Atlantic Circulation, Inc. et al v. Midwest Circulations, LLC et al
Filing
294
MEMORANDUM & OPINION - In conclusion, the Court finds that Defendant breached the Settlement Agreement's Moratorium provision six times by accepting subscription orders from Baker, Cowart, Nelson, Sheets, Fallin, and Rowe, Jr. Therefore, the Cou rt awards Plaintiffs $450,000 as agreed to by the parties in the Settlement Agreement -$75,000 for each breach. In turn, the Court awards nothing to Defendants because Plaintiffs did not breach when Stice agreed to purchase the contractual rights to Hayes and Smith from Robbins. In addition, the Court finds that neither side proved abreach of the Confidentiality provision of the Settlement Agreement and, therefore, awards no damages to either side. Finally, the Court awards no damages to either side on its tortious interference claims. Plaintiffs receive no damages because they have already succeeded on their breach of Moratorium claims, and awarding damages for tortious interference would be a double recovery. Defendants receive no damages because the evidence shows that Hayes initiated contact with Stice to inquire about joining his crew, Robbins waived her contractual rights to Hayes and Smith by entering an agreement to sell her rights to Stice, Shoemaker is not liable t o Robbins for Stice's non-payment under the agreement because Stice was not acting as Shoemaker's agent during the transaction, and there is no evidence that Stice took purposeful action to harm Robbins.Signed by Honorable Robert D. Mariani on 11/20/12. (jfg)
THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ATLANTIC CIRCULATION, INC., et aI.,
Plaintiffs
v.
1:10-CV-1368
(JUDGE MARIANI)
MIDWEST CIRCULATIONS, LLC, et aI.,
Defendants
MEMORANDUM OPINION
Trial was held in the above-captioned case on July 2, 2012 and concluded on July 6,
2012.1 For the reasons set forth below, the Court awards judgment in favor of Plaintiffs on
their six breach of Moratorium claims and awards judgment in favor of Defendants on
Plaintiffs' claims for breach of Confidentiality. The Court further awards judgment in favor of
Plaintiffs on Defendants' counterclaims for breach of contract and tortious interference with
business relations.
Statement of Facts ("SOF")
Joint Statement of Undisputed Facts
1. Plaintiff Atlantic Circulation, Inc. ("ACI") is a business engaged in the processing
of magazine subscription orders.
1 When citing to trial testimony, the Court will cite to the unofficial transcript. Should the parties order an
official transcript, it is probable that the Court's citations to the unofficial transcript will not correspond to the
pagination of the official transcript. For ease of Citation, the Court has designated trial testimony from July 2, 2012
as Part I, testimony from July 3 as Part II, testimony from July 5 as Part III, and testimony from July 6 as Part IV.
2. Plaintiff Daniel W. Shoemaker III ("Shoemaker") is the President, founder and
sole shareholder of ACI.
3. Defendant Midwest Circulations, LLC ("Midwest") is also a business engaged in
the processing of magazine subscription orders.
4. Defendant Bridget Robbins is the managing member and majority owner of at
least 80% of Midwest.
5. Midwest was formed on August 11, 2009.
6. ACI, Shoemaker, and Robbins were all parties in an earlier case pending in the
United States District Court for the Middle District of Pennsylvania, consolidated
into case number 1:08-CV-2063 (the "Initial Action"), over which Judge Caputo
presided.
7. Mediation in the Initial Action occurred on July 29,2009.
8. On September 29, 2009 [at 11 :39 a.m.], Shawn Lau, counsel for Plaintiffs in this
and the Initial Action, sent an e-mail to defense counsel which stated:
Per our telephone conversation of this date please be advised that The
[sic] two women we discussed, Kiona [sic] Wright or Hays and Heather
Smith are not and have not been clearing orders through ACI or Dan
Shoemaker or Brandon Stice nor have they been associated with these
parties in any business relationship. It is also my understanding that they
are not traveling together or otherwise associating unless this is changed
by mutual agreement of Stice and Robbins if such an agreement can be
reached as per my subsequent phone conference with Cynthia Becker of
this date.
9. Bridgett Robbins executed the Settlement Agreement on September 30, 2009.
2
10. Dan Shoemaker executed the Settlement Agreement on September 30,2009.
11. The Settlement Agreement contains a moratorium against doing business with
the other party's "Managers," and a confidentiality provision. Settlement
Agreement, mr 7 and 9.
12. The Settlement Agreement defines "Manager" as:
(1) A person, business entity, or unincorporated association who is either
in a direct contractual relationship with the entity claiming (hereinafter
"claiming entity") that person, business entity or unincorporated
association as a manager; (2) is in a direct contractual relationship with a
person, business entity, or unincorporated association who is in a direct
contractual relationship with the claiming entity, or (3) is compensated by
either the claiming entity, or a person, business entity or unincorporated
association in a direct contractual relationship with the claiming entity, in
a manner reasonably similar to other managers, as defined by this
section, of the claiming entity.
13. The Settlement Agreement places an affirmative duty on the parties to disclose
the terms of the moratorium to their individual Managers, and to require their
Managers to abide by the terms of the moratorium. If a party to the agreement
learns by any means that one of its Managers has breached, is attempting to
breach, or is considering breaching the terms of the moratorium, "the party has a
duty to take reasonable steps to end the breach or prevent the breach[.]"
Settlement Agreement, 1f 7(c).
14. The Settlement Agreement states that "if any Party to this Settlement Agreement
is damaged by a breach of this Moratorium, any such breach will result in actual
damages of at least $75,000." Settlement Agreement, 1f 7(d).
3
15. The Settlement Agreement states that U[d]amages for breach of this
Confidentiality Agreement are liquidated in an amount of $25,000." Settlement
Agreement,1l9(c).
16. Dan Shoemaker and ACI are bound by the terms of the Settlement Agreement.
17. Bridgett Robbins and Midwest are bound by the terms of the Settlement
Agreement.
18. Shallone Sheets entered into an independent contractor agreement with ACI
dated April 22, 2009, and executed between April 23 and April 29, 2009.
19. ACI cleared subscription orders for Shallone Sheets during the period of the
Moratorium.
20. Shallone Sheets was a Manager of ACI under the Settlement Agreement.
21. Midwest accepted four subscription orders from Shallone Sheets on January 10,
2010.
22. In August 2010, Shallone Sheets returned to ACI, and again began clearing
orders throUgh ACI.
23. Donald Nelson entered into an independent contractor agreement with ACI dated
January 29,2010, and executed between February 3 and February 12,2010.
24. ACI cleared subscription orders for Donald Nelson during the period of the
Moratorium.
25. Donald Nelson was a Manager of ACI under the Settlement Agreement.
4
26. Midwest entered into a contract with Donald Nelson's company, E.M.A. Sales, on
or about April 11 ,2010. Midwest accepted subscription orders from E.M.A. Sales
from April 15, 2010 to May 11,2010 and at other pOints thereafter.
27. Justin Cowart entered into an independent contractor agreement with ACI dated
December 29,2009, and executed between January 2 and January 8,2010.
28. ACI cleared subscription orders for Justin Cowart during the period of the
Moratorium.
29. Justin Cowart was a Manager of ACI under the Settlement Agreement.
30. Justin Cowart stopped clearing orders through ACI in mid-February 2010.
31. Midwest entered into a contract with Justin Cowart's company, Millennium Sales,
on or about March 8, 2010. Midwest accepted subscription orders from
Millennium Sales beginning on March 11, 2010.
32. Brad Baker entered into an independent contractor agreement with ACI which is
dated April 30, 2008, but was not executed until between September 29 and
October 11,2008.
33. ACI cleared subscription orders for Brad Baker during the period of the
Moratorium.
34. Brad Baker was a Manager of ACI under the Settlement Agreement.
5
35. Midwest entered into a contract with Brad Baker's company, SLAP Sales, on or
about April 7, 2010. Midwest accepted subscription orders from SLAP Sales
beginning on April 1, 2010.
36. Bryan Fallin entered into an independent contractor agreement with ACI dated
August 6,2007, and executed between August 22 and September 22,2007.
37. Bryan Fallin and Levi Gregg (the other member of Midwest) communicated prior
to the time that Bryan Fallin contracted with Midwest.
38. Midwest entered into a contract with Bryan Fallin's company, Northwoods
Marketing, on or about August 27,2009. Midwest accepted subscription orders
from Northwoods Marketing beginning on August 27, 2009.
39. Kenneth Rowe, \olr. entered into an independent contractor agreement with ACI
dated October 29,2008, and executed between October 31 and November 4,
2008.
40. Midwest entered into a contract with Cecilia Castleberry / Chi Sales on or about
February 12,2010. Cecilia Castleberry is Kenneth Rowe, Jr.'s girlfriend.
