HomeMy WebLinkAbout2010-5052HERRE BROS., INC., : IN THE COURT OF COMMON PLEAS OF
Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION
NELSON E. BISER,
JR., and NELSON
MECHANICAL, INC.,
Defendant : NO. 2010-5052 CIVIL TERM
IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS
TO COUNTERCLAIMS OF DEFENDANT BISER
BEFORE OLER, GUIDO and EBERT, JJ.
OPINION and ORDER OF COURT
OLER, J., June 2, 2011.
In this civil case Plaintiff, a mechanical and electrical construction
contractor/subcontractor, has sued a former employee and a corporation allegedly formed
by the employee, for "injunctive and monetary damages arising out of a perfidious
scheme by [the] former employee to (a) start a competing business; (b) misappropriate
confidential and proprietary information; (c) exploit and usurp for himself business
opportunities belonging to his employer; [(d)] tortiously interfere with [Plaintiff's]
contractual relations with its employees; and ([e]) sabotage his employer's business prior
to the termination of his employment."' The individual Defendant has filed an answer to
Plaintiff's complaint, with counterclaims for breach of contract, unjust enrichment,
conversion, attorneys' fees, and wrongful use of civil proceedings.2
For disposition at this time are Plaintiff's preliminary objections in the nature of
demurrers to the individual Defendant's counterclaims for conversion, attorneys' fees,
' Plaintiff's Complaint, ¶1, filed August 2, 2010 (hereinafter "Plaintiff's Complaint")
2 Defendant's Answer, New Matter, and Counterclaims, January 10, 2011 (hereinafter "Defendant's
Answer, New Matter, and Counterclaims").
and wrongful use of civil proceedings.3 These preliminary objections were argued on
March 25, 2011.
For the reasons stated in this opinion, the preliminary objections will be sustained
in part and denied in part.
STATEMENT OF FACTS
The complaint of the Plaintiff, Herre Bros., Inc. (hereinafter Plaintiff), was filed
on August 2, 2010.4 It alleged that the individual Defendant, Nelson E. Biser, Jr.
(hereinafter Defendant), had begun employment as an estimator with Plaintiff in 2003,5
had signed a confidentiality agreement incident to the employment ,6 had had access to
confidential and proprietary information of Plaintiff,' had devised a scheme to "steal
millions of dollars of work"g from Plaintiff and start a competing business while still
employed by Plaintiff,9 had solicited Plaintiff s customers, 10 stolen confidential
information," and sabotaged Plaintiffs business while still employed by Plaintiff,12 and
had been terminated by Plaintiff on July 15, 2010.13 Plaintiffs complaint contained
counts entitled Breach of Fiduciary Duty, 14 Breach of the Duty of Loyalty, 15 Breach of
the Duty of Confidentiality, 16 Tortious Interference with Employment and Fiduciary
s Plaintiff Herre Bros., Inc.'s Preliminary Objections to the Defendant Nelson Biser's Counterclaim,
January 31, 2011 (hereinafter "Plaintiff's Preliminary Objections to Defendant's Counterclaim).
4 Plaintiff's Complaint.
s Plaintiff's Complaint, ¶15.
6 Plaintiff's Complaint, ¶19.
Plaintiff's Complaint, ¶22.
s Plaintiff's Complaint, ¶40.
9 Plaintiff's Complaint, ¶45.
10 Plaintiff's Complaint, ¶40.
" Plaintiff's Complaint, ¶52.
12 Plaintiff's Complaint, ¶62.
13 Plaintiff's Complaint, ¶33.
14 Plaintiff's Complaint, ¶¶76-83.
15 Plaintiff's Complaint, ¶¶84-91.
16 Plaintiff's Complaint, ¶¶92-100.
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Relations, 17 Unfair Competition,is Unjust Enrichment,19 Breach of Contract,20 and
Conversion of Salary, Benefits, Fees, and Expenses .21
Following a ruling on Plaintiff's petition for a preliminary injunction, which
granted and denied certain preliminary relief to Plaintiff,22 and a denial of preliminary
objections to Plaintiff's complaint filed by Defendant ,23 Defendant filed an answer with
new matter and counterclaims to the complaint. 24
Defendant's counterclaims bore the following titles: Breach of Contract (Count 1);
Unjust Enrichment (Count 2); Conversion (Count 3); Claim for Reasonable Attorney's
Fees (Count 4); and Wrongful Use of Civil Proceedings (Count 5).25 The counterclaim
for breach of contract was based on an alleged failure of Plaintiff to pay commissions
earned by Defendant,26 and the unjust enrichment claim was similarly premised.27
The counterclaim for conversion was based upon Plaintiff s alleged "[retention of]
certain commission payments" to which Defendant was entitled pursuant to his
employment with Plaintiff;28 the counterclaim for attorneys' fees was based upon
Sections 2503(7) (dilatory, obdurate or vexatious conduct during the pendency of a
matter) and 2503(9) (dilatory, obdurate or vexatious conduct in the commencement of a
matter) of the Judicial Code,29 in connection with Plaintiffs allegedly frivolous appeal
17 Plaintiff's Complaint, ¶¶101-109.
" Plaintiff's Complaint, ¶¶110-114.
