Brice v. John Hoffert, Thomas L. Klonis, Hoffert & Klonis, P.C.
| Decision Date | 13 September 2016 |
| Docket Number | No. 5:15-cv-4020,5:15-cv-4020 |
| Parties | KENNETH BRICE and CHRISTINE BRICE, Plaintiffs, v. JOHN HOFFERT, THOMAS L. KLONIS, HOFFERT & KLONIS, P.C., and KIM BAUER, Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Defendant Kim Bauer's Motion for Summary Judgment, ECF No. 112 - Granted Attorney Defendants' Motion to Dismiss, ECF No. 148 - Granted
This case pertains to a dispute over family-owned businesses and real estate that were transferred from the plaintiff-parents to their adult defendant-daughter. Parents allege the daughter "stole" the properties with the help of the family lawyers through a real estate deed and stock certificates that contained forged or fraudulently obtained signatures. Daughter contends that the businesses and real estate were gifted to her from her parents.
For the reasons set forth below, the Court grants summary judgment in daughter's favor on all federal counts under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, and declines to exercise supplemental jurisdiction over the remaining state law claims against daughter and the family attorneys. This case represents a family dispute overfamily businesses. The parents' allegations against their daughter amount to nothing more than "garden variety business fraud" and do not meet the requirements of RICO.
On July 21, 2015, Plaintiffs Kenneth and Christine Brice, husband and wife, ("the Brices") initiated this action against their former attorneys, John Hoffert and Thomas L. Klonis, and their daughter Kim Bauer ("Bauer"). An Amended Complaint was filed on August 3, 2015, alleging three counts under RICO and thirteen state law claims. Am. Compl., ECF No. 2. Bauer filed an Answer on November 5, 2015, ECF No. 12, and an Amended Answer on April 6, 2016, ECF No. 67. The Attorney Defendants1 filed a Motion to Dismiss on November 9, 2015. ECF No. 13. The Motion was granted in part and denied in part on April 13, 2016. ECF No. 74.2 The Attorney Defendants filed an Answer with a counterclaim and a crossclaim on May 17, 2016, ECF No. 90.
This Court has federal question jurisdiction over the RICO claims pursuant to 28 U.S.C. § 1331. Although the Amended Complaint included the family lawyers in the RICO counts, a Stipulation was filed on July 20, 2016, wherein the Brices agreed to withdraw their federal claims, as well as certain state law claims for fraud and civil conspiracy, as to the Attorney Defendants only. ECF No. 133. Jurisdiction against the Attorney Defendants is therefore dependent on this Court's decision whether to exercise supplemental jurisdiction pursuant to 28 U.S.C. § 1367(c)(3).
On July 8, 2016, the Brices filed a Motion for Summary Judgment, arguing that Bauer failed to prove that they transferred the properties with donative intent, and without improper influence. ECF Nos. 116-118. The same day, Bauer filed a Motion for Summary Judgment, seeking to dismiss all claims based on the Brices' failure to establish that the transfers were the subject of forgeries. ECF No. 112. The Attorney Defendants also filed a Motion for Summary Judgment on July 8, 2016. ECF No. 114. At the time this Motion was filed, the RICO claims against the Attorney Defendants had not been dismissed and they argued, inter alia, that the Brices could not establish a "pattern of racketeering activity" or a RICO "enterprise." Id. Following the dismissal of the federal counts against the Attorney Defendants, they filed a Motion to Dismiss for lack of subject matter jurisdiction, asserting that there are no extraordinary circumstances warranting this Court's exercise of supplemental jurisdiction. ECF No. 148. On August 4, 2016, this Court issued notice to the parties pursuant to Fed. R. Civ. P. 56(f)(2)3 that Bauer's Motion for Summary Judgment might be granted on grounds not raised in the motion, specifically whether there is sufficient evidence to support the RICO claims, and allowed the parties to file supplemental briefs. ECF Nos. 162, 177. These Motions have been fully briefed.
Kenneth Brice founded, and was the sole owner of, KC Auto Body, Inc., KC Towing, Inc., and Brice Villa, Inc. Pls.' Add. Stmt Fact ¶ 4, ECF No. 137. All three businesses are located at 4841-4851 Perkiomen Avenue, Reading, Pennsylvania. Id. ¶ 5. The Brices assert that they are the owners of the real estate upon which KC Auto Body, Inc., and KC Towing, Inc., are situated, and that prior to April 8, 2015, they were the record owners of the real estate upon which Brice Villa is situated. Id. ¶¶ 6-7. On January 1, 2008, the Brices executed a deed givingBauer one-third of the property on which KC Auto Body, Inc., and KC Towing, Inc., sit. Id. ¶ 12.
