Segal v. Strausser Enters., Inc., CIVIL ACTION NO. 07-4647

Decision Date12 June 2019
Docket NumberCIVIL ACTION NO. 07-4647
PartiesKENNETH SEGAL, ADAM SEGAL, as trustee for and on behalf of THE KAREN AND KENNETH SEGAL DESCENDANTS TRUST, and SEGAL AND MOREL, INC. Plaintiffs, v. STRAUSSER ENTERPRISES, INC., GARY STRAUSSER, and LEONARD MELLON, Defendants.
CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
MEMORANDUM

SCHMEHL, J. /s/ JLS

This is a contract dispute between multiple parties involving the transfer and proposed development of several real estate lots in Forks Township, Pennsylvania. Specifically, parcels of land were divided into three separate phases and agreements for construction of single-family homes, condominiums, and townhomes. Plaintiffs bring these claims against Defendants for improperly filing a State Court Complaint and Lis Pendens in the Court of Common Pleas of Northampton County, which frustrated a proposed transaction between Plaintiffs and a third-party purchaser. Plaintiffs bring four claims against Defendants: Tortious Interference with Contract (Count I); Tortious Interference with Prospective Contractual Relations (Count II); Dragonetti Act (Count III); and Abuse of Process (Count IV). Defendants SEI and Mr. Mellon individually move for summary judgment arguing Plaintiffs' federal claims are precluded under collateral estoppel given the 2012 Redding Panel arbitration decision, and the claims fail as a matter of law. For the reasons explained below, this Court will deny Defendant SEI and Defendant Mr. Mellon's motions for summary judgment. We will first address Defendant SEI's collateral estoppel argument and then turn to the claims as a matter of law.

I. UNDISPUTED FACTS

The parties stipulated to the below facts for use in connection with Defendants' motions for summary judgment. This matter has a complicated history and involves numerous parties. Plaintiffs in this action are: 1) Segal and Morel, Inc. ("S&M, Inc."), builders and developers; 2) Kenneth Segal, President of S&M, Inc.; and 3) Adam Segal, sole trustee of The Karen and Kenneth Segal Descendants Trust (the "Trust") (collectively "S&M"). (ECF Docket No. 395, ¶¶ 1-3.) Also, at the time of this dispute, Mr. Segal and the Trust were the sole members of the following limited liability companies: Segal and Morel at Forks Township II, LLC; Segal and Morel at Forks Township III, LLC; Segal and Morel at Forks Township IV, LLC; and Segal and Morel at Forks Township X, LLC f/k/a Segal and morel at Forks Township VII, LLC ("S&M LLC VII") (collectively the "S&M LLCs").

Defendants in this action are: 1) Strausser Enterprises, Inc., a corporation engaged in the business of home building and real estate/community development; 2) Gary Strausser, President of SEI (collectively with Strausser Enterprises, "SEI"); and 3) Leonard Mellon, attorney at law and duly licensed to practice in the Commonwealth of Pennsylvania.1 (Id. at ¶¶ 6-10.) During this time, SEI built homes and developed a community known as the Riverview Estates ("Riverview") located in Forks Township, Pennsylvania. (Id. at ¶ 8.) Riverview is a multi-phase real estate development of single-family homes, condominiums, and townhomes, which includes a golf course and recreational center. (Id. at ¶ 9.)

S&M, Inc. contracted to purchase from SEI multiple parcels of land located in Forks Township, Northampton County, Pennsylvania, at a collective cost of more than $15,000,000. (Id. at ¶ 12.) The parcels of land were divided into three separate phases and agreements for construction of single-family homes, condominiums, and townhomes. (Id. at ¶ 13.) The first agreement, dated July 5, 2001, provided for a total of 105 single family dwellings known as Phase I (consisting of a maximum of 76 subdivided single family residential lots) and Phase III (consisting of 29 subdivided single family residential lots). (Id. at ¶ 14.) The second agreement, dated June 11, 2002, provided for a maximum amount of 110 condominiums, a parcel designation for a community center, and one single family residential lot known as Phase II. (Id.) And the third agreement, dated April 25, 2003, provided for a maximum of 56 townhouse lots known as Phase III. (Id.)

The July 5, 2001 (Phase I), and April 25, 2003 (Phase III), agreements were amended three times through a series of documents known as: 1) Amendment to Agreements of Sale of July 5, 2001, and April 25, 2003 ("First Amendment"); 2) Second Amendment to Agreements of Sale of July 5, 2001, and April 25, 2003 ("Second Amendment"); and 3) Third Addendum to Agreements of Sale of July 5, 2001, and April 25, 2003 ("Third Addendum"). (Id. at ¶ 15.) Specifically, the Second Amendment included an agreement where SEI would sell additional lots in Riverview - known as Phase IV - to S&M, Inc. (Id. at ¶ 16.) The Third Addendum contained a binding arbitration provision. (Id. at ¶ 17.) And the First Amendment and Third Addendum contained clauses ratifying and confirming the July 5, 2001, Agreement, and April 25, 2003, Agreement. (Id. at ¶ 18.) More specifically, the arbitration provisions in the Third Addendum expanded the scope to encompass not only disputes "concerning the terms of the Purchase Agreements and earlier Amendments, but also all other 'disputes arising under or from [theThird Addendum] or any previous Addendum or the Agreements of Sale between the parties.'" (ECF Docket No. 1, ¶ 27.)

