfeil, Esq., Aon Corporation Law Division, San Francisco, CA, for Defendants—Appellees. D.C. No. CV-02-3175—PJH. Before TASHIMA, THOMAS, and SILVERMAN, Circuit Judges. MEMORANDUM"` *# This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3. ~~ ~~;~"!~,~' 2C}~ 7 ~~hc~rr~~c~~~~ ~~:ut~r~~. E`~~~ ~I~:~irr~ (~ ~ri~ir~~1 t~,~~. ~~~v~;rr~rncrr~ Vtlar~*.~. 9 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 2 of 26 St. Paul Fire &Marine Insurance Co. v. Nonprofits Untied, 91 Fed.Appx. 537 (2004) **1 St. Paul Fire & Marine Insurance Company ("St.Paul") appeals the district court's order staying its federal declaratory relief action against Nonprofits United ("Nonprofits") and Aon Risk Services, Inc., of Northern California Insurance Services ("Aon"), due to a pending state court action between the parties.' We have jurisdiction *538 to review the propriety of the stay pursuant to 12 U.S.C. § 1291. See Wilton v. Seven Falls Co., 515 U.S. 277, 280-81, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) ("a district court's order staying federal proceedings in favor of pending state litigation is a ̀ final decisio[n]' appealable under 28 U.S.C. § 1291") (alteration in the original) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 10, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). We affirm. ~ Because the parties are familiar with the facts, we do not recite them here except as necessary to aid in -- -understanding-this disposition, - - - -- Although the district court issued the stay under both Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and, alternatively, Brillhart v. Excess Ins. Co., 3l6 U.S. 491, 62 S.Ct. l]73, 86 L.Ed. 1620 (1942), St. Paul only challenges the district court's stay under the abstention doctrine of Colorado River. (9th Cir.2003) ("Ripeness is a question of law we review de novo."). "A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all." Texas v. United States, 523 U.S. 296, 300, 118 S.Ct. 1257, l40 L.Ed.2d 406 (].998) (internal quotation marks omitted). Subject matter jurisdiction does not exist over claims which are not ripe for adjudication. See Cardenas v. Anzai, 311 F.3d 929, 933 (9th Cir.2001). Because St. Paul's claim for equitable relief, indemnity, and contribution is contingent on a future finding that St. Paul is liable to Nonprofits in the pending state court proceeding, the cause of action is not ripe and is not "independent in the sense that it could be litigated in federal court even if no declaratory claim had been filed." United Nat'l Ins. Co. v. R & D Latex Corp., 242 F.3d 1102, 1113 (9th Cir.2001). Therefore, the district court's decision to abstain is controlled by the discretionary Brillhart_ standard. See_Wilton,__515 U.S. at 289-90,__115 S.Ct. 2137 (reviewing the district court's decision to abstain for an abuse of discretion). **2 ~Z~ Here, the district did not abuse its discretion in staying the action to avoid: (1) needless decisions of state law; (2) forum shopping; and (3) duplicative litigation. See Gov't Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.1998) (en bane) (citing non-exhaustive factors from Brillhart ).2 The district court's order staying the declaratory relief action, is accordingly In Wilton, the Supreme Court-held-that the discretionary - - - - standard of Brillhart, and not the "exceptional 2 Because we conclude that the district court's stay was circumstances" test developed in Colorado River, controls proper under Brillhart, we need not address whether the a district court's decision to stay a purely declaratory district court abused its discretion in abstaining under judgment action during the pendency of parallel state the Colorado River doctrine. court proceedings. See 515 U.S. at 289-90, 115 S.Ct. 2137. Therefore, as long as no claim exists independent of St. Paul's claim for declaratory relief, the discretionary AFFIRMED. rule of Brillhart applies. See Snoclg~°ass v. Provident Life c~ Accident Ins. Co., 147 F.3d 1163, 1 l67 (9th Cir.1998). ~'~ Like the district court, we conclude that St. Paul's All Citations second cause of action against Aon for equitable relief, 91 Fed.Appx. 537, 2004 WL 60309 indemnity, and contribution is not ripe. See Laub v. United States Dent of the Interior. 342 F.3d 1080. 1084 End ofi Document Cry 20171'homsan Reuters. Nn claim to original U.S. Government Works. .~.~. ~_..~a~_,~~ ._e..~_ _.. _ _ __._ ~__.__.~._._..~_____._ ~~~'~`~.~ t C<~ ~~7`1 % ~~1~c~rt~~csr~ F~~ur,~rs. ~c~ ~l~irn ~~a cari ir~~l U,~, C~~~u~rnm~~~ Works, ~0 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 3 of 26 Standard Fire Ins. Co. v. Olsen, Not Reported in F.Supp.2d (2010) w_._W_ ~..~... ~a~~ ~ ~. ~._~,_. ..~~ ~.. ~.,_~ ~ _ _. _ _..,. ~.. _ __ 2010 WL 1689444 ~~;,:; S ' KeyCite Yellow Flag - Negative Treatment Declined to Follow by Nucor Corp. v. Employers Ins. Co. of Wausau, D.Ariz., August 7, 2012 2oio WL 1689444 Only the Westlaw citation is currently available. This decision was reviewed by West editorial staff and not assigned editorial enhancements. United States District Court, N.D. California, San Jose Division. The STANDARD FIRE INSURANCE COMPANY, Plaintiff, v. Perry OLS~N, Defendant. I. BACKGROUND A. Factual background Standard is incorporated in Connecticut and does business in several states, including California. Federal Complaint ¶ 3. Olsen is a resident of California and the owner of a forty-six foot Hunter sailboat named BOBBY MCGEE ("BoaY'). Id. ¶¶ 4-5, Ebey Decl. ¶ 4. On February 3, 2006, Standard issued an insurance policy to Olsen covering the Boat. The policy was renewed on February 3, 2008. Federal Complaint ¶ 6, Ex. A (policy renewal); Ebey Decl., Ex. 1 ("State Complaint'), Ex. A (initial policy) (indicating that the policy commenced on February 3, 2006). Na CV 10-00056 JF (PVT): 6n February 9 200$, the Boat was damaged in waters at ~ or near Pebble Beach, California. Federal Complaint ¶ 5. Apri126, 2oio. Olsen had the Boat repaired at Santa Cruz Yachts. Id. ¶ 7. Standard determined that the grounding of the Boat was covered by the policy and indemnified Olsen for what it Attorneys and Law Firms claims was the full cost of repair by Santa Cruz George Geoffrey Robb, Joshua A. Southwick, Gibson Yachts-approximately $169,000. Id. The parties dispute Robb & Lindh LLP, San Francisco, CA, for Plaintiff. whether Standard or Olsen controlled the repair process. Standard alleges that Olsen controlled the process and that Rebecca Connolly, Grunsky, Ebey, Farrar, &Howell, "Standard paid amounts due for repairs to Olsen, who in APC, Watsonville, CA, for Defendant. turn paid Santa Cruz Yachts without confirmation that the work was done satisfactorily or even completed." Id. Olsen claims that Standard controlled the repair process. ORDER GRANTING' DEFENDANT'S MOTION TO State Complaint ¶ 15 (alleging that (1) Standard instructed STAY Olsen to sign a contract with the salvage company; (2) Standard's claims representative stated that the Boat was ' This disposition is not designated for publication in the not a total loss and should be repaired; (3) Olsen advised official reports. Standard that he was not qualified to determine the scope, cost or quality of the repairs and requested authorization from Standard to retain a surveyor to oversee timely completion of adequate repairs; and (4) Standard refused JEREMY FOGEL, District Judge. Olsen's request and insisted that its claims representative would serve in the role of a surveyor and oversee the *1 Defendant Perry Olsen ("Olsen") moves to dismiss the complaint of Plaintiff The Standard Fire Insurance Company ("Standard") pursuant to Fed.R.Civ.P. 12(b)(1) and 13rillhart v. Excess Inszrrance Company of America, 31.6 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), or in the alternative to stay the instant action in deference to an action currently pending in the Santa Cruz Superior Court. The motion is opposed. The Court has considered the moving and responding papers and the oral arguments of counsel presented at the hearing on Apri123, 2010. For the reasons set forth below, the instant action will be stayed pending resolution of the state court litigation. repairs). Olsen claims that the repairs made by Santa Cruz Yachts were negligent and/or incomplete. These allegations form the basis of Olsen's state-court complaint for negligence against Standard, Santa Cruz Yachts and three other separately named defendants. State Complaint ¶¶ 26-29. Within that complaint, Olsen alleges that Standard assumed a duty to inspect and supervise the repairs to ensure that they were completed in accordance with the standard of care in the industry. Id. ¶¶ 27-29. Standard disputes that the policy covers the cost of completing or correcting repairs it has paid for previously. Federal "`"~~~~~ ~ ?{~'I ~l ~~~h~arr~~e~n €~cut~t~. R1c~ c;l~i~r~ tc~ c~rir,~in~.~l iJ,~. C~c~v~;rr~rt~~;nt iNc~rK~, 12 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 4 of 26 Standard Fire Ins. Co. v. Olsen, Not Reported in F.Supp.2d (2p10) 2010 WL 1689444 ~~~ ~~~~~ Complaint ¶ 8; State Complaint ¶¶ 17, 35-36 (alleging that Standard breached its written contract with Olsen, as well as the implied covenant of good faith and fair dealing by failing to reimburse him for the cost of completing and correcting Santa Cruz Yachts' inadequate repair work). Santa Cruz Yachts went out of business prior to completing repair of the Boat in a satisfactory manner. Federal Complaint ¶ 7. letter acknowledging that he had been advised of Olsen's intent to file suit, not mentioning that he had filed the instant federal case seeking declaratory relief the previous day. Id.; Robb Decl., Ex. E (January 7 Letter). On January 6, 2010, Standard filed the instant federal action seeking declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, as well as costs of suit and an order directing Olsen to participate in *2 Olsen retained Keefe, Kaplan Maritime, Inc. the appraisal process or refund the additional amounts ("KKMI") to work on the Boat. Olsen alleges that he has paid by Standard, depending on the Court's finding of spent more than $234,000 to correct and complete the liability. On January 21, 2010, Olsen filed his state-court repair work done by Santa Cruz Yachts. Federal complaint against Standard and four other separately Complaint ¶ 9. Standard alleges that it reviewed the work named defendants, alleging: (1) bad faith against done by KKMI and determined that only $56,016.52 of its Standard; (2) fraud against all defendants; (3) negligence work was "attributable to work not finished by Santa Cruz against all defendants; and (4) breach of written contract Yachts and paid without prejudice an additional against all defendants. Ebey Decl. ¶ 5, Ex. 1 ¶¶ 12-37. $56,016.52 to Olsen." Id. Standard claims that it contested Standard did not serve the complaint in the instant federal --coverage --.under. the--policy- as to_ the_ additional__costs action .until after Olsen _filed and served Standard in_the _____ claimed for Santa Cruz Yachts' improper repairs, but paid state-court action. Declaration of Frederick Ebey ("Ebey it without waiver in an attempt to resolve the disputed Decl.") ¶¶ 17-20 (claiming that the state complaint was claim. Finally, Standard asserts that Olsen has refused to filed on January 21, that Olsen's counsel first received a comply with policy terms requiring an appraisal, insisting letter with copies of the instant federal action enclosed on instead that Standard provide a "lump sum payment far in January 22, and that Olsen was served personally on excess of amounts that could be owed, interspersed with January 25). On April 6, 2010, the Santa Cruz Superior statements of ̀outrage' and ̀ bad faith.' "Declaration of Court denied Standard's motion to dismiss Olsen's G. Geoffrey Robb ("Robb Decl.") ¶¶ 2, 4, 5, 9, 12, 17 complaint in deference to the instant federal action. (stating that Olsen demands that Standard pay him for the following without attempting to allocate the amounts or agreeing to an appraisal as demanded. by the. terms of the policy: (1) covered grounding for which Standard has II. LEGAL STANDARD paid about $230,000 to date, (2) costs to re-do repairs done by Santa Cruz Yachts before it went out of business at about $150,000; and (3) costs of repairs done by Olsen unrelated to either the grounding or repair issues at about $76,000). B. Procedural background Prior to the filing of either the federal or the state court action, the parties communicated regarding the underlying dispute. Standard claims that Olsen first threatened to file suit in July 2009 and repeated the same threat of litigation for the following six months. Robb Decl. ¶¶ 4-12. Standard also claims that "Olsen refused to engage in any good faith negotiations and failed to respond to correspondence from Standard regarding the allocation related to the various vessel repairs." Opp. Mot. at 3, citing Robb Decl. ¶¶ 9-12. Olsen claims that in a telephone conversation on January 4, 2010, his counsel indicated to Standard that he intended to file a complaint against Standard for bad faith and other claims for relief Motion to Dismiss at 2 citing Ebey *3 Jurisdiction under 28 U.S.C. § 2201(a) is discretionary, and the district courts should avoid duplicative litigation. Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.1998). Before exercising jurisdiction, the district court must first determine if there is an actual case or controversy. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir.2005), citing American States Ins. Co, v. Keaî ns, 15 F.3d 142, 143 (9th Cir.1994). "Second, if the court finds that an actual case or controversy exists, the court must decide whether to exercise its jurisdiction by analyzing the factors set out in Br°illha~̂ t v. Excess Ins. Co., 3l6 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), and its progeny." Id., citing Kearns, 15 F.3d at 143-44. The primary Brillhart factors have been articulated as follows: "A district court should avoid needless determination of state law issues; it should discourage litigants from filing declaratory actions as a means of forum shopping; and it should avoid duplicative litigation." Huth v. Hartford Ins. Co, of the Mzdwest, 298 F.3d 800, 803 (9th Cir.2002), citing Dizol, 133 F.3d at 1225. Secondary considerations may include: DecL ¶ 14~On January 7, Standard's attorney wrote a ~~ ~ ~~ ~~ : ~ ~~ ~~1 % ~i~hc~rn~~>n I~~ruf~r~. Icy ~I irr~ f~ ari ir~~l t,J.~. C~c~verr~rr~~r~t ~lVc~rk~. 