Midwest accepted subscription orders from Cecilia Castleberry / Chi Sales from
January 29,2010 to May 25,2010.
41.ln June 2010, Kenneth Rowe, \olr. returned to ACI and again began clearing
orders through ACI.
6
42. All of ACI's independent contractor agreements contain the following "Term and
Termination" clause in paragraph 25, which states in part:
The term of this Agreement is one (1) year from the date of execution and
thereafter automatically renews one year thereafter until termination.
[ACI] or Independent Contractor may terminate this Agreement at any
time for any reason. Notice of termination shall be delivered in writing with
proof of receipt to the other party.
43. Shallone Sheets, Donald Nelson, Justin Cowart, Brad Baker, and Kenneth Rowe,
Jr. did not provide ACI with written notice of termination of their respective
contracts with ACI.
44. Defendants never saw a written notice of termination for Bryan Fallin, Justin
Cowart, Brad Baker, Donald Nelson, Shallone Sheets, or Kenneth Rowe, Jr.'s
contracts with ACI.
45. Bridgett Robbins is a former independent contractor of ACI.
46. Bridgett Robbins executed an independent contractor agreement with ACI
through her company Success Unlimited, Inc. in July 2007.
47. Bridget Robbins' 2007 independent contractor agreement with ACI contained the
following non-compete clause:
Independent Contractor and its principals agrees [sic] that they will not
during the period of three (3) years after their termination of such
contractual relationship with the Company, for whatever cause, directly or
indirectly, enter into the employment of or render any services to any
person, partners, corporations or other entity engaged in the magazine
business within the United States.
7
This clause was revised in later ACI contracts, specifically including those of
Sheets, Nelson, and Cowart to read:
Independent Contractor and its principals agree that they will not, during
the period of three (3) years after the termination of their contractual
relationship with Company for whatever reason, perform any services in
the fields of magazine subscription solicitation, management of magazine
subscription solicitation or magazine order processing anywhere in the
United States. Independent Contractor and its principals further agree
that they will not, during the period of three (3) years after the termination
of their contractual relationship with Company for whatever reason,
directly or indirectly enter into the employment of or render any services to
any other person, partners, corporations or other entity engaged in the
magazine solicitation business, the magazine order processing business
or a management role in the magazine solicitation processing business
within the United States.
48. Heather Smith executed an independent contractor agreement with Midwest on
or about August 30,2009.
49. Kiana Hayes executed an independent contractor agreement with Midwest on or
about September 1, 2009.
50. Midwest cleared subscription orders for Kiana Hayes and Heather Smith during
the period of the Moratorium.
51. Brandon Stice I Blue Diamond was in a contractual relationship with ACI on July
29,2009.
52. Brandon Stice I Blue Diamond was a Manager of ACI under the terms of the
Settlement Agreement.
8
53. On September 22,2009, Blue Diamond ordered Greyhound bus tickets through
ACI for Kiana Hayes and Heather Smith to travel from Fayetteville, NC to
Albuquerque, NM.
54. Lacey Knight, dOing business as Knight Sales, signed an independent contractor
agreement with ACI on November 9,2009.
55. Lacey Knight I Knight Sales was a Manager of ACI during the moratorium period
set forth in the Settlement Agreement.
56. Bridgett Robbins disclosed the terms of the Settlement Agreement to Heather
Smith in August 2009.
57. On October 1,2009, Bridgett Robbins sent an e-mail to her counsel stating the
following:
Brandon Stice and I have come to the agreement that Kiana can work for
him for $8000.00 and a dozen roses sent to my hotel with a thank you
card ... installments of payment via moneygraham [sic] will be sent ...
$3000.00 today $3000.00 next Tuesday and $2,000.00 the following
Tuesday.
Court's Further Finding of Facts
58. The terms of the Moratorium are as follows:
any company owned or operated by ... Bridgett Robbins ... shall not
hire, contract with, accept subscription orders from or otherwise enter into
business relations with any Manager, as defined by this Settlement
Agreement, of Atlantic Circulation, Inc., its principals or associated
entities, who was a Manager of Atlantic Circulation, Inc. as of July 29,
2009 or who became, or shall become, a Manager of Atlantic Circulation,
Inc. or any company owned or operated by Daniel W. Shoemaker, III,
9
during the time period beginning on July 29, 2009 and ending on July 28,
2010.
(Settlement Agreement, ~ 7(b)).
59. Shoemaker sent out a written notice of termination to all of his contractors in
November 2003 as part of a company reorganization. (PI. Ex. 63).
60. Shoemaker received written notices of termination from Brandon Stice, Josiah
Regan, and Jakob and Malissa Berlingeri in 2012. (PI. Exs. 26, 27, 28).
61. After leaving ACI upon submitting written notice of termination via a
discontinuance letter,2 Fallin returned to ACI as a Manager for Blue Diamond.
(Fallin Tr. Dep. at 26:7 ~9; PI. Ex. 24).
62. When he returned to ACI as a Manager for Blue Diamond, Fallin executed a new
Independent Contractor agreement with ACI for a term of one year with
automatic renewal on November 30,2008. (PI. Ex. 24).
63. Rowe, Jr. submitted sales orders to Midwest through Chi Sales. (PI. Ex. 11).
64. When Midwest hired Fallin in August 2009 and accepted orders from Rowe, Jr. in
February 2010, Fallin and Rowe, Jr. were still Managers of ACI.
65. Heather Smith was a Manager when Robbins disclosed the terms of the
Settlement Agreement. (Robbins T.T., Part IV, 71 :2-8; Smith Tr. Dep. at 20:1-9,
22:8-10).
i
Both Shoemaker and Robbins testified that discontinuances were used by sales agents and not
Managers. (Shoemaker T.T., Part I, 56:19-22; Robbins T.T., Part III, 139:14-19)
2
I
i
f
~'
10
66. Sales records from Smith's company, Tear It Up Sales, show the earliest sales
activity from Smith began on August 27, 2009. (PI. Ex. 43).
67. Hayes approached Knight and Stice about returning to work for Stice. (Hayes Tr.
Oep. at 33:25-34:8; Smith Tr. Oep. 71 :21-23; Knight Tr. Oep. at 51 :14-20).
68. Stice initially did not want to re-hire Hayes, but he relented because Hayes
begged him to take her back. (Stice Tr. Oep. at 32:20-23; 33:9-10; Knight Tr.
Oep. at 51 :14-20).
69. Stice initiated contact with Robbins about purchasing the rights to Hayes and
Smith. {Stice Tr. Oep. at 33:9-10; 44:7-11; 45:10-18}.
70. Shoemaker'S phone records indicate he received three phone calls from Robbins
on September 22, 2009 on his home business line and cell phone. (Oef. Ex.
116).
71. Unable to reach Shoemaker directly on the 29th, Robbins left Shoemaker a
voicemail message reminding him of the Moratorium clause in the Settlement
Agreement. {Robbins T.T., Part IV, 77:10-14,77:19-78:5; 87:4-10}.
72. Shoemaker instructed Stice not to hire Hayes and Smith, but if he did, to ensure
that the transaction was in writing. (Shoemaker T.T., Part I, 105:1-17; Stice Tr.
Oep. at 55:22-56:5).
II
73. Shoemaker, Stice, Knight, and Smith understood that Smith was Hayes's sales
agent. (Shoemaker T.T., Part I, 107:5-6; Knight Tr. Dep. at 53:1-6; Stice Tr. Dep.
at 31:18-22; 37:11-13; 42:20-43:2; Smith Tr. Dep. at 44:2-3).
74. Plaintiffs' attorney, Cynthia Becker, sent the following e-mail to Robbins on
September 29,2009 at 2:09 p.m.:
We have resolved the outstanding issues re: Brandon Stice stealing two of
Bridgett's managers. Surprisingly, Dan got into a major fight with Brandon
and told Brandon if he works either of the girls, Dan will not clear orders
for Brandon. Dan made Brandon send the girls home, and made his
position not to breach the settlement agreement very clear to Brandon and
his other managers. Brandon has since called Bridgett in an attempt to
purchase the managers' contracts. This is progress.
(PI. Ex. 61).
75. In Defendants' response to Plaintiffs' Interrogatories, Defendants state that this
proposed sale of Kiana Hayes's contract included the Heather Smith contract, as
well.
State whether Midwest, Robbins, or Success Unlimited ever took part in
any communications relating to the sale or contracts of Kiana Hayes
and/or Heather Smith.
Yes, Ms. Robbins took part in communications relating to the possible
sale of the contracts of Kiana Hayes and Heather Smith; however, the
sale of Ms. Hayes and Ms. Smith's contracts was never consummated.
(PI's Interrogatories, PI. Ex. 15, ~ 5).
