HomeMy WebLinkAbout2008-6930
RITE AID HDQTRS,CORP., : IN THE COURT OF COMMON PLEAS OF
Plaintiff, : CUMBERLAND COUNTY, PENNSYLVANIA
:
:
v. : CIVIL ACTION – LAW
:
:
IMPROVITA HEALTH PRODUCTS, : NO. 08-6930 CIVIL
INC., IMPROVITA CM-MACM, LLC :
and IMPROVITA CONTRACT :
MANNUFACTURING, LLC and :
THOMAS P. KLAMET, :
Defendants. :
IN RE: PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
BEFORE HESS, P.J., AND MASLAND, J.
ORDER OF COURT
nd
AND NOW, this 2 day of February, 2011, upon consideration of the Plaintiff’s Motion
for Summary Judgment, and Defendant Klamet’s response thereto, and after oral argument, the
Plaintiff’s Motion for Summary Judgment is GRANTED.
The Prothonotary is directed to enter judgment in this action in favor of Rite Aid and
against Defendants Improvita CM-MACM, LLC, Improvita Contract Manufacturing, LLC, and
Thomas P. Klamet.
BY THE COURT,
__________________
Kevin A. Hess, P.J.
RITE AID HDQTRS,CORP., : IN THE COURT OF COMMON PLEAS OF
Plaintiff, : CUMBERLAND COUNTY, PENNSYLVANIA
:
:
v. :
:
:
IMPROVITA HEALTH PRODUCTS, :
INC., IMPROVITA CM-MACM, LLC :
and IMPROVITA CONTRACT : CIVIL ACTION NO: 08-6930
MANNUFACTURING, LLC and :
THOMAS P. KLAMET, :
Defendants. :
IN RE: PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
BEFORE HESS, P.J., AND MASLAND, J.
OPINION AND ORDER
HESS, P.J., February , 2011.
The plaintiff, Rite Aid Hdqtrs, Corp., has filed a Motion for Summary Judgment against
Defendants Improvita CM-MACM, LLC; Improvita Contract Manufacturing, LLC; and Thomas
P. Klamet. (Plaintiff’s Motion for Summary Judgment, filed November 23, 2009). Plaintiff’s
complaint seeks a declaratory judgment that Defendants are obligated to indemnify Rite Aid for
all losses, expenses, damages, costs, and attorneys’ fees incurred by Plaintiff in defense of an
action filed against it in California, and all fees and costs associated with the action sub judice.
(Complaint, filed November 21, 2008).
Plaintiff’s complaint may be summarized as follows. Rite Aid is a national drug store
chain with its principal office in Cumberland County, Pennsylvania. (Complaint, ¶ 9).
Defendant Improvita manufactures, among other things, a product called “Germ Defense.”
(Complaint, ¶ 10). Defendant Thomas P. Klamet is alleged to be, or was, the President, Chief
Executive Officer and shareholder of Improvita Health Products, Inc; he is also alleged to be a
2
member of Improvita CM-MACM, LLC and Improvita Contract Manufacturing LLC.
(Complaint, ¶ 5).
In September 2005, Rite Aid and Improvita entered into an agreement whereby Improvita
was to sell Germ Defense to Rite Aid for resale under the Rite Aid private label brand in Rite
Aid retail stores. (Complaint, ¶ 12-13). Plaintiff alleged that at all times Improvita controlled
the regulatory information on the packaging as well as the “Compare to the active ingredients of
Airborne®” text on the packaging. (Complaint, ¶ 12). On July 9, 2008, Rite Aid and Improvita
Health Products, Inc. entered into a “Defense and Indemnity Agreement” in connection with the
agreement to sell Germ Defense. (Complaint, ¶ 13). On August 21, 2008, Rite Aid entered into
a substantially similar agreement with Improvita CM-MACM LLC. (Complaint, ¶ 13). The
Defense and Indemnity Agreements were attached to Plaintiff’s complaint as Exhibits A and B.
