REVILLE TIRE CO. et al v. RANALLI et al

Filing 139

MEMORANDUM OPINION re: 109 and 112 Motions for Summary Judgment. Signed by Chief Magistrate Judge Maureen P. Kelly on 09/21/17. (eca)

THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
REVILLE TIRE CO. doing business as
REVILLE WHOLESALE
DISTRIBUTING, R.T.C. WAREHOUSE
LTD., ROBERT J. REVILLE,
RAYMOND L. REVILLE, SUSAN L.
REVILLE, RICHARD H. REVILLE,
MICHAEL J. REVILLE, ROBERT
SEMAN, SUSAN SEMAN, and
JOSEPH KIGGINS,

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Plaintiffs/Counter Defendants,
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v.
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JAMES RANALLI, SR., JAMES P.
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RANALLI, UAS HERMITAGE
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OPERATIONS, LLC, UNITED AUTO )
SUPPLY OF SYRACUSE, WEST, INC., )
and UAS HERMITAGE REALTY, LLC, )
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Defendants/Counterclaimants.
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Counterclaimant,
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v.
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REVILLE TIRE CO., ROBERT J.
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REVILLE, RAYMOND L. REVILLE, )
SUSAN L. REVILLE, RICHARD H.
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REVILLE, MICHAEL J. REVILLE,
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ROBERT SEMAN, SUSAN SEMAN,
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and JOSEPH KIGGINS
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Counterclaim defendants. )

Civil Action No. 15-1036
Chief Magistrate Judge Maureen P. Kelly

Re: ECF Nos. 109 and 112

UNITED AUTO SUPPLY OF
SYRACUSE, WEST, INC.,

Civil Action No. 15-1036

OPINION
KELLY, Chief Magistrate Judge
I.

INTRODUCTION
This action was brought by Reville Tire Co., an Ohio Corporation, its related entity R.T.C.

Warehouse LTD., and the individual shareholders/principals of the Reville Tire Co. against UAS
Hermitage Operations, LLC, United Auto Supply of Syracuse West, Inc., and UAS Hermitage
Realty, LLC, New York entities, and two corporate principals. Reville Tire Co. had been a
financially distressed company for several years prior to meeting with UAS to explore the
possibility of UAS providing the company with financial and other assistance. The parties
negotiated an Asset Purchase Agreement (“APA”) whereby UAS would purchase certain assets
and assume certain liabilities from the Reville Tire Co. The APA was signed on June 23, 2015,
and provided UAS with a due diligence period prior to closing on the agreement. The APA also
permitted UAS to terminate the agreement prior to the closing if it was not satisfied with the
results of its due diligence. On July 28, 2015, UAS terminated the APA, and on August 7, 2015,
Reville Tire Co. filed the instant lawsuit.
Plaintiffs allege that Defendants fraudulently induced Plaintiffs to enter into the APA as a
ruse to take control of the Reville Tire Co. business without having to honor the contract.
Defendants, in turn, assert Counterclaims against Plaintiffs arising out of the same set of
circumstances. Pending before the Court are the parties’ cross-motions for partial summary
judgment. As more fully explained below, Plaintiffs’ motion for summary judgment will be
denied, and Defendants’ motion for summary judgment will be granted.

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II.

PROCEDURAL HISTORY AND FACTUAL BACKGROUND
A.

Parties

Plaintiff Reville Tire Co., doing business as Reville Wholesale Distributing, (“Reville
Tire”) is the owner and operator of an automobile parts wholesale, distribution, and warehousing
business with locations in Ohio and Pennsylvania. Plaintiff R.T.C. Warehouse Ltd. is an
affiliated company of Reville Tire with a warehouse facility on a parcel of land in Hermitage,
Pennsylvania. Plaintiffs Robert J. Reville, Raymond L. Reville, Susan L. Reville, Richard H.
Reville, Michael J. Reville, Robert Seman, Susan Seman, and Joseph Kiggins are suing as
individual shareholders of Reville Tire (collectively the “Reville Principals”).
Defendant companies are United Auto Supply of Syracuse, West, Inc. (“UAS”), a seller
and distributor of automotive parts and accessories, and its related entities UAS Hermitage
Operations, LLC and UAS Hermitage Realty, LLC. The two individual Defendants are a father
and son, both named James Ranalli. Plaintiffs identify the father as “James Ranalli, Sr.” and the
son as “James P. Ranalli.” In their pleadings Defendants state that the father’s name is “James
Ranalli,” and the son’s name is “James Ranalli, III.”
B.

