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HomeMy WebLinkAbout2003-3059 CivilRITE AID CORPORATION, Plaintiff VS. ROBERT SOUDER, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW 03-3059 CIVIL IN RE: PRELIMINARY OBJECTIONS OF THE DEFENDANT BEFORE HESS AND GUIDO, J.J. OPINION AND ORDER This is an action by Rite Aid Corporation (Rite Aid) against Robert Souder (Souder). Souder was formerly Rite Aid' s Senior Vice President for Human Relations. Rite Aid seeks to recover alleged wrongful payments it made to Souder. The following allegations are contained in the plaintiff' s complaint. In March of 1995, at the request of then CEO, Martin Grass, Rite Aid's Board of Directors adopted a long term incentive plan (LTIP I) under which certain executives of the company would be entitled to receive shares of the company's stock or the dollar equivalent value of such shares in the event the company' s earnings per share grew at certain rates over the ensuing four years. (Compl., ¶ 7.) Under the terms of LTIP I, the Board authorized payment only if Rite Aid's earnings per share grew at a minimum rate of at least 8% per year, compounded annually. The measurement period under LTIP I began in March of 1995 and concluded in March of 1999, covering the results of Rite Aid's 1995 through 1999 fiscal years. Id. A copy of the Rite Aids's 1996 Proxy Statement containing the terms ofLTIP I (under the title "Long-Term Incentive Plan" at p. 11) is attached to the Complaint as Exhibit A. The LTIP I document listing Mr. Souder as one of the Rite Aid executives entitled to receive shares under the plan is attached to the Complaint as Exhibit B. 03-3059 CIVIL Even though Rite Aid had not met the minimum earnings per share growth target required for payment under LTIP I, in July of 1999, Grass and Chief Financial Officer Franklyn Bergonzi caused the company to make a payment to Souder, falsely representing to the Board that the minimum earnings per share growth target required for payment under LTIP I had been met. (Compl., ¶ 8.) On or about July 1999, Souder received a substantial payment from Rite Aid purportedly on account of his earning the right to receive shares of the company's common stock under LTIP I. Id. In late 1999 or early 2000, after Grass had been dismissed by the Board and no longer had any authority to act on Rite Aid's behalf, he created and delivered letters to several company executives, purporting to obligate Rite Aid to pay these executives substantial sums upon termination of their employment with the company. Souder was one of the Rite Aid executives to receive such a letter. (Compl., ¶ 10.) The letter addressed to Souder was falsely dated June 12, 1998, falsely purported to have been written on Rite Aid's corporate stationary, and falsely purported to have been executed by Grass in his capacity as Rite Aid's Chief Executive Officer at a time when Grass was authorized to act in that capacity. (Compl., ¶ 11 .) In fact, the letter was a fabrication, typed on ersatz Rite Aid stationary and backdated to appear as though written over a year earlier when Grass was Rite Aid's CEO. Id. The back-dated letter to Souder purported to enhance the benefits Souder would otherwise have been entitled to receive under the standard deferred compensation agreement then in place between Souder and Rite Aid in several material respects. None of these enhanced benefits had been approved by any person with authority to act for the Rite Aid. (Compl., ¶ 12.) After receiving the letter from Grass, and allegedly knowing it to be a backdated fabrication, Souder caused the letter to be presented to the new management of Rite Aid, and 2 03-3059 CIVIL falsely represented that it was a genuine written obligation of the company. Souder allegedly intended that Rite Aid rely on the letter's bona fides and intended that the company honor the purported obligations assumed in the letter in accordance with its terms. (Compl., ¶ 13.) Unaware of Souder's alleged deception, Rite Aid honored the terms of the backdated letter that Souder presented to the new management by entering into an Executive Separation Agreement and General Release dated July 29, 2000 (the "Separation