(Complaint, Ex. A, B).
On August 1, 2008, Rite Aid was sued in federal court in California by a putative class
alleging that Rite Aid violated various portions of the California consumer protection laws with
regards to the sale of Germ Defense. (Complaint, ¶ 19). The allegations relate to claims that the
Germ Defense packaging contained improper statements which allegedly purported to provide a
cure for the common cold. (Complaint, ¶ 20). The claims also allege violations of the California
Unfair, Unlawful and Fraudulent Trade Practices law and California’s False Advertising law.
(Complaint, ¶ 20). Rite Aid alleged that, despite providing notice to Improvita by letter to
Klamet via Federal Express, it has not been indemnified for the costs of the litigation.
(Complaint, ¶¶ 22-25). Rite Aid filed this action seeking a declaratory judgment that Defendants
are obligated to indemnify Rite Aid for all losses, expenses, damages, costs, and attorneys’ fees
3
incurred by Plaintiff in defense of an action filed against it in California, and all fees and costs
1
associated with the action sub judice.
Rite Aid has further alleged that Defendant Klamet has closed Improvita Health Products,
Inc. and Improvita CM-MACM, LLC, and now does business as Improvita Contract
Manufacturing LLC in an attempt to avoid the liabilities and obligations of those entities, and to
perpetuate a fraud by using the other entities simply as shell corporations, yet continuing to reap
the benefits of the corporate form via this new entity. (Complaint, ¶¶ 28-33). Furthermore, Rite
Aid alleged that Improvita Health Products, Inc. and Improvita CM-MACM, LLC are grossly
undercapitalized, and that Klamet has abused the corporate form by substantially commingling
the assets of the Improvita entities with his own personal assets. (Complaint, ¶¶ 29-30). Lastly,
Rite Aid alleged that, to date, it has expended, and will continue to expend, a significant amount
of money in connection with the costs, expenses, and attorneys’ fees of the California action, as
well as the instant matter, of which none of it has been recouped from the Improvita entities or
Klamet. (Complaint, ¶¶ 34-46).
Plaintiff’s complaint contains three counts. Count I seeks a declaratory judgment against
Defendant Improvita Health Products, Inc., requesting that judgment be entered against it
declaring that the Defense and Indemnity Agreement obligates Improvita Health Products, Inc. to
indemnify Rite Aid for all losses, expenses, damages, costs and attorneys’ fees Rite Aid incurs in
connection with the California action and the action sub judice. (Complaint, ¶¶ 35-38). Count II
seeks a declaratory judgment against Defendant Improvita CM-MACM, LLC, requesting that
judgment be entered against it declaring that the Defense and Indemnity Agreement obligates
1
In its brief, Rite Aid includes litigation involving itself and the FTC as being among the losses, expenses,
damages, costs, and attorneys’ fees for which it now seeks relief. In the complaint, however, Rite Aid sets forth
three counts, none of which seek to recover costs associated with FTC litigation. We have found no amended
pleading, of any sort, seeking a declaratory judgment in conjunction with such litigation and, therefore, we decline
to review the merits of any such claim.
4
Improvita CM-MACM, LLC to indemnify Rite Aid for all losses, expenses, damages, costs and
attorneys’ fees Rite Aid incurs in connection with the California action and the action sub judice.
(Complaint, ¶¶ 39-42). Count III seeks a declaratory judgment as to Defendants Thomas P.
Klamet and Improvita Contract Manufacturing, LLC, requesting that judgment be entered
against them declaring that Thomas P. Klamet and Improvita Contract Manufacturing LLC are
the alter egos of Improvita Health Products, Inc. and Improvita CM-MACM, LLC and are thus
responsible for the obligations of those entities under the Defense and Indemnity Agreements
and must indemnify Rite Aid for all losses, expenses, damages, costs and attorneys’ fees Rite
Aid incurs in connection with the California action and the action sub judice. (Complaint, ¶¶ 43-
46).
