SPENCER v. CRYSTAL WATERS, INC. et al

Filing 78

MEMORANUDUM ORDER granting in part and denying in part 68 defendants' partial motion to dismiss plaintiff's second amended complaint. The motion is granted as to the breach of fiduciary claim at Count V. The motion is denied in all othe r aspects without prejudice to raise - after the close of discovery - any advanced factual or legal basis for relief in a motion for summary judgment. All as more fully set forth in the Memorandum Order. Signed by Judge David S. Cercone on 9/28/15. (mwm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
NORMA JEAN SPENCER,
Plaintiff,
v.
CRYSTAL WATERS, INC., THOMAS
H. LOUGHRY, JOHN W. LOUGHRY,
TLH COAL, CO., JONATHAN D.
CLARK, WJT ENTERPRISES,
WILLIAM J. MCINTYRE, and
GRAY ROCK, L.L.C.,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)

2:13cv334
Electronic Filing

MEMORANDUM ORDER
AND NOW, this 28th day of September, 2015, upon due consideration of defendants'
partial motion to dismiss plaintiff's second amended complaint and the parties' submissions in
conjunction therewith, IT IS ORDERED that [68] the motion be, and the same hereby is, granted
in apart and denied in part. The motion is granted as to the breach of fiduciary claim at Count V.
The motion is denied in all other aspects without prejudice to raise - after the close of discovery any advanced factual or legal basis for relief in a motion for summary judgment.
Plaintiff's claim for breach of fiduciary duty is untenable for a number of reasons. First,
the facts pled do not create a reasonable inference that plaintiff was a third party beneficiary of
the agreement between defendants Clark and TLH. "For appellees to be third party beneficiaries
of a contract there must be a contract." Melley v. Pioneer Bank, N.A., 834 A.2d 1191, 1201 (Pa.
Super. Ct. 2003). The Superior Court of Pennsylvania has opined:
[A] party becomes a third party beneficiary only where both parties to the contract
express an intention to benefit the third party in the contract itself, unless, the
circumstances are so compelling that recognition of the beneficiary's right is appropriate
to effectuate the intention of the parties, and the performance satisfies an obligation of the
promisee to pay money to the beneficiary or the circumstances indicate that the promisee
intends to give the beneficiary the benefit of the promised performance.

Melley v. Pioneer Bank, N.A., 834 A.2d 1191, 1202 (Pa. Super. Ct. 2003) (quoting Scarpitti v.
Weborg, 609 A.2d 147, 150-151 (Pa. 1992) (citations omitted) (emphasis in original); see also
Restatement 2nd Contracts § 302.
Here, plaintiff is unable to identify a contract wherein two contracting parties expressed
an intent to benefit her. Thus, the first basis for third party beneficiary status cannot be satisfied.
Recognition of third party beneficiary status under the second prong of the test likewise is
unavailable here. The Pennsylvania courts have utilized the following in implementing the
second component of the above-referenced test:
The first part of the test sets forth a standing requirement which leaves discretion with the
court to determine whether recognition of third party beneficiary status would be
appropriate. The second part defines the two types of claimants who may be intended as
third party beneficiaries. If a party satisfies both parts of the test, a claim may be asserted
under the contract.
Id. (citing Scarpitti, 609 A.2d at 150).
A contractual relationship between Clark and TLH can be inferred from the complaint.
However, a reasonable inference cannot be drawn that plaintiff was an intended or contemplated
third party beneficiary of their agreement. There is no allegation that Clark expressed an
intention to benefit plaintiff and the complaint fails to plead circumstances from which it
reasonably can be inferred that Clark and TLH contemplated plaintiff as a third party beneficiary
at any time.
Plaintiff avers the agreement between Clark, on behalf of Millcreek Processing, and TLH
was established before she entered into a contract with TLH. Second Amended Complaint at ¶
21, 46. This agreement provided that Millcreek would purchase and sell the coal mined on
plaintiff's property. Id. at ¶ 21. But these averments do not reasonably imply that the
contracting parties considered plaintiff to be a beneficiary. Furthermore, alleging Clark was
aware that royalties would be owed to plaintiff does not set forth facts showing that the parties
2