Factual Background

The substantive factual allegations between the parties occurred from June 5, 2015
through July 28, 2015. Relevant to resolving the current cross-motions for summary judgment
are Reville Tire’s financial condition prompting the negotiations with UAS; the negotiations
between the parties; the terms of the APA; events occurring after the APA was signed prior to
termination of the agreement; and the Reville Principals interactions with a non-party, Kenneth
Lanci.
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1. Reville Tire’s Financial Condition
Reville Tire, an automotive parts supplier, formerly operated in six locations across Ohio
and Pennsylvania. ECF No. 114 ¶ 2. Reville Tire sustained losses in fiscal years 2012, 2013 and
2014. Id. ¶ 3. From 2012 through 2015, Reville Tire sought advice from multiple financial
advisors and turn-around specialists, and also attempted to seek a merger with, or acquisition by,
multiple companies. Id. ¶¶ 4, 5.
As of May 2015, Reville Tire owed substantial sums to creditors, including more than $2
million to one of its auto parts supply vendors. Id. ¶ 9. Members of the Reville family had
loaned approximately $2.5 million to Reville Tire. Id. ¶ 10.
PNC Bank, N.A., a Reville Tire lender, held a perfected security interest in Reville Tire
assets, including but not limited to its inventory and general intangibles. Id. ¶ 7. On May 21,
2015, PNC Bank commenced a lawsuit against Reville Tire in which it sought to confess
judgment against the company in the amount of $1,406,398.31, plus interests and costs, after
Reville Tire defaulted on a line of credit. Id. On May 28, 2015, judgment was entered against
Reville Tire in favor of PNC Bank in the amount of $1,406,398.31, plus interests and costs. Id. ¶
8. Satisfaction of Judgment was entered on the docket on June 26, 2015. PNC Bank Nat. Assoc.
v. Reville Tire Co., No. 5:15-cv-01024 (N.D. Ohio 2015) (ECF No. 10).
2. Reville Tire and UAS’s Asset Purchase Agreement
On June 5, 2015, representatives of UAS and Reville Tire met to discuss the possible
purchase by UAS of some of Reville Tire’s assets. ECF No. 114 ¶ 14. The UAS representatives
first toured a Reville Tire warehouse in Hermitage, Pennsylvania, and then had a meeting with
Richard Reville, Robert Reville, Michael Reville, Raymond Reville, and Kenneth Lanci, a
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relative of one of the Reville Principals through marriage. Id. ¶¶ 15, 11. Mr. Lanci arrived after
the meeting began and was introduced as an advisor. Id. ¶ 16. James Ranalli, the father, testified
that he left the meeting after Mr. Lanci arrived because he “did not like him” and would “not do
business with him.” ECF No. 115 at 42. He also testified that one of the Reville Principals
followed him out of the meeting and told him that “Mr. Lanci does not own any of the
company.” Id.
On June 12, 2015, UAS provided Reville Tire with a draft of an Asset Purchase
Agreement (“APA”) in which UAS proposed to purchase certain assets of Reville Tire. ECF No.
114 ¶ 17. Between June 12 and June 18, 2015, Reville Tire, the Reville Principals and their
attorney reviewed and discussed the draft APA. Id. ¶ 18. Reville Tire’s counsel and the
individual Plaintiffs drafted a “Memorandum” during this time period addressing certain matters
with respect to the APA. ECF No. 124 ¶ 1. Mr. Lanci also reviewed the draft APA and
discussed it with some of the Reville Principals. ECF No. 114 ¶ 19. Reville Tire’s attorney
provided comments to Reville Tire, the Reville Principals, and Mr. Lanci, which were then
conveyed to UAS’s counsel. Id. ¶ 20.
On June 23, 2015, Reville Tire and the Reville Principals (with the exception of Susan
Seman) executed the APA. Id. ¶ 21; ECF No. 86-1. The individual Plaintiffs signing the APA
did so as Reville Tire’s “SHAREHOLDERS.” ECF No. 114 ¶ 22. James Ranalli, the father,
executed the APA on behalf of UAS Hermitage Operations LLC. Id. ¶ 21.
UAS Hermitage Operations LLC subsequently assigned its rights under the Asset
Purchase Agreement to United Auto Supply of Syracuse, West, Inc. (“UAS”), pursuant to
paragraph 19 of the APA. Id. ¶ 23. In support of the assignment, UAS cites to its proposed
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“First Amendment to Asset Purchase Agreement,” ECF No. 86-2, in which UAS states that UAS
Hermitage Operations, LLC assigned its rights under the APA to United Auto Supply of
Syracuse, West, Inc. ECF No. 114 ¶ 23. UAS also cites to its July 28, 2015 letter to Reville Tire
terminating the APA, which also specified that United Auto Supply of Syracuse, West, Inc. is the
successor-in-interest to UAS Hermitage Operations, LLC. Id. 1
Pursuant to the terms of the APA, UAS agreed, among other things, to purchase certain
(but not all) of the assets of Reville Tire, including but not limited to Reville Tire’s inventory
(“Inventory”), in exchange for an assumption of certain (but not all) of Reville Tire’s liabilities
(“Assumed Liabilities”) and payment of certain other consideration. Id. ¶ 24; ECF No. 86-1 ¶ 1
(Assets), ¶ 2 (Liabilities), & ¶ 3 (Consideration). In the APA, the parties agreed that UAS’s
assumption of the Assumed Liabilities of Reville Tire would be deemed full consideration for
Reville Tire’s Inventory. ECF No. 114 ¶ 25; ECF No. 86-1 ¶ 3(a)(iii). The parties also agreed
that a “Closing” on the transactions contemplated in paragraph 12 of the APA would only occur
upon the satisfaction of certain contingencies set forth in paragraph 8, and after the delivery of
certain documents indicated in paragraphs 12(b) & 12(c). ECF No. 114 ¶ 26.
The terms of the APA expressly permitted UAS to conduct due diligence of Reville Tire's
operations, including the review of “all material information” that UAS might request regarding
the business of Reville Tire, and access to Reville Tire's suppliers and customers. ECF No. 114
¶ 27; ECF No. 86-1 ¶ 6(a). The APA provides that UAS “shall” conduct due diligence between
1

Reville Tire denies that the cited exhibits support the proposition that UAS Hermitage Operations, LLC assigned
its rights under the APA to United Auto Supply of Syracuse, West, Inc., but Reville Tire is otherwise unable to cite
to any record evidence to show that the assignment did not take place or is not valid. ECF No. 127 ¶ 23. Reville
Tire only cites to deposition testimony of UAS’s president, James Ranalli, in which he states that he lacks personal
knowledge that UAS Hermitage Operations, LLC transferred, sold, or assigned rights to any other UAS entity. Id.
See ECF No. 128-1 at 14. Reville Tire has not come forth with any competent evidence to dispute that UAS
Hermitage Operations, LLC assigned its rights under the APA to United Auto Supply of Syracuse, West, Inc.

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the execution date and the Closing, including a review of the business, operations, assets,
contracts, legal compliance and future prospects of Reville Tire's business. ECF No. 114 ¶ 28;
ECF No. 86-1 ¶ 8(k). The APA also provides that UAS’s prepossession of Reville Tire locations
begins on the date of the APA and continues until Closing or termination. ECF No. 124 ¶ 3;
ECF No. 86-1 ¶ 8(n).
The parties agreed that UAS would take a physical count of the Inventory in a manner
determined by UAS, and that the audit of the Inventory shall be conducted using “Pronto Pricing,
including discounts.” ECF No. 114 ¶ 29; ECF No. 86-1 ¶ 6(f). Reville Tire and the Reville
Principals who signed the APA agreed that UAS would have “access to and exclusive
possession” of all of Reville Tire’s locations for the purpose of conducting its due diligence and
for installing any computers or equipment that UAS deemed necessary in order to commence
operations immediately upon the closing of the transaction. ECF No. 114 ¶ 30; ECF No. 86-1 ¶
8(n).
The parties agreed that the Asset Purchase Agreement “may be terminated without
further liability of either party at any time prior to the Closing . . . [or] by [UAS] on or prior to
the end of the Due Diligence Period if [UAS] is not satisfied with the results of its due diligence
investigation in [UAS]’s sole discretion.” ECF No. 114 ¶ 31; ECF No. 86-1 ¶ 11. Paragraph 11
of the APA also indicates that “[u]pon the termination of this Agreement for any reason
whatsoever, the parties shall be discharged and released from any further rights or obligations
[t]hereunder.” Id. The parties also agreed that Reville Tire and the Reville Principals would
“indemnify UAS for any material breach of any representation, warranty or covenant of” Reville
Tire and the Reville Principals. ECF No. 114 ¶ 32; ECF No. 86-1 ¶ 10(b).
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Reville Tire and the Reville Principals made certain representations and warranties set
forth in Paragraph 4 of the APA, titled “Seller’s and Each Shareholder’s Representations and
Warranties.” ECF No. 114 ¶ 33; ECF No. 86-1 ¶ 4. Relevant to the instant motion are the
following representations and warranties:
•

that Reville Tire had the power to own and sell the assets and to vest good and
marketable title in them (ECF No. 86-1 ¶ 4(b));

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that the APA’s descriptions of Reville Tire’s Assets were “complete and accurate
descriptions of all assets owned by [Reville Tire] which are used or useful in the
operation of the Business,” (Id. ¶ 4(d)(i))

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that Reville Tire had “good and marketable title to all of the Assets,” and has “complete
and unrestricted power and right to sell, assign, convey and deliver the Assets to Buyer,”
(Id. ¶ 4(d)(ii))

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that they were not aware of any pending litigation against Reville Tire or any of the
Reville Principals, (Id. ¶ 4(f));

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that there were no material changes in Reville Tire's financial condition or assets since its
last financial statement, (Id. ¶ 4(k)(i));

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that the Reville Principals were the owners of the stock of Reville Tire, (Id. ¶ 4(l));

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that neither the APA nor any other document furnished by Reville Tire in connection
with the APA “contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements contained herein or therein not misleading
in any respect,” (Id. ¶ 4(u));

•

that no representation made in the APA was untrue, (Id. ¶ 4(v)); and

•

that “[t]here is no fact or circumstance known to [Reville Tire] or each Shareholder
which adversely affect the condition (financial or otherwise), properties, assets, liabilities,
business, operations or prospects of the Business which has not been set forth in this
Agreement or the schedules hereto,” (Id. ¶ 4(u)).