76. Robbins sent the following draft agreement, dated September 30,2009, to Stice:
I, Bridgett Robbins, agree to sell the contract of Kiana Wright (Hays)
currently contracted through Midwest Circulations LLC, a company owned
12
and operated by Bridgett Robbins, to Brandon Stice of Blue Diamond
Subscriptions (clearing thru Atlantic Circulations Inc.) for the face value of
$8,000.00. First installment of payments are due by October 1st, 2009 in
the amount of $3,000 payable in the form of MoneyGram to Bridgett
Robbins. The next installment will be due the following Tuesday.
Thereafter, final payment will be collected no later than the 31st day of
October. In addition, there will be a dozen roses with a thank you card
sent to the hotel where Bridget Robbins resides. By selling Kiana Wright
(Hays)' contract, there will be no violation or stipulations of the agreement
made by the court in Middle District of Pennsylvania. If payments are not
made by the dates given, this agreement is void.
(PI. Ex. 16; Stice Tr. Dep. at 46:5-8).
77. After Robbins drafted and signed an agreement, she faxed it to Stice. However,
Stice never returned a signed agreement to Robbins. (Robbins T.T., Part IV,
91 :6-93:7; Stice Tr. Dep. at 49:4-11).
78. Stice never paid the $8,000 due on the Stice-Robbins agreement because when
Hayes and Smith arrived, it was clear to him that they were drug addicts. (Stice
Tr. Dep. 30:17-21; 48:17-21; 49:4-11; 50:8-12; 51:16-21).
79. Shoemaker was unaware that Stice never paid $8,000 due on the Stice-Robbins
agreement. (Shoemaker T.T., Part 1,123:7-11; Shoemaker T.T., Part 11,66:13
20; 68:15-24).
80. Shoemaker has no control over the operations of his independent contractors.
(Shoemaker T.T., Part 11,24:23-25:13; see, e.g., PI. Ex. 50, 11 1).
13
Conclusions of Law
1. Defendants breached the Settlement Agreement when they accepted orders from
Baker, Cowart, Fallin, Nelson, Rowe, Jr., and Sheets during the Moratorium.
2. Defendant Robbins did not breach the Confidentiality provision of the Settlement
Agreement when she disclosed the terms of the Agreement to Smith.
3. Brandon Stice and Blue Diamond were not acting as agents of Plaintiff
Shoemaker when Stice was negotiating with Defendant Robbins for the rights to
Hayes and Smith.
4. Plaintiff Shoemaker took reasonable measures to ensure that his Manager, Stice,
did not breach the Settlement Agreement by hiring Hayes and Smith from
Defendants. Because of these reasonable measures, Plaintiffs did not breach
the Settlement Agreement.
5. Defendant Robbins waived her rights to enforce a breach of the Moratorium by
agreeing to sell her contractual rights to both Hayes and Smith to Stice.
6. Neither Plaintiffs nor their agent (Attorney Lau) fraudulently induced Robbins to
sign the Settlement Agreement.
7. Plaintiffs did not breach the Confidentiality provision of the Settlement Agreement
when they temporarily attached the Agreement as an exhibit to their initial
Complaint.
14
8. Plaintiffs did not tortiously interfere with Defendants' contracts with Hayes and
Smith.
Introduction
Because this is a diversity action alleging state law breach of contract and tort
claims, the case is governed by Pennsylvania law. Nat'l City Mortgage Co. v. Stephen, 647
F.3d 78, 82 (3d Cir. 2011) (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82
L.Ed. 1188 (1938)).
Breach of Contract Claims
Each side claims the other breached key terms of the Settlement Agreement:
namely, the Moratorium and Confidentiality provisions.
Moratorium
Defendants' Alleged Breach
To establish a breach of contract claim in Pennsylvania, one must prove: U(1) the
existence of a contract, including its essential terms, (2) a breach of a duty imposed by the
contract, and (3) resultant damages." McShea v. City of Philadelphia, 995 A.2d 334, 340
(Pa. 2010). U[S]ettlement agreements are governed by contract law principles." Lesko v.
Frankford Hosp.-Bucks Cnty., 15 A.3d 337, 341-42 (Pa. 2011). Because it is undisputed
that the Settlement Agreement applies to this action and because the Agreement contains
liquidated damages provisions (SOF mr 14, 15), the focus of the Court's analysis will be on
the second element: breach of duty.
15
Plaintiffs claim that Defendants hired Baker, Cowart, Fallin, Nelson, Rowe, Jr., and
Sheets during the Moratorium in breach of the Settlement Agreement. Midwest cleared
orders for Baker, Cowart, Nelson, and Sheets during the Moratorium. (SOF 1m 21 (Sheets),
26 (Nelson), 31 (Cowart), 35 (Baker)). The Joint Statement of Facts also states that these
four were Managers of ACI under the Settlement Agreement. (SOF 1m 20 (Sheets), 25
(Nelson), 29 (Cowart), and 34 (Baker)).
Under the plain terms of the Settlement Agreement, the Court finds that these
admissions alone attach contractual liability to Defendants. Under the express terms of the
Settlement Agreement,
any company owned or operated by . . . Bridgett Robbins . . . shall not hire,
contract with, accept subscription orders from or otherwise enter into
business relations with any Manager, as defined by this Settlement
Agreement, of Atlantic Circulation, Inc., its principals or associated entities,
who was a Manager of Atlantic Circulation, Inc. as of July 29, 2009 or who
became, or shall become, a Manager of Atlantic Circulation, Inc. or any
company owned or operated by Daniel W. Shoemaker, III, during the time
period beginning on July 29, 2009 and ending on July 28, 2010.
(SOF ~ 58) (emphasis added).
That is, anyone who was a Manager of ACI as of July 29, 2009 or afterwards was off
limits to Defendants, regardless of whether they terminated their contracts in writing.
Because the Court finds that Fallin and Rowe, Jr. were also ACI Managers during the
moratorium period (see infra), under the terms of the Settlement Agreement, liability
attaches to Defendants for accepting orders from Rowe, Jr. and Fallin, as well.
16
However, at oral argument, Attorney Lau stated that for contractual liability to attach,
the breaching party would have to hire a Manager during the Moratorium without that
Manager having submitted a written notice of termination. (Tr. of Oral Arg. at 9:18-25).3
Even under this standard, Plaintiffs have proven their case. Defendants concede that these
Baker, Cowart, Nelson, and Sheets never tendered written notices of resignation. (SOF 11
43). Therefore, Plaintiffs have proven their breach of contract claims with respect to these
four Managers.
Defendants argue that Plaintiffs waived the requirement of written notice by a course
of conduct. "[S]ubsequent modifications or waivers can be shown either by express
agreement or actions which necessarily involve such alterations." Malesh v. Chechak, 493
A.2d 106, 109 (Pa. Super. Ct. 1985) (citing Wagner v. Graziano Constr. Co., 136 A.2d 82,
84 (Pa. 1957)). Defendants cite to testimony from Shoemaker saying that he "suspected
that" he has accepted verbal notice from his contractors in the past. However, he
immediately followed that statement with "I cannot for the life of me at this moment think of
an example." (Def. Ex. 95,107:11-108:9). This statement is hardly proof of a course of
conduct which tolerated the use of verbal notice of terminations.
There is also evidence that Shoemaker followed his own requirements of written
notice of termination. Shoemaker sent out a written notice of termination to all of his
contractors in November 2003 as part of a company reorganization. (SOF 11 59). He also
3
This transcript is also unofficial, so any citations likely will be different from the pagination of the official
transcript.
17
received written notices of termination from Brandon Stice, Josiah Regan, and Jakob and
Malissa Berlingeri in 2012. (SOF ~ 60).
Moreover, the Court does not see the relevance of Shoemaker's course of conduct
with other contractors when each of the Independent Contractor Agreements with Baker,
Cowart, Nelson, and Sheets explicitly required written notice of termination from either side
before the contract would be terminated. (SOF ~ 42). The Court concludes that
Defendants have not proven that Shoemaker waived the requirement of written notice in his
business dealings either with the four Managers at issue (Baker, Cowart, Nelson, and
Sheets) or in his dealings with other Independent Contractors. Therefore, there is little
difficulty determining that Defendants breached the Settlement Agreement when they hired
Baker, Cowart, Nelson, and Sheets during the Moratorium.
Defendants contend that Fallin and Rowe, Jr. were no longer Managers of ACI when
Midwest hired them. The basis for this argument is that though neither Fallin nor Rowe, Jr.
submitted a written notice of resignation, neither had cleared any orders with ACI for a
significant period of time before joining Midwest. Defendants attempt to show that inactivity
in a contractor's sales accounts can constitute termination, a variant of their argument
above. 4
Fallin had signed an Independent Contractor agreement with ACI on AUgust 22,
2007. (SOF ~ 36). After leaving ACI upon submitting written notice of termination via a
4 Fallin testified that "it's just an unspoken thing throughout the hotel with my crew, that in order to leave
one company, you have to leave that company and then like three to six months later, you can go to another sales
company." (Fallin Tr. Dep. at 19:17-21).