contemplated that she would be a third party beneficiary of their agreement. Thus, plaintiff has
failed to make a plausible showing that she was a third party beneficiary of Clark and TLH's
relationship or any potential duty Clark owed TLH.
Second, the complaint fails to allege facts that give rise to a fiduciary relationship
between the parties. "To plead a claim for breach of fiduciary duty under Pennsylvania law, the
plaintiff must first prove the existence of a fiduciary relationship." Reginella Constr. Co, Ltd. v.
Travelers Cas. And Sur. Co. of Am., 949 F. Supp.2d 599, 611 (W.D. Pa. 2013) aff'd sub nom.
Reginella Const. Co. v. Travelers Cas. & Sur. Co. of Am., 568 F. App'x 174 (3d Cir. 2014)
(citing e.g., In re Estate of Clark, 359 A.2d 777, 781 (1976)). The Pennsylvania Supreme Court
has "recognized three categories of relationships between contracting parties" which include "an
ordinary, arm's-length relationship," "an agency relationship," and "a confidential relationship."
Wisniski v. Brown & Brown Ins. Co. of PA, 906 A.2d 571, 577 (Pa. Super. Ct. 2006) (citing
Basile v. H & R Block, Inc., 761 A.2d 1115, 1120 (Pa. 2000)). A fiduciary relationship arises
among contracting parties where there is an agency relationship or a confidential relationship.
Id.
There are three requirements to establish an agency relationship: "'manifestation by the
principal that the agent shall act for him, the agent's acceptance of the undertaking and the
understanding of the parties that the principal is to be in control of the undertaking.'" Id.
(quoting Basile, 761 A.2d at 1120)). "The key and distinctive feature of an agency relationship
is the agent's power to affect the legal relationship of the principal with third parties . . . . " Id.
(citing Basile, 761 A.2d at 1120)).
"'A confidential relationship is marked by such a disparity in position that the inferior
party places complete trust in the superior party's advice and seeks no other counsel, so as to give
rise to a potential abuse of power.'" Id. (quoting eToll, Inc. v. Elias/Savion Adver., Inc., 811
3

A.2d 10, 23 (Pa. Super. Ct. 2002)). In determining whether a confidential relationship arises
"'[t]he critical question is whether the relationship goes beyond mere reliance on superior skill,
and into a relationship characterized by overmastering influence on one side or weakness,
dependence, or trust, justifiably reposed on the other side.'" Id. (quoting eToll, 811 A.2d at 23).
One party merely "'rel[ying] and pa[ying] for the specialized skill or expertise of the other party'"
does not establish a fiduciary relationship. Id. (quoting eToll, 811 A.2d at 23).
Plaintiff's averments give rise to neither an agency relationship nor a confidential
relationship. Clark did not have the authority to affect plaintiff's legal relationship with third
parties or bind her contractually. She was not even aware of Clark or Millcreek's relationship
with TLH when she contracted with TLH. Second Amended Complaint at ¶ 41. Therefore,
plaintiff and Clark could not have had an agency relationship.
Moreover, the parties did not have a confidential relationship. The circumstances do not
represent a scheme where a dominant party takes advantage of a weaker party's trust. Even the
lowest standards need to make a showing of reliance and influence between two parties are not
satisfied here. Plaintiff was not aware of Clark's agreement with TLH to sell the coal, and
therefore was incapable of relying on Clark in any degree. Consequently, a confidential
relationship did not exist.
The facts alleged fail to raise the reasonable inference that discovery will produce
evidence of either an agency or confidential relationship. In the absence of either of these
relationships, a fiduciary duty claim cannot be maintained and Count V must be dismissed.

s/David Stewart Cercone
David Stewart Cercone
United States District Judge
4

cc:

George P. Chada, Esquire
P. Brennan Hart, Esquire
Brett C. Shear, Esquire
Curtis M. Schaffner, Esquire
James R. Hankle, Esquire
(Via CM/ECF Electronic Mail)

5