The procedural history of this case is of importance. On January 13, 2009, Defendants
filed an answer to Plaintiff’s complaint. (Answer and New Matter, filed January 13, 2009). As a
result, Rite Aid served its First Set of Interrogatories and its First Set of Requests for Production
of Documents on Defendants. (Motion for Summary Judgment, Ex. 6-7). Defendants did not
respond to Rite Aid’s interrogatories or document requests. Furthermore, Defendants did not
respond to telephone calls or letters sent by counsel for Rite Aid. (See Motion for Summary
Judgment, Letter of Brian P. Downey, Ex. 8).
On April 22, 2009, we entered an order granting an Amended Motion to Withdraw filed
by Defendants’ counsel, James W. Kraus, and stayed proceedings for sixty days to allow
Defendants to obtain replacement counsel. (Order of Court, April 22, 2009). To date, there has
been no entry of appearance for replacement counsel for Defendants Improvita CM-MACM,
LLC or Improvita Contract Manufacturing, LLC. (CIVIL ACTION NO: 08-6930 Docket).
5
On July 10, 2009, Rite Aid, still having received no response to its Interrogatory or
Document Requests, filed a Motion to Compel Responses to Plaintiff’s Discovery Requests.
(Plaintiff’s Motion to Compel, filed July 10, 2009). On August 6, 2009, argument was heard on
the Motion, and, on that day, we entered an order directing Defendants to respond to all
outstanding discovery requests within thirty days “and in default thereof to suffer sanctions,
namely, that they will be barred from asserting a defense to this action.” (Order of Court, August
6, 2009). On that day, we also deferred Plaintiff’s request for a default judgment pending a
Motion for Summary Judgment.
Defendants have not responded to the outstanding discovery requests within the required
thirty days. As a result, on November 23, 2009, Plaintiff filed the instant Motion for Summary
th
Judgment. Despite our Order of August 6 barring Defendants from asserting a defense to the
action absent their response to Plaintiff’s discovery requests, Defendant Klamet, in his individual
capacity, filed an opposition to the summary judgment motion on December 10, 2009.
(Defendant Thomas P. Klamet’s Opposition to Plaintiff’s Motion for Summary Judgment, filed
December 10, 2009). The opposition does not address the outstanding discovery requests, nor
th
does it address our August 6 Order. Rather, Defendant Klamet’s opposition to Plaintiff’s
Motion for Summary Judgment contains various allegations and assertions amounting to a
defense of himself in his individual capacity.
Under Rule 1035 of the Pennsylvania Rules of Civil Procedure, the court may grant
summary judgment after the relevant pleadings are closed and “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 any additional discovery or expert report.” Pa. R. Civ. P. 1035.2(1). Summary
judgment shall be granted whenever “the material facts are undisputed,” or the facts are
6
insufficient “to make out a prima facie cause of action or defense.” McCarthy v. Dan Lepore &
Sons Co., 724 A.2d 938, 940 (Pa. Super. Ct. 1998); Pa. R. Civ. P. 1035.2(1). Furthermore, it is
“[t]he moving party [who has] the burden of proving that no genuine issues of material fact
exist.” Reliance Ins. Co. v. IRPC, Inc., 2006 Pa Super 150, ¶ 8, 904 A.2d 912, 914. “In
determining whether to grant summary judgment, the trial court must view the record in the light
most favorable to the non-moving party and must resolve all doubts as to the existence of a
genuine issue of material fact against the moving party.” Id. at 914-15.
