Capitol Presort Servs., LLC v. XL Health Corp.

• Citation: 175 F.Supp.3d 430
• Decision Date: 30 March 2016
• Docket Number: CIVIL ACTION NO. 1:13-CV-2287
• Parties: Capitol Presort Services, LLC, Plaintiff v. XL Health Corporation, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

175 F.Supp.3d 430

Capitol Presort Services, LLC, Plaintiff

v.XL Health Corporation, Defendant.

CIVIL ACTION NO. 1:13-CV-2287

United States District Court, M.D. Pennsylvania.

Signed March 30, 2016

Jacob M. Theis, Thomas G. Collins, Buchanan Ingersoll & Rooney PC, Harrisburg, PA, for Plaintiff.

Brian P. Seaman, Christine M. Debevec, Stradley, Ronon, Stevens & Young, LLP, Philadelphia, PA, for Defendant.

MEMORANDUM

Christopher C. Conner

, Chief Judge, United States District Court, Middle District of Pennsylvania

Capitol Presort Services, LLC (“Capitol Presort”) commenced this breach of contract action against XL Health Corporation (“XL Health”) asserting that XL Health unilaterally terminated a service agreement between the parties prior to the expiration of its initial term. Before the court are the parties' respective cross-motions (Docs. 36, 40) for summary judgment pursuant to Federal Rule of Civil Procedure 56

. The court will grant XL Health's motion and deny Capitol Presort's motion.

I. Factual Background and Procedural History¹

Capitol Presort provides mail automation services to government entities and private companies located in Pennsylvania, Maryland, and Virginia. (Doc. 40-1 ¶ 1; Doc. 47 ¶ 1). Specifically, Capitol Presort obtains discounted postage rates for clients by sorting, barcoding, and delivering commingled mail to the United States Postal Service in bulk quantity. (Doc. 38 ¶ 9; Doc. 40-1 ¶ 1; Doc. 47 ¶ 1; Doc. 49 ¶ 9). XL Health employs nurse practitioners who perform in-home patient care. (Doc. 38 ¶ 6; Doc. 49 ¶ 6).

The parties' business relationship commenced in 2009, with Capitol Presort processing XL Health's mail on an as-needed basis. (Doc. 38 ¶ 17; Doc. 40-1 ¶ 3; Doc. 47 ¶ 3; Doc. 49 ¶ 17). The parties did not enter into a written agreement at that time. (Doc. 40-1 ¶ 3; Doc. 47 ¶ 3). The volume of mail tendered by XL Health to Capitol Presort increased between June 2009 and October 2011. (Doc. 38 ¶ 21; Doc. 49 ¶ 21).

Capitol Presort and XL Health entered into a written service agreement (“the agreement”) for automated mail processing on October 7, 2011. (Doc. 40-1 ¶ 6; Doc. 47 ¶ 6). Therein, Capitol Presort agrees to provide mail services to XL Health at fixed rates, including transporting, presorting, barcoding, commingling, and delivering XL Health's mail to the United States Postal Service. (See Doc. 39-3 at 2, 5). In return, XL Health agrees to prepare its mail for processing in a specified manner, to wit: by “affix[ing] the correct postage at the applicable USPS discount rate,” dating and sealing envelopes, ensuring the visibility of mailing addresses, and appending presort endorsements to envelopes. (Id. at 2). XL Health further covenants to remit timely payment for all services rendered and to return Capitol Presort's equipment in the event of default. (See id. at 2-3).

The agreement includes a provision which states that its initial term is three years, commencing October 31, 2011, and that thereafter it “shall continue from year to year unless written notice of an intention to terminate is given by either party at least thirty (30) days before the initial term or any subsequent one (1) year period.” (Id. at 2). The inceptive three-year term thus extends through October 31, 2014. (See Doc. 38 ¶ 64; Doc. 49 ¶ 64). The agreement additionally contains the following integration clause: “This constitutes the entire agreement and is [sic] understood and agreed that there are no representations, warranties, verbal understandings or agreements of any kind other than specified herein.” (Doc. 39-3 at 4). The parties concur that the agreement includes neither a minimum volume provision nor an exclusivity provision. (Doc. 40-1 ¶¶ 12-13; Doc. 47 ¶¶ 12-13).

For approximately eighteen months, Capitol Presort provided mail automation services to XL Health pursuant to the agreement. (Doc. 38 ¶¶ 44-45; Doc. 49 ¶¶ 44-45). On April 25, 2013, William Snook (“Snook”), a representative of XL Health, emailed Mark Dennin (“Dennin”), Vice President of Sales and Customer Service for Capitol Presort; Snook informed Dennin that “beginning Monday April 29 we will no longer be in need of your services.” (Doc. 40-10). XL Health proffered its final set of mail to Capitol Presort for processing on April 23, 2013. (Doc. 38 ¶ 61; Doc. 49 ¶ 61).