13 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 5 of 26 Standard Fire Ins. Co. v. Olsen, Not Reported in F.Supp.2d (2010) 2010 WL 1689444 ~ ~~ [W]hether the declaratory action will settle all aspects of the controversy; whether the declaratory action will serve a useful purpose in clarifying the legal relations at issue; whether the declaratory action is being sought merely for the purposes of procedural fencing or to obtain a `res judicata' advantage; or whether the use of a declaratory action will result in entanglement between the federal and state court systems. In addition, the district court might also consider the convenience of the parties, and the availability and relative convenience of other remedies. Dizol, 133 F.3d at 1.225 n. 5 (citation omitted). III. DISCUSSION A. Whether Brillhart applies d h d d' d 1 C 1' 11 *4 whether the claim for monetary relief is independent in the sense that it could be litigated in federal court even if no declaratory claim had been filed. In other words, the district court should consider whether it has subject matter jurisdiction over the monetary claim alone, and if so, whether that claim must be joined with one for declaratory relief. United Nat'l, 242 F.3d at 1113. The first inquiry is whether the court has subject matter jurisdiction over the monetary and specific performance claims alone. Standard contends that this Court has admiraltyz and diversity jurisdiction over these claims. Olsen -does -not--contest that--this -Court-has--admiralty......... jurisdiction over the claims, arguing instead that removal of his state court action based solely on general maritime jurisdiction would defeat the choice of forum protected by the "savings to suitors" clause of 28 U.S.C. § 1441. Reply at 3, citing Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1069 (9th Cir.2001). In this case, however, the instant action was not removed from state court, making Olsen conten s t at Stan ar s Fe era omp amt a eges Morris inapposite. only a claim for relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2001 and that this Court's 2 jurisdiction over the action thus is discretionary. Standard argues that the Federal Complaint cannot be dismissed or stayed under Brillhart because it seeks affirmative monetary relief (reimbursement of monies found to have been overpaid to Olsen and costs of suit) and specific performance (an order requiring Olsen to abide by the policy's mandated appraisal process) in addition to declaratory relief. The Ninth Circuit applies "the principle that ̀ when other claims are joined with an action for declaratory relief (e.g., bad faith, breach of contract, breach of fiduciary duty, rescission, or claims for other monetary relied, the district court should not, as a general rule, remand or decline to entertain the claim for declaratory relief.' " United Nat'l Ins. Co. v. R & D Latex Corp.., 242 F.3d 1102, 1112 (9th Cir.2001), quoting Dizol, 133 F.3d at 1225. Despite the Ninth Circuit's holding in United Nat'l, "the presence of claims for monetary relief does not require the district court to accept jurisdiction where the action is `primarily declaratory in nature.' " Keown v. Tudor Ins. Co., 621. F.Supp.2d 1025, 1029 (D.Haw.2008), quoting United .Nat'l, 242 T'.3d at 1112. Rather, the court must analyze: The Brillhart analysis and abstention doctrine has been applied in the context of admiralty eases. Hawaii Stevedores, Inc. v. NT & T Co., 363 F.Supp.2d 1253, 1271 (D.Haw.2005), citing Phoenix Assurance PLC v. Marimed Foundation for Island Healdh Care, 125 P.Supp.2d 1214 (D.Haw.2000) (recognizing that "[nJeither the Supreme Court nor the Ninth Circuit have determined the amount of discretion a district court possesses in deciding whether to exercise jurisdiction in a declaratory judgment action when the court is sitting in admiralty" and holding that analysis under Dizol is proper). With respect to diversity jurisdiction, Olsen insists that while there is diversity between himself and Standard, the pending state-court case could not be removed under 28 U.S.C. § 1441 because complete diversity among the parties is lacking. The state court complaint alleges claims not only against Standard but also against four other parties, all of which are residents of California. State Complaint ¶¶ 3-7. Once again, the Court must look to the instant action and its concerned parties. Complete diversity does exist as between Standard and Olsen. Accordingly, the Court determines that it has diversity jurisdiction over Standard's claims for monetary relief and specific performance. _.~~_~.~_v.~~.~.~~,_~e~w~~~. ..~..~w..m__~..~.._~___._ __.._ .__..._~.____.- --._... i (~~ 20`I7 ~~hcar~~u _~ ~: r~. ~r.~ el~irr~ to cari~in~l E1.~. C~~vern~~~nf ~ll~z~rk~. 14 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 6 of 26 Standard Fire Ins. Co. v. Olsen, Not Reported in F.Supp.2d (2410) 2010 WL 1689444 ~~.~~~~~~~~~ However, the United Nat'l inquiry does not end with a determination of subject matter jurisdiction. The Court also must resolve whether the monetary relief and specific performance Standard seeks are independent of Standard's claim for declaratory relief. Standard seeks a judicial declaration that: (1) the expenses to complete and correct the improper repairs done by Santa Cruz Yachts are not covered by the policy in whole or in part; (2) that Standard satisfied its obligation under the policy for the claim arising out of the grounding and subsequent repairs to the Boat; and (3) that Olsen's claim for policy benefits is barred in whole or in part by Olsen's own breaches of the policy. Federal Complaint ¶ 22(a)-(c). Standard's requests for monetary relief and specific performance necessarily require a predicate finding as to the obligations of Standard and Olsen under the policy. Id. ¶¶ 22(d) (requesting "that if the Court determines that ._.._Standard has overpaid Olsen_ in_relation t~_ the_ claim,_ that Olsen be ordered to refund the amount of said over payment"); id. ¶ 22(e) ("in the alternative, if the Court finds that additional policy benefits are owed to Olsen, that the quantum of covered losses is to be determined by the aforesaid Appraisal process ..."); id. ¶ 22(~ (requesting costs of suit). The resolution of Standard's requests for specific performance and monetary relief thus are "inextricably intertwined with, and dependent] upon a declaration of coverage." N. Pac. Seafoods, Inc. v. Nat'l Union Fire Ins. Co., No. C06-795RSM, 2008 WL 53180, at *3 (W.D.Wash.2008); see also Keown, 621 F.Supp.2d at 1030-31 (holding that the "the proposition that `all claims for monetary relief prevent the federal court from declining jurisdiction over an insurance declaratory judgment action,' is incorrect as a matter of law."). *5 The Court concludes that although Standard seeks monetary relief and specific performance in addition to its claim for declaratory relief, the instant action nonetheless is "primarily declaratory in nature" and subject to the discretionary exercise of jurisdiction. N. Pac. Seafoods, Inc., 2008 WL 53180, at *3, quoting United Nat'l, 242 F.3d at 1113. B. Brillhart analysis "[A] district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment." Wilton v. Seven Falls Co., 515 U.S. 277, 288, 115 S.Ct. 2137, 2143, 132 L.Ed.2d 214 (1995). In assessing a declaratory relief action, "the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration." Id. at 288. "[W]here the basis for declining to proceed is the pendency of a state proceeding, a stay will often be the preferable course, because it assures that the federal action can proceed without risk of a time bar if the state case, for any reason, fails to resolve the matter in controversy." Id. at 288 n. 2, citing P. Bator, D. Meltzer, P. Mishkin, & D. Shapiro, Hart and Wechsler's The Federal Courts and the Federal System 1451, n. 9 (3d ed.1988). 1. Determination of state law issues Standard's claim "requires the construction of a marine insurance contract. Disputes involving marine insurance contracts for vessels engaged in maritime commerce and navigation fall within admiralty jurisdiction." Phoenix Assurance PLC v. Mar°imed Foundation for Island Health Care Training, 125 F.Supp.2d 1214, 1219 (D.Haw.2000), citing Simon v. Intercontinental Transport B. V., 882 F.2d l 435, 1441 (9th. Cir. ] 989). "Disputes arising under marine insurance contracts are governed by state law ... unless an established federal rule addresses the issues raised, or there is a need for uniformity in admiralty practice." Yat v. Albany Ins. Co., 281 F.3d 803, 806 (9th Cir.2002), citing Kiernan v. Zu~°ich Cos., 150 F.3d 1120, 1121 (9th Cir.1998); see also Certain Undef~vriters at Lloyds v. Inlet Fisheries Inc., S l 8 F.3d 645, 649 (9th Cir.2008) ("Following Wilburn Boat ~v. Fireman's Fund Ins. Co., 348 U.S. 310, 75 S.Ct. 368,. 99 L.Ed. 337 (1955).], if extant federal admiralty law does not contain an applicable rule, courts are instructed to look to state law, rather than fashioning a new federal admiralty rule or adopting one from British law. Thus, the Supreme Court acknowledged the leading role of states in governing insurance policies, including marine insurance policies."); see id. at 650 ("In the Ninth Circuit, we require that the rule be sufficiently longstanding and accepted within admiralty law that it can be said to be "established."). Olsen argues that the relief sought by Standard's Federal Complaint-a declaration that the costs of completing or correcting repair work are not covered by the policy-presents no novel issues of admiralty law. Olsen points out that the Ninth Circuit frequently has applied controlling state law to marine insurance contractual issues. See e.g., Bohemia, Inc, v. Home Ins. Co., 725 F.2d 506, 511-12 (9th Cir.1984) (sitting in admiralty jurisdiction and applying state law to an insurer's duty to exercise good faith in evaluating and settling a claim); Szaydana v. Reed Stenhouse of Washington, Inc., 820 F.2d 1506, 1510 (9th Cir.1987) (holding that "[s]ince there is no federal admiralty law on the issue of agency in the marine insurance context, we turn to Washington law on the subject."); Yu, 281 F.3d at 8l1 (concluding that "[b]ecause there is no established federal rule governing the doctrine of equitable estoppel in marine insurance contracts" state law governs). Olsen contends that ' ~°~~ C~ 20117 ~hc~rr~~c~n ~:~~at~rs, ~Jca rl~im t~ cari °- nal U. . C~c~vernm~nt ~1lfarks. 15 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 7 of 26 Standard Fire Ins. Co. v. Olsen, Not Reported in F.Supp.2d (2010) 2010 WL1689444 California law governs interpretation of the parties' insurance contract, and that the instant action thus is distinguishable from Youell v. Exxon Corp., 74 F.3d 373, 376 (2d Cir,1996). *6 In Youell, the court determined that Brillhart abstention was unwarranted because the case raised novel issues of federal maritime law. Id. at 376 (holding that the novel issue of whether maritime loss was caused by the insured's recklessness or was fortuitous required the federal court to hear the case, despite parallel state court proceedings). Standard does not appear to dispute that no existing federal admiralty rule applies to the issues presented here-the respective obligations of a marine insurer and insured regarding repair of a boat-yet it contends that the issues are somehow novel. Despite its concession at oral argument that the present case is not "Exxon Valdez," Standard does not explain why or how the--issue in-dispute is so novel that state__contract_law should not apply. Inlet Fisheries Inc., Sl8 F.3d at 649 ("if extant federal admiralty law does not contain an applicable rule, courts are instructed to look to state law, rather than fashioning a new federal admiralty rule or adopting one from British law"). Standard contends only that there is a "need for uniformity under maritime law" on an insurer's duty for negligent or incomplete repairs. Opp. Mot. at 6 (stating that while California regulates the obligations of the insurer and insured related to automobiles, see, e.g. Cal. Ins.Coda. § 758.5, similar efforts... have not been... extended to boat repairs), citing. Alex L. Parks, "The Law and Practice of Marine Insurance and Average" Vol. II, page 738 (Cornell Maritime Press, 1987) (asserting that "questions of reasonableness must be tested from the standpoint of both the underwriter and shipowner. If the assured acts imprudently, then any extra costs incurred are for the assured's account.") The Gourt concludes that in the absence of an applicable federal maritime rule or a novel issue of admiralty law, interpretation of the subject insurance policy necessarily will involve application of California law. before Standard filed the instant action, Olsen's counsel told Standard's counsel that he intended to file a complaint against Standard for bad faith and other claims for relied; see also Robb Decl., Ex. E (Jan 7 letter from Standard's counsel to Olsen's counsel acknowledging Olsen's intention to file suit, but omitting any mention that Standard filed the instant action the prior day). Olsen claims that Standard's failure to serve the Federal Complaint until after Olsen filed his State Complaint establishes that Standard sought a tactical advantage by filing an anticipatory action for declaratory relief, increasing Olsen's litigation expenses because Olsen will be forced to commute from Santa Cruz, where he resides, and to litigate the same issues in two courts. *7 Standard contends that its filing in this Court represents nothing more than a good faith effort to resolve a dispute over which Olsen had been threatening litigation .for. six months. "The_purpflse oftk~e D~cl~ratory Judgment. Act is to relieve potential defendants from the Damoclean threat of impending litigation which a harassing adversary might brandish, while initiating suit at his leisure-or never." Hal Roach Studios, Inc. v. Richard Feiner and Co., Inc., 896 F.2d 1542, 1555 (9th Cir.1990) (citation and quotation marks omitted). The record does reflect prolonged communication between the parties over a six month period during which Standard appears to have made attempts at resolution short of litigation. Robb Decl., Exs. A-G (letters, primarily from Standard to Olsen, attempting to resolve the issues central to the instant action). Standard claims that it is Olsen who has engaged in forum-shopping and gamesmanship by asserting claims in its State Complaint against four California defendants in order to defeat diversity jurisdiction. The Court finds that there is insufficient evidence that either party acted in deliberate bad faith. Accordingly, it concludes that this factor does not favor a determination in favor of either party. 