18
discontinuance letter, Fallin returned to ACI as a Manager for Blue Diamond, which itself
was an Independent Contractor of ACI.5 (SOF W51,52,61). When he returned to ACI as
a Manager for Blue Diamond, Fallin executed a new Independent Contractor agreement
with ACI for aterm of one year on November 30, 2008. (SOF ~ 62).
At trial, the Court conditionally sustained Defendants' objection to the admission of
the Stice-Fallin Independent Contractor agreement because Shoemaker was not a party to
the contract and was unable to lay a foundation for the evidence. The Court's ruling was
conditioned on its reading of the Stice and Fallin depositions. (Shoemaker T.T., Part I,
74:22-75:3). Upon reading their depositions, the Court finds that neither Stice nor Fallin
authenticated the Independent Contractor agreement between them at their depositions in
that neither was shown a copy of the agreement itself. However, the Court is satisfied that
their combined testimony satisfies the requirements of both FED. R. EVID. 901 (b)(3)
("comparison with an authenticated specimen by ... the trier of fact.") and FED. R. EVID.
901 (b)(4) ("(t]he appearance, contents, substance, internal patterns, or other distinctive
characteristics of the item, taken together with all the Circumstances.").
(T]he showing of authenticity is not on a par with more technical evidentiary
rules, such as hearsay exceptions, governing admissibility. Rather, there
need be only a prima facie showing, to the court, of authenticity, not a full
argument on admissibility. Once a prima facie case is made, the evidence
goes to the [fact-finder] and it is the [fact-finder] who will ultimately determine
the authenticity of the evidence. The only requirement is that there has been
substantial evidence from which (the fact-finder] could infer that the document
was authentic.
5 Stice and Blue Diamond are no longer Managers of ACI. Stice tendered his written notice of termination
in January 2012. (SOF 11 60; Shoemaker T.T., Part I, 88:5-14).
19
Link v. Mercedes-Benz of N. Am., Inc., 788 F.2d 918, 928 (3d Cir. 1986). Adocument can
be "properly authenticated pursuant to Rule 901, either by direct testimony or by the
contents of the documents themselves." Id. at 927. That is, the "[t]estimony of awitness
with personal knowledge is sufficient." United States v. Bansal, 663 F.3d 634, 667 (3d Cir.
2011) (finding that a comparison with already authenticated and admitted exhibits was
proper to determine another exhibit's authenticity).
Both Stice and Fallin acknowledged that there had been a written agreement. Fallin
testified that he signed an agreement with Blue Diamond three days after Thanksgiving in
2009, though he later corrected himself and said the agreement was in 2008. (Fallin Tr.
Dep. at 16:23-17:3; 28:12-18; 31:20-24). Stice also testified that he signed an agreement
with Fallin, and though he did not have a copy of the agreement with him at the deposition,
he stated it was "the exact same contract" with slight changes in font and party names.
(Stice Tr. Dep. 93:15-95:1). After comparing the Stice-Fallin agreement with other ACI
Independent Contractor agreements, and comparing the signatures of Stice and Fallin to
other documents bearing their signatures, the Court is satisfied that the proffered Stice
Fallin Independent Contractor agreement is authentic, as well as admissible.
Following a period of inactivity with ACI, Fallin signed an Independent Contractor
agreement with Midwest on August 27,2009 on behalf of his company, Northwoods
Marketing. (SOF, 38). Fallin testified that he gave Stice verbal notice of termination two
weeks in advance. (Fallin Tr. Dep. 27:24-25). He sold no subscriptions through Blue
20
Diamond or any other entity from New Year's Day of 2009 until August 2009, when he
joined Midwest. (/d. at 32:1-13).
Meanwhile, Rowe had signed an Independent Contractor agreement with ACI for a
term of one year with automatic renewal on October 31, 2008. (SOF ~ 39). According to
his sales records at ACI, the last order he submitted to ACI before moving to Midwest was
on July 21, 2009. (PI. Ex. 33; Shoemaker T.T., Part I, 49:21-50:2). Rowe's girlfriend,
Cecilia Castleberry, signed an Independent Contractor agreement with Midwest on
February 12, 2010 on behalf of Castleberry's sales organization, Chi Sales. (SOF ~ 40).
Rowe submitted sales orders to Midwest through Chi Sales. (SOF ~ 63).
If the Court were to accept Defendants' argument that a period of inactivity can
constitute termination, then any period (of unspecified length) of inactivity could constitute
termination of acontractual relationship. This cannot be. Therefore, the Court finds that
when Midwest hired Fallin in August 2009 and accepted orders from Rowe, Jr. in February
2010, they were still Managers of ACI. (SOF ~ 64).
As such, they were subject to the Settlement Agreement's Moratorium clause. It
matters not that Fallin was hired before the Settlement Agreement was formally signed
because this portion of the Agreement was retroactive to July 29, 2009. (SOF ~ 58).
Therefore, when Defendants accepted subscription orders from Fallin and Rowe, .Jr. during
the Moratorium, they breached the Settlement Agreement.
!
,
;
i
21
I
Plaintiffs' Alleged Breach
Brandon Stice and his company, Blue Diamond, LLC, were formerly Managers of
ACI. (SOF W51,52). Defendants claim that Plaintiffs hired Hayes and Smith during the
Moratorium in breach of the Settlement Agreement. The Court rejects this contention
because the evidence shows that Robbins had agreed to sell the contracts of Hayes and
Smith to Brandon Stice, under the business name, Blue Diamond. Her written agreement
with Stice constituted a waiver of her right to sue for breach of contract (Settlement
Agreement) against Shoemaker. See Malesh v. Chechak, 493 A.2d 106, 109 (Pa. Super.
Ct. 1985) ("waivers can be shown either by express agreement or actions...") (citing
Wagnerv. Graziano Constr. Co., 136 A.2d 82, 84 (Pa. 1957)).
Robbins agreed to sell the Kiana Hayes contract to Stice for $8,000 and a dozen
roses, though Stice never returned a signed agreement. (SOF 11 77). Robbins sent the
following signed draft agreement, dated September 30,2009, to Stice:
I, Bridgett Robbins, agree to sell the contract of Kiana Wright (Hays) currently
contracted through Midwest Circulations LLC, a company owned and
operated by Bridgett Robbins, to Brandon Stice of Blue Diamond
Subscriptions (clearing thru Atlantic Circulations Inc.) for the face value of
$8,000.00. First installment of payments are due by October 1st, 2009 in the
amount of $3,000 payable in the form of MoneyGram to Bridgett Robbins.
The next installment will be due the following Tuesday. Thereafter, final
payment will be collected no later than the 31st day of October. In addition,
there will be a dozen roses with a thank you card sent to the hotel where
Bridget Robbins resides. By selling Kiana Wright (Hays)' contract, there will
be no violation or stipulations of the agreement made by the court in Middle
District of Pennsylvania. If payments are not made by the dates given, this
agreement is void.
22
(SOF 11 76) (emphasis added). Under this agreement, Robbins expressly waived any rights
she had under the Settlement Agreement to Hayes and Smith.6 She also sent a
confirmation e-mail to Attorney Becker on October 1, 2009 saying:
Brandon Stice and I have come to the agreement that Kiana can work for him
for $8,000.00 dollars and a dozen roses sent to my hotel with a thank you
card... installments of payment via moneygraham [sic] will be sent. ..
$3,000.00 today, $3,000.00 next Tuesday and $2,000.00 the following
Tuesday.
(SOF 11 57).
Though the draft agreement and e-mail from Robbins to Attorney Becker refer to
only Kiana Hayes, in Defendants' response to Plaintiffs' Interrogatories, Defendants admit
that this proposed sale of Kiana Hayes's contract included Heather Smith, as well.
State whether Midwest, Robbins, or Success Unlimited ever took part in any
communications relating to the sale or contracts of Kiana Hayes and/or
Heather Smith.
Yes, Ms. Robbins took part in communications relating to the possible sale of
the contracts of Kiana Hayes and Heather Smith; however, the sale of Ms.
Hayes and Ms. Smith's contracts was never consummated.
(SOF 11 75). Given that this is an admission, the Court does not credit Robbins's testimony
that she refused to sell Smith's contractual rights to Stice. (Robbins T.T., Part IV, 88:20-25).
Rather, the exchange of e-mails between 1) Attorney Lau and Attomey Becker and
2) Attorney Becker and Robbins shows that the parties understood that the proposed sale
6 Even if the Court were to conclude the draft was ambiguous, under Pennsylvania law, "[w]hen an
ambiguity exists, it will be construed against the drafter of the contract." Clairton Slag, Inc. v. Dep't of Gen. Servs.,
2 A.3d 765, 773 (Pa. Commw. Ct. 2010). Therefore, whether the terms of the draft were ambiguous or not, the
Court would either interpret the draft as an express waiver of Robbins's rights or would construe the draft against
her.