Agreement"). Souder resigned from employment with Rite Aid upon the execution of the Separation Agreement. (Compl., ¶ 16.) Rite Aid paid Souder substantial amounts under the Separation Agreement and under the Deferred Compensation Agreement as amended by the Separation Agreement. Id. Following Grass' guilty plea to a federal charge of conspiracy to defraud Rite Aid and upon learning of Souder's deception, Rite Aid's Board terminated the Separation Agreement and the Deferred Compensation Agreement, and demanded repayment of the sums paid to Souder thereunder. (Compl., ¶ 21.) Plaintiff filed an Amended Complaint on October 21, 2003, seeking recovery of payments made to Defendant pursuant to LTIP I and the Agreement. Pending before the court are the preliminary objections to the Amended Complaint. DISCUSSION Defendant's first preliminary objection seeks to strike certain counts of the complaint for unjust enrichment, mistake and breach of fiduciary duty because the complaint does not attach certain required documents. Pa.R.C.P. 1019(i) requires that "when any claim or defense is based upon a writing, the pleader shall attach...the material part" of that writing. Defendant contends that Plaintiff' s attachments are not a material part of the writing and that Plaintiff' s Exhibit A, 3 03-3059 CIVIL the Proxy Plan, fails to conform to 1019(i) for a number of reasons. Defendant argues that the Proxy Plan attachment does not set forth Defendant's obligations, fails to provide its authorship and does not specifically mention Defendant. Additionally, Defendant argues that Exhibit B is nothing more than a list of names and numbers and not a "material part" of the writing on which this claimed is based. Plaintiff s attachments are a material portion of the writing upon which the claim is based. Exhibit A, attached to Plaintiff s Complaint, is a proxy statement that describes the LTIP. Exhibit B, attached to Plaintiff s Complaint, lists Defendant as a participant in the plan and sets forth the amount of shares Defendant was to be awarded. 1019(i) does not require that every part of every document of the plan be attached. Defendant also argues that the complaint violates Pa.R.C.P. 1019(h). 1019(h) requires that "when any claim or defense is based upon an agreement then the pleading shall state specifically whether the agreement is written or oral." While it is true that Plaintiff fails to specifically state that the agreement is written, it is clear from the complaint that the agreement in dispute was written. See United Airlines v. Tevan Management Group, Inc., 51 Pa. D. ~:;C.4th 392 (Mercer Co. 2001) (overruled preliminary objections based on 1019(h) because complaint, with attached relevant provisions of a written agreement, asserted with sufficient specificity that the agreement was in writing.) While this court is not bound by the holding in United Airlines_, its logic is undeniably persuasive. Where a complaint, with attachments of a disputed written agreement, clearly shows that the agreement is written, the complaint should not be stricken for its failure to point out the obvious. 4 03-3059 CIVIL Defendant also argues that Plaintiff' s claim for unjust enrichment, mistake and fraud is insufficiently pleaded in violation ofPa. R.C.P. 1019(a). Rule 1019(a) states: "the material facts on which a cause of action or defense is based shall be stated in a concise and summary form." Pennsylvania is a fact pleading state and therefore a complaint must apprise the defendant of the nature and extent of the Plaintiff' s claim so the defendant has notice of what the plaintiff intends to prove at trial and may prepare to meet such proof with his own evidence. Clark v. Septa, 691 A.2d 988 (Pa. Commw. 1997). Defendant preliminarily objects to Plaintiff' s unjust enrichment claim because the complaint alleges no wrongful conduct by Defendant. An action for unjust enrichment does not require culpability on the part of the defendant. The elements of unjust enrichment are benefits conferred on the defendant, by the plaintiff, appreciation of such benefits by defendant, and acceptance and retention of such benefits under such circumstances that it would be inequitable for the defendant to retain the benefit without payment of value. AmeriPro Search, Inc. v. Fleming Steel Co., 787 A.2d 988, 991 (Pa. Super. 