3. Duplicative litigation 2. Forum shopping On April 6, 2010, the Santa Cruz Superior Court denied "Forum shopping weighs in favor of a stay when the party Standard's motion to dismiss Olsen's complaint in opposing the stay seeks to avoid adverse rulings made by deference to the instant federal action. Under California the state court or to gain a tactical advantage from the law, in addition to answering Olsen's four claims for application of federal court rules." See Travelers Indern. relief that are aligned with the declaratory relief sought in Co. v. Madonna, 914 F.2d 1364, 1371 (9th Cir.1990) this action, Standard will be required to include any (citation omitted). The parties present competing claims for monetary relief and specific performance under portrayals of their communications prior to filing their the policy in a compulsory cross-complaint, as such respective lawsuits. Olsen contends that Standard, upon claims are "related to the subject matter of the complaint." learning that Olsen intended to file an action for bad faith, See Ca1.Code. Civ. Proc. § 426.30. ran to the federal courthouse in an effort to file first. See Ebey Decl. ¶ 14 (stating that on January 4, two days Standard argues that the litigation need not be duplicative ~~ ~ ~C)~17 ~Chc~r~~~s~ar~ F~~ut~rs. ~lc~ rl~it~ ~r~ c~ri in~l 1.1.x. ~e~v~rr~r~~nf: V~Icark~. 16 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 8 of 26 Standard Fire Ins. Co. v. Olsen, Not Reported in F.Supp.2d (2010) 2010 W~1689444 because this Court could retain jurisdiction over the "relatively narrow, specific and distinct marine insurance issues raised in Standard's complaint." Opp. Mot. at 9 (stating that Standard would ask the Court to "first order the parties to participate in the Appraisal process as required by the policy, and upon Standard's satisfaction of its policy obligations following Appraisal, issue an order declaring that Standard has fully complied with the policy terms and conditions; and then, if required, order Olsen to reimburse any overpayment by Standard."). However, because Standard is required to allege the claims pled in the instant action as counter-claims to Olsen's State Complaint, duplicative litigation cannot be avoided. Accordingly, the Court concludes that this factor favors abstention.' in the Santa Cruz Superior Court. See ~YVilton, 515 U.S. at 288; Principal Life lrrs. Co., 394 F.3d at 672 (holding that the court should balance the relative concerns of "judicial administration, comity, and fairness to the litigants."). At the same time, "where the basis for declining to proceed is the pendency of a state proceeding, a stay will often be the preferable course, because it assures that the federal action can proceed without risk of a time bar if the state case, for any reason, fails to resolve the matter in controversy." Wilton, 515 U.S. at 288 n. 2. Because the parallel state proceeding provides the strongest basis for abstention, the instant action will not be dismissed but instead will be stayed pending resolution of the state court litigation. 3 "If there are parallel state court proceedings involving IV. ORDER the same issues and parties pending at the time the -- -- -federal --declaratory - action is - filed, -there -is a - *g Good cause therefor appearing, if is hereby ordered presumption that the entire suit should be heard in state that the motion to dismiss is DENIED and the alternativecourt." Dizol, 133 F.3d at 1225. "However, there is no motion to stay is GRANTED. Per the discussion on thepresumption in favor of abstention in declaratory actions generally, nor in insurance coverage cases record during the hearing on the motion, the Court also specifically." Id. Olsen contends that the parallel state directs that Olsen, Standard, and any interested separately court action gives rise to a presumption that the instant named defendants in the parallel state court action action should proceed in state court. Standard argues participate in mediation through this Court's alternative that Dizol's presumption does not apply here because dispute resolution program. the state court action was not pending "at the time t{ae federal declaratory action [wasJ filed. " Id. (emphasis added). However, it appears that the purposes of the IT IS SO ORDERED. __ .presumption judicial ...economy, comity and __ federalism-are served still here where the state court has denied Standard's motion to dismiss and the state All Citations court action has proceeded beyond its infancy. In light of the above considerations, the Court finds that judicial efficiency and fairness would not be served by allowing this case to proceed in parallel with the litigation __ End of Dncumer7t Not Reported in F.Supp.2d, 2010 WL 1689444 Cry 2017 Thomson Reuters. No claim to original U.S. Government Works. ' ".~i~~~ ~ ~C}~7 ~~f7arrt~an R ut~r~. N~a claim to carigin~l tJ.~, ~ov~rnm~nt Works. ~7 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 9 of 26 Nationwide Agribusiness Ins. Co. v. Sheriff, Not Reported in ~.Supp.3d (2015j 2015 WL 365679 ~~~ ~ ~~~~~~ 2oi5 WL 365679 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. NATIONWIDE AGRIBUSINESS INSURANCE COMPANY, Plaintiff, v. Logan W. SHERIFF, George Ungemach and Karen Ungemach, his wife, Michael Ungemach and Henry Sells, Jr., Defendants. No. i:i4-cv-2082. Signed Jan. 2~, 2oi5. Defendant Logan Sheriff ("Sheriff") filed a Motion to Dismiss Plaintiff's Action on November 17, 2014. (Doc. 5). Sheriff filed his brief in support of the Motion on December 1, 2014. (Doc. 13). Nationwide filed its brief in opposition to the Motion on December 15, 2014. (Doc. 14). Defendants George Ungemach, Karen Ungemach, and Michael Ungemach (collectively the "Ungemachs") also filed a brief in support of Sheriff's Motion on December 18, 2014. (Doc. 15). Sheriff filed his reply brief on December 24, 2014. (Doc. 23). Nationwide filed a reply brief in opposition to the Ungemachs' brief on December 31, 2014. (Doc. 28). Thus, having been fully briefed by the parties, this Motion is ripe for our review. Additionally, on December 23, 2014, Defendant Henry Attorneys and Law Firms Sells, Jr. ("Sells") filed a Motion to Dismiss the Action. - -- -- -- - - - -(Doc. 1~). Sells filed a-brief in-support of the-Motion-on Charles E. Haddick, Jr., Joshua D Leaver, Dickie the same day. (Doc. 20). Nationwide filed its brief in McCamey & Chilccote PC, Camp Hill, PA, for Plaintiff. opposition to this Motion on January 5, 2015. (Doc. 30). The time for Sells to file a reply brief has expired. This David B. Dowling, Rhoades & Sinon LLP, Harrisburg, Motion is also ripe for our review. PA, John W. Ditzler, Reilly, Wolfson, Sheffey Schrum And Lundberg, LLP, Heather A Eggert, Clu•istopher J. Coyle, Henry &Beaver, Henry &Beaver, LLP, Lebanon, PA, for Defendants. __ MEMORANDUM JOHN E. JONES III, District Judge. *1 Presently pending before the Court are two Motions to Dismiss Plaintiff's Action for Declaratory Relief Pursuant to Federal Rule of Civil Procedure 12(b)(1), one filed by Defendant Logan Sheriff (Doc. 5) and one filed by Defendant Henry Sell, Jr. (Doc. 19). For the reasons that follow, we will grant both motions to dismiss, thus declining to exercise our jurisdiction in the matter sub judice. Our dismissal is without prejudice to the parties' ability to seek a declaratory judgment in state court. I. PROCEDURAL HISTORY On October 29, 2014, Plaintiff Nationwide Agribusiness Insurance Company ("Nationwide") filed a Complaint against all Defendants. (Doc. 1). With this action, Nationwide seeks declaratory relief and a determination of the respective rights and responsibilities of the parties with regard to the liability insurance policy at issue in this matter, which was issued by Nationwide to Michael Ungemach, George Ungemach, Michael Ungemach-Partner as insureds. II. FACTUAL SUMMARY The facts, as pleaded in the Complaint, are as follows: Nationwide is an Ohio corporation with its principal offices in Columbus, Ohio. (Doc. 1, ¶ 6). All of the Defendants are._ residents of Palmyra,_ Lebanon County, Pennsylvania. (Id., ¶ 7-10). Nationwide issued a Farmowners Policy and Farm Umbrella Policy, Number FPKN FMPN 6624725813, to the Ungemachs (the "Policy"). (Id., ¶ 11). The Policy period covered Apri122, 2013 to April 22, 2014. (Id.) The Policy covered the Named Insureds, and any other person or organization qualifying as a Named Insured under the Policy. Specifically, it protected the Named Insureds from liability for bodily injury and property damage occurring on the Ungemachs' farm located at 200 Chestnut Hill Road, in Palmyra, Pennsylvania. (Id., ¶ 12). This protection from liability was subject to restrictions and exclusions, detailed in the Policy documents. (Id.) *2 This declaratory judgment action concerning the Nationwide Policy has its origins in an alleged accident injuring a young man, Logan Sheriff, on the Ungemach farm. On or about June 4, 2014, Sheriff filed a personal injury lawsuit in the Lebanon County Court of Common Pleas, alleging that he was injured while attempting to clean the heaters in the chicken houses on the Ungemach farm on November 19, 2013. (Id., ¶ 19-20). Sheriffls alleged injuries include severe personal injuries and economic loss. (Id., ¶ 20). Sheriff's suit asserted claims of ~~~~ ~~ ~(7°17 ~1~harri~c~r~ R~u~~rs. C~a c;l~irr7 tc~ ~arir~inal ~1.. ~~avrn~~ner~~ ~1llark~.~_~ 19 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 10 of 26 Nationwide Agribusiness Ins. Co. v. Sheriff, Not Reported in F.Supp.3d (2015) 2015 WL 365679 negligence against the Ungemachs and Henry Sells, Jr. (Id., Ex. B). According to the Sheriff Complaint, Sheriff was employed at Porr Pig Farm in Lebanon County, working for a man named Robert Porr. (Id., ¶ 21). Nationwide alleges that the Sheriff Complaint states that in November 2013, George Ungemach asked Porn if he could "borrow Logan on a temporary basis" to have him milk cows. (Id., ¶ 22). Porr said he would discuss this possibility with Sheriff. (Id.) Sheriff then contacted George Ungemach, confirming he was willing to work on a temporary basis. (Id., ¶ 24). The parties dispute whether Sheriff should be categorized as an "employee" or a "temporary worker" of the Ungemachs, because the categorization will decide whether the Nationwide Policy covers liability resulting from the alleged accident. The Policy contains an employers' liability exclusion, meaning that if Sheriff is considered an_employee of the Ungemachs,_as _opposed to a temporary worker, the Policy does not cover liability resulting from the accident. (Id., ¶ 55-56). *3 Due to the high volume of declaratory judgment actions filed by insurance companies and their insureds, the Third Circuit has warned that "[t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call on the federal forum." State Auto Ins. Cos. v..Summy, 234 F.3d 131, 136 (3d Cir.2000). Federal district courts consider a variety of factors when exercising their reasoned discretion in these types of declaratory judgment actions. The Third Circuit has recently announced the following eight factor test to guide district court discretion, to the extent they are relevant: "1) the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy; 2) the convenience of the parties; 3) the public interest in settlement of the uncertainty of obligation; Additionally, there are two state court declaratory 4) the availability and relative convenience of other judgment actions pending between the parties. Sheriff remedies; filed the first state declaratory action, and then George and Michael Ungemach filed the second one. (Docs.14-3, 5) a general policy of restraint when the same issues are 30, 32). Both are pending before the Lebanon County pending in state court; Court of Common Pleas. Nationwide intends to seek dismissal of both of these state actions, on the grounds 6) avoidance of duplicative litigation; ..__they were filed ....after Nationwide... filed.... the instant declaratory judgment action in federal court. (Docs.30, 7) prevention of the use of the declaratory action as a 32), method of procedural fencing or as a means to provide another forum in a race for res judicata; III. DISCUSSION A. Abstention Under the Declaratory Judgment Act Under the Declaratory Judgment Act, federal courts have discretionary jurisdiction to "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." Reifer v. Westport Ins. Corp., 751 F.3d 1.29 (3d Cir.2014) (citing 28 U.S.C. § 2201(a)). The federal court's discretion is broad, and is informed by "considerations of practicality and wise judicial administration" in deciding whether to hear the case. YVilton v. Seven Falls Co., S l 5 U.S. 277, 288, 115 S.Ct. 21.37, 132 L.Ed.2d 214 (] 995). Thus, prior to considering the merits of such an action, "it is necessary to determine whether the Court should even entertain [the] case under the Declaratory Judgment Act at all." Employers Mutual Casualty Co. v. Burke Landscaping, .Inc. et al., No. 13-4043, 2014 WL 981195, at * 1 (E.D.Pa. March 13, 2014). 8) (in the insurance context), an inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion." Reifer, 751 F.3d at 146. The Third Circuit cautioned that these factors are "non-exhaustive," and a district court may find it appropriate to consider other factors based on the circumstances of a particular case. Id. In insurance cases, district courts are instructed to continue to consider the guidance from Summy. Id. at 147. There, a federal district court exercised its discretionary jurisdiction in a declaratory judgment action brought by an insurance company against its insured, ultimately granting the insurer summary judgment based on an exclusion in the policy applicable to the case. Summy, 234 F.3d at 132. On appeal, the Third Circuit vacated the district court's judgment, noting that no federal questions were involved in the case, and that it is important for state courts to be ~~t~~ C~ ~(~'17 ~Thc~m~car~ C~~~a~~r~. E~~ cl~itn ~c~ cariinal U.~. C~~v~rr~rn~;r~~ ~ticar#cs. ~0 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 11 of 26 Nationwide Agribusiness Ins. Co. v. Sheriff, Nat Reported in F.Supp.3d (2015) ~.~..~_ ,~~.._.~.,~e.__~_._.._,~_wd~..w~ ~...~ __ _ __ ~._..~~~n._.e__ _,~.~. _._,.