De Lage Landen Financial Serv. Inc. v. Floors

• Decision Date: 28 July 2011
• Docket Number: 08–534.,Civil Action Nos. 08–533
• Citation: 792 F.Supp.2d 812
• Parties: DE LAGE LANDEN FINANCIAL SERVICES, INC.v.RASA FLOORS, LPDe Lage Landen Financial Services, Inc.v.Viewpoint Computer Animation, Inc., et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

792 F.Supp.2d 812

DE LAGE LANDEN FINANCIAL SERVICES, INC.

v.RASA FLOORS, LPDe Lage Landen Financial Services, Inc.

v.Viewpoint Computer Animation, Inc., et al.

Civil Action Nos. 08–533

08–534.

United States District Court, E.D. Pennsylvania.

July 28, 2011.

James W. Hennessey, Matthew P. Faranda-Diedrich, Patrick M. Northen, C. Lawrence Holmes, Dilworth Paxson LLP, Philadelphia, PA, for De Lage Landen Financial Services, Inc.Jason C. Berger, Weir & Partners LLP, Philadelphia, PA, Ronald P. Gossett, Gossett & Gossett, P.A., Hollywood, FL, for Rasa Floors, LP.

MEMORANDUM RE: PLAINTIFF'S AND OTHER PARTIES' MOTIONS FOR SUMMARY JUDGMENT ON PLAINTIFF'S BREACH OF CONTRACT CLAIM AND DEFENDANTS' COUNTERCLAIMS

BAYLSON, District Judge.

+-------------------+
                ¦TABLE OF CONTENTS  ¦
                +-------------------+
                

                I.  Factual and Procedural History                                      818
                

    A.   Background                                                     818
                    B.   Rasa Floors                                                    820
                    C.   Viewpoint                                                      822
                    D.   NCC                                                            823
                

                II. Legal Standards                                                     824
                

    A.   Summary Judgment                                               824
                    B.   Choice of Law                                                  824
                

                     Under Pennsylvania Law, DLL Is Entitled to Summary Judgment that
                III. Defendants Breached the Contract Between Defendants and DLL, as a   826
                     Matter of Law
                

         As a Matter of Law, DLL Has Established that Defendants
                    A.   Breached Their Lease Agreements                                826
                    B.   Defendants' Defenses Are Unavailing                            829
                

              Defendants Cannot Establish that the Lease Agreements Are
                         1.   Unconscionable                                            829
                         2.   Rasa's Argument Regarding Breach by DLL Is Without Merit  830
                              Defendants' Arguments Regarding Breach by DLL and Mutual
                         3.   Mistake Are Without Merit                                 831
                         4.   Defendants' Argument Regarding Illegality Are Without     833
                              Merit
                

    Assertions By Third Party HP Do Not Prevent the Entry of Summary
                VI. Judgment in Favor of DLL and Against Rasa, Viewpoint and NCC        835
                V.  DLL Is Entitled to Summary Judgment on Defendants' Counterclaims    837
                

    A.   Defendants Have Not Shown a Genuine Issue of Material Fact as  837
                         to Fraudulent Misrepresentation
                

              Defendants Have Not Established Misrepresentation by
                         1.   Capital 4                                                 838
                         2.   Conduct of Capital 4 May Not Be Imputed to DLL            839
                

                  Defendants' Theory of Apparent Agency Is Without
                              a.  Merit                                                 841
                                  Defendants' Theory of Agency by Estoppel Is Without
                              b.  Merit                                                 842
                              c.  Defendants' Agency Arguments Are an Attempt to        842
                                  Circumvent Language of Finance Lease Contracts
                

              Defendants Have Not Established Misrepresentation by DLL
                         3.   and DLL Had No Obligation to Disclose Information to      843
                              Defendants
                

    B.   Claims Under Various Consumer Protection Laws                  845
                    C.   Defendants' RICO Claims Against DLL                            845
                

         1.   Elements of a RICO Claim                                  846
                         2.   Defendants Fail to Establish the Requisite Elements of    846
                              Their RICO Counterclaims Against DLL
                

                VI. Conclusion                                                          849
                

Plaintiff De Lage Landen Financial Services, Inc. (hereinafter “Plaintiff” or “DLL”) has moved for summary judgment pursuant to Fed.R.Civ.P. 56 on its sole claim in this case, for breach of contract, against Defendants Rasa Floors & Carpet Cleaning, LLC (“Rasa”); Viewpoint Computer Animation, Inc. (“Viewpoint”); and third-party Defendant Northcentral Communications, Corp. (“NCC”) (hereinafter collectively “Defendants”) (ECF Nos. 189, 191 in C.A. 08–533; 171 in C.A. 08–534), and on Defendants' Counterclaims against DLL. There has been extensive briefing and oral argument on the parties' claims, and related issues.

