HomeMy WebLinkAbout98-0600 CivilSELINSGROVE BEDDING,
INC. and WILLIAMSPORT
BEDDING, INC.,
Plaintiffs
· IN THE COURT OF COMMON PLEAS OF
· CUMBERLANDCOUNTY, PENNSYLVANIA
v. · CIVIL ACTION - LAW
Defendant · NO. 98-0600 CIVIL TERM
IN RE: PLAINTIFFS' MOTION FOR SUMMARY
JUDGMENT ON DEFENDANT'S COUNTERCLAIMS
BEFORE HESS and OLER, JJ.
LEMOYNE SLEEPER CO.,
INC.,
ORDER OF COURT
AND NOW, this3nc[day of June, 2000, upon consideration of Plaintiffs'
Motion for Summary Judgment on Defendant's Counterclaims, and for the reasons
stated in the accompanying opinion, the motion for summary judgment is denied.
BY THE COURT,
esley Oleri, J~., J.
Mark K. Emery
5115 East Trindle Road
Mechanicsburg, PA 17055
Attorney for Plaintiffs
Jordan Cunningham, Esq.
2320 N. Second Street
Harrisburg, PA 17110
Attorney for Defendant
SELINSGROVE BEDDING,
INC. and WILLIAMSPORT
BEDDING, INC.,
Plaintiffs
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
v. ·CIVIL ACTION - LAW
Defendant · NO. 98-0600 CIVIL TERM
IN RE: PLAINTIFFS' MOTION FOR SUMMARY
JUDGMENT ON DEFENDANT'S COUNTERCLAIMS
BEFORE HESS and OLER, JJ.
LEMOYNE SLEEPER CO.,
INC.,
OPINION and ORDER OF COURT
OLER, J., June ,2000.
The present civil action arises out of business relationships whereby
Plaintiffs sold products made by Defendant. Plaintiff Selinsgrove Bedding, Inc.,
has sued Defendant for breach of contract, tortious interference with business
relations, and breach of a covenant of good faith and fair dealing. Plaintiff
Williamsport Bedding, Inc., has sued Defendant for negligent misrepresentation,
fraud, and breach of a covenant of good faith and fair dealing.
Defendant has filed a two-count counterclaim. One count asserts a claim
against Plaintiff Williamsport Bedding for breach of contract, and the other count
asserts a claim against a certain nonparty who allegedly guaranteed the obligations
of Williamsport Bedding. For disposition at this time is a motion for summary
judgment filed by Plaintiffs with respect to Defendant's counterclaims.
Plaintiffs' motion for summary judgment, as it relates to Defendant's claim
for breach of contract, is based upon contentions that the evidence does not
support one aspect of the claim and that public policy does not support a second
aspect. Plaintiffs' motion, as it relates to Defendant's claim against an alleged
guarantor, is based upon the contention that a nonparty can not be sued on a
counterclaim.
Plaintiffs' motion for summary judgment on Defendant's counterclaims
was argued on March 1, 2000. For the reasons stated in this opinion, the motion
will be denied.
STATEMENT OF FACTS
The present action was commenced by the filing of a praecipe for writ of
summons on February 2, 1998; a complaint was filed on March 4, 1998. An
answer with new matter and counterclaims was filed by Defendant on April 1,
1998. A reply to the new matter and counterclaims was filed by Plaintiffs on April
15, 1998.
Pursuant to a stipulation of counsel,~ Plaintiffs filed an amended complaint
on January 27, 1999.2 The facts alleged in Plaintiffs' amended complaint may be
summarized as follows: Plaintiffs are Selinsgrove Bedding, Inc., a corporation
conducting business in Selinsgrove, Pennsylvania, and Williamsport Bedding,
Inc., a corporation which formerly conducted business in Muncy, Pennsylvania.3
Defendant is Lemoyne Sleeper Co., Inc., a corporation having offices in Lemoyne,
Pennsylvania,4 and being a manufacturer and distributor of bedding products.5
In 1992 and 1995 respectively, Defendant granted franchises to Plaintiff
Selinsgrove Bedding, and Plaintiff Williamsport Bedding, to sell its product line,
~ See Stipulation of Counsel To Allow Plaintiffs To File Amended Complaint,
filed January 27, 1999.