ECF No. 114 ¶ 33.
The APA includes a continuing obligation of disclosure, including a representation that
Reville Tire would not incur any debt, encumber any assets or take any action which would
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cause the representations in the APA to be untrue. ECF No. 114 ¶ 34; ECF No. 86-1 ¶¶ 6(c) &
8(h)-(i). Reville Tire and the Reville Principals who signed the APA also covenanted that from
the date of the APA through the Closing Date, Reville Tire would “not encumber or sell any of
the Assets.” ECF No. 114 ¶ 35; ECF No. 86-1 ¶ 6(g)(ii).
With regard to Reville Tire employees the APA provides that UAS “shall not be required
to employ any employees of [Reville Tire],” but “[UAS] shall be permitted to interview [Reville
Tire’s] employees for possible employment with [UAS] at any time between the date [t]hereof
and the Closing of the transactions contemplated” by the APA. ECF No. 114 ¶ 36; ECF No. 861 ¶ 14.
The APA also includes a provision that the APA and any attached Exhibits, Schedules, or
referenced agreements, is the only agreement between the parties, contains all terms and
conditions, and supersedes all prior agreements. ECF No. 114 ¶ 37; ECF No. ¶ 23(b). The
parties further agreed that the APA may not be modified except by a subsequent writing. ECF
No. 114 ¶ 37; ECF No. 86-1 ¶ 23(c).
The APA included an estimate that Reville Tire’s inventory was worth $2.7 million. ECF
No. 114 ¶ 38; ECF No. 86-1 ¶ 3(a)(iii). The parties memorialized in a Letter Agreement to the
APA, dated June 19, 2015, that the parties anticipated that the Assumed Liabilities would be $3.3
million as of the Closing Date. ECF No. 114 ¶ 39; ECF No. 115 at 525-26.
The APA expressly permitted UAS to contact Reville Tire’s creditors in order to
negotiate settlements of Assumed Liabilities on behalf of Reville Tire, and that if UAS “is unable
to negotiate acceptable settlements with any of the aforementioned creditors prior to the end of
the Due Diligence Period, [UAS] shall be permitted to terminate this Agreement and receive a
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refund of any amounts paid by [UAS] to [Reville Tire] hereunder as of the date of such
termination.” ECF No. 114 ¶ 63; ECF No. 86-1 ¶ 2(b). The APA also provides that it “shall be
construed and interpreted according to the internal laws of the Commonwealth of Pennsylvania,
excluding any choice of law rules that may direct the application of the laws of another
jurisdiction.” ECF No. 114 ¶ 64; ECF No. 86-1 ¶ 22.
3. The Due Diligence Period and Termination of the APA
UAS commenced its due diligence and pre-possession activities after the execution of the
APA. ECF No. 114 ¶ 48. UAS performed a physical count of Reville Tire’s Inventory for
purposes of confirming the Inventory’s existence and value. Id. ¶ 49. Representatives of Reville
Tire were present at all times for UAS’s inventory count, pre-possession and due diligence
efforts. Id. ¶ 50. In performing its count of the Inventory, UAS used the agreed-upon Pronto
Pricing, the pricing used by a buying group of which both Reville Tire and UAS were members,
for parts subject to such pricing. Id. ¶ 51; ECF No. 86-1 ¶ 6(f).
During the due diligence period UAS sent a team of approximately 20 or more
representatives to Reville Tire locations. ECF No. 124 ¶ 5. Eight people were to conduct the
physical inventory. Id. Additional UAS employees and representatives also worked on due
diligence and prepossession transition matters remotely. Id. UAS sent vehicles to Reville Tire
locations, which were used to make Reville Tire deliveries. Id. ¶ 6. UAS insured Reville Tire
vehicles. Id. ¶ 7. UAS purchased and installed equipment, including computers, telephones,
cameras, and other hardware, in Reville Tire locations. Id. ¶ 10. UAS shipped approximately
$500,000 worth of inventory to Reville Tire locations. Id. ¶ 11.