In or about 2008, Bauer began working at KC Auto Body, Inc., KC Towing, Inc., and Brice Villa, Inc., to learn from her father, Kenneth Brice, how to run the businesses. Id. ¶ 11; Bauer Stmt Fact ¶ 2, ECF No. 113. By 2010, Bauer had taken over management. Pls.' Add. Facts ¶ 13; Bauer Stmt Fact ¶ 3. The businesses paid to or for the Brices forty percent of the annual profits, credit card bills, annual country club dues, and weekly payments to Mrs. Brice. Pls.' Stmt Facts ¶¶ 20-24, ECF Nos. 117-118.
On September 24, 2011, Michael Depaul prepared a memorandum outlining the Brices' wishes for distribution of their assets upon their death, which included transferring the businesses through a stock purchase plan and transferring the real estate to Bauer. Pls.' Add. Facts ¶ 16. On October 4, 2012, Bauer terminated Mr. Depaul. Id. ¶ 20. Prior thereto, the Brices contacted Timothy Kershner, an accountant, to discuss tax preparation for the businesses. Id. ¶ 21; Bauer Stmt Fact ¶¶ 5-6. Mr. Kershner was engaged to prepare the personal income tax returns of the Brices and of Bauer, and the tax returns for the businesses for 2012. Pls.' Add. Facts ¶ 24; Bauer Stmt Fact ¶¶ 27-29. But see Pls.' Add. Facts ¶ 54 ().
During the first week of December 2012, Mr. Kershner and Bauer exchanged a series of emails about her father's intention to "gift" by the end of the year. Pls.' Add. Facts ¶ 28 and Emails, Ex. 2, ECF No. 138-5. On December 12, 2012, the Brices met with Mr. Hoffert and Mr. Kershner to discuss the possible gifting, to Bauer, of the businesses and the real estate on which the Brice Villa mobile home park is located. Pls.' Add. Facts ¶ 29; Bauer Stmt Fact ¶ 6. A week later, Mr. Kershner emailed Bauer to inform her that he spoke with Mr. Hoffert, who indicated that he would obtain the Brices' signatures to transfer all shares of stock in the three businessesto Bauer, as well as on a deed transferring the land where the businesses and Brice Villa sit. Pls.' Add. Facts ¶ 34 and Ex. 18, ECF No. 137-19.
The Brices contend that they did not intend to transfer any property to Bauer at that time. Pls.' Add. Facts ¶ 43. However, they purportedly signed a deed for the Brice Villa real estate and stock certificates for the three businesses transferring the properties to Bauer. Id. 25. The deed and the stock certificates for Brice Villa, Inc. and for KC Auto Body, Inc. are dated October 1, 2012, while the stock certificate for KC Towing, Inc. is dated January 1, 2013. Id. The Brices assert that they have no recollection of signing these documents. Id. ¶ 43.
The Brices suggest that the emails between Bauer and Mr. Kershner confirm that there had not been any transfers by December 2012, and support their challenge to the validity of the documents, most of which were dated October 1, 2012. Pls.' Add. Facts ¶¶ 34-37 and Ex. 20, ECF No. 137-21. Bauer responds that the deed and stock certificates were backdated for tax purposes because October 1, 2012, was the beginning of the fiscal year for those companies. Bauer Stmt Fact ¶ 19.
On October 22, 2013, a Gift Tax Return for the Brices, reflecting a gift of the real estate, was filed with the IRS, and included the Brices' signatures. Pls.' Add. Facts ¶ 52. The Brices assert that they have no memory of signing the Gift Tax Return. Pls.' Add. Facts ¶ 43. On May 29, 2015, the Brices signed an amended Gift Tax Return stating that there was no completed gift in 2012. Id. ¶ 56.
The deed was maintained in the Attorney Defendants' office until it was recorded by them on April 8, 2015, with the Berks County Recorder of Deeds. Pls.' Add. Facts ¶ 41 and Ex. 10, ECF No. 137-11; Pls.' Resp. Bauer Stmt Fact ¶ 23, ECF No. 138. Mr. Hoffert testified that when he found the deed in a file, he realized it had never been recorded and therefore recorded it promptly. Bauer Stmt Fact ¶ 23; Pls.' Add. Facts ¶ 24. Mr. Hoffert explained that he believedhe should have recorded it at the time it was signed. Hoffert Dep. 103:15-23, Ex. E, ECF No. 113. When asked how the deed was transmitted to the Berks County Recorder of Deeds Office, Mr. Hoffert testified that his secretary likely walked it over, as his office is across the street. Id. at 140:16 - 141:2.4 The original certificates were also held by the Attorney Defendants and were never delivered to Bauer.5 Pls.' Add. Facts ¶ 45. Further, the back sides of the three stock certificates are not executed and there are no executed stock powers relating thereto. Pls.' Add. Facts ¶¶ 44 and Ex. 22, ECF No. 137-23.
The Brices claim in this lawsuit that Bauer defrauded them of their ownership in the businesses and real estate through the execution of the deed and the three stock certificates, and then tried to hide the transfers.
Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Turner v. Schering-Plough...
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