23
included both Hayes and Smith. In the morning of September 29, Attorney Lau confirmed to
Attorney Becker that neither Hayes nor Smith had been working for ACI and they would not
do so "unless this has changed by mutual agreement of Stice and Robbins."
Dear Cynthia and Bruce, as per our telephone conversation of this date,
pease [sic] be advised that [t]he two young women we discussed Ki[a]na
Wright or Hayes and Heather Smith are not and have not been clearing
orders for ACI or Dan Shoemaker or Brandon Stice nor have they been
associated with these parties in any business relationship. It is also my
understanding that they are not traveling together or otherwise associating
unless this has changed by mutual agreement of Stice and Robbins if such an
arrangement can be reached as per my subsequent phone conference w[i]th
Cynthia Becker of this date.
(SOF 1f 8). Later that afternoon, Attorney Becker sent the following e-mail to Robbins:
We have resolved the outstanding issues re: Brandon Stice stealing two of
Bridgett's managers. Surprisingly, Dan got into a major fight with Brandon and
told Brandon if he works either of the girls, Dan will not clear orders for
Brandon. Dan made Brandon send the girls home, and made his position not
to breach the settlement agreement very clear to Brandon and his other
managers. Brandon has since called Bridgett in an attempt to purchase the
managers' contracts. This is progress.
(SOF 1f 74). It is clear from Attorney Lau's e-mail, that any potential agreement would cover
both Hayes and Smith. Attorney Becker's e-mail is even more explicit in that she refers to
the "two" women as "managers." Given that the parties defined "Manager" in away
explicitly different from the traditional meaning of the word in employment circumstances,
the Court does not view this characterization of Hayes and Smith as a mistake on Attorney
Becker's part.
24
At the time, Shoemaker understood that Hayes was a Manager and Smith was her
sales agent. (SOF 11 73). Lacey Knight, Stice, and Smith also characterized Smith as
Hayes's sales agent. (Jd.). Stice clarified the $8,000 covered "Kiana's company and
anything that would be assessed to her like if she had a crew van or if she had agents. No,
I doubt - doubtfully would have just given $8,000 to an individual person. No. It was her
and her downline." (Stice Tr. Dep. at 31 :18-22; SOF 11 73). Stice also said, "I never was
told that Heather was a manager. Heather works for Kiana from what I understand." (Stice
Tr. Dep. at 37:11-13; SOF 11 73).
First of all, we never discussed Heather, because of the fact that Heather
portrayed herself as an agent of Kiana's and any agents would be part of
Kiana's agreement due to [...] fact that Kiana is the sole provider. And I
mean, you know as well as I do, that when you're the crew manager you're
also the crew owner. And so, therefore, I never questioned her agents.
(Stice Tr. Dep. at 42:20-43:2; SOF 11 73). Smith corroborated this testimony: "Kiana was
Brandon's original agent, and I was her original agent." (Smith Tr. Dep. at 44:2-3; SOF 11
73). Though Smith's status as a Manager or asales agent is immaterial to the analysis of
the scope of the Stice-Robbins agreement, 7 the Lau and Becker e-mails and the
overwhelming trial testimony show that the agreement covered both Hayes and Smith.
Thus, Robbins waived her rights to both Hayes and Smith.
7 If Smith were a Manager, then Robbins waived her contractual right to enforce the terms of the
Settlement Agreement against Plaintiffs with respect to Smith. If Smith were an agent, then the Settlement
Agreement would not apply at all, and Defendants could not recover for breach of contract. The above evidence is
cited merely to show that all parties agreed that the Stice-Robbins agreement encompassed both Hayes and Smith.
25
It is also clear that Stice never returned a signed agreement or paid the $8,000 due
to Robbins. (SOF 1f1f 77,78). Stice testified that he did not pay the $8,000 because when
Hayes arrived in New Mexico, it was clear that she was a drug addict. "I had to pretty much
let her do rehab again. You know, I can't just shell out eight grand on a girl who has lost a
hundred pounds since last time I saw her. I just can't do that, and Bridget knew it." (Stice
Tr. Dep., 30:17-21; SOF 11 78). "I agreed to give $8,000 to the Kiana that I knew as Kiana.
You can't send me a bag with bones in it with bags under your eyes. I ain't paying eight
thousand for that. Okay? It would cost more in rehab for that girl. I can't do it." (Stice Tr.
Dep. at 48:17-21). Stice also said, "I'm sorry I broke the agreement. ... I mean, I still had a
deal with Bridget and she knows as well as I do that, you know, you can't get water from a
rock, you know." (Id. at 50:8-12; see a/so 51:16-21). Thus, Stice admits that he did not pay
the $8,000 he agreed to pay Robbins because he claims he did not receive the expected
benefit of his bargain.
If Robbins were suing Stice, she may have had a valid claim against him for breach
of contract. Precisely why Shoemaker and ACI should be responsible for Stice's non
payment is unclear to the Court. Defendants argue that Shoemaker was obligated under
the Settlement Agreement to prevent any breaches of the Settlement Agreement by any of
his Managers, which included Stice and Blue Diamond. Notwithstanding the Court's
determination that Robbins waived her rights under the Settlement Agreement to Hayes and
Smith, the Settlement Agreement does not require either party to guarantee that each side's
26
Managers will not breach the Agreement. Instead, it requires only that Shoemaker and
Robbins take "reasonable steps" to ensure that no Manager breaches the Settlement
Agreement. (SOF ~ 13) ("the party has a duty to take reasonable steps to end the breach
or prevent the breach[.]"). The Court finds Shoemaker met his obligations under the
Settlement Agreement and will not impose on him a duty to guarantee non-breaches by his
Managers.
Shoemaker testified that he did not recall receiving a voicemail from Robbins on
September 22,2009 regarding Hayes and Smith traveling with Stice, (Shoemaker T.T., Part
11,33:16-20), even though his phone records indicate that he did receive a phone call from
her on his home business line and his cell phone. (SOF ~ 70). Robbins also testified that
she placed three calls to Shoemaker on September 22, 2009, but she never spoke with him
directly and left him a voicemail instead. (SOF ~ 71). Robbins called Stice to remind him
that under the Settlement Agreement, there was a Moratorium in place. (ld.).
Nevertheless, upon receiving an inquiry from counsel as to whether Hayes and
Smith were working for ACI, Shoemaker contacted Stice to confirm the two women's status.
[Stice] assured me that they were not [working for Blue Diamond], and he
also assured me that he wouldn't [hire them]. I then heard back, I think, one
more time that there was a negotiation between Mr. Stice and Ms. Robbins to
acquire these two individuals. And I made it clear to Mr. Stice that, you know,
unless you get some kind of formal agreement between yourself and -- you
know, Blue Diamond and Ms. Robbins and Midwest that would be a violation
of the settlement agreement and not to do that. I then -- I then heard -- I think
that there was an agreement reached between Mr. Stice and Ms. Robbins.
27
(SOF ~ 72; Shoemaker T.T., Part I, 105:1-17). In fact, Shoemaker testified that Robbins
would not sign the Settlement Agreement unless the issue of Hayes and Smith "was taken
care of." (Id. at 106:21-25).8
Stice's testimony also absolves Shoemaker of any liability:
I told [Shoemaker] they were coming out. ... I just told him they were coming
out. I sent him a copy of the contract. He said not to do it, but - he said if I
do do it, just make sure that I uphold my end. And I kinda rcked that up. But
that's all that we pretty much talked about as far as Kiana coming, I guess.
(Stice Tr. Dep. at 55:22-56:5). According to Stice, neither Hayes nor Smith was clearing
orders for him as of September 29, 2009, because they were both "staying high." (/d. at
64:19-20).
The evidence shows that Shoemaker did not follow up with Stice, so he was
unaware that Stice never paid Robbins the $8,000 due on the contract (SOF ~ 79), but the
Court will not impose liability on Shoemaker for failure to guarantee a prevention of what
Defendants view as Stice's breach of the Settlement Agreement. This is especially so in
light of Stice's testimony that "managers are private contractors" (Stice Tr. Dep. at 23:4-5),
and Shoemaker'S testimony that he has no control over the operations of his Independent
Contractors or their sales crews. (SOF ~ 80). Stice was not acting as Shoemaker's agent,
as stated in Stice's Independent Contractor agreement with ACI. "Neither party hereto is
authorized to act or represent itself as an agent of the other for any purpose.... [ACI] does
8
See also Robbins T.T., Part IV, 79:16-25.
28
not have any control over the manner and means and personnel Independent Contractor
selects to perform its services."9 (ld.).