19 Plaintiff's Complaint, ¶¶I15-120.
20 Plaintiff's Complaint, ¶¶121-124.
21 Plaintiff's Complaint, ¶¶125-128.
22 Order of Court, August 17, 2010.
23 Order of Court, December 20, 2010.
24 Defendant's Answer, New Matter, and Counterclaims.
2s Defendant's Answer, New Matter, and Counterclaims..
26 Defendant's Answer, New Matter, and Counterclaims, ¶147.
27 Defendant's Answer, New Matter, and Counterclaims, ¶153.
28 Defendant's Answer, New Matter, and Counterclaims, ¶157.
29 Act of July 9, 1976, P.L. 586, §2, as amended, 42 Pa. C.S. §2503.
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from an award of unemployment compensation to Defendant and Plaintiff's pursuit of a
preliminary and permanent injunction in this case;30 the counterclaim for wrongful use of
civil proceedings was based upon Section 8351 of the Judicial Code ,31 in connection with
Plaintiff's pursuit of a preliminary and permanent injunction in this case .32
Plaintiff has filed preliminary objections in the nature of demurrers to Defendant's
counterclaims for conversion, attorneys' fees, and wrongful use of civil proceedings. 33
With respect to the conversion claim, Plaintiff maintains that Defendant's action for
money in the form of commissions is encompassed by his claims for breach of contract
and unjust enrichment and "does not present one of the limited circumstances and
exceptions where money can be the subject of a conversion claim."34 With respect to the
claim for attorneys' fees, Plaintiff argues, inter alia, that Defendant's claim as it relates to
an unemployment compensation matter can not be attached to the instant suit and his
claim as it relates to the instant case is premature. 35 With respect to the claim for
wrongful use of civil proceedings, Plaintiff contends, inter alia, that Defendant's action is
premature .36
DISCUSSION
Conversion. As it may affect a claim for tortious conversion, the "gist of the
action" doctrine has been well described in Pittsburgh Construction Co. v. Griffith, 2003
PA Super 374, 834 A.2d 572, as follows:
Conversion is a tort by which the defendant deprives the plaintiff of his right to a
chattel or interferes with the plaintiff's use or possession of a chattel without the
plaintiff's consent and without lawful justification. A plaintiff has a cause of action in
conversion if he or she had actual or constructive possession of a chattel at the time of the
so Defendant's Answer, New Matter, and Counterclaim, ¶179.
"Act of Dec. 19, 1980, P.L. 1296, §1, as amended, 42 Pa. C.S. §8351.
sz Defendant's Answer, New Matter, and Counterclaim, ¶183.
" Plaintiff's Preliminary Objections to Defendant's Counterclaim.
34 Plaintiff's Preliminary Objections to Defendant's Counterclaim, ¶9
" Plaintiff's Preliminary Objections to Defendant's Counterclaim, ¶¶22, 27.
36 Plaintiff's Preliminary Objections to Defendant's Counterclaim, 31.
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alleged conversion. Money may be the subject of conversion. However, the failure to pay
a debt is not conversion.
In general, courts are cautious about permitting tort recovery based on
contractual breaches. In keeping with this principle, this Court has recognized the "gist of
the action" doctrine, which operates to preclude a plaintiff from re -casting ordinary
breach of contract claims into tort claims. The conceptual distinction between a breach of
contract claim and a tort claim has been explained as follows:
Although they derive from a common origin, distinct differences
between civil actions for tort and contractual breach have been developed
at common law. Tort actions lie for breaches of duties imposed by law as
a matter of social policy, while contract actions lie only for breaches of
duties imposed by mutual consensus agreements between particular
individuals. . . . To permit a promiseeto sue his promisor in tort for
breaches of contract inter se would erode the usual rules of contractual
recovery and inject confusion into our well-settled forms of actions.