2 The amended complaint added a second breach of contract claim on behalf of
Plaintiff Selinsgrove Bedding, Inc., inter alia. See Plaintiffs' amended complaint,
Count IV.
3 Plaintiffs' amended complaint, paragraphs 1-2, Exhibit B.
4 Plaintiffs' amended complaint, paragraph 3.
5 Plaintiffs' amended complaint, Exhibits A, B.
2
and granted exclusive sales territories to them.6 Subsequently, animosity
developed on the part of Defendant's principal toward the principals of Plaintiffs.?
With respect to Plaintiff Selinsgrove Bedding, Defendant breached the
franchise agreement in two ways: it competed with the franchisee within territory
where such competition was proscribed8 and it ceased supplying products to the
franchisee.9 In addition, Defendant tortiously interfered with customer
relationships of the franchisee,l° and "breached [a] duty of good faith and fair
dealing implied in the [franchise agreement]?~
With respect to Plaintiff Williamsport Bedding, Defendant made negligent
misrepresentations which caused the franchisee to suffer losses in the form of
~2 In
expenditures for a long-term lease, advertising expenses, and inventory costs.
addition, Defendant made intentional misrepresentations to the franchisee which
resulted in the same losses~3 and "breached [a] duty of good faith and fair dealing
implied in the [franchise agreement]?4
Prior to the filing of any responsive pleading by Defendant to Plaintiffs'
amended complaint, Plaintiffs filed a "Motion for Summary Judgment on
Defendant's Counterclaims" on September 24, 1999. On October 20, 1999,
Plaintiffs' amended complaint, paragraphs 6-8.
Plaintiffs' amended complaint, paragraphs 4-5, 9.
Plaintiffs' amended complaint, count III.
Plaintiffs' amended complaint, count IV.
l0 Plaintiffs' amended complaint, count V.
~ Plaintiffs' amended complaint, count VI.
~2 Plaintiffs' amended complaint, count I.
~3 Plaintiffs' amended complaint, count II.
~4 Plaintiffs' amended complaint, count VI.
Defendant filed an answer to Plaintiffs' amended complaint; the answer was
~5 No
accompanied by new matter and a reassertion of the aforesaid counterclaims.
further pleadings have been filed.
On October 25, 1999, Defendant filed an answer to the motion for summary
judgment. The answer challenges the timeliness of the motion~6 and disputes it on
the merits. ~?
Defendant's two counterclaims may be summarized as follows: The first,
naming Plaintiff Williamsport Bedding as counterclaim defendant, asserts a cause
of action for breach of contract arising out of Plaintiff's alleged use of Defendant's
name and Plaintiff's alleged continuation of business, after the expiration of the
term of the parties' agreement and in violation of provisions therein.
This counterclaim is supported by averments (a) that the parties' agreement
was entered into on July 22, 1995, (b) that the right of Williamsport Bedding to
use Lemoyne Sleeper's name derived from the agreement, (c) that Williamsport
Bedding was prohibited under the agreement from retailing products in
competition with those made by Lemoyne Sleeper during the term of the
agreement and for two years thereafter within a fifty-mile radius of any Lemoyne
Sleeper dealer, Lemoyne Sleeper store or Lemoyne Sleeper customer without the
~5 In this pleading, the middle initial of the nonparty named as a counterclaim
defendant was corrected.
16 Defendant's Response to Plaintiffs' Motion for Summary Judgment on
Defendant's Counterclaims, at 1, 3.
~? Defendant's Response to Plaintiffs' Motion for Summary Judgment on
Defendant's Counterclaims, at 1-5.