Defendants claim that the September 29, 2009 e-mail from Attorney Lau to Attorney
Becker fraudulently induced Robbins to sign the Settlement Agreement. But for that e-mail,
Robbins claims she never would have signed the Settlement Agreement. To prove
fraudulent inducement under Pennsylvania law, Plaintiff must prove the following elements:
(1) a representation; (2) which is material to the transaction at hand; (3) made
falsely, with knowledge of its falsity or recklessness as to whether it is true or
false; (4) with the intent of misleading another into relying on it; (5) justifiable
reliance on the misrepresentation; and (6) the resulting injury was proximately
caused by the reliance.
Eigen v. Textron Lycoming Reciprocating Engine Div., 874 A.2d 1179, 1185 (Pa. Super. Ct.
2005). A plaintiff must prove the elements of fraud with clear and convincing evidence.
EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d 253,275-76 (3d Cir. 2010) (citing Skurnowicz V.
Lucci, 798 A.2d 788,793 (Pa. Super. Ct. 2002)).
Attorney Lau's e-mail to Attorney Becker from the morning of September 29,2009
states that Hayes and Smith "are not and have not been clearing orders through [Plaintiffs]
or Brandon Stice nor have they been associated with [them] in any business relationship. It
is also my understanding that they are not traveling together or otherwise associating unless
9 Robbins testified that when the agreement with Stice fell through, in October 2009 she contacted
Shoemaker to demand that Stice cease any attempt to work Hayes and Smith. She conceded that she never spoke
to Shoemaker directly regarding the voided agreement with Stice. (Robbins T.T., Part III, 206:11-14). She stated,
however, that using one of her sales agent's cell phones (she could not remember which agent), she left
Shoemaker a voicemail regarding Stice-'s nonpayment. There is no record evidence of such a phone call, and
Robbins acknowledged that she had "no proof of that" call to Shoemaker. (Id. at 217:1-13; 218:9-23; 220:1-221:3;
PI. Ex. 74). As such, the Court will not credit her testimony that Shoemaker was aware of Stice's failure to pay the
agreed-upon $8,000 to Robbins.
29
this is changed by mutual agreement of Stice and Robbins." (SOF ~ 8). Based on this
information alone, it is difficult to determine the source of Attorney Lau's information, but
ultimately, that information would have stemmed from Stice.
In an attempt to show the falsity of Attorney Lau's statements, Defendants make
much of bus tickets that Blue Diamond purchased for Hayes and Smith on September 22,
2009 and September 29, 2009. (PI. Ex. 41, 42). The first set of tickets was from
Fayetteville, North Carolina to Albuquerque, New Mexico, and the second set of tickets was
from Albuquerque to Las Cruces, New Mexico. (ld.). Though the tickets were purchased
through ACI, Shoemaker explained that ordertng bus tickets was a service ACI provided to
its Independent Contractors, IIbut we never paid for the travel expenses. They are all
charged to the independent contractor." (Shoemaker T.T., Part 11,31 :15-17).
Though the undersigned expressed strong doubts as to the relevance of such
evidence, at trial, each side presented much testimony over how long it would have taken
Hayes and Smith to travel from North Carolina to New Mexico and the precise date and
location when the two caught up with Stice's sales crew. Defendants still have not shown
how this testimony is relevant because regardless of when and where Hayes and Smith met
up with Stice's sales crew, there is no record evidence that either Attorney Lau or
Shoemaker had independent personal knowledge of whether Hayes and Smith were in a
business relationship Stice when Stice and Robbins were negotiating for the rights to Hayes
and Smith. Both would have relied entirely on Stice's representations as to the status of
30
Hayes and Smith. Further undermining Robbins's argument of fraudulent inducement is her
admission at trial that she never saw the e-mail from Attorney Lau prior to trial. (Robbins
T.T., Part III, 201 :24-203:4). Rather, she relied on statements from Stice that though Hayes
and Smith were in his hotel, he was "sending them home," (Id. at 203:5-204:7).
There is no evidence that would indicate that Attorney Lau made false statements,
was reckless with respect to the truth of his statements, or that he intended to mislead
Robbins through those statements. Thus, assurning for the moment that the statements in
Attorney Lau's e-mail were untrue and Robbins was aware of Attorney Lau's statements
without having seen the e-mail, Defendants have failed to show by clear and convincing
evidence that Plaintiffs' agent fraudulently induced Robbins to sign the Settlement
Agreement.
Therefore, the Court finds that Plaintiffs did not breach the Moratorium provision of
the Settlement Agreement. As such, it is unnecessary to determine "who breached first,"10
thereby causing an inquiry as to whether the initial breach relieved the non-breaching party
of any obligation to perform, because only one party breached the Moratorium provision of
the Settlement Agreement - the Defendants.
Confidentiality
Defendants Alleged Breach
I
10 itA material breach of a contract relieves the non-breaching party from any continuing duty of
performance" under the contract. UL Trans., Inc., v. Pilot Air Freight Corp., 962 A.2d 639, 648 (Pa. 2009).
31
Plaintiffs claim that Defendants breached the Confidentiality provision numerous
times. The parties do not dispute that Robbins disclosed the terms of the Settlement
Agreement to Heather Smith in August 2009. (SOF ~ 56; Robbins Trial Test, Part III,
180:23-181 :5). The evidence shows that Smith did not execute her Independent Contractor
agreement with Midwest until August 30,2009. (SOF ~ 48; Robbins Trial Test, Part III,
166:8-22). Thus, Plaintiffs argue that Robbins divulged the terms of the Settlement
Agreement before Smith was a Manager of Midwest.
Robbins argues that though there was no formal Independent Contract between
Midwest and Smith, there was an oral contract in place with Smith acting as an Independent
Contractor (SOF ~ 65) because Midwest was not formed until August 11, 2009. (SOF ~ 5).
Smith testified in her trial deposition that in July 2009 when she learned of the one-year
Moratorium between Shoemaker and Robbins, she (Smith) was a Manager for Robbins.
(SOF ~ 65). Though Smith testified that Robbins told her that Smith's promotion to
Manager was contingent on Smith "writ[ing] consistent business," (Smith Tr. Dep. at 89:4-9)
Smith said that she was one of two people who were promoted to Manager "[b]ecause all
her other managers that she had when she went to Midwest were already managers for her
underneath Family Subscriptions. Me and Nicki was [sic] the only ones that she promoted
when she switched over." (/d. at 90:1-4).
According to Robbins, she and Smith each understood that a contract would be in
place once Midwest was incorporated. In support of this contention, Robbins testified that
32
she allowed Smith to bring her daughter on the road with the Midwest sales team, and only
Managers were permitted to bring children on the road. (Robbins T.T., Part IV, 71 :18-72:7).
Sales records from Smith's company, Tear It Up Sales, show the earliest sales activity from
Smith began on August 27,2009. (SOF 1J 66).
It appears from the testimony of both Robbins and Smith that each considered Smith
to be a Manager when Smith came on to Midwest. Under the express terms of the
Settlement Agreement, between July 29, 2009 and July 28,2010,
any company owned or operated by ... Bridgett Robbins ... shall not hire,
contract with, accept subscription orders from or otherwise enter into
business relations with any Manager, as defined by this Settlement
Agreement, of Atlantic Circulation, Inc., its principals or associated entities,
who was a Manager of Atlantic Circulation, Inc. as of July 29, 2009 or who
became, or shall become, a Manager of Atlantic Circulation, Inc. or any
company owned or operated by Daniel W. Shoemaker, III, during the time
period beginning on July 29, 2009 and ending on July 28, 2010.
(SOF 1J 58) (emphasis added). In turn, Manager is defined as:
(1) A person, business entity, or unincorporated association who is either in a
direct contractual relationship with the entity claiming (hereinafter "claiming
entity") that person, business entity or unincorporated association as a
manager; (2) is in a direct contractual relationship with a person, business
entity, or unincorporated association who is in a direct contractual relationship
with the claiming entity, or (3) is compensated by either the claiming entity, or
a person, business entity or unincorporated association in a direct contractual
relationship with the claiming entity, in a manner reasonably similar to other
managers, as defined by this section, of the claiming entity.
(SOF 1J 12) (emphasis added).
Plaintiffs argue that Robbins is attempting to re-define "Manager" in a manner that is
inconsistent with the definition contained within the Settlement Agreement. To the extent
33
that Defendants argue that a Manager is someone who can bring her child on the road with
her, the Court agrees with Plaintiffs. The Court notes that nowhere in this agreement is
there any mention of a Manager being defined as one who is allowed to bring his/her child
"on the road." Being permitted to bring one's child on the road may very well have been a
"perk" of the job, but having the ability to bring one's child on the road is not what defines a
Manager; it is merely a side benefit of having the title of Manager.