However, a breach of contract may give rise to an actionable tort where the
wrong ascribed to the defendant is the gist of the action, the contract being collateral. The
important difference between contract and tort claims is that the latter lie from the breach
of duties imposed as a matter of social policy while the former lie from the breach of
duties imposed by mutual consensus. In other words, a claim should be limited to a
contract claim when the parties' obligations are defined by the terms of the contracts, and
not by the larger social policies embodied by the law of torts.
Id. at ¶¶19-20,834 A.2d 581-82 (citations omitted).
In the present case, Defendant's claim for conversion, as pled, is premised upon an
alleged failure of his employer to pay commissions incident to his employmenta claim
based not upon social policy but upon a purported mutual understanding of the parties,
and encompassed by Defendant's alternative counterclaims for breach of contract and in
quasi -contract. As such, it can not be said that the gist of this aspect of Defendant's action
is tortious as opposed to contractual. Accordingly, Plaintiff's preliminary objection in the
nature of a demurrer to Defendant's counterclaim for conversion will be sustained.
Attorneys' fees. With respect to an award of attorneys' fees, Pennsylvania follows
the American Rule, which provides that "a litigant cannot recover counsel fees from an
adverse party unless there is express statutory authorization, a clear agreement of the
parties or some other established exception. In Pennsylvania, the American Rule is
embodied in 42 Pa.C.S. § 1726(a)(1), which provides that attorneys' fees are not an item
of taxable costs except as permitted by 42 Pa.C.S. § 2503 (relating to right of participants
to receive counsel fees) ...." Mosaica Academy Charter School v. Commonwealth,
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Department of Education, 572 Pa. 191, 206-07, 813 A.2d 813, 822 (2002) (citations
omitted).
Under Sections 2503(7) and 2503(9) of the Judicial Code it is provided that
[t]he following participants shall be entitled to a reasonable counsel fee as part of the
taxable costs of the matter:.. .
(7) Any participant who is awarded counsel fees as a sanction
against another participant for dilatory, obdurate or vexatious conduct
during the pendency of a matter [and] ...
(9) Any participant who is awarded counsel fees because the conduct
of another party in commencing the matter or otherwise was arbitrary,
vexatious or in bad faith 37
However, these sections do not contemplate a claim for attorneys' fees in one
action based upon conduct occurring in a different action. Cf. Township of Lower Merion
v. QED, Inc., 738 A.2d 1066, 1073 (Pa. Commw. Ct. 1999). Furthermore, it has been
previously held by this court that a counterclaim for attorneys' fees under Section
2503(9) of the Judicial Code is subject to a preliminary objection in the nature of a
demurrer, on the ground that such a claim is premature at the pleading stage. Koepf v.
Peters, No. 11 Equity 1993 (Cumberland Co. June 2, 1993); see also Shevchik v.
Zwergel, 8 Pa. D. & C.4th 66 (Westmoreland Co. 1990). A similar conclusion has been
reached as to a claim for attorneys' fees under Section 2503(7) of the Code. Seghetti v.
Heritage Resorts of Gettysburg, 19 Pa. D. & C.4th 218 (Adams Co. 1993).
To hold otherwise would raise ancillary matter in every litigation that would
serve only to complicate the issues and perhaps even keep a jury from embarking on a
rightful path. These are matters that are best decided by the court upon a petition at the
conclusion of the case.38
Based upon the foregoing, Plaintiff's preliminary objection in the nature of a
demurrer will be sustained with prejudice as to Defendant's counterclaim for attorneys'
fees as it relates to Plaintiff's alleged conduct with respect to an unemployment
compensation matter and will be sustained without prejudice as to Defendant's
37 Act of July 9, 1976, P.L. 586, §2, as amended, 42 Pa. C.S. §2503.
38 Shevchik v. Zwergel, 8 Pa. D. & C.4th 66, 67 (Westmoreland Co. 1990).
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counterclaim for attorneys' fees as it relates to Plaintiff's alleged conduct with respect to
the above -captioned litigation.
Wrongful use of civil proceedings. Under Section 8351 of the Judicial Code, a
party may seek redress for harm caused by another's wrongful use of civil proceedings. 39
A claimant under this section must show that (1) the other party acted in a grossly
negligent manner or without probable cause and primarily for a purpose other than that of
securing the proper discovery, joinder of parties or adjudication of the claim in which the
proceedings are based and (2) the proceedings have terminated in favor of the claimant.
Act of Dec. 19, 1980, P.L. 1296, §1, as amended, 42 Pa. C.S. §8351(a).