The contracts between DLL and Defendants each state that Pennsylvania law will control and the Court has determined that Pennsylvania law will govern DLL's claims. After review of the briefs and other filings accompanying the parties' motions and cross motions, the Court concluded DLL was entitled to summary judgment in its favor as to its claims and entered an Order to this effect on June 24, 2011 (ECF No. 259 in C.A. 08–533; 229 in C.A. 08–534). Denial of Defendants' Cross Motions for Summary Judgment was subsumed in the entry of summary judgment in favor of DLL. This Memorandum will explain the reasons for the Order. This Memorandum will additionally address DLL's Motions for Summary Judgment as to Defendants' counterclaims against DLL and will grant summary judgment in favor of DLL on Defendants' counterclaims against DLL.

I. Factual and Procedural HistoryA. Background

The parties are familiar with the lengthy factual and procedural background of this case and thus, the Court briefly restates only those facts relevant to the summary judgment motions. The Court held hearings and made relevant findings of fact in conjunction with Defendants' Motions for Class Certification. The Court's August 20, 2010 Memorandum denying Defendants' class motions described the nature of the contracts at issue as follows:

Under its “Power of $Zero” (“POZ”) program, the now-defunct Capital 4[, Inc. (“Capital 4”) ] ¹ offered telephone and internet services to business customers for a set monthly fee, and for a fixed period of time. In addition to receiving telephone and internet services provided by Capital 4, customers had the option of receiving either (1) networking and telephone equipment, (2) a cash rebate, or (3) a combination of equipment and a partial cash rebate. At some point after Capital 4's POZ program was up and running, 3Com [Corporation (“3Com”) ] became aware of and interested in the program. Beginning in 2005, Capital 4 and 3Com entered into a series of contractual agreements defining their roles respecting the POZ agreement, in which, among various contractual obligations, Capital 4 would provide customers with 3Com networking and telephone equipment.

To finance the cost of the equipment and/or cash rebates, Capital 4 arranged with financial institutions to act as funding sources for Capital 4 customers. 5/5/10 Hr'g Tr., Testimony of Steven Majer, Jr., 14–15, 27–29. DLL was one of these such lenders. 5/4/10 Hr'g Tr., Testimony of Douglas Cunningham, 57–58. Thus, under the POZ program, POZ customers entered into two separate contracts: (1) a POZ Customer Agreement with Capital 4 (“POZ Customer Agreement”), and (2) an equipment lease or rental agreement with a leasing company such as DLL (“Lease Agreement”) which was referred to in the POZ Customer Agreement as a “Funding Agreement.” DLL and 3Com's Joint Post–Hearing Br. 4.De Lage Landen Fin. Servs., Inc. v. Rasa Floors, LP, 269 F.R.D. 445, 454 (E.D.Pa.2010) (Baylson, J.).

As noted above, DLL entered into two different types of agreements. DLL and Capital 4 entered into a Business Communications Program Agreement (“Program Agreement”), which outlined DLL's and Capital 4's roles as lender/lessor and vendor, respectively. Plaintiff's Appendix to Statement of Undisputed Facts, Ex. D. The Program Agreement stated that lease agreements could include “Soft Costs” such as service, maintenance, installation, delivery, software, and training associated with leased equipment, and that DLL would fund Capital 4 for service and maintenance quarterly or monthly, less DLL's administrative fee. Pl.'s App. to Statement of Undisputed Facts, Ex. D at ¶ A(8).

DLL's separate Lease Agreements ² with customers specified that DLL had no responsibility for service or maintenance related to leased equipment, but that lease payments could “INCLUDE THE COST OF MAINTENANCE AND/OR SERVICE BEING PROVIDED BY THE SUPPLIER AND/OR MANUFACTURER[.]” App. Ex. C at § 7. Thus, “[e]ach customer's monthly fee was apportioned to the lender for the lease payment on equipment, and to Capital 4 for the telephone and internet services.” De Lage Landen Financial Services, Inc., 269 F.R.D. at 454 (citing 5/5/10 Hr'g Tr., Majer, 32–33).

DLL originally filed suit in two separate cases against two separate Defendants, Viewpoint and Rasa, for breach of contract and unjust enrichment on February 2, 2008. Id. at 449. Defendants brought several counterclaims against DLL and brought third party claims against 3Com and Capital 4. Id. The cases were consolidated for purposes of discovery on April 14, 2009. Id. With leave granted by the Court, DLL filed a third-party complaint against NCC on October 5, 2009 (ECF No. 105 in C.A. 08–533). The Court has issued decisions on several motions to dismiss during this period, resulting in the narrowing of claims and counterclaims. See De Lage Landen Financial Services, Inc., 269 F.R.D. at 449–51.

On March 24, 2011, following substantial discovery, DLL filed Motions for Summary Judgment on its breach of contract claims against Rasa, Viewpoint, and NCC and on Defendants' counterclaims (ECF Nos. 189, 191 in C.A. 08–533; 171 in C.A. 08–534). Defendants filed responsive briefs on May 16, 2011 (ECF Nos. 222, 225 in C.A. 08–533; 205 in C.A. 08–534). Defendants' responses included cross motions for summary judgment, but their initial briefing was limited to DLL's claims, pursuant to this Court's Order of April 15, 2011, 2011 WL 1465565 (ECF No. 211 in C.A. 08–533; 189 in C.A....