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Before and after the execution of the APA, Reville Tire represented that its Inventory was
worth approximately $2,700,000. ECF No. 114 ¶ 52. At the conclusion of UAS’s due diligence,
UAS’s count of Reville Tire's Inventory was approximately $1 million less than the estimate
included in the APA. Id. ¶ 53. Reville Tire does not admit the accuracy of the UAS count, but
does not dispute the record evidence cited by UAS to support its count, nor does it cite to record
evidence showing that UAS’s count was inaccurate. See ECF No. 127 ¶ 53. Reville Tire also
argues that UAS improperly conducted the inventory and thus its count was inaccurate. UAS
also discovered that Reville Tire’s Inventory included goods that Reville Tire had on
consignment and did not own. ECF No. 114 ¶ 54.
Before and after the APA, Reville Tire represented that the Assumed Liabilities were in
the amount of approximately $3.3 million. Id. ¶ 55. Reville Tire acknowledged in an email
dated July 24, 2015, that its inventory and accounts payable were not “in line with [the] original
agreement of $3.3 [million] in payable and $2.7 [million] in inventory,” and that “the gap is
approximately $300,000 over the agreed spread.” Id. ¶ 56; ECF No. 115 at 541-42.
On July 21, 2015, UAS proposed to amend the APA in writing to, in part, “establish the
Assumed Liabilities and correct the Inventory Estimate, such that the Asset Purchase Agreement
accurately reflects the facts as they exist on and as of the date of this Amendment.” ECF No.
115 at 659-666; ECF No. 114 ¶ 57. On July 23, 2015, Reville Tire and the Reville Principals
refused the modification. Id. In an email to the Ranalli’s, Raymond Reville explained that
Reville Tire concluded that UAS’s proposed amendments were “more ultimatums than options”
and that the parties had “negotiated a fair and equitable contract in good faith and are of the
opinion that we need to continue to proceed with the original contract.” ECF No. 115 at 632-33.
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The parties continued discussions but were unable to resolve their disagreements. ECF No. 114
¶ 57.
On July 28, 2015, UAS sent notice to Reville Tire and the Reville Principals that it was
terminating the APA pursuant to paragraph 11, and cited the unsatisfactory results of its due
diligence review. Id. ¶ 58.
After the termination of the APA, UAS recovered some, but not all, of the inventory it
had shipped to Reville Tire locations. ECF No. 124 ¶ 12. UAS also picked up some of the
equipment that it had installed in Reville Tire locations. Id. ¶ 13. Reville Tire had debt with
parts suppliers, which it settled by shipping certain inventory back to such suppliers and
acknowledge in a Settlement Agreement that some of the inventory being returned was inventory
to which UAS asserted a claim. Id. ¶ 14.
Reville Tire and the Reville Principals have not indemnified UAS for any breach of the
APA. ECF No. 114 ¶ 65. After UAS terminated the APA, the Reville Principals discussed and
analyzed among themselves, Mr. Lanci, and counsel, whether to resume the business, but
ultimately did not resume the business. Id. ¶ 59. Reville Tire is now effectively out of business.
Id. ¶ 61.
4. Factual Allegations Regarding Kenneth Lanci’s Dealings with Reville Tire
In May of 2015, Reville Tire asked Kenneth Lanci, a self-professed “turnaround expert,”
to assist with Reville Tire’s dire financial circumstances. Id. ¶ 11. On May 22, 2015, the Reville
Principals assigned all of their ownership shares in Reville tire to RTC II, LLC, an entity owned
solely by Mr. Lanci, which made Mr. Lanci the sole shareholder of Reville Tire. Id. ¶ 12. The
Reville Principals assigned their shares to Mr. Lanci because they wanted him to have the
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authority to negotiate with PNC Bank on behalf of Reville Tire. Id.
Reville Tire, the Reville Principals, and Mr. Lanci were aware of the PNC Bank lawsuit
before the APA was signed on June 23, 2015. Id. ¶ 46. On or about June 23, 2015, the Reville
Principals authorized Reville Tire to enter into a settlement with PNC Bank. Id. ¶ 40; see also ¶¶
7-8. On June 24, 2015, Reville Tire and PNC Bank entered into a confidential settlement
agreement pursuant to which Reville Tire agreed to pay PNC Bank $925,000 in exchange for a
full and final settlement of the judgment of $1,406,398.31 that had been entered against Reville
Tire. Id. ¶ 41. Mr. Lanci signed the settlement agreement as the “sole shareholder” of Reville
Tire. Id. Robert Reville also signed the settlement agreement. Id.
On June 23, 2015, Reville Tire executed a promissory note in favor of Mr. Lanci in
which it promised to pay Mr. Lanci $925,000, the amount Reville Tire had agreed to pay PNC
Bank pursuant to the settlement agreement. Id. ¶ 42. As part of this transaction, Reville Tire
granted to Mr. Lanci a security interest in its assets, including its inventory. Id. After UAS
terminated the APA, Mr. Lanci filed an Initial Financing Statement with the Ohio Secretary of
State, perfecting his security interest in Reville Tire assets on August 5, 2015. Id. ¶ 62.
Reville Tire contends that Mr. Lanci was the sole shareholder of Reville Tire from May
22, 2015, through June 24, 2015, and that at some time thereafter the shares reverted back to the
Reville Principals. Neither Reville Tire nor Mr. Lanci has produced any writing documenting
the transfer of the Reville Tire shares from Mr. Lanci’s company back to the Reville Principals.
Id. ¶43. Neither Mr. Lanci nor Robert Reville testified that such a writing exists or were able to
specify when the shares reverted back to the Reville Principals. Id. There is no dispute,
however, that Mr. Lanci was the sole shareholder of Reville Tire on June 23, 2015.
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At no time did Reville Tire, the Reville Principals or Mr. Lanci reveal to UAS that Mr.
Lanci or his company was ever a shareholder of Reville Tire. Id. ¶ 44. At no time did Reville
Tire, the Reville Principals, or Mr. Lanci reveal to UAS that Reville Tire and Mr. Lanci had
agreed to an arrangement whereby Mr. Lanci would lend money to Reville Tire to settle the PNC
Bank judgment in exchange for Mr. Lanci obtaining a security interest in some of the same
assets that Reville Tire and the Reville Principals who signed the APA had agreed to sell to
UAS. Id. ¶ 45.
James Ranalli, the president of UAS testified that had he known that the Reville
Principals were not the shareholders of Reville Tire as of May 22, 2015, that Mr. Lanci was the
sole shareholder of Reville Tire, and that Reville Tire would pledge its inventory and other assets
to Mr. Lanci in exchange for his settlement of Reville Tire’s debt to PNC Bank, then UAS would
not have entered into the APA. Id. ¶ 47; ECF No. 115 at 529, ¶ 11.
C.

Procedural Background

Reville Tire filed a Complaint on August 7, 2015, followed by an Amended Complaint
on August 25, 2015. ECF Nos. 1 & 3. Reville Tire filed a Second Amended Complaint on
August 23, 2016. ECF No. 86. UAS filed an Amended Answer to Second Amended Complaint
and Counterclaim on October 25, 2016. ECF No. 101. On November 16, 2015, Reville Tire
filed an Answer to Defendants’ Counterclaim. ECF No. 103.
Reville Tire asserts eight claims against UAS. Count I alleges that UAS made intentional
misrepresentations in order to fraudulently induce Reville Tire to enter into the APA. Count II is
a claim that UAS violated the Pennsylvania and Ohio Uniform Trade Secrets Act. Reville Tire
also asserts two claims of tortious interference with contractual/business relations: Count III
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concerns interference with Reville Tire employees. Count IV alleges interference with Reville
Tire customers.
Count V is a claim of unfair competition. In Count VI, Reville Tire asserts a claim of
conversion for UAS’s interference with Reville Tire’s property rights, and Count VII is a claim
of unjust enrichment related to UAS receiving benefits from Reville Tire without compensation.
Finally, in Count VIII, Reville Tire asserts a claim for declaratory relief stating that UAS is
legally obligated to pay employee wages for the period during which UAS controlled the Reville
Tire business.
In its Counterclaim, UAS asserts six causes of action. Count I is a claim of fraudulent
inducement against Reville Tire and all individual Plaintiffs based on alleged intentional
misrepresentations and omissions designed to induce UAS to enter into the APA. UAS asserts
claims of fraud (Count III) and negligent misrepresentation (Count IV) based primarily on the
same misrepresentations and omissions. Count II is a breach of contract claim against Reville
Tire and seven of the individual Plaintiffs (Susan Seman is not included in this Count as she did
not sign the APA). Finally, UAS asserts claims of conversion (Count V) and unjust enrichment
(Count VI) against Reville Tire only.
On December 21, 2016, Reville Tire and UAS each filed a motion for summary
judgment. ECF Nos. 109, 112. Reville Tire seeks summary judgment on all six of UAS’s
counterclaims. Reville Tire has not moved for affirmative summary judgment on any claims.
UAS seeks summary judgment on Reville Tire’s Count I and Count IV. In addition, Defendants
seek summary judgment as a matter of law on all counts arguing that the individual Plaintiffs are
not entitled to bring a cause of action that lies solely with the Reville Tire Company. UAS also
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seeks affirmative summary judgment as to liability only on its claims of fraudulent inducement
and breach of contract.
III.

