Blue Mountain Mushroom Co. v. Montery Mushroom

• Citation: 246 F.Supp.2d 394
• Decision Date: 05 September 2002
• Docket Number: No. 00-CV-4915.,00-CV-4915.
• Parties: BLUE MOUNTAIN MUSHROOM CO., INC. and Blue Ball National Bank Plaintiffs v. MONTEREY MUSHROOM, INC., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

246 F.Supp.2d 394

BLUE MOUNTAIN MUSHROOM CO., INC. and Blue Ball National Bank Plaintiffs v. MONTEREY MUSHROOM, INC., Defendant.

No. 00-CV-4915.

United States District Court, E.D. Pennsylvania.

September 5, 2002.

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Matthew H. Haverstick, Barley, Snyder, Senft & Cohen, Lancaster, PA, John E. Muir, Kozloff Stoudt, Wyomissing, PA, Rees Griffiths, Barley Snyder Senft & Cohen, LLC, York, PA, George J. Shoop, Barley Snyder Senft & Cohen, Reading, PA, for plaintiffs.

James J. Rodgers, Dilworth, Paxson, LLP, Philadelphia, PA, Thomas S. Biemer, Dilworth Paxson LLP, Philadelphia, PA, Donald B. Lynn, Jr., Dilworth Paxson, LLP, Philadelphia, PA, for defendant.

MEMORANDUM AND ORDER

VAN ANTWERPEN, District Judge.

Presently before this court is Defendant's Motion for Reconsideration filed on August 6, 2002, requesting this court to reconsider our Memorandum and Order dated July 25, 2002. Plaintiffs filed a Response on August 20, 2002. Also before us is Defendant's Motion for Summary Judgment filed on July 14, 2002, and Plaintiffs' Memorandum in Opposition to Defendant's Motion for Summary Judgment filed on July 18, 2002. For reasons set forth below, we will grant Defendant's Motion for Reconsideration, and vacate our July 25, 2002 Order and withdraw the accompanying Memorandum. This court will grant Summary Judgment to Defendant in part. Defendant's motion for summary judgment concerning Plaintiffs' promissory estoppel, fraud (intentional misrepresentation), negligent misrepresentation, and breach of an implied covenant of good faith and fair dealing claims will be granted and these claims will be dismissed.

BACKGROUND This case arises out of a default on an agreement to purchase Plaintiff Blue Mountain Mushroom Co. ("Blue Mountain"). In 1999, Blue Mountain defaulted on its loan obligation to co-Plaintiff Blue Ball National Bank ("BBNB") and was forced to declare bankruptcy. Subsequently, BBNB suggested Blue Mountain find a purchaser for all its assets. On August 3, 2000, Blue Mountain, acting as Debtor-in-Possession, entered into a final Agreement of Sale and Purchase ("the Agreement") with Defendant Monterey Mushrooms, Inc. ("Monterey") for the sale of substantially all of Blue Mountain's assets to Monterey. The Bankruptcy Court approved the purchase on August 3, 2000. Between August 3 and August 28, 2000, Monterey attempted to acquire the necessary funds to complete the purchase. Seven days after the Agreement's closing date, on August 28, 2000, Monterey advised Blue Mountain that it was defaulting on its obligation under the Agreement to purchase Blue Mountain. Pursuant to the Agreement, Blue Mountain retained the $50,000.00 deposit (Agreement ¶22.2). Defendant Monterey alleges that the provisions of the agreement with Blue Mountain called for the retention of the deposit as liquidated damages and constituted the sole remedy for defaulting on its obligation to purchase, thus barring further claims. Plaintiff Blue Mountain Mushroom Company, Inc. is a Pennsylvania corporation with its principal place of business in Pennsylvania. Co-Plaintiff Blue Ball National Bank is a bank operating in Pennsylvania, and Defendant Monterey Mushroom, Inc., is a Californian corporation with its principal place of business in Watsonville, California. We have jurisdiction in this case founded upon 28 U.S.C. § 1334 (diversity of citizenship).

DISCUSSION

I. Motion for Reconsideration Standard

A motions for reconsideration may be filed under local Rule 7.1(g) and FED. R. CIV. P. 59(e): "[a]ny motion to alter or amend a judgment shall be filed no later than 10 days after the entry of the judgment." The purpose of a motion for reconsideration is "to correct manifest errors of law or fact or to present newly discovered evidence." Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir.1985). Generally, a motion for reconsideration will only be granted on one of the following three grounds: "(1) there has been an intervening change in controlling law; (2) new evidence, which was not previously available, has become available; or (3) it is necessary to correct a clear error of law or to prevent manifest injustice." Smith v. City of Chester, 155 F.R.D. 95, 96-97 (E.D.Pa.1994); see also Jubilee v. Horn, 959 F.Supp. 276, 278 (E.D.Pa.1997).