~w 2015 WL 365679 able to resolve uncertain areas of state law. Id. at 136. The court also noted that "when the state law is firmly established, there would seem to be even less reason for the parties to resort to federal court," and that only an "unusual" case in such circumstances would merit the exercise of a federal court's jurisdiction. Id. Furthermore, "[the defendant insureds] vigorous objection to the District Court's assumption of jurisdiction should have weighed in favor of refusing to entertain the action." Id. In addition to the consideration of the above factors, the Third Circuit also clarified in Reifer that "the existence of pending parallel state proceedings militates significantly in favor of declining jurisdiction, although it alone does not require doing so." Reifer, 751 F.3d 144-145 (emphasis added). Conversely, where a pending parallel state proceeding is absent, this "militates significantly in favor of exercising jurisdiction .... Id. at 144. Consequently, a court must determine whether a state proceeding is-in-fact-sufficiently "parallel" so as to-weigh against exercising jurisdiction. A parallel state proceeding is "another proceeding ... pending in a state court in which all the matters in controversy between the parties could be fully adjudicated." Id. at 139 (quoting Brllhart v. Excess Ins. Co. ofAmerica, 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942)). B. Application of the DJA *4 Applying the factors and considerations outlined above to the matter sub judice, we first note that there are no federal questions at issue in the underlying case. Nationwide itself concedes that the instant declaratory judgment action only concerns a matter purely within the scope of Pennsylvania state law, to wit, whether Sheriff should be considered a temporary worker or an employee under the policy. (Doc. 30, pg.9). Thus, we find no "special call" on our federal forum. Additionally, it is Nationwide's contention that there are no novel or peculiar issues of state law at play here and thus we should feel comfortable resolving the merits of this action, citing to two federal district court cases for the proposition that the insurance policies' definitions of "temporary worker," in those particular cases, were not ambiguous.' However, Sheriff counters that this is a matter of unresolved state law, asserting that no Pennsylvania court has addressed the term "temporary worker" as used in an employers' liability exclusion in an insurance policy. Both of these arguments can co-exist as true. Although federal district courts have found particular insurance policies' definitions of "temporary worker" to not be sufficiently ambiguous so as to require construction against the insurer, Pennsylvania state courts have not independently addressed the term in this context. However, it is unclear how Nationwide's argument on this point advances its position. Empire Fire expressly stated that Pennsylvania state courts had not yet addressed the term "temporary worker," and whether its definition is ambiguous in this context.2 Thus, Defendants are correct that this is an area of unsettled state law. In this type of situation, Summy advises us to decline jurisdiction and allow state courts to develop the law on the topic. Id. at 136. As a result, this Summy factor weighs against our exercise of jurisdiction. 1 Empire Fire and Marine Ins. Co. v. Jones, 739 P.Supp.2d 746 (1VI.D.Pa.2010); State Auto Property and Cas. Iris. Co. v. Bonk, No. 3:11—cv-1796, 2013 WL 3356045 (M.D.Pa. July 3, 201.3). 2 Specifically, Pennsylvania courts have not addressed the use of the verb "furnish" in an insurance policy's definition of "temporary ~vorker~" and whether the concept of an employer "furnishing" a worker to someone else is ambiguous. Nationwide heavily relies on Canal Ins. Co. v. Paul Cox Trucking, et al., No. 1:05—cv-2194, 2006 WL 2828755 (IvI.D.Pa. Oct.2, 2006), for its argument that the Court should exercise its jurisdiction in this case. Nationwide argues that Canal is much more analogous to the instant case compared to the facts in Summy and Reifer. In Canal, the district court denied the defendant's motion to dismiss the federal declaratory judgment action and decided to exercise its jurisdiction. Cavral, 2006 WL 2828755, at *4. However, Canal involved issues of federal law, which the court found weighed against declining jurisdiction. The presence of a federal issue is a material distinction from our case, under Brillhart. Thus, we do not find Nationwide's reliance on Canal to be particularly persuasive. C. Presence and Scope of Pending Parallel State Proceedings The issue of whether a parallel state proceeding exists is heavily disputed by the parties. As noted earlier, if a parallel state proceeding is found to exist, this triggers a presumption in favor of abstention. Reifer, 751 F.3d at 145. In determining whether it is appropriate to proceed with the federal declaratory judgment action despite a related pending state court action, a federal court should examine "the scope of the pending state court proceeding," in addition to the presence of federal questions and whether there are unsettled issues of state law at issue in the case. Brillhart, U.S. at 495; see also Sammy, 234 F.3d at 136.' "When a pending state court ~;~p~. r';.~~':_` C X017 ~I~hc~msan ~~i~~~rs. I ra claim fa ~rir~inal U.S. ~c~v~rnrr~errt Wark~. 21 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 12 of 26 Nationwide Agribusiness Ins. Co. v. Sheriff, Not Reported in F.Supp.3d (2Q'15) 2015 W L 365679 proceeding and a federal declaratory proceeding present `the same issues ... between the same parties,' the federal court should decline to exercise jurisdiction in deference to the state court." Canal, 2006 WL 2828755, at *2 (quoting Brillhart, 31.6 U.S. at 495). However, if the pending state and federal actions involve different issues or different parties, a federal court may decide to use declaratory relief to resolve the issues before it that are beyond the scope of the state court proceeding. Id. The fifth and sixth Reifer factors are appropriate to consider at this juncture, as well, to wit, the "general policy of restraint when the same issues are pending in state court" and the "avoidance of duplicative litigation." Reifer, 751 F.3d at 146. 234 F.3d at 136. Additionally, Nationwide relies on the case of Choate v. Breaux for its lis pendens argument, but this case explicitly states that the defense of lis pendens is only applicable to the state action, where the parallel federal action was filed first. Choate v. Breaux, No. 4:11—cv-2118, 2012 WL 4103934, at *7 (M.D.Pa. Aug.31, 2012). For all of the reasons aforestated, including that we find that at least one pending parallel state proceeding exists between the parties, the presumption in favor of abstention is triggered. D. Application of the Remaining Reifer Factors 3 Having determined that there is at least one sufficiently We have already discussed the latter two factors, so our parallel proceeding pending in state court, we proceedinquiry in this section of our Discussion will focus on the issue of the scope of the state court proceedings with the rest of our analysis with the overarching _between the parties. _ _ __ presumption that we should decline to exercise -thejurisdiction over declaratory action. Thus, we should only exercise jurisdiction if the balance of the remaining *5 In the instant case, there are not one, or two, but three Reifer factors weigh heavily in favor of exercising jurisdiction. They too do not favor Nationwide. pending state court actions among these parties, including separate declaratory judgment actions filed by Sheriff and Considering the Reifer factors of convenience to the the Ungemachs. Both are intended to determine the scope parties of a federal declaratory judgment action and the of the Nationwide insurance coverage. To add a fourth prevention of the use of this. action as a method of cause of action relating to the same issues between the procedural fencing, these concerns also weigh in favor of parties that are already being heard in state court, and this declining jurisdiction. Clearly, this federal action is not time in federal court, would be the very definition of convenient to any of the. parties involved but Nationwide. -vexatious,--inefficient,-and--duplicative-litigation.- Despite All of the Defendants are united in their desire to not this, Nationwide contends that the other state filing, relitigate in federal court, when they are already Sheriff s underlying negligence suit, does not involve the expending their time and resources in three state court same set of issues as would a declaratory judgment action actions. Further, all of the Defendants are located in the concerning the scope of coverage of the insurance policy same geographic area of Lebanon County, so the Lebanon at issue. While this cannot be gainsaid, it still leaves two County Court of Common Pleas in that area is convenient state declaratory judgment actions seeking to resolve the for them. We are also concerned about procedural fencing very same issue Nationwide aims to resolve in the matter and Nationwide's motivations for so vigorously pursuing sub judice: whether Nationwide's insurance policy covers a declaratory judgment action in a federal forum, when all the defense and indemnification of the Ungemachs with of the other parties involved oppose it, and declaratory regard to Sheriff's injury on their farm.a judgment actions have been filed in state court. In any event, we note that it is not strictly necessary to have a pending parallel state proceeding in a case where there are no issues of federal law, in order for us to decline to exercise our jurisdiction in a declaratory judgment action. Reifer, 751 F.3d at 146. Nationwide also argues that the state court declaratory judgment actions were filed after the instant action and are thus barred by the doctrine of lis pendens. However, the Third Circuit has explicitly stated that it is "irrelevant" to our considerations that a state declaratory judgment action is filed after the federal declaratory action. Summy, *6 Regarding the other generally applicable factors, none weigh strongly in favor of retaining jurisdiction. There does not appear to be a significant public interest in a federal court resolution of this case, especially since as noted there are no federal questions involved. Concededly, a federal court's declaratory judgment would resolve the insurance coverage issue for the parties, thus removing an uncertainty of obligation among them with regard to the Policy, so that Reifer factor weighs in favor of retaining jurisdiction. However, other relatively convenient remedies are available, considering Nationwide could have pursued a declaratory judgment action in state court under Pennsylvania state law, and "n`~'t_~a ~ ?Q17 ~~~~ar~~t~~~r~ F~~t~r~. c~ ~I~it~~ 9c~ c~, :r~- ~I (J.~s, C~~u~;rnrn~rr~ Vtfork~, 2..~ Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 13 of 26 Nationwide Agribusiness Ins. Co. v. Sheriff, Not Reported in F.Supp.3d (2015) 2015 WL 365679 ~ ~~ ~~ indeed two declaratory judgment actions are already pending in state court with the purpose of resolving the question of the scope of coverage of the insurance policy at issue. Lastly, the eighth Reifer factor, which notes the "inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion" applies to the instant matter. Reifer, 751 F.3d at 146. Nationwide is defending the Ungemachs in the underlying personal injury action, but under reservation of rights. Having weighed all the factors derived from Reifer, Summy, and Brillhart, we conclude that the most judicious and efficient decision is to decline to exercise our jurisdiction in this matter. N. CONCLUSION _ __ Consistent with our above discussion, we shall grant Defendants' Motions to Dismiss and decline to exercise our jurisdiction in the matter sub judice. This case shall be dismissed without prejudice, so the parties may proceed to resolve the matter amongst them in state court. End of Document An appropriate order shall issue. ORDER In accordance with the Memorandum issued on today's date, it is hereby ORDERED that: 1. Sheriff's Motion to Dismiss (Doc. 5) is GRANTED. 2. Sells' Motion to Dismiss (Doc. 19) is GRANTED. 3. This case is DISMISSED WITHOUT PREJUDICE. 4. The Clerk of Court is directed to CLOSE the file on this case. All Citations Not Reported in F.Supp.3d, 2015 WL 365679 C~ 2017 Thomson Reuters. No claim to original U.S. Government Works. .._, t~ Zf31 7 "~17ca~~n~c~r~ ~~uf~r~. ~1c cl~it~n tra aric~ir:~l tJ,. ~c~v~rnm~nt lNc~rks. 23 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 14 of 26 Lewis v. Qelp Family Powder Coatings, Inc., Nat Reported in F.Supp.2d (2011) ..~..~~_~~~~a~.,a,~~M.e.~.~~._.~.~... _ ~__ _ __...~~ ~.._.~~.a.a._.__~._~ 2011 WL 1230207 2oii WL ia3o2o~ Only the Westlaw citation is currently available. United States District Court, W.D. Pennsylvania. Clint N. LEWIS, Plaintiff, property damage. For the reasons set forth below, the Court will grant Defendants' Motion for Partial Summary Judgment motion, and will deny Plaintiff's Motion for Summary Judgment. v. DELP rAMILY POWDER COATINGS, INC., et al., Defendants. I. BACKGROUND AND PROCEDURAL HISTORY At all relevant times, Plaintiff, Clint N. Lewis, owned Civil Action No. o8—i365. commercial real estate located at 1605 Route 422 E, ~ Fenelton, Pennsylvania 16034 (the "Subject Property"). March 3i, 2oi1. (Am. Compl. ¶ 1, ECF No. 20.) At the time this lawsuit was filed, Plaintiff resided in Westfield, Indiana. Defendants Clyde C. Delp and Donna Delp are husband Attorneys and Law Firms and wife and reside in Butler, Pennsylvania. Defendants James W. Creenan, Creenan Law Offices, PC, Walter A. Delp and Carol Delp are husband and wife and -- -Murrysville, PA, for-Plaintiff.