STANDARD OF REVIEW
Summary judgment may only be granted where the moving party shows that there is no

genuine dispute about any material fact, and that judgment as a matter of law is warranted. Fed.
R. Civ. P. 56(a). Pursuant to Federal Rule of Civil Procedure 56, the court must enter summary
judgment against a party who fails to make a showing sufficient to establish an element essential
to his or her case, and on which he or she will bear the burden of proof at trial. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). In evaluating the evidence, the court must interpret the facts
in the light most favorable to the nonmoving party, drawing all reasonable inferences in his or
her favor. Watson v. Abington Twp., 478 F.3d 144, 147 (3d Cir. 2007).
The burden on a motion for summary judgment is initially on the moving party to
demonstrate that the evidence contained in the record does not create a genuine issue of material
fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 140 (3d Cir. 2004); Aman v. Cort
Furniture Rental Corp., 85 F.3d 1074, 1080 (3d Cir. 1996). A dispute is “genuine” if the
evidence is such that a reasonable trier of fact could render a finding in favor of the nonmoving
party. McGreevy v. Stroup, 413 F.3d 359, 363 (3d Cir. 2005). Where the nonmoving party will
bear the burden of proof at trial, the moving party may meet its burden by showing that the
admissible evidence contained in the record would be insufficient to carry the nonmoving party’s
burden of proof or that there is an absence of evidence to support the nonmoving party’s case.
Celotex Corp., 477 U.S. at 322, 325; Marten v. Godwin, 499 F.3d 290, 295 (3d Cir. 2007).
Once the movant meets its burden, the burden shifts to the nonmoving party to “set forth specific
16

facts showing that there is a genuine issue for trial” and to present sufficient evidence
demonstrating that there is indeed a genuine and material factual dispute for a jury to decide.
Fed. R. Civ. P. 56(e). See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986);
Celotex, 477 U.S. at 323–25. The nonmoving party must go beyond his or her pleadings and
designate specific facts by the use of affidavits, depositions, admissions or answers to
interrogatories showing that there is a genuine issue of material fact for trial. Id. at 324. The
nonmoving party cannot defeat a well-supported motion for summary judgment by simply
reasserting unsupported factual allegations contained in his or her pleadings. Williams v.
Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989).
One of the principal purposes of summary judgment is to isolate and dispose of factually
unsupported claims or defenses. Celotex, 477 U.S. at 323–24. The summary judgment inquiry
asks whether there is a need for trial—“whether, in other words, there are any genuine factual
issues that properly can be resolved only by a finder of fact because they may reasonably be
resolved in favor of either party.” Liberty Lobby, 477 U.S. at 250. In ruling on a motion for
summary judgment, the court's function is not to weigh the evidence, make credibility
determinations or to determine the truth of the matter, but only to determine whether the
evidence of record is such that a reasonable jury could return a verdict for the nonmoving party.
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150–51 (2000) (citing decisions);
Liberty Lobby, 477 U.S. at 248–49; Simpson v. Kay Jewelers, Div. of Sterling, Inc., 142 F.3d
639, 643 n.3 (3d Cir. 1998). The mere existence of a factual dispute, however, will not
necessarily defeat a motion for summary judgment. Only a dispute over a material fact -- that is,
a fact that would affect the outcome of the suit under the governing substantive law -- will
17

preclude the entry of summary judgment. Liberty Lobby, 477 U.S. at 248.
A defendant who moves for summary judgment is not required to refute every essential
element of the plaintiff's claim; rather, the defendant must only point out the absence or
insufficiency of plaintiff's evidence offered in support of one or more those elements. Celotex,
477 U.S. at 322–23. If the evidence the nonmovant produces is “merely colorable, or is not
significantly probative,” the moving party is entitled to judgment as a matter of law. Liberty
Lobby, 477 U.S. at 249. The nonmoving party must “do more than simply show that there is
some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986). To survive summary judgment, the nonmoving party must
“make a showing sufficient to establish the existence of [every challenged] element essential to
that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477
U.S. at 322. Furthermore, “[w]hen opposing summary judgment, the non-movant may not rest
upon mere allegations, but rather must ‘identify those facts of record which would contradict the
facts identified by the movant.’” Corliss v. Varner, 247 F. App’x 353, 354 (3d Cir. 2007)
(quoting Port Auth. of N.Y. and N.J. v. Affiliated FM Ins. Co., 311 F.3d 226, 233 (3d Cir. 2002)).
Inferences based upon speculation or conjecture do not create a material factual dispute
sufficient to defeat a motion for summary judgment. Robertson v. Allied Signal, Inc., 914 F.2d
360, 382 n.12 (3d Cir. 1990).
IV.

DISCUSSION
The relevant facts can be summarized succinctly. Reville Tire was in dire financial

condition for several years prior to negotiating an agreement whereby UAS would purchase
Reville Tire’s assets and assume its liabilities. Reville Tire’s financial condition was in such
18

poor shape that the only way that UAS would consider investing its money, expertise, personnel,
and equipment was on terms that were favorable to UAS. Reville Tire engaged in an armslength negotiation with benefit of counsel and with full knowledge of its financial condition and
bargaining position. The end result of the negotiations was an agreement that essentially
provided for UAS to take over operating Reville Tire.
During the due diligence period UAS discovered a major discrepancy in the value of
Reville Tire’s Inventory and Liabilities from what was stated in the APA. As a result of this
significant discrepancy UAS proposed to amend the APA. Reville Tire rejected the proposed
amendments, and UAS exercised its right to terminate the APA.
Reville Tire’s position in this lawsuit is that UAS entered negotiations planning to
fraudulently induce Reville Tire to execute an agreement while intending to terminate the
agreement once UAS had taken operational control of the business.
UAS’s position is that it was deceived by Reville Tire. After terminating the agreement
UAS discovered several facts Reville Tire did not disclose prior to execution of the APA, nor at
any time during the due diligence period. Among these facts are:
•

none of the individual Reville Principals who signed the APA were shareholders
or owners of Reville Tire at the time they executed the contract;

•

the actual sole shareholder at the time of the execution of the APA was RTC II,
LLC, whose President was Kenneth Lanci;

•

That Lanci lent Reville Tire money to settle the judgment entered against it by
PNC Bank, and in exchange Revile Tire granted a security interest to Lanci in
Reville Tire’s assets, some of which UAS had agreed to purchase and Reville Tire
had agreed to sell in the APA.