On September 7, 2001, SEI entered into an Agreement of Sale with Michael and Anthony Rinaldi to purchase about 125 acres of land located in Forks Township, Pennsylvania, known as the "Rinaldi Tract" or "Riverview West" (the "Rinaldi Agreement"). (ECF Docket No. No. 395, ¶ 19.) On February 28, 2003, SEI subsequently entered into an Assignment of the Rinaldi Agreement to S&M VII, LLC by contract which assigned SEI's rights and obligations under the Rinaldi Agreement to S&M VII, LLC. (Id. at ¶¶ 20-21.) Under the Rinaldi Agreement, SEI was to receive 25 acres of the approximate 125 total acres conveyed under the Rinaldi Assignment. (Id. at ¶ 22.) The Agreements mentioned above, along with the First Amendment, Second Amendment, Third Addendum, Rinaldi Agreement, and Rinaldi Assignment - collectively known as the "Purchase Agreements" - closed in multiple phases: December 5, 2001 (Phase I); March 7, 2003 (Riverview West); October 3, 2003 (Phase II); April 20, 2004 (Phase III Townhouses and Singles); and, February 17, 2005 (Phase IV). (Id. at ¶ 24.)

The current dispute between the parties arises out of the "Buy Back Option" language in the June 11, 2002 (Phase I), Agreement, and "Right of First Refusal" language in the April 25, 2003 (Phase III), Agreement. (Id. at ¶ 25.) First, the June 11, 2002, Agreement included a "Buy Back" provision under clause 5.17.4, which stated:

Buyer acknowledges that Phase II is a four-year build out and agrees to aggressively market the purchased properties to homebuyers. Should Buyer be unable to market the properties successfully, absent any government imposed moratorium, building an average of 20 units per year over a four (4) year period, it hereby agrees to give Seller a right of first refusal to take back the approved and improved lots at the same price contained herein.
This buy back option creates no obligation on Seller to re-purchase any lots, nor is it a guarantee of their marketability. This option is also not intended to havepriority over any mortgage interest in the property and Seller agrees to subordinate this option to any and all financing or Buyer.

(Id.) Second, the April 25, 2003, Agreement included a "Right of First Refusal" provision under clause 5.17.4, which stated:

Should Buyer decide to sell all or some of the lots Buyer hereby agrees to give Seller a right of first refusal to take back the approved and improved lots.
This buy back option creates no obligation on Seller to re-purchase any lots, nor is it a guarantee of their marketability. This option is also not intended to have priority over any mortgage interest in the property and Seller agrees to subordinate this option to any and all financing or Buyer.

(Id. at ¶ 28.) Prior to finalizing the language in the "Right of First Refusal" provision under clause 5.17.4 of the April 25, 2003, Agreement, the parties agreed to strike two phrases: 1) "be unable to market the properties successfully, absent any government imposed moratorium, building an average of 25 units per year"; and 2) "at the same price contained herein." (Id. at ¶ 26-27.)

Following execution of the Purchase Agreements, S&M, Inc. assigned "its rights, interests, and obligations under the Purchase Agreements to" certain limited liability companies, such as S&M LLC, whose sole members were Mr. Segal and the Trust. (Id. at ¶¶ 29-30.) Specifically, S&M states: "[S&M, Inc.] shall have the right to designate one or more of its subsidiaries or affiliate entities to acquire title to the Property hereunder." (ECF Docket No. 1, ¶ 15.) S&M, Inc. then assigned "all of its rights, interests and obligations under and pertaining to" the Purchase Agreements and the Amendments, to the S&M LLCs - affiliates of S&M, Inc. (Id. at ¶ 17.) Accordingly, all of S&M, Inc.'s rights were transferred to the S&M LLCs.

On December 21, 2005, Mr. Segal and the Trust entered into an Agreement of Sale with K. Hovnanian Pennsylvania Acquisitions, LLC ("KHOV"). (Id. at ¶ 31.) According to the contract, KHOV was acquiring "all Membership Interests in the LLCs, pursuant to the terms andconditions of [the Hovnanian Agreement]" from Mr. Segal and the Trust. (Id. at ¶ 32.) The Hovnanian Agreement defined "Membership Interest" as:

[A]ll Assets defined herein, but shall not include any assumption of debts, claims, accounts payable, liabilities or obligations of Seller's of any kind or nature, whether accrued or unaccrued, absolute or contingent; and Seller shall, after Closing, remain responsible for all debts, claims or accounts payable, liabilities or obligations of Seller.

(Id. at ¶ 33.) The Hovnanian Agreement defined "Assets" as:

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