-- - --- reside in East_._ Kittanning, Pennsylvania. _Defendants Clyde C. Delp, Donna Delp, Walter A. Delp, and Carol Jason E. Rolls, Kurt S. Risl~or, Rishor Simone, Butler, Delp are collectively referred to as the "Delps" or the PA, for Defendants. "Individual Defendants." Defendant Delp Family Powder Coatings, Inc. ("DFPC") was incorporated on or about April 8, 2002 under Pennsylvania law,' with its principal OPINION place of business in Fenelton, Pennsylvania, and operated a powder coating business on the commercial property owned by Plaintiff. Clyde Delp and Walter Delp are the LENIHAN, United States Magistrate Judge. President and Vice—President of DFPC, respectively. (Clyde Delp Dep. at 207.) Plaintiff seeks damages in *1 Currently before the Court for disposition are two excess of $75,000 for the alleged damage to his property motions for summary judgment in this diversity case, and for the diminution in value to the property.2 which arises out of Defendants alleged lease and use of commercial real property owned by Plaintiff located in Fenelton, Pennsylvania. Defendants have moved for partial summary judgment (ECF No. 46) on three bases: (1) Plaintiff has not and cannot produce sufficient evidence from which a jury could find that Defendants expressly contracted to pay Plaintiff's attorneys' fees, (2) Plaintiff's claims of negligence and promissory estoppel are not entitled to recovery of attorneys' fees, and (3) Plaintiff's negligence claim is barred by the gist of the action doctrine. Plaintiff has also filed a motion for summary judgment (ECF No. 49), arguing that there are no material facts in dispute and that he is entitled to judgment as a matter of law, on the following points: (1) Defendants breached the oral lease agreement and are responsible for unpaid (abated) rent, unauthorized alterations, and property damage; (2) Defendants' negligence in operating and maintaining their powder coating operation caused property damage to Plaintiff s building in the form of damaged roof shingles, sheathing and .trusses, concrete slab, and unpermitted disposal of industrial wastewater in violation of Pennsylvania law; and (3) Plaintiff's evidence is undisputed that his property suffered a diminution of value due to the extensive According to the Pennsylvania Department of State, the incorporation date of DFPC is April 8, 2002. However, Defendants contend that the creation date of DFPC is disputed. Defs.' Am. Resp. to PI.'s Concise Stmt. Material Facts at ¶ 9, ECF No. 67. Thus, this Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332(a)(1}. In or about January of 2002, Plaintiff's father, Nick Lewis, entered into discussions with Clyde Delp and Walter Delp regarding the leasing of the Subject Property to the Defendants for the purpose of operating a family powder coating business, which had yet to be formed. In February of 2002, Clyde Delp tendered $500.00 cash to Nick Lewis as a deposit to hold the building until February 25, 2002. Although Nick Lewis and Clyde and Walter Delp agreed that $3,000.00 per month was a fair price for rent of the Subject Property, in early March of 2002, they negotiated a reduction in the rent for the first '~~~`~.~1 C~~ 2{717 Thc~rr~~c~~7 F~~~1r~. f~a el~im tca ari~ir~~l tJ.~~ Governrn~nt Wc~rk~. 2~ Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 15 of 26 Lewis v. Delp Family Powder Goatings, Inc., Not Reported in ~.Supp.2d (2011) 2011 WL 1230207 six months to $1,500.00 per month.' On March 7, 2002, Clyde Delp sent Nick Lewis a check for $1,500.00 for the a Specifically, Attorney Crisman informed Defendants first month's rent written from the personal checking that they would have to meet the following three account of Clyde and Donna Delp. On April 5, 2002, conditions in order to remain as tenants: (1) payment of Walter Delp paid $1,500.00 for the April rent by personal $9,000.00 allegedly due in deferred rent, (2) providing check from the account of Walter and Carol Delp. additional information regarding the powder coating operation, and (3) executing written lease agreement, 3 all within thirty days of May 4 2006. (Pl.'s App. Ex. 4, The parties disagree, however, as to the reason for the reduction in rent and whether the reduction was to be repaid. Plaintiff contends that the $9,000.00 reduction for the first six months was an abatement to assist the business during its start up period and was to be collected later on during the term of the lease. On the other hand, Clyde and Walter Deip contend that during lease negotiations, Nick Lewis represented to them that the Subject Property possessed 480 volt electric line and natural gas, but an inspection of the properly in early March revealed otherwise. Clyde and Walter Delp informed Nick Lewis that there would be no lease -without.-.the 480.. volt_ electric__line and natural gas._ According to C►yde and Walter Delp, Nick agreed to reduce the rent to $1,500.00 a month for the first six months in exchange for the Delps paying for the materials and labor to make modifications to the building needed for the powder coating operation. Clyde and Walter submit that they never agreed to repay the rent reduction nor did Nick Lewis expect them to do so. (Clyde Delp Dep. at 59-61.) *2 Clyde and Walter Delp, initially as the incorporators of DFPC, and subsequently, as its officers, intended that the only parties to the lease would be themselves, as officers of DFPC, and Nick Lewis. (Clyde Delp Dep. at 99.) However, Plaintiff maintains that all of the Individual Defendants, as well as DFPC, were parties to the lease agreement. Clyde and Walter Delp further maintain that they entered into an oral lease with Nick Lewis upon the understanding that a written lease agreement would be entered into after the corporation was formed. However, it appears that a written lease agreement was never negotiated nor executed. Nonetheless, the Delps continued operating the powder coating business for over four years under the oral lease. On May 4, 2006, Plaintiff's attorney at that time, David A. Crisman, Esquire, sent a letter to Clyde Delp and family and Walter Delp and family, in which he gave the Defendants an ultimatum—either pay the $9,000 allegedly due in abated rent and sign a written lease agreement within thirty days, or the oral lease would be terminated and Defendants would have to vacate the premises. (Pl.'s App. in Supp. Resp. Concise Stmt., Ex. 4, ECF No. 57-1.) Defendants disputed that they owed $9,000.00 in abated rent, and continued to occupy the premises and pay rent through September 2006. ECF No. 57-1.) After Defendants vacated the Subject Property in September of 2006, Plaintiff and/or Nick Lewis inspected the property and purportedly found damage to the Subject Properly, which Plaintiff claims consisted of damage to the roof trusses, roof decking, shingles, walls, footers, concrete pads, septic system, electrical service and wiring, phone lines, storage shelves and damages arising out of Defendants' failure to properly dispose of hazardous materials at the Subject Property. Defendants dispute that their powder coating operation caused the alleged damages, and submit that many of the building components were already damaged when they took possession in March of 2002, and that the electrical and other systems were in working order when they vacated the premises. Plaintiff claims he decided to sell the property "as is" for a diminished value, because the cost of the repairs would have been too high. Although the Subject Property allegedly had a fair market value of $1,100,000 (exclusive of property damage and liability, and based on the appraisal by Plaintiff's real estate expert Kelly), Plaintiff sold the property for substantially less, in "as is" condition, for $590,000. Plaintiff filed a claim for the property damage with his insurance company, Atlantic States Insurance Company ("Atlantic States"), which denied the claim. After Atlantic States denied his claim Plaintiff sued Atlantic States in this District, at Civil Action No. 2:08~v-1040.5 Shortly thereafter, Plaintiff filed the instant lawsuit against the Defendants, asserting three claims—breach of contract against the Individual Defendants (Count I); negligence against all Defendants (Count II); and promissory estoppel against the Individual Defendants (Count III). (Am. Compl., ECF No. 20.) In response, Defendants filed three counterclaims—in the first and second counterclaims, DFPC filed a breach of contract claim and quantum merit claim, respectively, against Plaintiff; in the third counterclaim, the Delps brought a wrongful use of civil proceedings claim against Plaintiff. (Ans., ¶¶ 81-93, ECF No. 21.) After the close of discovery, Defendants filed a Motion for Partial Summary Judgment (ECF No. 46), and Plaintiff filed his own Motion for Summary Judgment (ECF No. 49). The motions have been fully briefed and responded to, and thus, are ripe for Y ~ tt t0'1 "I ~Ch~rr~s~~ F~~~~t~t~~. [~lcr ~I~im tts c?~~iyir7~l ~~.. ~c~vc~rn~n~nt WarK~, ~~a Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 16 of 26 Lewis v. Delp Family Powder Coatings, Inc., Not Reported in F.Supp.2d (2011 j 2011 WL 1230207 disposition. That case has been stayed pending the outcome of the dispute in the present matter. II. STANDARD OF REVIEW *3 Summary judgment is appropriate 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, 6 show that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c). Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party's case, and for which that party will bear the burden of proof at trial: C'elotex Corp: v. C'atrett, 477 U.S: 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). their intent to enter into a written lease agreement, one was never executed nor negotiated. (ECF No. 47, ¶¶ 1, 7-8; ECF No. 57, ¶¶ 1, 7-8.)~ Specifically, Plaintiff testified that the proposed lease agreement attached to his Amended Complaint as Exhibit I, which provided in part for attorneys' fees, was never negotiated between the parties. (ECF No. 47, ¶ 7; ECF No. 57, ¶ 7.) In addition, there is no written agreement between Plaintiff and the Individual Defendants and/or DFPC regarding payment of his attorneys' fees. More specifically, the moving party bears the initial burden of identifying evidence which demonstrates the absence of a genuine issue of material fact. Once that burden has been met, the nonmoving party must set forth "specific facts showing that there is a genuine issue for trial" or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. Matsushita Elec. Indus. Corp. v. Zenith Radio C.orp.,-475 U.S. 574,-387, 106 S.Ct.-1348, 89 L.Ed.2d-538 (1986) (quoting FED.R.CIV.P. 56(e)) (emphasis added by Matsushita Court). An issue is genuine only "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). III. DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT A. Relevant Facts The facts material to Defendants' motion for partial summary judgment are derived largely from Plaintiff's deposition testimony. Specifically, Defendants point to Plaintiff's testimony that the Delps entered into an oral lease with him for the use of the Subject Property to operate a family powder coating business. (Defs.' Concise Stmt. Material Facts in Supp. Mot. Partial Summ. J. ("Defs.' CSMF in Supp. SJ") at ¶ 3, ECF No. 47; Pl.'s Responsive Concise Stmt. Material Facts ("Pl.'s Resp. CSMF") at ¶¶ 2-3, ECF No. 57.) Plaintiff further testified that DFPC was not a party to the oral lease. (ECF No. 47, ¶ 2; ECF No. 57, ¶¶ 2-3.) Although the parties discussed Plaintiff denies that there was no written lease agreement, and he bases his denial on the parties' (Plaintiff's and the Individual Defendants') contemplation of such an agreement and agreement to sign a written lease. (Pl.'s Resp. CSMF at ¶ 1, ECF No. 57.) However, that does not negate the undisputed fact that a written lease agreement was not executed by the parties. In paragraph 29 of his Amended Complaint, Plaintiff testified that he was referring to both the Individual Defendants and DFPC when he alleged that "[p]ursuant to the agreement between the parties, Defendants assumed all obligations, covenants and conditions of the Tenants under the oral lease and were advised that hazardous materials were not permitted on the Subject Property." (ECF No. 47, ¶ 5; ECF No. 57, ¶ 5.) In paragraph 32 of his Amended Complaint, Plaintiff testified that he was referring to both the Individual Defendants and DFPC when he alleged that "[t]he Lease places all responsibility for repairs and maintenance of the Subject Property, including both structural and non-structural elements, solely on Defendants, the Tenants." (ECF No. 47, ¶ 6; ECF No. 57, ¶ 6.) B. Discussion *4 Defendants move for summary judgment on two issues—whether Plaintiff is entitled to recover his attorneys' fees from Defendants, and whether Plaintiff's negligence claim is barred by the gist of the action doctrine. The Court will address each argument in turn. 1. Plaintift"s Attorneys' Fees Generally, Pennsylvania state courts follow the American Rule in determining whether to award attorneys' fees in a given case. In essence, the American Rule provides that the "parties to litigation are responsible for their own counsel fees, `unless otherwise provided by statutory authority, agreement of the parties, or some other recognized exception.' " Mrozek v. Eiter, 805 A.2d 535, 538 (Pa.Super.Ct.2002) (quoting Hart v. O'Malley, 781 ~~ 2017 T"~~am~c~~7 I~~u~er~. I~c~ claim t~ carigin <~~f t~l.~. C~overr7rr~~nf War{~s, 27 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 17 of 26 Lewis v. Delp Family Powder Coatings, Inc., Not Reported in F.Supp.2d (2011 j _ _~_.,..~.~_...~_..._~.~~..._.~. --~m..d.m. ~~...~ ~. .~ 2011 WL1230207 A.2d 1.21.1, 1216 (Pa. Super.Ct.2001)) (citing Merlino v. Delawa~°e County, 556 Pa. 422, 728 A.2d 949, 951 (Pa.1999) ("This Court has consistently followed the general, American rule that there can be no recovery of attorneys' fees from an adverse party, absent an express statutory authorization, a clear agreement by the parties or some other established exception.")). See also O'Brien v. Travelers Prop. & Cas. Ins. Co., 65 F. App'x 853, (3d Cir.2003). Moreover, Pennsylvania courts have routinely applied the American Rule to deny recovery of attorneys' fees in breach of contract and negligence cases. See, e.g., Jama Corp. v. Gupta, Civ. A. Nos. 3:99-cv-01624 & 1574, 2008 WL 108671, *3 (M.D.Pa. Jan.4, 2008) (citing Krassnoski v. Rosey, 454 Pa.Super. 