As noted hereafter in the text, Defendant's challenge to the timeliness of the
motion relates to the pendency of discovery. Neither party appears to regard as
significant the absence of a responsive pleading to Plaintiffs' amended complaint
at the time Plaintiffs' motion for summary judgment on Defendant's counterclaims
was filed, nor the absence even now of any reply on the part of Plaintiffs to the
counterclaims which were eventually filed by Defendant.
4
consent of Lemoyne Sleeper, (d) that the expiration date of the agreement was
December 31, 1995, in the absence of an election by Lemoyne Sleeper to extend
it, (e) that Lemoyne Sleeper did not elect to extend it, (f) that the agreement
terminated on December 31, 1995, (g) that Williamsport Bedding improperly
continued to use Lemoyne Sleeper's name after termination of the agreement, and
(h) that Williamsport Bedding operated a retail store in violation of the restrictive
covenant after termination of the agreement.~g Damages in excess of $35,000.00
are sought by Defendant Lemoyne Sleeper on this counterclaim.~9
The second counterclaim filed by Defendant Lemoyne Sleeper, naming one
James B. O'Leary as counterclaim defendant, asserts a cause of action arising out
of Mr. O'Leary's alleged agreement to guarantee the obligations of Plaintiff
Williamsport Bedding on its contract with Defendant? Damages in excess of
$35,000.00 are sought by Defendant Lemoyne Sleeper on this counterclaim.2~
Plaintiffs request summary judgment on Defendant's counterclaim against
Williamsport Bedding for breach of contract on the grounds that (a) the evidence
shows that the use of the Lemoyne Sleeper name by Williamsport Bedding after
December 31, 1995, was authorized by implication through the continued
shipment of Lemoyne Sleeper products to Williamsport Bedding after that date22
and (b) that Defendant, as the party solely responsible for termination of the
agreement in question, may not invoke the benefit of the covenant restricting
lg Counterclaim of Defendant against Plaintiff Williamsport Bedding, Inc.,
paragraphs 1, 3-13.
19 Counterclaim of Defendant against Plaintiff Williamsport Bedding, Inc., ad
damnum clause.
20 Counterclaim of Defendant against James B. O'Leary, paragraphs 1 5-16.
2~ Counterclaim of Defendant against James B. O'Leary, ad damnum clause.
22 Plaintiffs' Motion for Summary Judgment on Defendant's Counterclaims,
paragraphs 1-7.
competition by Williamsport Bedding.23 Plaintiffs request summary judgment
against Defendant on its counterclaim against James O'Leary on the ground that,
procedurally, a nonparty may not be named as a defendant in a counterclaim filed
by an original defendant.24
Defendant's answer to Plaintiffs' motion for summary judgment contends
that the motion is premature because discovery has not been completed.25 In
addition, in connection with the counterclaim against Plaintiff Williamsport
Bedding, Defendant avers that Williamsport Bedding continued to use the
Lemoyne Sleeper name after shipments of Lemoyne Sleeper products had
ceased,26 and denies that any conduct on its part would serve to preclude
enforcement of the restrictive covenant.27
Briefs have been submitted by the parties which include many attachments
of an evidentiary nature. In addition, both briefs have discussed issues not raised
in Plaintiffs' motion.
23 Plaintiffs' Motion for Summary Judgment on Defendant's Counterclaims,
paragraphs 8-15.
24 See Plaintiffs' Brief in Support of Their Motion for Summary Judgment on
Defendant's Counterclaims, at 16-17.
25 Defendant's Response to Plaintiffs' Motion for Summary Judgment on
Defendant's Counterclaims, at 1, 3.
26 Defendant's Response to Plaintiffs' Motion for Summary Judgment on
Defendant's Counterclaims, at 5.
27 Defendant's Response to Plaintiffs' Motion for Summary Judgment on
Defendant's Counterclaims, at 4.