UAS submits that it had it known these facts it would not have entered into the APA.
The Court will consider UAS’s argument that the individual Plaintiffs are not entitled to
19

bring a cause of action that lies solely with Reville Tire. Next, the Court will discuss UAS’s
argument that summary judgement as a matter of law is appropriate on Reville Tire’s claims of
fraudulent inducement and tortious interference with contractual relations regarding Reville
Tire’s customers. Finally, the Court will address UAS’s Counterclaims. UAS seeks affirmative
judgment as a matter of law as to liability on its counterclaims of fraudulent inducement and
breach of contract, while Reville Tire seeks summary judgment in its favor on all of UAS’s
counterclaims.
A.

Individual Plaintiffs

UAS moves for summary judgment as to the individual Reville Tire Plaintiffs on each
Count arguing that such individuals are not permitted to bring a direct action against a third party
for injuries to the corporation. Reville Tire impliedly concedes that UAS is correct and the
individual Plaintiffs do not have standing to bring the claims asserted by failing to acknowledge
UAS’s argument.
“To have standing to sue individually, the shareholder must allege a direct, personal
injury – that is independent of any injury to the corporation – and the shareholder must be
entitled to receive the benefit of any recovery.” Hill v. Ofalt, 85 A.3d 540, 548 (Pa. Super. Ct.
2014); Morison Informatics, Inc. v. Members 1st Fed. Credit Union, 97 A.3d 1233, 1237 (Pa.
Super. Ct. 2014). See City of Riviera Beach Gen. Employees Ret. Sys. v. Mylan N.V., No. 2:15CV-821, 2016 WL 4367549, at *13 (W.D. Pa. May 10, 2016), report and recommendation
adopted, No. 2:15-CV-821, 2016 WL 4275822 (W.D. Pa. Aug. 12, 2016); In re Bruno, 553 B.R.
280, 286 (Bankr. W.D. Pa. 2016) (citing Hill, 85 A.3d at 549) (“if damages to a shareholder
result indirectly, as the result of an injury to the corporation, and not directly, the shareholder
20

cannot sue as an individual”). The claims in the Second Amended Complaint allege injuries
against the corporation. Accordingly, the Court will grant UAS’s motion for summary judgment
as a matter of law as to all claims asserted by the individual Plaintiffs for lack of standing.
B.

Reville Tire’s Fraudulent Inducement Claim

In Count I of the Second Amended Complaint, Reville Tire asserts a claim of fraudulent
inducement against UAS. To recover on a claim of fraudulent inducement Pennsylvania
“require[s] proof of the following elements by clear and convincing evidence: (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.” EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d
253, 275 (3d Cir. 2010); Eigen v. Textron Lycoming Reciprocating Engine Div., 874 A.2d 1179,
1185 (Pa. Super. Ct. 2005). “The tort of intentional non-disclosure has the same elements as
intentional misrepresentation “except in the case of intentional non-disclosure, the party
intentionally conceals a material fact rather than making an affirmative misrepresentation.”
Bortz v. Noon, 729 A.2d 555, 560 (Pa. 1999).
Reville Tire alleges that both James Ranalli and his son, James Ranalli, III, “acting as
agents and on behalf of UAS, made [certain] identified intentional misrepresentations to
Reville’s Shareholders in an effort to induce Reville to enter in the APA and to afford
Defendants access to Reville’s assets, facilities, employees and customers.” ECF No. 86 ¶ 67.
Throughout the Second Amended Complaint, Reville Tire generally alleges that UAS

21

fraudulently induced Reville to execute the APA and never intended to honor it. 2 Reville Tire’s
general fraudulent inducement allegation rests on the following contentions:
•

“UAS promised to purchase substantially all of Reville’s tangible and intangible
assets and to assume a very narrow scope of liabilities.” Id. ¶ 2 (emphasis added);
and

•

“Reville and its Shareholders signed the APA in complete reliance on Ranalli’s
[the father] representation and promise, which he made as agent and on behalf of
UAS, that UAS would purchase the assets of the Company, Ranalli, Jr. [the son]
made the same representation on behalf of UAS.” Id. ¶ 41 (emphasis added).

These contentions do not support a fraudulent inducement claim. Reville Tire’s allegation that
UAS promised to purchase assets and assume specified liabilities, but in fact never intended to
do so, is a straightforward allegation that UAS breached the contract.
To support a fraudulent inducement claim Reville Tire must point to some false, material
misrepresentation that Reville Tire justifiably relied on that is not simply a claim that UAS
promised to honor the terms of the contract but did not. Viewing the Second Amended
Complaint in a light most favorable to Reville Tire, the Court has identified three potential
allegations of intentional misrepresentations supporting the general claim:
•

“During the negotiations, Ranalli [the father] expressed his strong desire to have
UAS take possession of Reville’s assets and control of Reville’s business, to
ensure a smooth operational transition at closing.” Id. ¶ 29.

•

“Ranalli [the father] and UAS declined Reville’s offer to take responsibility for
negotiating with the Company’s unsecured creditors.” Id. ¶ 30.

2

Reville Tire also alleges that the due diligence process, UAS’s proposed amendments to the APA, and the
termination of the APA were conducted under fraudulent pretenses. None of the allegations regarding the due
diligence process, the proposed amendments, or the termination are germane to Reville Tire’s claim that UAS
fraudulently induced Reville Tire to execute the APA because all of those events occurred after the execution of the
APA.

22

•

“Reville was assured by Ranalli [the father] and Ranalli, Jr. [the son] that
employees and certain employed members of the family would be retained as
UAS employees, and that the business would continue to operate going forward.”
Id. ¶ 33.
UAS argues that Reville Tire’s fraudulent inducement claim fails as a matter of law

because the claimed misrepresentations are either merged in or superseded by explicit terms in
the APA. “Where the parties to an agreement adopt a writing as the final and complete
expression of their agreement, alleged prior or contemporaneous oral representations or
agreements concerning subjects that are specifically covered by the written contract are merged
in or superseded by that contract.” Blumenstock v. Gibson, 811 A.2d 1029, 1035 (Pa. Super. Ct.
2002) (citation omitted). “[P]arol evidence of representations is inadmissible as to a matter
covered by a written agreement with an integration clause unless the parties agreed that those
representations would be added to the written agreement but they were omitted because of fraud,
accident or mistake. Id. (citing 1726 Cherry Street Partnership v. Bell Atlantic Properties, Inc.,
653 A.2d 663, 666 (Pa. Super. Ct. 1995), interpreting Bardwell v. Willis Co., 100 A.2d 102, 104
(Pa. 1953). See also Bowman v. Meadow Ridge, Inc., 615 A.2d 755, 758–59 (Pa. Super. Ct.
1992) (where alleged oral representations or agreements concern matters dealt with within an
integrated written contract “parol evidence to vary, modify or supersede the written contract is
inadmissible in evidence”).
The APA contains the following integration clause:
23.
General Provisions. This Agreement together with all Exhibits
and Schedules hereto, and including all other agreement(s) made a part hereof by
reference[]:
(b)
is the only agreement between the parties hereto and contains all of
the terms and conditions agreed upon with respect to the subject matter
23