78, 684 A.2d 635, 637 n. 2 (Pa.Super.Ct.1996)); Allegrino v. Conway E & S, Inc., Civ. A. No. 09-1507, 2010 WL 2035658, *12 (W.D.Pa. May 18, 2010) (citing cases) (footnote omitted). the litigation. There is simply no allegation or evidence in the record that any of the Defendants or their counsel engaged in behavior during this litigation that would justify an award of attorneys' fees under either Section 2503 or Rule 11. Accordingly, neither Section 2503 nor Rule ll provides Plaintiff with an exception to the American Rule. *5 Next, Plaintiff posits that the evidence at trial may result in a finding by the triers of fact that Defendants deliberately evaded a written commercial property lease, which would have included a provision for attorneys' fees. In such case, Plaintiff submits that the jury or Court would be authorized to award Plaintiff his counsel fees. In support, Plaintiff incorporates his Responsive Concise Statement of Material Facts (ECF No. 57), which he submits contains "direct or inferential evidence that Defendant willfully breached the agreement and used -- Defendants --submit ---that -- under the ...American ._._Rule, a _ such as a pretext to_ avoid the _written_ agt~ement."' (Pl.'s prevailing party cannot recover attorneys' fees from an Mem. of Law in Opp'n to Defs.' Mot. for Summ. J. at 2, adverse party without an express statutory provision, a ECF No. 56.) The Court is not persuaded by Plaintiff's clear agreement by the parties, or some other established argument. exception. In the case at bar, Defendants contend that there is no evidence in the record to show that any of the ~ In further support of his willful breach argument, Defendants expressly contracted to pay Plaintiff's Plaintiff contends Defendants agreed to provide attorneys' fees. According to Defendants, given that insurance coverage for their operation, but Defendants' DFPC was not a party to the oral lease, and none of the insurers) failed to cure their damage to his property. Defendants entered into a written agreement regarding (ECF No. 56 at 2.) However, Plaintiff fails to cite any payment of attorneys' fees, the record evidence fails to support for this statement in the record. _show_ that any of Defendants expressly contracted to pay Plaintiff's attorneys' fees. Defendants further contend that there are no genuine issues of material fact and all Defendants are entitled to summary judgment as a matter of law as Plaintiffls legal and equitable claims of negligence and promissory estoppel do not provide for recovery of attorneys' fees. In response, Plaintiff acknowledges the American Rule, but requests that the Court deny, or at least defer until time of trial, the portion of Defendants' motion for partial summary judgment seeking dismissal of Plaintiff's prayer for attorneys' fees. In support, Plaintiff argues that one or more exceptions to the American Rule may apply here. In particular, Plaintiff points to 42 Pa. Cons.Stat. Ann. § 2503 and Federal Rule of Civil Procedure 11, as potentially providing authorization to award attorneys' fees. Section 2503 is a Pennsylvania statute authorizing an award of attorneys' fees, inter alia, as a sanction for dilatory, obdurate or vexatious conduct, and Rule 11 provides for sanctions where Rule 11(b) has been violated. Plaintiffls response misses the mark. Both the statutory provision and rule cited by Plaintiff are to be used as a sanction where either counsel or a party is found to have engaged in bad faith or dilatory conduct during First, assuming, for argument's sake, that Plaintiff could successfully prove at trial that Defendants deliberately evaded a written commercial property lease, which seems questionable given the summary judgment record, Plaintiff has failed to show, or at least raise a material issue of fact, that the written agreement allegedly evaded actually existed. Plaintiff, as well as Clyde and Walter Delp, testified that neither side entered into any negotiations with regard to the proposed lease agreement. The parties further agree that the proposed lease agreement was never executed. Moreover, Plaintiff has not provided any evidence to show that the written agreement Defendants allegedly evaded was the proposed lease agreement attached to his Amended Complaint as Exhibit I. Indeed, Clyde and Walter Delp both testified they never saw the proposed lease agreement before this litigation began, and their testimony is not disputed. Therefore, to the extent Plaintiff relies on the attorneys' fee provision in the proposed lease agreement to provide an exception to the American Rule, such reliance is misplaced. Second, Plaintiff does not identify specifically which ' ~~ ~ '~`~ C~ 2017 ~h~rr~sa~ ~ut~r .bra ~I~irrt ~~ aric~in~l lJ,~. ~overnrn~nt W~ark~. ~~ Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 18 of 26 Lewis v. Delp Family Powder Coatings, Inc., Not Reported in F.Supp.2d (2011) _..~~....,...__w___...~,._,~ ..._...~~... _ _ _ __._.~..__~_ _._ ...__ 2011 WL1230207 paragraphs of his Responsive Concise Statement of Material Facts support his argument. From the Court's own review of Plaintiff's Responsive Concise Statement of Material Facts, it appears that the only paragraph that is relevant to this argument is paragraph 1. And when the Court reviews paragraph 1 of Plaintiff's Responsive Concise Statement of Material Facts, it cannot conclude that the cited evidence provides authority for an award of counsel fees.R Rather than try to establish the existence of a written agreement which includes a provision for attorneys' fees, Plaintiff turns instead to the record to point out conduct by Defendants from which a reasonable jury could infer that Defendants deliberately evaded the alleged "written agreement." Plaintiff's argument puts the proverbial cart before the horse. Without some evidence of the existence of a written agreement in the first instance, it is simply irrelevant that the Defendants might have intentionally tried to evade its enforcement. Plaintiff has failed to point to-.any waiting in-the-record-that could possibly constitute the referenced "written agreement." 8 Specifically, in paragraph 1, Plaintiff cites the deposition testimony of Clyde Delp, to the effect that Clyde told Nick Lewis he expected a written lease, and wanted the lease in writing because he did not want any misunderstanding (Clyde Delp Dep. at p. 45, lines 21-25; p. 46, lines 18-20.) Clyde further testified that there was an oral agreement that if everything worked out, starting in April, everything he and Nick Lewis agreed to verbally would be put in a written agreement; Nick Lewis was supposed to come up with a written agreement that Clyde could present to his attorney (Id. at p. 55, lines 23-25, p. 56, lines 1-9). Plaintiff also cites to the deposition of Nick Lewis at page 54, lines 4 through 8, but the cited testimony merely indicates that at a meeting (date unknown) with Nick Lewis, Clyde and Walter Delp did not give Nick any written information about the terms that they wanted to have in the lease or agreement to lease the property. Plaintiff also cites Clyde Delp's testimony in support of the statement in his Responsive CSMF that the "individual Defendants, through their own conduct, later evaded Plaintiffls efforts to secure the written lease." Pl.'s Resp. CSMF at ¶ 1, ECF No. 57 (citing Clyde Delp Dep. at p. 101, lines 15-25—p. 102, lines 1-5). However, the Court finds nothing in the cited portion of Clyde's deposition testimony to support such statement. Similarly, Plaintiff fails to cite to evidence in the record which supports his statement "Defendants' continued non-compliance with the Plaintiff's tolerant requests,...." Id. In addition, the remaining cites to the record in paragraph 1 (Clint Lewis Dep. at p. 194, lines 8-13; May 4, 2006 letter from Attorney Crisman to Defs. (Pl.'s App. Exs. 1 & 4, ECF No. 57-1).) provide evidence of Plaintiffls position, that it appeared to Clint Lewis that Defendants were not going to honor the oral agreement between them, and that Defendants would have to satisfy three conditions in order for the landlord/tenant relationship to continue. However, material issues of fact exists as to what terms comprised the oral agreement or whether the oral agreement was, in fact, breached. For example, evidence exists in the record which, if believed by the triers of fact, supports the Delps' position that they did not owe $9,000.00 in additional rent. *6 Plaintiff further argues that the quantum of his attorneys' fees represents a consequential damage directly flowing from the Defendants' breach of contract, and the amount incurred will be an element of damage against his insurance company, Atlantic States, in the related litigation filed at docket number 2:08–cv-1040. According to Plaintiff, he would not have incurred attorneys' fees in this case and the related litigation but for Defendants breach of the lease and the substantial damage that resulted to the building. Again, Plaintiff fails to cite any legal authority for this proposition. Plaintiffls attempt to recast his attorneys' fees as consequential damages of the breach is unavailing and nothing more than a pedestrian attempt to circumvent the American Rule. Indeed; Pennsylvania appellate courts have held that attorneys' fees are not recoverable as consequential damages. See, e.g., Haverstick v. Erie Gas Co., 29 Pa. 254, 1.857 WL 7455, *3 (Pa.1857) (holding in an action for breach of contract plaintiff could not recover as damages the cost of his attorney's fees to bring the lawsuit); Caldwell v. Keystone Insurance Cv., 212 Pa.Super. 379, 243 A.2d 448, 449-50 (Pa.Super.Ct.1968) (superior court affirmed the trial court's denial of the insured's damage claim, holding that the insured could not recover his costs, including attorneys' fees, associated with the obtaining of a judgment against the tortfeasor responsible for the insured's loss). Finally, Plaintiff argues that because Defendants have not moved for summary judgment on his promissory estoppel claim, under which he seeks to enforce the terms of the written agreement which includes a provision for payment of Plaintiff s attorneys' fees, the issue of attorneys' fees can only be addressed at trial. In support, Plaintiff cites Thomas v. E.B. Jermyn Lodge No. 2, 693 A.2d 974, 977 (Pa.Super.Ct.1997), acase in which the superior court held that, under a promissory estoppel theory, sufficient evidence existed from which the jury could find that the plaintiff reasonably relied on the fraternal lodge's promise to pay his legal fees. The superior court's holding in Thomas is distinguishable, however, because in that case, the court found sufficient evidence existed that the fraternal lodge promised to pay plaintiff s legal fees. In contrast here, Plaintiff has failed to produce, in opposition to Defendants' summary judgment motion, any evidence ~:i ~~ ~f~`1 % Th~n°~~~~7 ~~~~at~rs, ~l~a ~I~it~n t~ c~rigin~l ~J.. C~c~u~rn~~n~n~ VVttork~. 2~ Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 19 of 26 Lewis v. Deip Family Powder Coatings, inc., Not Reported in F.Supp.2d (2011) 2011 W~ 1230207 that Defendants agreed to pay his attorneys' fees ar at least raises an issue of fact in that regard. In any event, the Court does not find Plaintiff's argument persuasive. The American Rule applies to Plaintiff's promissory estoppel claim as it is essentially a claim for breach of contract. As Plaintiff has failed to show that an exception to the American Rule applies to his promissory estoppel claim, the Court finds the mere' fact that Defendants have not moved for summary judgment on his promissory estoppel claim does not preclude this Court from granting Defendants' summary judgment motion on terms of the contracts, and not by the larger social policies embodied in the law of torts." Bash v. Bell Telephone Co., 41.1. Pa.Super. 347, 601. A.2d 825, 830 (1.992). 247 F.3d at 103-04.~ In addition, the Pennsylvania Superior Court noted in Bash that a breach of contract claim "may not be converted into a tort action simply by alleging that the conduct in question was done wantonly." Phico Ins. Co., 663 A.2d at 757 (citing Bash, 601 A.2d at 829). Plaintiff's request for attorneys' fees. y The Pennsylvania Supreme Court has yet to address the "gist of the action" doctrine, and, therefore, has not *7 Accordingly, as Plaintiff has failed to point to a issued a ruling expressly adopting it. Pennsylvania's statutory basis, clear agreement of the parties, or another intermediate appellate courts have, however, and those applicable exception to the American Rule, the Court decisions "must be accorded significant weight and finds that Plaintiff is not entitled to recover his attorneys' should not be disregarded absent persuasive indication fees froixa Defend~~ts._Additignally, 2s_the American Rule __ that the highest court would rule otherwise." U.S. bars recovery of attorneys' fees on negligence claims, Underwriters Ins: Ca. v: Liberty-Mutual-Ins. Co.; -80 P.3d 90, 93 (3d Cir.1996). The Pennsylvania Superior Plaintiff's negligence claim does not provide a basis for Court, as well as several district courts, have predicted recovering attorneys' fees, and in any event, his that the Pennsylvania Supreme Court will adopt the negligence claim is barred by the gist of the action doctrine. See eToll, 811 A.2d at 14 (Pa.Super.Ct.2002); doctrine. See discussion infra in Part 2. Woods v. LIZ~i Med GGC, No. CN.A. 08-2495, 2009 WL 141854, at *6 n. 11 E.D.Pa. Jan.21, 2009) (citing cases); Freedom t'rop., L.P. v. Lansdale Warehouse 2. Negligence Claim Defendants also request summary judgment on Plaintiff's negligence claim, arguing that the gist of the action doctrine precludes Plaintiff from recasting his ordinary breach of contract claims as tort claims. The "gist of the action" doctrine prevents a plaintiff from bringing a tort claim that merely restates a breach of contract claim. eToll, Inc. v. Elias/Savion Adve~°., .Inc., 811 A.2d 10, ] 4 (Pa.Super.Ct.2002); Phico /ns. Co, v. Presbyterian Med. Serv. Corp., 444 Pa.Super. 221, 663 A.2d 753, 757 (Pa.Super.Ct.1995); see also Bohlen—Uddeholm Am., Inc. v. Ellwood Group, Inc., 247 F.3d 79, 103 (3d Cir.2001). The court of appeals in Bohlen—Uddeholm further explained: Under the "gist of the action" test, to be construed as a tort action, the [tortious] wrong ascribed to the defendant must be the gist of the action with the contract being collateral.... [T]he important difference between contract and tort actions is that the latter lie from the breach of duties imposed as a matter of social policy while the former lie for the breach of duties imposed by mutual consensus. Redevelopment Auth. of Cambria County v. International Ins. Co., 454 Pa.Super. 374, 685 A.2d 581, 590 (1996) (en bane) (quoting Pl7ico Ins. Co. v. Presbyterian Med. Sews. Corp., 444 Pa.Super. 221, 663 A2d 753, 757 (1995)). In other words, a claim should be limited to a contract claim when "the parties' obligations are defined by the Co., Inc., Civ. A. No. 06-5469, 2007 WL 2254422, at *4-5 (F,.D.Pa. Aug.2, 2007). The mere existence of a contractual relationship between two parties does not necessarily bar one party from asserting a tort claim against the other. Knit With v. Knitting Fever, Inc., Civ. A. No. 08-4775, 2009 WL 3427054, *4 (E.D.Pa. Oct.20, 2009) (citing Bohlen—Uddelholm, 247 F.3d at 104) (other citation omitted)). Nonetheless, the gist of the action doctrine will preclude a party from pursuing a tort claim for the mere breach of contractual duties, where a separate or independent event giving rise to the tort is lacking. Id. (citing Smith v. Lincoln Benefit Life Co., No. CIV.A.08-1.324, 2009 WL 789900, at *20 (W.D.Pa. Mar. 23, 2009) (citing Air Prods. & Chems., Inc. v. Eaton Metal Prods. Co., 256 F.Supp.2d 329, 340 (E.D.Pa.2003)). As the district court explained in Knit With: *8 "When a plaintiff alleges that the defendant committed a tort in the course of carrying out a contractual agreement, Pennsylvania courts examine the claim and determine whether the ̀ gist or gravamen of it sounds in contract or tort." Sunguest Info. Sys., Inc. v. Dean Witter Reynolds, Inc., 40 F.Supp.2d 644, 651 (W.D.Pa.1.999). To make this determination, the court must ascertain the source of the duties allegedly ~.'