6
Statement of Law
Record on motion for summary judgment. For purposes of the present
motion for summary judgment,28 the record in this case consists of Plaintiffs'
amended complaint, Defendant's answer with new matter and counterclaims to
Plaintiff's amended complaint, Plaintiffs' motion for summary judgment on
Defendant's counterclaims, and Defendant's answer to Plaintiffs' motion for
summary judgment on Defendant's counterclaims. Attachments to the parties'
briefs are not part of the record. See Scopel v. Donegal Mutual Ins. Co., 698 A.2d
602, 606 (Pa. Super. Ct. 1997); Quigley v. Miller, 49 Cumberland L.J. 107, 108
n.4 (2000); Freed v. Allstate Ins: Co., 45 Cumberland L.J. 272, 274 (1996). Nor,
as a general rule, will an issue contained only in a brief be considered by a court.
See, e.g., Commonwealth v. Gallagher, 353 Pa. Super. 426, 435 n.4, 510 A.2d 735,
739 n.4 (1986), rev'don other grounds, 519 Pa. 291,547 A.2d 355 (1988)..
Standard of review pertaining to motion for summary judgment.
Pennsylvania Rule of Civil Procedure 1035.2 provides as follows:
After the relevant pleadings are closed, but within such
time as not to unreasonably delay trial, any party may move for
summary judgment in ~vhole or in part as a matter of law
(1) whenever there is no genuine issue of any material fact
as to a necessary element of the cause of action or defense
which could be established by additional discovery or expert
report, or
(2) if, after the completion of discovery relevant to the
motion, including the production of expert reports, an adverse
party who will bear the burden of proof at trial has failed to
produce evidence of facts essential to the cause of action or
defense which in a jury trial would require the issues to be
submitted to a jury.
28 See Pa. R.C.P. 1035.1 (record for purposes of motion for summary judgment).
7
"[T]he mission of the summary judgment procedure is to pierce the
pleadings and to assess the proof in order to see whether there is a genuine need
for a trial." Ertel v. Patriot-News Co., 544 Pa. 93, 100, 674 A.2d 1038, 1042
(1996), cert. denied, 519 U.S. 1008 (1996), citing Curran v. Philadelphia
Newspapers, Inc., 497 Pa. 163, 176, 439 A.2d 652, 658 (1981), appeal denied, 522
Pa. 576, 559 A.2d 37 (1989). "The purpose [of the second provision in the Rule]
is obviously to protect a party against whom an essential allegation cannot be
supported with evidence from the burden of going to trial in order to secure a
resolution of the matter." Moritz v. Gluck, 48 Cumberland L.J. 1, 3 (1998), citing
Eaddy v. Hamaty, 694 A.2d 639 (Pa. Super. Ct. 1997).
On a motion for summary judgment, the record must be examined in the
light most favorable to the non-moving party, and all doubts as to the existence of
a genuine issue of material fact must be resolved against the moving party. Ertel
v. Patriot-News Co., 544 Pa. 93, 98-99, 674 A.2d 1038, 1041 (1996), cert. denied,
519 U.S. 1008 (1996); see Moll v. Ambrose, 96-4053 Civil Term (Cumberland
Co. December 3, 1999) (Bayley, J.).
Enforceability of covenant not to compete as affected by circumstances of
termination of agreement between parties. A covenant not to compete in a
franchise agreement is not per se unenforceable. See Piercing Pagoda, Inc. v.
Hoffner, 465 Pa. 500, 506-509, 351 A.2d 207, 210-211 (1976). Nor is there a per
se rule that a covenant not to compete can not be enforced by a party that
terminated the business relationship, where no fault can be attributed to that party.
See American Mutual Liability Ins. Co. v. Kosan, 582 F. Supp. 269, 271 (W.D. Pa.
1984), aff'd, 817 F.2d 751 (3rd Cir. 1987). Between businesses, covenants not to
compete have been held enforceable in cases where the relationship between the
parties terminated by reason of an election not to renew the agreement by the party
benefiting from the covenant. See, e.g., Volunteer Firemen's Insurance Services,
Inc. v. CIGNA Property and Casualty Ins. Agency, 693 A.2d 1330, 1338-39, 1342
(Pa. Super. Ct. 1997).