Nevertheless, the Court finds that Smith was a Manager when Robbins disclosed the
terms of the Settlement Agreement to her.11 "Where the parties have agreed on the
essential terms of acontract, the fact that they intend to formalize their agreement in writing
but have not yet done so does not prevent enforcement of such agreement." Mazzella v.
Koken, 739 A.2d 531, 536 (Pa. 1999); see also Am. Eagle Outfitters v. Lyle & Scott Ltd.,
584 F.3d 575, 582 (3d Cir. 2009) (concluding that though "an agreement to enter into a
binding contract in the future does not alone constitute a contract, ... parties may bind
themselves contractually although they intend, at some later date, to draft a more formal
document.") (citing Goldman v. McShain, 247 A,2d 455, 459 (Pa. 1968)) (all other internal
citations and quotation marks omitted).
11 The Court finds that Smith was a Manager for Defendant Midwest for the purpose of determining
Smith's status at the time of Robbins's disclosure to Smith of the terms of the Settlement Agreement. At the time
Robbins was negotiating the sale of the contracts for Hayes and Smith to Stice, it appears that all parties
understood that Smith was Hayes's agent. The Court noted above that Smith's status during the Stice-Robbins
negotiations was immaterial. If the Court had found that Smith would be brought on as Hayes's sales agent at Blue
Diamond, there would be no inconsistency between that finding and the Court's finding that Smith was a Manager
at Midwest.
34
The evidence shows that though Robbins and Smith did not execute a written
Independent Contractor agreement until August 30,2009, they had an oral agreement that
Smith was a Manager and they would execute a written contract after Midwest was
incorporated. An oral agreement existed until August 30,2009, when the parties
"formalize[d] their agreement in writing." All that the Settlement Agreement requires is that
there exist a "direct contractual relationship" between Robbins and Smith for the latter to be
a Manager. The Settlement Agreement did not require such a "direct contractual
relationship" to be reduced to writing.12 Because Plaintiffs bear the burden of proving a
breach, and the Court finds that Smith was a Manager when Robbins disclosed the contents
of the Settlement Agreement to her, the Court rejects Plaintiffs' breach of Confidentiality
claim.
Plaintiffs also contend that Robbins breached the Confidentiality provision of the
Settlement Agreement when she disclosed some of the terms of the agreement to Katie
Behlke in or around July 2011. (Behlke Tr. Dep. at 7:11-19). Behlke testified in her trial
deposition that Robbins had told her that under the Settlement Agreement, Shoemaker had
not won any money from Robbins and that no parties to the Agreement would be allowed to
hire Managers from any other party for a certain period of time. (Id. at 8:1-8). Behlke also
testified that Robbins disclosed the terms of the Agreement to other people, including
12 1n finding that Smith was a Manager and thus entitled to know of the terms contained in the Settlement
Agreement, the Court does not reach Defendants' argument that only the Moratorium provisions were retroactive
to July 29, 2009, whereas the remainder of the Settlement Agreement became enforceable on September 30,2009
when both Shoemaker and Robbins signed it.
35
James Gates, Nicole Lee, and others. (Id. at 32:13-36:2,44:9-21). This testimony is not
fully trustworthy.
Belhke's testimony regarding Nicole Lee is entirely hearsay, and the testimony
regarding "other sales agents" is ambiguous. Behlke never identifies when these
disclosures took place or to whom Robbins disclosed. Belhke also testified that when
Robbins made the disclosures, she was "directly speaking to" Managers while sales agents
were present. It is unclear whether the sales agents heard Robbins as they were cycling "in
and out." (ld. at 44:14-21). Robbins testified:
I said we don't hire each other's people. We have that mutual understanding,
and I left it at that. I don't want to wake up one morning and half his company
is sitting in my hotel and these kids not understand why. We have an
agreement. We don't hire these people. I don't hire -- vice versa. It's as simple
as that. Leave it alone.
(Robbins Trial Test., Part III, 186:11-16). Robbins later clarified, "I didn't tell them about the
agreement. I said it simple as a sentence as, I'm not hiring his people, he doesn't hire my
people." (Jd. at 192:22-24). Therefore, the only disclosure of which Behlke had first-hand
knowledge was Robbins's alleged disclosure to Behlke in the summer of 2011.
Furthermore, Shoemaker testified that "the existence of [the moratorium provision" I don't
think was asecret. I think that the content and the intent of it was." (Shoemaker T.T., Part
I, 182:2-3).
If Behlke were aManager, then the disclosure was permissible under the Settlement
Agreement; if she were a sales agent, disclosure would be prohibited. When asked what
36
her status was while employed for Robbins in the summer of 2011, Behlke was not certain.
Her deposition testimony indicates she was confused. At one point in her trial deposition,
Behlke testified that she "went over under the impression [she] was ajunior manager."
(Behlke Tr. Dep., at 45:4-5,45:17-21).13 She had been a Manager with ACI previously, as
well. (Id. at 57:9-58:4). When Plaintiffs' counsel asked her whether Managers usually have
sales agents underneath them, Behlke responded that at one point, she did have agents
working under her. (Id. at 13:14-16).
However, upon pressing from Plaintiffs' counsel over whether Robbins disclosed the
terms of the Agreement when Belke was a sales agent, Behlke stated, "I was a sales agent
for the last portion of working for her. So I don't - I'm not - yes, it would be atrue
statement." (/d. at 15:1-7). She later said, "I mean I was a sales agent during
conversations to which she mentioned the settlement agreement." (Id. at 16:8-10).
Finally, Robbins testified in Court that she disclosed the terms of the Agreement to
Behlke, but Behlke was a Manager who had "[m]aybe one or two people" working under
her. (Robbins Trial Test., Part III, 195:1-6).
Because the Court did not have an opportunity to see Ms. Behlke live, has only her
confused deposition transcript to draw from, and Robbins testified that Behlke was a
Manager at the time of disclosure in July 2011, it finds that Plaintiffs have not met their
13 Earlier in her deposition, Behlke stated that as of July 2011, she "was a junior manager that sold
magazines," but she did not have a written contract with Robbins. (ld. at 10:21-11:5).
37
burden of proof of showing that Robbins disclosed the terms of the Agreement to Behlke in
violation of the confidentiality provision of the Agreement.
Plaintiffs' Alleged Breach
On the other hand, Defendants claim that Plaintiffs breached the Confidentiality
provision by filing the present lawsuit and filing the Settlement Agreement as an exhibit to
the Complaint. (See Doc. 1, Ex. A). This is the only allegation that Plaintiffs ever breached
the Confidentiality provision. As a matter of law, this argument fails.
"[S]ettlement documents can become part of the public component of a trial under
either of two circumstances: (1) when a settlement is filed with a district court; and (2) when
the parties seek interpretative assistance from the court or otherwise move to enforce a
settlement provision." LEAP Systems, Inc. v. MoneyTrax, Inc., 638 F.3d 216, 220 (3d Cir.
2011) (internal citations and quotation marks omitted). In the previous litigation between the
parties which culminated in the Settlement Agreement, the parties filed a Stipulation of
Dismissal which Judge Caputo Signed before dismissing the case. (See 1:08-CV-2063,
Docs. 66, 67). In the Stipulation, the parties agreed that this Court would "retain jurisdiction
for any and all disputes, claims, or causes of action arising out of the parties' settlement
agreement including, but not limited to, the settlement agreement's Moratorium against
business relations with Managers of other parties to the settlement, the Agreement Not to
Disparage ... , and the Confidentiality Agreement." (Id.). This satisfies the second test set
forth in LEAP Systems, wherein the Third Circuit noted that "the parties specifically
38
requested at the March 25,2008 proceeding that the District Court retain jurisdiction to
interpret and enforce the terms of the settlement agreements." 638 F.3d at 221. Therefore,
the settlement agreement was a "judicial document for purposes of determining the public's
right of access." Id. at 220. 14
Here, once a dispute arose as to whether Defendants had breached the terms of the
Settlement Agreement and Plaintiffs filed a Complaint asking this Court "to interpret and
enforce the terms" of the Agreement, the document became ajudicial record "subject to the
common law 'right of access' doctrine." LEAP Systems, 638 F.3d at 221. Therefore, there
was no breach of the Confidentiality agreement when Plaintiffs temporarily attached the
Settlement Agreement to the Complaint. 15
Defendants rely heavily on Toon v. Wackenhut Corrections Corp., for the proposition
that attaching aconfidential settlement agreement as an exhibit to acourt filing is a per se
breach of confidentiality. 250 F.3d 950 (5th Cir. 2001) (affirming sanctions imposed on the
plaintiffs' counsel for disclosing the terms of a settlement agreement which called for the
defendant to pay $1,500,000 to the plaintiffs' counsel by a date certain for alleged sexual,
physical, and mental abuse committed by the defendant's employees against the plaintiffs,
who were young girls at ajuvenile correctional facility). The facts of Toon were unique and
Ultimately, though the settlement agreement was a judicial document, the Third Circuit upheld the
district court's sealing of the agreement because the right of public access to judicial records is not absolute, and
the parties "would not have entered into the settlement agreements but for the Court's assurance of
confidentiality." Id. at 222.