"A motion for reconsideration is not properly grounded on a request that a court reconsider repetitive arguments that have fully examined by the court ...." Tobin v. General Elec. Co., No. Civ. A. 95-4003, 1998 WL 31875 (E.D.Pa.1998). "The key to success on a motion is to show that there were facts or legal issues properly presented but overlooked by the court in its decision." E.D. PA. R. 7.1(g) cmt. 6.b. (citing Marriott Senior Living Servs. v. Springfield Twp., No. Civ. A. 97-3660, 2000 WL 1781937 (E.D.Pa.2000)).

Defendant's Motion for Reconsideration is granted because "it is necessary to correct a clear error of law," and because this court overlooked other dispositive arguments presented by Defendant's counsel. The incorrect recitation of Pennsylvania law on liquidated damages is discussed below. After we discuss our "clear error of law," this court will proceed to Defendant's overlooked arguments regarding: (1) alleged breach of an implied covenant of good faith and fair dealing; (2) BBNB as an intended third party beneficiary; (3) alleged negligent misrepresentation; (4) alleged fraud; and (5) alleged promissory estoppel.

II. Summary Judgment Standard

We render summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R.Crv.P. 56(c). An issue is "genuine" only if there is a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is "material" only if it might affect the outcome of the suit under governing law. Id. at 248, 106 S.Ct. 2505.

All inferences must be drawn, and all doubts resolved, in favor of the non-mov-ing parties-in this case, Plaintiffs. U.S. v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Gans v. Mundy, 762 F.2d 338, 341 (3d Cir.1985). On a motion for summary judgment, the moving party bears the initial burden of identifying those portions of the record that it believes demonstrate the absence of material fact. Celotex Corp. v. Catrett, All U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To defeat summary judgment, the non-moving parties must respond with facts of record that contradict the facts identified by the movant and may not rest on mere denials. Id. at 321 n. 3, 106 S.Ct. 2548 (quoting FED.R.CIV.P. 56(e)); see First Nat'l Bank of Pennsylvania v. Lincoln Nat'l Life Ins. Co., 824 F.2d 277, 282 (3d Cir.1987). The non-moving parties must demonstrate the existence of evidence that would support a jury finding in their favor. See Anderson, All U.S. at 248-49,106 S.Ct. 2505.

III. Liquidated Damages

Defendant contends that this court's July 25, 2002 Memorandum and Order should be reconsidered "to correct a clear error of law." Smith, 155 F.R.D. at 96-97. Defendant argues that Pennsylvania contract law bars a plaintiff who retains liquidated damages from seeking additional actual damages. While this court previously examined the legal issues in the case, the Defendant has correctly presented, to this court, different authority under Pennsylvania contract law which applies when a plaintiff who has retained a liquidated damage award seeks additional monetary damages versus equitable relief.¹ We believe our prior Order and Memorandum were incorrect.

Under Pennsylvania contract law a party that retains legally enforceable liquidated damages will be barred from seeking actual damages. See Carlos R. Leffler, Inc. v. Hutter, 696 A.2d 157, 162 (Pa.Super.1997) ("[PJarties who agree to include a liquidated damages clause in their contract, and do so properly, cannot later claim entitlement to actual damages; rather, in keeping with the law of contracts, the parties must be bound by their bargain."); 13 PA. CONS. STAT. ANN. § 2718.² Additionally, once a court finds a legally enforceable liquidated damages clause, any evidence of actual damages is inadmissable under Pennsylvania contract law as irrelevant to the action. See Commonwealth v. Mitchell, 517 Pa. 203, 216 n. 2, 535 A.2d 581 (1987); Calabro v. Dept. of Aging, 689 A.2d 347, 352 (Pa.Cmwlth.1997).³

This rule of law protects the bargained for contract between Blue Mountain and Monterey. Holding plaintiffs to the liquidated amount when a plaintiff alleges actual damages exceed liquidated damages mirrors the rule that the breaching party must pay liquidated damages despite the fact that actual damages may be lower. See Citicorp Mortg., Inc. v. Morrisville Hampton Village Realty Ltd., 443 Pa. Super. 595, 662 A.2d 1120, 1122 (1995) (granting defendant the liquidated damage amount despite evidence that actual damages were smaller because there was no evidence that the liquidated damages constituted a penalty). Therefore, if this court finds in the future that the liquidated damage clause is legally enforceable, then Plaintiff will not be able to recover actual damages under a breach of contract claim.⁴

IV. Breach of Implied Covenant of Good Faith and Fair Dealing.

Defendant's motion for summary judgment with regards to Plaintiffs claim concerning an alleged breach of implied covenant of good faith and fair dealing, will be granted. As Defendant correctly states, and Plaintiff does not challenge in their reply brief, Pennsylvania law does not recognize a separate claim for breach of implied covenant of good faith and fair dealing. See Drysdale v. Woerth, 1998 WL 966020, at *3 (E.D.Pa. Nov.18,...