hereof, and supersedes all prior agreements, understandings or intents
among the parties hereto; and
(c)
may not be modified except by a writing executed by both parties
hereto.
ECF No. 86-1 ¶ 23.
The APA is an integrated contract covering the entire agreement of the parties and
specifically covers the matters Reville Tire alleges were UAS’s fraudulent misrepresentations.
The agreement concerned the matter of Ranalli’s desire to take possession and control of the
business as the essence of the APA is that UAS will take possession and control of Reville Tire’s
business. The APA covers the matter of employment of Reville Tire employees by UAS by
explicitly stating that UAS “shall not be required to employ any employees” of Reville Tire. Id.
¶ 14. Despite Reville Tire’s allegation that UAS declined its offer to negotiate with Reville
Tire’s creditors, the APA directly states that during the due diligence period UAS “shall be
permitted to contact Seller’s creditors to whom the Assumed Liabilities are owed for purposes of
negotiating settlements.” Id. ¶ 2(b).
Moreover, given that the matters alleged by Reville Tire were matters covered in in the
APA, it would not have been justifiable for Reville Tire to rely on the alleged prior oral
misrepresentations in executing the APA. This was an arms-length negotiation between
sophisticated parties represented by counsel. Therefore, UAS is correct that Reville Tire’s fraud
claim fails and summary judgment as a matter of law will be granted as to Count I of the Second
Amended Complaint.
Reville Tire ignores UAS’s argument that the APA is an integrated contract and therefore
evidence of alleged prior oral representations inadmissible. Reville Tire instead emphasizes its
24

general fraud allegation that UAS never intended to purchase Reville Tire and never intended to
honor the terms of the APA. Reville Tire’s argument consists of recounting its allegations of
alleged misconduct committed by UAS after execution of the APA as evidence that UAS never
intended to comply with the terms of the APA. Reville Tire never points to any admissible
evidence of a fraudulent misrepresentation by UAS before signing the APA that the Reville
Principals Tire justifiably relied upon in executing the APA. What Reville Tire alleges may
support other causes of action, and Reville Tire has asserted six other claims not being
challenged on summary judgment, but it does not support a fraudulent inducement claim.
C.

Reville Tire’s Claim of Tortious Interference with its Customers

In Count IV of the Second Amended Complaint, Reville Tire claims that UAS
“intentionally, improperly and without privilege or justification interfered with Reville’s
contractual and/or business relationships with its customers.” ECF No. 86 ¶ 93. Reville Tire
alleges that, after the execution of the APA, UAS improperly informed Reville Tire’s customers
that UAS had acquired or taken control of Reville Tire’s business and operations and conducted
business with Reville Tire’s customers prior to the termination of the APA. Id. Reville Tire
alleges that UAS’s conduct was “designed and intended to cripple, harm and destroy an integral
part of Reville’s business and ensure that Reville would be unable to profitably operate – or
operate at all – following UAS’s termination of the APA.” Id. ¶ 94.
“The elements of a cause of action for intentional interference with a contractual relation,
whether existing or prospective, are as follows: (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
25

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.” RX Home
Care, Inc. v. Dubin, No. 1926 EDA 2012, 2013 WL 11256832, at *3–4 (Pa. Super. Ct. July 29,
2013) (quoting Strickland v. Univ. of Scranton, 700 A.2d 979, 985 (Pa. Super. Ct. 1997)
(citations omitted)).
“Pennsylvania has expressly adopted the Restatement (Second) of Torts, which states that
a necessary element of this tort is improper conduct by the alleged tortfeasor . . . .” Crivelli v.
Gen. Motors Corp., 215 F.3d 386, 394 (3d Cir. 2000) (citing Adler, Barish, Daniels, Levin &
Creskoff v. Epstein, 393 A.2d 1175, 1183 (Pa. 1978); and Restatement (Second) of Torts §§ 76667). When determining whether the interference is improper the Restatement offers the
following factors for the Court to consider:
(a) the nature of the actor's conduct, (b) the actor's motive, (c) the interests of the
other with which the actor's conduct interferes, (d) the interests sought to be
advanced by the actor, (e) the social interests in protecting the freedom of action
of the actor and the contractual interests of the other, (f) the proximity or
remoteness of the actor's conduct to the interference and (g) the relations between
the parties.
Restatement (Second) of Torts § 767. “The general issue is ‘whether, upon a consideration of
the relative significance of the factors involved, the conduct should be permitted without
liability, despite its effect of harm to another.’” Crivelli, 215 F.3d at 395 (quoting Adler, 393
A.2d at 1184 n.17).
UAS argues that Reville Tire is unable to show the absence of privilege or justification
on the part of UAS or actual legal damage. UAS argues that the APA gave UAS the right to
exclusive possession of the business and the right to meet with its customers, and thus UAS’s
conduct was properly performed as part of its legally protected interest.
26

The APA expressly permitted UAS to conduct due diligence of Reville Tire's operations,
which included review of “all material information” that UAS might request regarding access to
Reville Tire's customers. ECF No. 86-1 ¶ 6(a). The APA also expressly provided that during the
due diligence period
•

Reville Tire shall permit UAS “full access (during reasonable hours not to
interfere with the operations of the Business) to the personnel, facilities,
books and records, insurance policies and related records, agreements,
customers, permits and licenses of” Reville Tire. Id. ¶ 8(k) (emphasis
added).

•

Reville Tire “shall cooperate with [UAS] in arranging meetings between
[UAS’s] representatives and [Reville Tire’s] customers . . . .” Id.

•

that UAS shall have “access to and exclusive possession” of all of Reville
Tire’s locations for the purpose of conducting its due diligence and for
installing any computers or equipment that UAS deemed necessary in
order to commence operations immediately upon the closing of the
transaction. Id. ¶ 8(n).

Moreover, UAS points out that Reville Tire consented to UAS’s conduct and its’ personnel were
present for UAS’s actions in relation to Reville Tire customers.
The conduct that UAS engaged in with Reville Tire’s customers was permitted under the
terms of the APA. The APA was a contract whereby UAS would take over Reville Tire. Reville
Tire executed the agreement knowing that prior to closing on the APA, UAS was going to begin
the process of taking over the business and as a practical matter, it had to engage with customers.
In fact, Reville Tire encouraged, participated, or acquiesced in this conduct. The fact that UAS
would, in the course of taking over a business, inform existing Reville Tire customers that it was
under contract to take over the business is conduct that “should be permitted [under the APA]
without liability, despite its effect of [potentially] harm[ing]” Reville Tire in the event that the
APA was terminated. Crivelli, 215 F.3d at 395.
27