Pennsylvania Rule of Civil Procedure 4019(a)(1)(viii) provides that a court may, on
motion, make an appropriate order if “a party or person otherwise fails to make discovery or to
obey an order of court respecting discovery.” Pa.R.Civ.P. 4019(a)(1)(viii). Pennsylvania Rule
of Civil Procedure 4019(c)(2) provides that a court, when acting under subsection (a) of the rule,
may enter an order “refusing to allow the disobedient party to support or oppose designated
claims or defenses, or prohibiting such party from introducing in evidence designated
documents, things or testimony. . . .” Pa.R.Civ.P. 4019(c)(2). The decision of a trial court to
sanction a party in violation of a discovery order and the severity of such a sanction are “both
vested in the sound discretion of the trial court.” Jetson Direct Mail Services, Inc. v. Department
of Labor and Industry State Workmen's Insurance Fund, 782 A.2d 631, 634 (Pa. Cmwlth. 2001)
(citing Croydon Plastics Co., Inc. v. Lower Bucks Cooling & Heating, 698 A.2d 625, 629
(Pa.Super. 1997), petition for allowance of appeal denied, 553 Pa. 689, 717 A.2d 1028 (1998)).
Courts should carefully balance the factors of a case in order to insure a just result is reached by
the decision to sanction a party. Id. An abuse of discretion as follows: an abuse of discretion is
found in instances where there exists
not merely an error of judgment, but [where] if in reaching a conclusion the law is
overridden or misapplied, or the judgment exercised is manifestly unreasonable,
7
or the result of partiality, prejudice, bias or ill-will, as shown by the evidence or
the record, discretion is abused.
Paden v. Baker Concrete Construction, Inc., 540 Pa. 409, 412, 658 A.2d 341, 343 (1995)
(quoting Mielcuszny v. Rosol, 317 Pa. 91, 93-94, 176 A. 236, 237 (1934)).
At the time that we entered our Order of August 6, 2009, the Interrogatories and
Document Requests which Rite Aid had served upon Defendants had been outstanding for more
than sixteen months. To date, and even after an Opposition to Plaintiff’s Motion for Summary
Judgment was filed by Defendant Klamet in his individual capacity, Defendants have not
responded to the outstanding discovery requests, and it is clear that they do not intend to do so.
Our Order directed Defendants to respond to all outstanding discovery requests within thirty
days “and in default thereof to suffer sanctions, namely, that they will be barred from asserting a
defense to this action.” (Order of Court, August 6, 2009). No efforts have been made by any of
the defendants to comply with the discovery order or the discovery requests; as a result,
Defendants are barred from asserting a defense against Plaintiff’s claims and the matter is ripe
for summary judgment.
The Defense and Indemnity Agreements attached to Plaintiff’s complaint require
Improvita Health Products, Inc. (Ex. A) and Improvita CM-MACM LLC (Ex. B) to
. . .defend, indemnify and hold harmless Rite Aid, its shareholders, officers and
agents, affiliated companies, and subsidiaries from any and all losses, expenses,
damages, costs and attorneys fees that they, or any of them, may at any time from
the date hereof incur by reason of certain claims, actions and/or investigations by
the Consumer Product Safety Commission and/or any other federal, state, local or
other governmental entity and also including as well, but not limited to, claims
and/or lawsuits involving allegations by any person or entity of negligence,
personal injury, product liability, failure to comply with [the Compliance with the
Law section], as well as intellectual property rights infringement arising out of the
sale, purchase, consumption and/or use of each of the Product sold to Rite Aid.
8
(Complaint, Ex. A, B). Attached to Plaintiff’s Motion for Summary Judgment is an affidavit of
James J. Comitale, Vice President and Assistant General Counsel for Rite Aid. (Motion for
Summary Judgment, Ex. 2). The affidavit describes the California action wherein Rite Aid was
sued by a putative class alleging that Rite Aid violated various portions of the California
consumer protection laws with regards to the sale of Germ Defense. That action is styled Fink v.