.~'~~ C~ 2f~~ 7 7harr~:~an I~~ut~rs. ~lra ulairn try ori~}inal lJ.~. C~ov~rr~rr~~nt Works. 30 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 20 of 26 Lewis v. Delp Family Powder Coa#ings, Inc., Not Reported in F.Supp.2d (2011) 2011 WL 1230207 breached. Sunburst Paper, LLC v. Keating Fibre Int'l., No. CIV.A.06-3957, 2006 WL 3097771, at *2 (E.D.Pa.Oct.30, 2006). 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 the contract itself ...; (3) where the liability stems from a contract ...; or (4) where the tort claim essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract. eToll, 811 A.2d at 19 (internal quotation marks and citations omitted). "In other words, if the duties in question are intertwined with contractual obligations, the claim sounds in contract, but if the duties are collateral to the contract, the claim sounds in tort." Sunburst Paper, 2006 WL 3097771, at *2. 2009 WL 3427054, at *5. The Court decides as a matter of law _whether the gist of the action doctrine applies to the case at bar. Knit YVith, 2009 WL 3427054, at *5 (citing Alexander Mill Servs., LLC v. Bearing Distribs., Ins., No. CIV.A. 06-1116, 2007 WL 2907174, *8 (W.D.Pa. Sept. 28, 2007)); see also eToll, 811 A.2d at 15. In support of their argument that the gist of the action doctrine precludes Plaintiffs negligence claim, Defendants point to certain allegations in the Amended Complaint, specifically, paragraphs 39, 49 and 51, wherein Plaintiff "haphazardly" alleges Defendants' use of the property was "tortious." (Defs.' Mem. of Law in Supp. Partial Summ. J. at 5, ECF No. 48.) Defendants also point to paragraph 29 where Plaintiff alleges "Defendants assumed all obligations, covenants and conditions of the Tenants under the oral lease and were advised that hazardous materials were not permitted on the Subject Property." Am. Compl., ¶ 29. In addition, Defendants direct the Court to paragraph 32, in which Plaintiff alleges that the "Lease places all responsibility for repairs and maintenance of the Subject Property, including both structural and non-structural elements, solely on Defendants, the Tenants." Am. Compl., ¶ 32. Significantly, Defendants argue, Plaintiff testified that the allegations in paragraphs 29 and 32 apply to all Defendants. Defendants further submit that the damages alleged in support of Plaintiff's negligence claim are incidental to the damages arising out of the alleged breach of contract involving Defendants' usa of the Subject Property. Finally, Defendants maintain that even after discovery, there is insufficient evidence from which the trier of fact could find that the alleged damages resulted from some transcendent social policies making the purported lease collateral. his tort claim is the gist of the action because he never agreed to allow Defendants to devastate his building and he never had an agreement with Delp Family Powder Coatings, as the tenancy began before it was incorporated. Plaintiff's argument misses the mark. If the standard for applying the gist of the action doctrine was, as Plaintiff contends, merely asserting that he did not agree to allow Defendants to devastate his building,'° it would turn the doctrine on its head. Plaintiff would have the Court ignore the fact that he has alleged in his breach of contract claim that under the oral lease, the Defendants assumed all obligations, covenants and conditions of the Tenants (Am.Compl., ¶ 29), assumed all responsibility for repairs and maintenance of the Subject Property (Am.Compl., ¶ 32), and that under the oral lease and the proposed lease agreement, the Individual Defendants are liable for all of the obligations of Tenants, including, among other things, seeking authorization prior to modifications and/or alterations of the Subject Properly, and maintaining and. repairing the Subject Property in accordance with the lease (Am.Compl., ¶ 44). However, Plaintiff cannot claim for purposes of his breach of contract claim that an enforceable agreement exists, and then turn around and argue, for purposes of his tort claim (and the gist of the action doctrine), that there is no agreement. Plaintiff simply cannot have it both ways." to Plaintiff's version of the test appears to be grounded on a contract principle, i.e., agreement, not on a tort principle, i.e., a duty to act based on established social. policy. ~ ~ It is one thing to advance alternate legal theories of recovery but quite another to take inconsistent factual positions. Contrary to Plaintiff's argument, because Plaintiff alleges that Defendants committed a tort in the course of carrying out a contractual agreement, the Court must look to the source of the duties allegedly breached. Knit With, 2009 WL 3427054, at *5 (citing Sunquest Info. Sys., 40 F.Supp2d at 651; Sunburst Paper, 2006 WL 3097771, at *2). When the Court does so here, it is constrained to find that the duties allegedly breached were created and grounded in the oral lease and/or proposed lease agreement,'Z and Defendants' liability stems from its contractual relationship with Plaintiff. Indeed, Plaintiff's own pleading asserts that liability stems from the oral lease and the proposed lease agreement. (Am.Compl., ¶ 44.) In addition, the proposed lease agreement *9 In response, Plaintiff advances several arguments, (Am.Compl., Ex. I), which Plaintiff urges the Court to none of which have any merit. First, Plaintiff submits that enforce, contemplates that Tenant" shall be responsible ~ '~`,,? `~ ~~17 ~Cr7t~rr7srar~ R~u~~r ~. f~a cl~it~n tra c~rir~inl lJ.~. av~rnm~nf 11Vcark~. 3`1 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 21 of 26 Lewis v. Delp Family Powder Coatings, Inc., Not Reported in F.Supp.2d (2011} .~ _ _ ~ ~_~__ _.___..~..~ _ r _ . ___~_--~__~...._.~._.~_.e_~. _ _._~._..~~.._ 2011 WL1230207 for all repairs and/or damages to the Subject Property caused by Tenants use or possession of said property, regardless of whether said use or possession was negligent, willful or illegal, or the result of the willful or illegal acts or negligence of Tenants employees, guests or invitees. Ex. I, ¶ 3(A). Moreover, the proposed lease agreement contemplates that should Tenant fail to discharge any of their repair and maintenance responsibilities, after notice to cure and upon failure to cure such default, Landlord may, in his sole discretion, complete the repairs or maintenance and bill the cost of such to Tenant as additional rent. Ex. I, ¶ 3(B). Thus, it is clear from the proposed lease agreement that Defendants' alleged duties regarding maintenance and repair of, and/or damage to, the Subject Property derive from their contractual relationship, and not a social policy embodied in tort law.'a Also, quite interestingly, in his memorandum of law filed in support of his motion for summary judgment (ECF_No. 50), Plaintiff states: "To be clear, the, Defendants, inter alia, purposefully removed the oil heater and numerous electric service lines in breach of the lease, neither of which can be construed as negligent conduct." Thus, Plaintiff's own argument shows that he believes that the duties allegedly breached were created and grounded in the oral lease. Plaintiff's remaining arguments. The possibility that a jury may find that Defendants did not breach a term of the oral lease does not make the gist of the action a tort, As discussed above, the gist of the action test focuses on the source of the duties alleged; it is not predicated upon the potential outcome in a given case. Nor is it relevant that Plaintiff intends to present evidence at trial of fraudulent conduct by Defendants—Defendants are seeking to apply the gist of the action doctrine to bar Plaintiff's negligence claim. Finally, Plaintiff argues that the gist of the action doctrine flows from Pennsylvania's Civil Rules of Procedure, which required actions to be designated as either actions in trespass or assumpsit, for purposes of gauging whether some other rule of law (like a statute of limitation) should apply as a limitation on a claim. Since Defendants are not attempting to assert a defense other than gist of the action, Plaintiff maintains that application of the gist of the action doctrine is unnecessary. The Court finds Plaintiff's„argument completely__lacking in merit. Not surprisingly, Plaintiff fails to cite any legal authority in support of his argument. Accordingly, the Court finds that the gist of the action doctrine bars Plaintiff's negligence claim. Thus, Defendants are entitled to judgment as a matter of law in their favor on Plaintiff's negligence claim. 12 Defendants' responsibilities vis a vis the resulting damage to the Subject Property are set forth in the proposed written lease agreement (Am.Compl., Ex. I) C. Conclusion which Plaintiff urges this Court to enforce. For the reasons set forth above, the Court will grant Defendants' Motion for Partial Summary Judgment in its entirety. 13 The proposed lease agreement states that the term "Tenant” collectively refers to all of the individual Defendants as well as Delp Family Powder Coatings. (Ex. I, Preamble.) 14 The final, if not fatal, flaw in Plaintiffls argument is his failure to demonstrate that Defendants' duties, with regard to the use and possession of the Subject Property, were imposed as a matter of social policy. *10 In light of these circumstances, it is clear that the contractual relationship here was not collateral. It is of no moment, therefore, that a factual dispute exists with regard to the terms of the oral lease and whether the parties agreed to execute a written lease (the proposed lease agreement), as the determination of whether the gist of the action doctrine applies is a question of law, not fact. There is simply no basis in the record or in the law for An appropriate order will follow. IV. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT Plaintiff moves for summary judgment in his favor on the following points; (1) the Delps, as lessees, are responsible for breaching the oral lease agreement with respect to the unpaid rent, unauthorized alterations, and the property damage to the building; (2) the Delps negligently set up, operated and maintained their powder coating operation, which caused property damage to the Lewis Building in the form of damaged roof shingles, sheathing and trusses, concrete slab, and unpermitted disposal of industrial waste water in violation of Pennsylvania law; and (3) no evidence exists in the record to dispute Plaintiff's evidence that the property suffered a diminution of value due to the extensive property damage. Since the Court has already ruled in Defendants' favor on Plaintiffls negligence claim, the Court finds that Plaintiff is not entitled to summary judgment as a matter of law as to the second point set forth above. Thus, the Court will V ~.~`~ ~a~°;~ ~ 2.C}~ 7 ~"hc?rr»estl F~~ut~r~. (~c~ cl~irr~ k~ oric~in~l U. . C~c~vernrr»r~t Works. 32 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 22 of 26 Lewis v. Delp Family Powder Coatings, Inc., Not Reported in F.Supp.2d (2011} 2011 WL 1230207 consider Plaintiffls motion with respect to the first and third points only. A. Relevant Facts15 is As a preliminary matter, the Court notes several exchange for DFPC paying for the labor and materials needed to make alterations (approved by Nick Lewis) to the Subject Property for 480 volt electrical and natural gas hook-ups which were required for its powder coating operation. (Defs.' Concise Stmt. in Opp'n, ¶¶ 16-18, 21, ECF No. 54.) infirmities with Plaintiff's Concise Statement of Material Facts ("Pl.'s CSMF"), ECF No. 51. In many Also in dispute is whether Defendants needed and/or instances, the Court was unable to locate in the record obtained prior authorization from Plaintiff to make documents cited by Plaintiff in support of his statement. alterations to the building for their powder coating For example, Exhibits 5, 6 and 7 to Walter Delp's operation. Plaintiff contends that the Delps needed prior deposition are missing. Also, many statements are not authorization from him to make any modifications or supported by the record citations. See, e.g., ¶¶ 8, 12, 13, alterations to the building for their powder coating & 26, Pl.'s CSMF. Or, the cited evidence does not operation but none was sought. In response, Defendantssupport the statement. See, e.g., ¶¶ 10, 11, 16 (second and third sentences), 17 (second sentence), 18, 25. counter that Nick Lewis, as Plaintiffs agent, approved all alterations and no unauthorized alterations were made to the building. (Defs.' Concise Stmt. in Opp'n at ¶¶ 30, 55, *11 Plaintiff submits that material issues of fact do not ECF No. 54.) Plaintiff also contends that the Delps never exist as to any of the points upon which he seeks $ought ar obtained approval .from him to use a small summary judgment. However, a review of the parties' "evaporator" unit as a means to eliminate industrial submissions and the record evidence clearly reveals Wastewater. (Pl.'s CSMF at ¶ 16, ECF No. 51.)" otherwise.' Defendants contend that they did not need Plaintiffs approval to use the evaporator and, in any event, Nick Lewis had express knowledge that the evaporator was 16 The factual disputes noted below by the Court are not installed and being used and never raised any objection. to be construed by the parties as the only facts deemed (Defs.' Concise Stmt. in Opp'n at ¶¶ 30, 38-39.) m dispute, but are merely a representative sample of the many contested facts in this litigation. Although the parties do not dispute that an oral lease existed, that appears to be the extent of their consensus. From the record, it is clear that the parties dispute the terms of the oral lease, including the actual parties to the lease, and the date it was formed, and whether they agreed to execute a written agreement. For example, Plaintiff contends that the parties to the oral lease consisted of Clyde and Donna Delp, and Walter and Carol Delp. Defendants, on