15 The Settlement Agreement was attached as Exhibit A to the Complaint and subsequently removed from
the docket. Thereafter, any time either side attached the Agreement as an exhibit, it did so under seal.
Furthermore, Defendants do not show how they were harmed, if at all, by Plaintiffs' "disclosure" of the Agreement
to the public.
14
39
entirely different from the facts at issue here. In affirming the district court's finding of bad
faith and assessment of sanctions on the disclosing party, the Fifth Circuit noted several
facts supporting the finding of bad faith:
Plaintiffs' counsel intentionally filed the motion to enforce unsealed, exposing
the terms of the settlement agreement to the public. Compounding their
disregard of the confidentiality provision in the settlement agreement, one of
the attorneys allowed himself to be quoted in a newspaper article exposing
the settlement agreement. ... For example, counsel argue that they
researched the relevant case law and determined that it was in their client's
best interest to file the enforcement motion unsealed.... Also indicative of
bad faith is the justification offered by plaintiffs' counsel to the district court
that the public had a right to know about the conduct of [the defendant's]
employees.
Id. at 953. Referring to multiple communications between counsel regarding the confidential
nature of the agreement (including a letter which reminded the plaintiffs' counsel that all
future filings with the district court stemming from the agreement would be kept confidential,
that is, filed under seal), the Fifth Circuit concluded, "confidentiality was at the heart of the
settlement agreement. The agreement encompassed very delicate claims, and maintaining
the confidentiality of the sensitive nature of the plaintiffs' allegations was a preeminent
concern for both sides of the litigation." Id. Rejecting the plaintiffs' counsel's proffered
reasons for failing to file the motion under seal, the Court found that "in reality, plaintiffs'
counsel simply engaged in self-help albeit under the guise of seeking judicial intervention."
Id. at 953-54.
40
Therefore, as a matter of law, Plaintiffs did not breach the Confidentiality provision
when they temporarily attached the Settlement Agreement as an exhibit to their initial
Complaint.
Conclusion
In summary, the Court finds that Defendants breached the Settlement Agreement six
times by accepting subscription orders from Baker, Cowart, Fallin, Nelson, Rowe, Jr., and
Sheets during the Moratorium. The Court finds no other breaches of the Settlement
Agreement by either side and thus awards no damages on either side's breach of
Confidentiality claims or on Defendants' counterclaims for breach of the Moratorium.
Normally, in a breach of contract claim, once the Court has determined a contract
existed and one party breached a duty imposed by that contract, it would determine what
actual damages, if any, are appropriate. This analysis would include any mitigation of
damages on the part of the prevailing party.16 For instance, the joint statement of facts
shows that Sheets and Rowe, Jr. returned to ACI after a brief stint with Midwest. (SOF W
22,41). Furthermore, it appears from Fallin's sales record with Blue Diamond that he never
submitted a sale to Stice before moving to Midwest. (PI. Ex. 34). These considerations
surely would have factored into the Court's determination of the damages to which Plaintiffs
are entitled.
16 See
TruServe Corp. v. Morgan's Tool & Supply Co., Inc., 39 A.3d 253, 262 (Pa. 2012).
41
However, because the Settlement Agreement contains a liquidated damages
provision, an inquiry into the actual damages incurred is unnecessary. Accordingly, the
Court awards $75,000, as agreed to by the parties, per breach for atotal of $450,000 in
favor of Plaintiffs. The Court notes that this award is a considerable sum which is entirely
the result of the parties' previous agreement in which they were both represented by
competent counsel and agreed to these liquidated damages provisions.
Tortious Interference Claims
Here again, each side accuses the other of interfering with its Managers. At trial,
Attorney Lau represented to the Court that Plaintiffs are not seeking a double recovery on
both the breach of contract and tortious interference claims for Defendants' hiring of
Plaintiffs' six Managers. This was an affirmation of Plaintiffs' previous position at oral
argument. (Tr. of Oral Arg. at 23:4-7; "So it's our contention that [Robbins] did interfere with
those contracts ... which is an alternative remedy that we brought forth."). Because the
Court has granted all six of Plaintiffs' breach of contract claims regarding the Moratorium, it
will not address Plaintiffs' tortious interference claims.
Furthermore, because the Court finds that Robbins waived her rights to sue under
the Settlement Agreement when she agreed to sell her contractual rights to Hayes and
Smith, Shoemaker and ACI could not have tortiously interfered with her rights to Hayes and
Smith. As stated above, there is also no evidence that Stice was acting on behalf of
Shoemaker as Shoemaker's agent when he agreed to purchase the contractual rights of
42
Hayes (which also covered Smith). Therefore, Defendants have not shown how liability
would be imputed to Shoemaker for the actions of Stice. Nevertheless, the Court will
engage in an analysis of Defendants' claims.
Under Pennsylvania law, a party must show the following to establish atortious
interference with a business relationship claim:
(1) the existence of a contractual, or prospective contractual relation between
the complainant and a third party; (2) purposeful action on the part of the
defendant, specifically intended to harm the existing relation, or to prevent a
prospective relation from occurring; (3) the absence of privilege or justification
on the part of the defendant; and (4) the occasioning of actual legal damage
as a result of the defendant's conduct.
Steffy & Son, Inc. v. Citizens Bank of Pennsylvania, 7 A.3d 278, 288-89 (Pa. Super. ct.
2010). It is clear that at the time of the Stice-Robbins agreement, Hayes and Smith had
Independent Contractor agreements with Midwest and Robbins, thus satisfying the first
element of tortious interference. However, there is no evidence that either Stice or
Shoemaker took "purposeful action" to poach Hayes and Smith from Robbins.
Stice testified that it was Hayes who first approached him about hiring her. In fact, "I
was against it at first, one hundred percent. I think it was a horrible idea to bring Kiana back
after what she has done and how she acted throughout her stay." (SOF 1f 68; Stice Tr.
Dep.,32:20-23). However, he relented because "Kiana was begging and begging and
begging for ajob." (Id. at 33:9-10). Lacey Knight, Stice's 'fiancee, also testified that Hayes
"begged to come back. Well, she really had to beg Brandon because he didn't want her to
come back. I had to talk him into it." (Knight Tr. Dep., 51 :18-20). Lastly, Hayes testified
43
that she initiated contact with Lacey Knight before returning to work for Stice. "I texted
Lacey, and we just started talking again, and then I just went back over there." (SOF ~ 67;
Hayes Tr. Dep., 33:25-34:8).
Thus, Stice was initially against taking Hayes back onto his sales crew, so he did not
take "purposeful action" to harm Robbins. Furthermore, as stated before, upon learning of
Stice's proposed purchase of Hayes's and Smith's contracts from Robbins, Shoemaker "got
into a major fight with Brandon." (SOF ~ 74). The evidence further shows that Shoemaker
instructed Stice not to go through with it, and if he did, to ensure that any transaction was
consummated in writing. (SOF ~ 72). This is assuredly not the type of "purposeful action"
intended to harm Robbins that is necessary to establish atortious interference claim.
Therefore, the Court will not award Defendants any damages for their counterclaim for
tortious interference.
Conclusion
In conclusion, the Court finds that Defendant breached the Settlement Agreement's
Moratorium provision six times by accepting subscription orders from Baker, Cowart,
Nelson, Sheets, Fallin, and Rowe, Jr. Therefore, the Court awards Plaintiffs $450,000 as
agreed to by the parties in the Settlement Agreement - $75,000 for each breach. In turn,
the Court awards nothing to Defendants because Plaintiffs did not breach when Stice
agreed to purchase the contractual rights to Hayes and Smith from Robbins.
44
In addition, the Court finds that neither side proved a breach of the Confidentiality
provision of the Settlement Agreement and, therefore, awards no damages to either side.
Finally, the Court awards no damages to either side on its tortious interference
claims. Plaintiffs receive no damages because they have already succeeded on their
breach of Moratorium claims, and awarding damages for tortious interference would be a
double recovery. Defendants receive no damages because the evidence shows that Hayes
initiated contact with Stice to inquire about joining his crew, Robbins waived her contractual
I
I
I
f
rights to Hayes and Smith by entering an agreement to sell her rights to Stice, Shoemaker is
,
not liable to Robbins for Stice's non-payment under the agreement because Stice was not
I
acting as Shoemaker's agent during the transaction, and there is no evidence that Stice
took purposeful action to harm Robbins.
Robert D. Mariani
United States District Judge
45
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