8
Alleged misjoinder of claim against nonparty by Defendant. "Subject to
certain exceptions, all objections and defenses ... must be pleaded in a preliminary
objection, answer, reply or counter-reply or they cannot be raised at any time
thereafter." 2B Anderson, Pennsylvania Civil Practice §1032.1 at 111 (1969); see
Pa. R.C.P. 1028 (preliminary objections), 1030 (affirmative defenses), 1032
(waiver rule). "The waiver of defenses and objections which results from a failure
to plead extends to objections to ... misjoinder of causes of action, misjoinder of
parties, [and] misjoinder of counterclaims .... "Id. § 1032.2 at 113, 116; see
Somers v. Gross, 393 Pa. Super. 509, 512 n.2, 574 A.2d 1056, 1057 n.2 (1990)
Application of Law to Fact.s.
In the present case, after a careful review of the record and issues properly
before the court, we are not persuaded that judgment should be summarily granted
against Defendant on its counterclaims. With respect to the counterclaim against
Plaintiff Williamsport Bedding, the evidence does not mandate a conclusion that
the alleged use of Lemoyne Sleeper's name following the expiration of the parties'
agreement was wholly permissible or that Lemoyne Sleeper's election not to
extend the parties' agreement foreclosed its right to enforce the covenant not to
compete. With respect to the counterclaim against James B. O'Leary, the'
challenge on the basis of misjoinder is procedurally insupportable.29
29 In view of this disposition of the case, it is unnecessary to consider whether
Plaintiffs' motion should be denied on the ground that it preceded completion of
discovery.
9
Alleged misjoinder of claim against nonparty by Defendant. "Subject to
certain exceptions, all objections and defenses ... must be pleaded in a preliminary
objection, answer, reply or counter-reply or they cannot be raised at any time
thereafter." 2B Anderson, Pennsylvania Civil Practice {}1032.1 at 111 (1969); see
Pa. R.C.P. 1028 (preliminary objections), 1030 (affirmative defenses), 1032
(waiver rule). "The waiver of defenses and objections which results from a failure
to plead extends to objections to ... misjoinder of causes of action, misjoinder of
parties, [and] misjoinder of counterclaims .... "Id. {} 1032.2 at 113, 116; see
Somers v. Gross, 393 Pa. Super. 509, 512 n.2, 574 A.2d 1056, 1057 n.2 (1990)
Appli.cation of Law to Facts
In the present case, after a careful review of the record and issues properly
before the court, we are not persuaded that judgment should be summarily granted
against Defendant on its counterclaims. With respect to the counterclaim against
Plaintiff Williamsport Bedding, the evidence does not mandate a conclusion that
the alleged use of Lemoyne Sleeper's name following the expiration of the parties'
agreement was wholly permissible or that Lemoyne Sleeper's election not to
extend the parties' agreement foreclosed its right to enforce the covenant not to
compete. With respect to the counterclaim against James B. O'Leary, the
challenge on the basis of misjoinder is procedurally insupportable.29
For the foregoing reasons, the following order will be entered:
29 In view of this disposition of the case, it is unnecessary to consider whether
Plaintiffs' motion should be denied on the ground that it preceded completion of
discovery.
ORDER OF COURT
AND NOW, this 2na day of June, 2000, upon consideration of Plaintiffs'
Motion for Summary Judgment on Defendant's Counterclaims, and for the reasons
stated in the accompanying opinion, the motion for summary judgment is denied.
BY THE COURT,
/s/J. Wesley Oler, Jr,
J. Wesley Oler, Jr., J.
Mark K. Emery, Esq.
5115 East Trindle Road
Mechanicsburg, PA 17055
Attorney for Plaintiffs
Jordan Cunningham, Esq.
2320 N. Second Street
Harrisburg, PA 17110
Attorney for Defendant
10