Capitol Presort initiated the action sub judice with the filing of a complaint (Doc. 1) on August 30, 2013. Therein, Capitol Presort asserts a breach of contract claim stemming from XL Health's unilateral termination of the agreement prior to the expiration of its three-year term. (See id.) On September 9, 2014, the court denied (Doc. 16) XL Health's motion to dismiss for failure to state a claim, finding the agreement valid and enforceable under Pennsylvania's Uniform Written Obligations Act, notwithstanding an apparent lack of consideration flowing from XL Health to Capitol Presort. 33 PA. CONS. STAT. § 6. The parties timely filed the instant cross-motions and supporting papers. (Docs. 36-51). The motions are fully briefed and ripe for disposition.

II. Legal Standard

Through summary adjudication, the court may dispose of those claims that do not present a “genuine dispute as to any material fact” and for which a jury trial would be an empty and unnecessary formality. FED. R. CIV. P. 56(a)

. The burden of proof tasks the non-moving party to come forth with “affirmative evidence, beyond the allegations of the pleadings,” in support of its right to relief. Pappas v. City of Lebanon, 331 F.Supp.2d 311, 315 (M.D.Pa.2004) ; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). This evidence must be adequate, as a matter of law, to sustain a judgment in favor of the non-moving party on the claims. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250–57, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-89, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Only if this threshold is met may the cause of action proceed. See Pappas, 331 F.Supp.2d at 315.

Courts are permitted to resolve cross-motions for summary judgment concurrently. See Lawrence v. City of Phila., 527 F.3d 299, 310 (3d Cir.2008)

; see also Johnson v. Federal Express Corp., 996 F.Supp.2d 302, 312 (M.D.Pa.2014) ; 10A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2720 (3d ed. 2014). When doing so, the court is bound to view the evidence in the light most favorable to the non-moving party with respect to each motion. FED. R. CIV. P. 56 ; Lawrence, 527 F.3d at 310 (quoting Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir.1968) ).

III. Discussion

Pennsylvania substantive law governs this diversity action. See Lafferty v. St. Riel, 495 F.3d 72, 76 (3d Cir.2007)

(citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ). To prevail on its claim for breach of contract under Pennsylvania law, Capitol Presort must prove: (1) the existence of a contract, including its essential terms; (2) XL Health's breach of a duty imposed by those terms; and (3) actual loss or injury resulting from the breach. See Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir.2003) (quoting CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa.Super.Ct.1999) ).

Capitol Presort seeks entry of summary judgment in its favor and requests a bench trial to determine damages. (See Doc. 36). The gravamen of Capitol Presort's supplication is that the terms of the agreement, as intended by the parties, obligated XL Health to provide its eligible mail to Capitol Presort in toto for a minimum of three years. (See Doc. 37 at 24). Capitol Presort endeavors to support its position by pointing the court to various and sundry evidence of record extrinsic to the agreement. (See id. at 18–25). Ultimately, Capitol Presort urges the court to hold, as a matter of law, that XL Health's decision to unilaterally terminate the agreement caused Capitol Presort to suffer injury commensurate with “the profits that [it] would have received...if all of XL Health's...[qualifying mail] was provided to [Capitol Presort]...for the last 18 months of the three-year [term].” (Id. at 24–25).

XL Health also moves the court for Rule 56

judgment as to Capitol Presort's breach of contract claim, asserting that Capitol Presort “cannot establish that XL Health breached the [a]greement or that [Capitol Presort] was damaged as a result.” (Doc. 41 at 24). Counterpoising Capitol Presort's punctum saliens , XL Health vehemently disavows any obligation to provide Capitol Presort with the totality of its eligible mail during the agreement's initial three-year term. (See id. at 11–23). XL Health directs the court to the plain language of the agreement in support of its request for summary disposition. (See id. at 11–16).

Distilled to their essence, the parties' diametric arguments converge upon a discrete inquiry: whether the agreement contains a latent ambiguity, permitting the introduction of extrinsic evidence. (Compare Doc. 41 at 11-23; Doc. 48 at 3-22; Doc. 50 at 2-4, 6-10, with Doc. 37 at 6-17; Doc. 46 at 3-14; Doc. 51 at 8-9). Capitol Presort submits that the agreement's initial three-year term evinces the parties' intent to grant exclusive mail processing rights to Capitol Presort, rendering the agreement latently ambiguous. (See Doc. 37 at 6-17). Capitol Presort's attendant postulations are threefold: (1) that a plain reading of the agreement leads to “an absurd and unreasonable outcome,” (id. at 9–12); (2) that extrinsic evidence proves the exclusive nature of the agreement, (id. at 12–16); and (3) that a plain reading of the agreement “result[s] in an interpretation that violates XL Health's duty of good faith and fair dealing,” (id. at 16–17). XL Health ripostes that “the [a]greement is clear and unambiguous and...an agreement silent as to exclusivity is neither exclusive nor ambiguous as a matter of law.” (Doc. 48 at 4).

The court will first address Capitol...