It is obvious from the second prerequisite for relief that, as a general rule, a claim
under the act can not be pursued while the litigation complained of remains pending. See
Linker v. Custom -Gilt Machinery, Inc., 594 F. Supp. 894, 902 (E.D. Pa. 1984). However,
there is some authority for the proposition that such a claim can be pursued by a
defendant with respect to a preliminary injunction that has been denied, even though the
plaintiff's underlying action against the defendant remains pending. AG Cullen
Construction, Inc. v. Travelers Casualty and Surety Co., 2009 WL 382501 (W.D. Pa.
2009).
Accordingly, the court will not peremptorily dispose of Defendant's counterclaim
for wrongful use of civil proceedings as it relates to Plaintiff's unsuccessful pursuit of a
preliminary injunction, but will sustain Plaintiff's demurrer to the counterclaim as it
relates to the balance of Plaintiff's action.
ORDER OF COURT
AND NOW, this 2nd day of June, 2011, upon consideration of Plaintiff Herre
Bros., Inc.'s Preliminary Objections to the Defendant Nelson Biser's Counterclaims,
following oral argument held on March 25, 2011, and for the reasons stated in the
accompanying opinion, it is ordered and directed as follows:
39 Act of Dec. 19, 1980, P.L. 1296, §1, as amended, 42 Pa. C.S. §8351.
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1. Plaintiff's preliminary objection in the nature of a demurrer to
Defendant's counterclaim for conversion is sustained, and the
counterclaim (Count 3) is dismissed;
2. Plaintiff's preliminary objection in the nature of a demurrer to
Defendant's counterclaim for attorneys' fees is sustained, and the
counterclaim (Count 4) is dismissed, with prejudice as to the aspect of
the counterclaim relating to an unemployment compensation action
and without prejudice to Defendant's right to petition for such fees
following trial as to the balance of the counterclaim;
3. Plaintiff's preliminary objection in the nature of a demurrer to
Defendant's counterclaim for wrongful use of civil proceedings is
denied as it relates to Plaintiff's unsuccessful pursuit of a preliminary
injunction and is otherwise sustained, and the counterclaim (Count 5)
is dismissed except as it pertains to the preliminary injunction; and
4. Plaintiff is afforded a period of 20 days from the date of this
order to file a reply to Defendant's new matter and surviving
counterclaims or portions thereof.
Steven M. Williams, Esq.
240 N. Third Street, 7th Floor
Harrisburg, PA 17101
Attorney for Plaintiff
Kevin D. Gillespie, Esq.
315 North Front Street
Harrisburg, PA 17101
Attorney for Defendant
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BY THE COURT,
s/ J. Wesley Oler, Jr.
J. Wesley Oler, Jr., J.
HERRE BROS., INC., : IN THE COURT OF COMMON PLEAS OF
Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION
NELSON E. BISER,
JR., and NELSON
MECHANICAL, INC.,
Defendant : NO. 2010-5052 CIVIL TERM
IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS
TO COUNTERCLAIMS OF DEFENDANT BISER
BEFORE OLER, GUIDO and EBERT, JJ.
ORDER OF COURT
AND NOW, this 2nd day of June, 2011, upon consideration of Plaintiff Herre
Bros., Inc.'s Preliminary Objections to the Defendant Nelson Biser's Counterclaims,
following oral argument held on March 25, 2011, and for the reasons stated in the
accompanying opinion, it is ordered and directed as follows:
1. Plaintiff's preliminary objection in the nature of a demurrer to
Defendant's counterclaim for conversion is sustained, and the
counterclaim (Count 3) is dismissed;
2. Plaintiff's preliminary objection in the nature of a demurrer to
Defendant's counterclaim for attorneys' fees is sustained, and the
counterclaim (Count 4) is dismissed, with prejudice as to the aspect of
the counterclaim relating to an unemployment compensation action
and without prejudice to Defendant's right to petition for such fees
following trial as to the balance of the counterclaim;
3. Plaintiff's preliminary objection in the nature of a demurrer to
Defendant's counterclaim for wrongful use of civil proceedings is
denied as it relates to Plaintiff's unsuccessful pursuit of a preliminary
injunction and is otherwise sustained, and the counterclaim (Count 5)
is dismissed except as it pertains to the preliminary injunction; and
4. Plaintiff is afforded a period of 20 days from the date of this
order to file a reply to Defendant's new matter and surviving
counterclaims or portions thereof.
BY THE COURT,
J. Wesley Oler, Jr., J.
Steven M. Williams, Esq.
240 N. Third Street, 7th Floor
Harrisburg, PA 17101
Attorney for Plaintiff
Kevin D. Gillespie, Esq.
315 North Front Street
Harrisburg, PA 17101
Attorney for Defendant