NBTY, Inc., et al., CV09-05058FMC, U.S. Dist. Court, Central District of California. Because
the action arises out of allegedly deceptive acts or practices in connection with the Germ Defense
advertising, the aforementioned Defense and Indemnity Agreements require that Improvita
Health Products, Inc. and Improvita CM-MACM LLC indemnify Plaintiff for “any and all
losses, expenses, damages, costs and attorneys fees that [Rite Aid]” may have incurred in
connection with the defense of such action. (Complaint, Ex. A, B). Because our Order of
th
August 6 barred Defendants from asserting a defense, there is no genuine issue of any material
fact as to a necessary element of the cause of action; furthermore, also as a result of our Order,
Defendants are unable to “to make out a prima facie. . .defense.” See McCarthy, 724 A.2d at
940; Pa. R. Civ. P. 1035.2(1). As a result, Plaintiff is entitled to summary judgment as a matter
of law. See Aubrey v. Precision Airmotive LLC, 7 A.3d 256, 261 (Pa. Super. 2010) (“A trial
court may grant summary judgment as a matter of law whenever there is no genuine issue of
material fact or ‘the record contains insufficient evidence of facts to make out a prima facie
cause of action or defense and, therefore, there is no issue to be submitted to a jury.’”).
With respect to Defendant Klamet, summary judgment is proper for the same reasons.
th
Our Order of August 6 also bars Defendant Klamet from asserting a defense to this action as a
result of the defendants’ failure to abide by our discovery order. Defendant Klamet is alleged to
be, or was, the President, Chief Executive Officer and shareholder of Improvita Health Products,
9
Inc; he is also alleged to be a member of Improvita CM-MACM, LLC and Improvita Contract
Manufacturing LLC. (Complaint, ¶ 5). The affidavit of James J. Comitale, attached to
Plaintiff’s Motion for Summary Judgment, provides that Defendant Klamet, in an attempt to
escape the liabilities and obligations of Improvita CM-MACM LLC and Improvita Health
Products, Inc., now does business as Improvita Contract Manufacturing LLC. (Motion for
Summary Judgment, Ex. 2 at ¶¶ 12-14). The affidavit further provides that Defendant Klamet
has grossly undercapitalized the Defendant entities in this matter, and has failed to adhere to
corporate formalities by substantially intermingling the assets of the Improvita entities and his
th
own personal assets. Id. Because our Order of August 6 barred Defendant Klamet from
asserting a defense, there is no genuine issue of any material fact as to a necessary element of the
cause of action; furthermore, also as a result of our Order, Defendants are unable to “to make out
a prima facie. . .defense.” See McCarthy, 724 A.2d at 940; Pa. R. Civ. P. 1035.2(1). As a result,
Plaintiff is entitled to summary judgment as a matter of law.
With respect to Defendants Improvita CM-MACM, LLC and Improvita Contract
Manufacturing, summary judgment is also proper for the additional reason that these entity
Defendants remain unrepresented and are, therefore, unable to lodge a defense as a matter of law.
Rite Aid is correct in pointing out that our Superior Court has held that the “law is clear;” a
corporation may appear in court only through an attorney admitted to practice before the court.
Walacavage v. Excell 2000, Inc., 480 A.2d 281, 284-85 (Pa. Super. 1984). The reasoning for
this rule is an application of traditional corporate governance: that “a corporation can do no act
except through its agents and that such agents representing the corporation in Court must be
attorneys at law who have been admitted to practice, are officers of the court and subject to its
control.” Id. As a result, Defendants Improvita CM-MACM, LLC and Improvita Contract
10
Manufacturing, LLC are not able to make out a prima facie defense to the action without
counsel, and Plaintiff is entitled to summary judgment.
ORDER OF COURT
nd
AND NOW, this 2 day of February, 2011, upon consideration of the Plaintiff’s Motion
for Summary Judgment, and Defendant Klamet’s response thereto, and after oral argument by
the parties, the Plaintiff’s Motion for Summary Judgment is GRANTED.
The Prothonotary is directed to enter judgment in this action in favor of Rite Aid and
against Defendants Improvita CM-MACM, LLC, Improvita Contract Manufacturing, LLC, and
Thomas P. Klamet.
BY THE COURT,
__________________
Kevin A. Hess, P.J.
Brian P. Downey, Esquire
For the Plaintiff
P. J. Mooney, Esquire
For the Defendant Klamet
:rlm
11