the other hand, dispute that Donna and Carol Delp had any involvement in the business, or that their spouses were acting on their behalf. Moreover, Clyde and Walter contend that they did not enter into the oral lease in their personal capacities, but rather, entered into the oral lease, initially as the incorporators of DFPC and later as its officers. The parties also dispute whether Defendants owe Plaintiff $9,000.00 in unpaid rent. Plaintiff submits that he agreed to abate the rent by $1,500 a month for the first six months as an accommodation to the Delps during their start-up period, and the Delps were to pay the $9,000.00 in abated rent back over subsequent months. (Pl.'s CSMF at ¶ 7, ECF No. 51.) Defendants strongly dispute this statement, citing evidence in the record in support of their position that the $9,000.00 reduction in rent was in I~ Plaintiff's citation to record, Nick Lewis Dep. at 172, does not support this statement. The parties also dispute whether the Defendants were responsible for the property damage to the building, and the related issue of the quantity of damages Plaintiff sustained as a result of Defendants' actions. Plaintiff contends that Defendants' negligent operation of their powder coating business caused damage to the Subject Property, relying principally on the expert report of CEC Forensic Engineers dated May 14, 2010 (Ex. 10, Pl.'s App., ECF No. 52-2) ("CEC Report"), and cost estimates provided by various contractors/service providers (Ex. 10, Tab Q, Pl.'s App., ECF No. 52-5). With regard to the alleged diminution of value of the Subject Property, Plaintiff submits the report of his expert real estate appraiser, James Kelly. Defendants deny that their powder coating operation caused the alleged property damage, and cite to the expert report of John L. Suhrie, Professional Engineer, in support. (Defs.' Concise Stmt. in Opp'n at ¶ 64, ECF No. 54.) In addition, the expert report of Gateway Engineers, which was submitted by Plaintiff, reaches the same conclusions as Mr. Suhrie. (Pl.'s App., Ex. 10, Tab E, ECF No. 52-3.) Defendants also deny Plaintiff s claim for diminution of value and cite the expert report of James S. Keffalas, certified real "~"'.~~ C~ ?CJ`s t ~~r~carr~~€~n ~~ut~r~. ~i~ cl~irn ~c~ r~ric~ir7~l t~.~. t~~v~rn~r~~;r~t Vltc~rk~, 33 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 23 of 26 Lewis v. Delp Family Powder Coatings, Inc., Nat Reported in F.Supp.2d (2011) .a~~ ~.._.~._~..~.~. .~._~..w_~.~,....__.~...~.~..~. _ _ _ __ _. _ __ . 2011 WL1230207 estate appraiser. (Defs.' Concise Stmt. in Opp'n at ¶ 63, ECF No. 54.) Defendants further contend that Plaintiff failed to mitigate his damages, which also calls into question the quantity of damages on which Plaintiff requests summary judgment in his favor. (Defs.' Concise Stmt. in Opp'n at ¶¶ 60-61, ECF No. 54.) *12 Thus, the Court concludes that Defendants have adduced sufficient evidence to demonstrate that the above facts, which are material to deciding Plaintiff's summary judgment motion, are disputed. Accordingly, on this basis alone, Plaintiff is not entitled to summary judgment in his favor. B. Discussion Given that the material facts are disputed, the Court will only briefly address Plaintiff's legal arguments in support 9f summary judgment....._ Plaintiff's legal argument in support of his first point on which he seeks summary judgment focuses mainly on the issue of whether Donna and Carol Delp can be held personally responsible for the breach of the oral lease. In support of this argument, Plaintiff relies on inapposite Pennsylvania case law involving a husband's authority to act for both himself and his wife in dealing with entireties property. No such authority exists in this case as it does not involve entireties property, but rather, a commercial lease. Moreover, the fact that the first two rent checks were drawn on personal checking accounts that also bore the names of the Delp wives is insufficient alone to show an expressed or implied authority to act on their behalf.18 The undisputed evidence shows that neither was involved in the powder coating business—neither spoke to Nick Lewis over the phone nor met Clint Lewis, and Carol Delp testified she never spoke to Clint Lewis; nor did either wife sign any checks or other documents relating to the business. (Defs.' Concise Stmt. in Opp'n at ¶¶ 4, 7-13.) There is simply no evidence in the record to suggest that Carol and Donna Delp were involved in the powder coating business.' ~$ Plaintiffs reference to Carol Delp's deposition testimony (Pl.'s CSMF at ¶ 2) cannot be construed as evidence of her participation in the oral lease at issue here, as her response was to a hypothetical question. 19 Because Defendants have not cross-moved for summary judgment on the issue of whether Defendants Carol Delp and Donna Delp could be held liable on Plaintiff's breach of the oral lease, the Court is constrained by controlling precedent in this circuit to refrain from entering summary judgment sua sponte in Defendants' favor. See Gibson v. Mayor &Council of the Ciry of Wilmington, 355 F.3d 215, 222-24 (3d Cir.2004); DL Resources, Inc. v. FirstEnergy Solutions Corp., 506 P.3d 209, 223-24 (3d Cir.2007). Plaintiff also advances the argument that under Pennsylvania common law, a lessee is responsible to its lessor for all harm caused to the premises. In support, Plaintiff refers to the following passage from the Pennsylvania Supreme Court's opinion in Earle v. Arbogast & Bastiann: Generally, in the absence of an express covenant on the subject, the law implies a covenant on the part of the lessee so to treat the demised premises-that they may-revert to the lessor unimpaired, except by usual wear and tear, and uninjured by any willful or negligent act of the lessee. The implied covenant does not, however, extend to the loss of buildings by fire, flood, or tempest, or enemies, which it was not in the power of the lessee to prevent, and there is no implied covenant that the lessee shall restore buildings which have been destroyed by accident without fault on his part. 180 Pa. 409, 416-17, 36 A. 923 (1897) (citations omitted). As here, the lease in Earle was an oral lease, which did not include an agreement to repair or to deliver the premises in good order and condition at the end of the lease term. Under such circumstances, the Earle court held that the lessees were under an implied duty not to negligently injure the leased premises while using it. Id. at 418, 36 A. 923, 36 A. at 924. The court further opined that in order to recover on the basis of an implied covenant, the lessor was required to show that the lessee was negligent in its use of the leased property. Id. Thus, although an explosion occurred in machinery used by the lessees causing damage to the leased premises, the court affirmed the judgment below in favor of the lessees on the basis that the lessor failed to meet his burden to proving that the lessees were negligent. Id. *13 The court's holding in Earle actually undermines Plaintiff's argument that under Pennsylvania law a lessee is responsible to its lessor for all harm caused to the premises. Rather, as Earle makes clear, in the absence of an express covenant, a lessee is only responsible for harm __ ,,, i ~ C> 20~ 7 ~fhc~rr~>e~r~ ~~t~r~. ~c~ cl~irr~ ~~ arir~in~l ~J.~. C~c~tierr~rnent Wr~rks. ~4 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 24 of 26 Lewis v. Delp Family Powder Coatings, Inc., Not Reported in F.Supp.2d (2411) 2011 WL 1230207 to the leased premises caused by its negligence. However, Plaintiff has not asserted a claim for breach of the implied covenant in his Amended Complaint. Even if he had, material issues of fact exist precluding summary judgment on that issue. In opposing summary judgment on Plaintiff's first point, Defendants argue that Plaintiff has failed to offer any factual support that a lease was formed with him on February 2, 2002, as his identity was not discovered by any of the Defendants until sometime after the Grand Opening in late May of 2002, and e~ibits relied on by Plaintiff in support of individual liability all bear Nick Lewis' name rather than Plaintiff's. In addition, Defendants cite to evidence in the record in support of their argument that material issues of fact exist as to the parties to the oral lease, as well as the actual formation date of DFPC, noting that it is possible for a corporation to obtain de jute/de facto status_ prior to the recording_date of its articles of incorporation. Defendants further submit that Plaintiff's evidence fails to adequately disprove their testimony denying the rent abatement or confirming any necessary authorizations for alterations were obtained. The Court agrees with Defendants that material issues of fact exist precluding summary judgment on Plaintiff's first point. As to his argument that Defendants' powder coating operation negligently caused extensive damage to his building, Plaintiff submits that his concise statement contains ample evidence of the damage to his building, as contrasted with Defendants' evidence, which consists of one expert report from Mr. Suhrie. However, the Court notes that the expert report of Gateway Engineers also supports Defendants' position, as does the expert report of James Keffalas. Plaintiff also takes issue with the substance of Mr. Suhrie's report. This issue is best raised, however, either in a Daubert hearing or upon cross examination of the witness. In any event, Plaintiffls argument requires a weighing of the evidence, which is within the sole province of the jury. Moreover, Plaintiffls argument presumes, without proving, that Defendants negligently operated their business.20 In opposition, Defendants argue only that Plaintiff has failed to brief the issue of application of any social duty or policy that would support his claim of negligence against any of the Defendants. To the extent Plaintiff seeks summary judgment in his favor on the issue of Defendants' negligence, Plaintiffs motion must fail for the same reasons stated by this Court in granting Defendants' motion for partial summary judgment on Plaintiff's negligence claim. See Section III, Part 2, supra. In any event, material issues of fact exist as to whether Defendants' powder coating operation caused the alleged property damage to the Subject Property. 20 Defendants' negligence, if any, would only be relevant to the extent Plaintiff was pursuing a claim for breach of the implied covenant to turn over leased premises in good condition. However, no such claim is presented in Plaintiffs Amended Complaint. *14 Finally, Plaintiff submits that the quantity of damages he sustained cannot reasonably be disputed, and offers in support the CEC Report and the report of his expert real estate appraiser, James Kelly. Plaintiff further posits that Defendants have not adduced any credible evidence of the cost of repair nor of the diminution in value of the Subject Property. Based on this evidence, Plaintiff requests entry of judgment in the amount of $621,900.00, which is comprised of the diminution of value, one-year's lost rental income, _capital gains_taxes_and_transfertaxes. In response, Defendants counter that Plaintiff has ignored their denial of damages and their expert reports supporting their denial, specifically the reports of James S. Keffalas, certified real estate appraiser, and John L. Suhrie, Professional Engineer. (Defs.' Concise Stmt. in Opp'n at ¶¶ 63-64, ECF No. 54.) Mr. Suhrie offers an opinion regarding the cause of cracks to the concrete which he attributes to higher than normal shrinkage that was caused by excessive water in the concrete mix and/or the size of the panel poured, and scaling of concrete floor. due to poor quality concrete and/or inadequate or over finishing of the slab. Suhrie Report at 5-6 (Defs.' App, Ex. H, ECF No. 55/65). Mr. Suhrie also observed photos of the building's interior taken in 2002, prior to DFPC's occupancy of the building, showing blocking of the roof ventilation and ridge vents, a condition that could lead to mold growth. Id. at 6. His inspection did not reveal any unusual deflections, unevenness or structural problems with the roof. Id. at 7. In addition, the expert report of Gateway Engineers, which was submitted by Plaintiff, reaches the same conclusions as Mr. Suhrie. Pl.'s App., Ex. 10, Tab E, ECF No. 52-3. Mr. Keffalas opines that the fair market value of the Subject Property as of September 30, 2006 was $525,000.00, indicating that Plaintiff sold the Subject Property for more than the existing market value. Keffalas Report at 10 (Defs.' App. 1, Ex. G (ECF No. 55/65). The Court finds the evidence cited by Defendants is sufficient to raise a question of material fact with regard to the quantity of Plaintiff's alleged damages. Moreover, in order to end in favor of Plaintiff, the Court would have to weigh the testimony of the experts. However, that task is reserved exclusively for the triers of fact. Accordingly, "~ ~'S t i ~#`_ ~ 2017 ~I~hc~rn~~r~ ~~«t~r~. C~e~ c{~im to c~rig3n~! lJ,~. t~€~vern~n~nt Wc~rk~, 3~ Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 25 of 26 Lewis v. Qelp Family Powder Coatings, Inc., Nat Reported in F.Supp.2d (2011) 2011 WL 1230207.~m~~.____.~..~a~,~~.,~w.,.w.~.~.~...~~..~,.~.___..~.._.m ~.......~. summary judgment in Plaintiff s favor on the amount of his damages is inappropriate. is not entitled to summary judgment as a matter of law as to whether the Delps negligently set up, operated and maintained their powder coating operation, which caused property damage to the Lewis Building. Accordingly, the V. CONCLUSION Court will deny Plaintiff's motion for summary judgment. For the reasons set forth above, the Court finds material issues of fact exist precluding summary judgment in *15 An appropriate order will follow. Plaintiff's favor as to whether (1) the Delps, as lessees, are responsible for the unpaid rent, unauthorized alterations, and the damage to the building, and (3) evidence exists in the record to dispute Plaintiff's All Citations evidence that the property suffered a diminution of value due to the extensive property damage. In addition, since Not Reported in F.Supp.2d, 2011 WL 1230207 the Court has already ruled in Defendants' favor on Plaintiff's negligence_ claim, the Court finds that Plaintiff End of Document C) 2Q17 Thomson Reuters. No claim to original U.S. Government Works. C~ 2017 Thaw can F2~u~~rs. Rlra claim Ica cri in i U.~. C,avernm~nfi Works. 36 Case 1:17-cv-00010-JEJ Document 56-1 Filed 04/27/17 Page 26 of 26