2001). The Superior Court has expressly held, "[O]n a claim of unjust enrichment, a showing of wrongdoing ... on the part of the defendant is not necessary." Gee v. Eberle, 420 A.2d 1050, 1059 (Pa. Super. 1980). In an unjust enrichment claim the "courts focus not on intention, but on the result of the unjust enrichment .... "Gee, 420 A.2d at 1059. Rite Aid alleges that $ouder received a sum from it and that it would be unjust for him to retain that sum. Plaintiff' s unjust enrichment claim is proper. Defendant also preliminarily objects to Plaintiff' s allegation of mistake. Plaintiff alleges: Rite Aid paid Souder under LTIP I based upon a mutual mistake of fact, to wit: the belief that the Company experienced growth in its earnings per share over the relevant period sufficient to meet the target required to justify payment to Souder under LTIP I when in fact the Company had not achieved such growth in its earnings per share. 5 03-3059 CIVIL (Compl., ¶ 28.) The thrust of Souder's objection is that the mistake was not mutual but unilateral. He argues that the complaint shows only unilateral control and action by Rite Aide. Rite Aid alleges a mistake of fact by Souder: Souder, like Rite Aid, thought the company had higher earnings per share than it actually did. Whether Souder actually made that mistake will be determined through discovery or at trial. In another preliminary objection, Souder contends that Rite Aid's claims in Counts III-VI of the Complaint concerning Souder's fraudulently procured severance agreement must be dismissed because those claims are governed by ERISA. This contention is erroneous. None of Rite Aid's claims fall remotely within the exclusive purview of ERISA. The exclusivity provision of the ERISA statute is narrowly circumscribed: "The district courts of the United States shall have exclusive jurisdiction of civil actions under this sub chapter." 29 U.S.C. 1132 (e)(1). There are nine enumerated civil actions that may be brought under ERISA. 29 U.S.C. § 1132(a). The federal courts have exclusive jurisdiction over those nine enumerated actions only. 29 U.S.C. § 1132(e)(1). Rite Aid's claims against Souder for fraud, breach of contract and breach of fiduciary duty arising from his fake severance letter do not fall within the nine enumerated civil actions under ERISA. · Rite Aid is not a participant or a beneficiary under ERISA. See 29 U.S.C. 1132(a)(1). · Rite Aid is not seeking relief against a fiduciary of an ERISA plan. See 29 U.S.C. 1132(a)(2). · Rite Aid is not seeking to enjoin a practice which violates ERISA or to enforce ERISA provisions. See 29 U.S.C. 1132(a)(3). 6 03-3059 CIVIL · Rite Aid is not seeking information concerning an Administrator's I.R.S. information. See 29 U.S.C. 1132(a)(4). · Rite Aid is not acting as the Secretary of Labor, nor is Rite Aid a state or U.S. Territory. See 29 U.S.C. 1132(a)(5)-(7). · Rite Aid is not seeking to enjoin an act which violated the repealed 29 U.S.C. 1021(f). See 29U. S.C. 1132(a)(8). · Rite Aid is not seeking to enforce an insurance contract or an insurance annuity. See 29 U.S.C. 1132(a)(9). Finally, the defendant seeks to sever that portion of the case involving LTIP I claims. Severance, however, is not a legal basis for preliminary objection. See Pa.R.C.P. 1028. ORDER AND NOW, this are DENIED. 15th day of June, 2004, the preliminary objections of the defendant BY THE COURT, Alan J. Davis, Esquire William A. Slaughter, Esquire Hara K. Jacobs, Esquire Peter C. Amuso, Esquire For the Plaintiff Thomas L. Wenger, Esquire For the Defendant :rlm Kevin A. Hess, J. 7 RITE AID CORPORATION, Plaintiff VS. ROBERT SOUDER, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW 03-3059 CIVIL IN RE: PRELIMINARY OBJECTIONS OF THE DEFENDANT AND NOW, this defendant are DENIED. BEFORE HESS AND GUIDO, J.J. ORDER 15th day of June, 2004, the preliminary objections of the BY THE COURT, Alan J. Davis, Esquire William A. Slaughter, Esquire Hara K. Jacobs, Esquire Peter C. Amuso, Esquire For the Plaintiff Thomas L. Wenger, Esquire For the Defendant Kevin A. Hess, J. :rlm