Viewing UAS’s conduct under the Restatement factors supports this conclusion.
Restatement (Second) of Torts § 767. UAS’s motive was to facilitate a transition from Reville
Tire’s business operations to UAS. Reville Tire had an interest in assisting UAS in the transition
as it too had an interest in ensuring a smooth transition. UAS actions were not in opposition to
the terms of the APA. Finally, the relations between UAS and Reville Tire were dictated by the
APA and, as long as the parties were performing under the APA, their interests were aligned.
It was only after UAS terminated the APA that Reville Tire sought to view UAS’s
legitimate conduct with its customers during the due diligence period as a tortious interference.
Reville Tire admits that UAS properly gained access to “trade secrets and confidential business
information, including customer lists,” during the course of the due diligence period. ECF No.
126 at 9. Reville Tire does not argue that gaining access to this information was not justified or
privileged; rather Reville Tire explicitly argues that UAS improperly used such information
“after the termination of the APA” to continue business relations with Reville Tire’s customers.
Id. (emphasis added). See id. at 10 (APA does not allow UAS to use confidential information
gained in course of parties’ relationship to service customers “after termination of the APA”).
Reville Tire is correct that there is no provision covering what happens to customers if the parties
do not close on the APA. The APA contemplated one of two outcomes: (1) the parties would
close on the APA and UAS would complete its takeover of the business; or (2) one of the parties
would exercise its rights under the APA to terminate the agreement prior to closing.
Reville Tire’s opposition to UAS’s motion rests on its allegation that UAS’s true
“improper conduct” is that it used the APA as a ruse to take over Reville Tire’s business without
having to pay Reville Tire as agreed in the APA. Again, this allegation may support other causes
28

of action but it does not support a claim of tortious interference with Reville Tire’s relationships
with its customers. Reville Tire is unable to point to a non-privileged act committed by UAS
that would amount to a tortious interference with Reville Tire’s contractual relationship with its
customers and therefore the court will grant UAS’s motion to dismiss Count IV of the Second
Amended Complaint.
D.

UAS’s Counterclaims

UAS moves for affirmative summary judgment on its fraudulent inducement and breach
of contract counterclaims. Reville Tire moves for summary judgment on all counterclaims.
1. UAS’s Fraudulent Inducement, Fraud, and Negligent Misrepresentation
Counterclaims
UAS’s claims of fraud, fraudulent inducement, and negligent misrepresentation are
discussed together as all are based on the allegations that Reville Tire shareholders falsely
represented to UAS (i) that each of them were shareholders of Reville Tire at the time the APA
was executed; (ii) that Mr. Lanci was in fact the sole shareholder of Reville Tire; and (iii) that
Reville Tire intended to pledge its assets to Mr. Lanci in exchange for Lanci settling Reville
Tire’s debt to PNC Bank. In addition, the elements required to establish all three causes of
action are similar.
As stated previously, a fraud or fraudulent inducement claim in Pennsylvania requires
clear and convincing proof of a representation; which is material to the transaction at hand; made
falsely, with knowledge of its falsity or recklessness as to whether it is true or false; the intent of
misleading another into relying on it; justifiable reliance on the misrepresentation; and the
resulting injury was proximately caused by the reliance. Eigen, 874 A.2d at 1185. “A
misrepresentation is material if the party would not have entered into the agreement but for the
29

misrepresentation.” Id. at 1186.
Similarly, to establish a claim of negligent misrepresentation requires proof of: “(1) a
misrepresentation of a material fact; (2) made under circumstances in which the misrepresenter
ought to have known its falsity; (3) with an intent to induce another to act on it; and (4) which
results in injury to a party acting in justifiable reliance on the misrepresentation. Bortz v. Noon,
729 A.2d at 561 (citing Gibbs v. Ernst, 647 A.2d 882, 890 (Pa. 1994), citing Restatement
(Second) Torts § 552).
The APA provided that each shareholder represent and warrant to UAS, in part, that the
“Shareholders are the owners of all of the issued and outstanding shares of the common capital
stock of [Reville Tire]. No other parties hold any options, warrants or other rights with respect
to the stock of [Reville Tire].” ECF No. 86-1 ¶ 4(l). The Reville Principals who signed the APA
did so as “shareholders,” and were so identified as shareholders throughout the APA. There is
no dispute that the Reville Principals assigned their shares in Reville Tire to RTC II, LLC, an
entity solely owned by Mr. Lanci on May 22, 2015, thereby making Mr. Lanci the sole
shareholder of Reville Tire. Mr. Lanci remained as the sole shareholder until at least June 24,
2015, the day after the APA was executed on June 23, 2015.
The APA also provided that each Shareholder represent and warrant to UAS, in part, that
there “is no fact or circumstance known to . . . each Shareholder which adversely affects . . . the
condition (financial or otherwise), properties, assets, liabilities, business, operations or prospects
of the Business which has not been set forth in this Agreement or the schedules hereto.” Id. ¶
4(u). Reville Tire does not dispute that Mr. Lanci was granted a security interest in certain
Reville Tire assets, including its inventory, on or about June 23, 2015, in connection with the
30

settlement reached with PNC Bank signed by Mr. Lanci as Reville Tire’s sole shareholder. Nor
does Reville Tire assert that it informed UAS of this arrangement.
Finally, UAS asserts that had it known that the Reville Principals were not the
shareholders of Reville Tire, that Mr. Lanci was the sole shareholder of Reville Tire, and that
Reville Tire would pledge its inventory and other assets to Mr. Lanci in exchange for his
settlement of Reville Tire’s debt to PNC Bank, then UAS would not have entered into the APA.
Accordingly, UAS argues that summary judgment as a matter of law should be granted as to
liability on its fraudulent inducement claim.
Because Reville Tire does not allege that it informed UAS that the Reville Principals
were not shareholders prior to or on the date of execution of the APA, that they had assigned
their shares to Mr. Lanci, or that they planned to and did grant Mr. Lanci a security interest in
assets, UAS’s factual allegations of misrepresentation are undisputed. Reville Tire offers a posthoc argument that fraudulent inducement could not have occurred since it later transferred
ownership of the shares from Mr. Lanci back to the principals (although there is no evidence to
support that this in fact happened) and because the side deal with Mr. Lanci requiring
encumbering certain assets to resolve an adverse judgment from PNC Bank would have been
resolved by the time the parties were ready to close on the APA. Such an argument is a tacit
admission that Reville Tire purposely withheld this information and intended to keep it secret in
hopes that Reville Tire would be able to reverse its actions without UAS ever discovering the
misrepresentations. Reville Tire admits as much by arguing that UAS suffered no harm and
therefore there was no foul. ECF No. 109 at 10 (who was a shareholder “made no difference” as
“the Reville family owned all shares . . . at the end”); Id. at 20 (“the Reville’s could never
31

commit fraud, as the APA explicitly requires only that Reville’s assets . . . be unencumbered at
closing”). See also ECF No. 126 at 14, 18.
Reville Tire mischaracterizes UAS allegation that the Reville Principals failed to disclose
that they were not shareholders, to a claim that because the Reville Principals were not
shareholders the APA was not valid. ECF No. 109 at 12-13; ECF No. 126 at 17-18. This
argument is irrelevant to UAS’s counterclaims. Reville Tire also provides no support for arguing
that UAS should have conducted due diligence on Mr. Lanci. UAS was not informed that Mr.
Lanci was the sole shareholder or that he had any involvement with the transaction. 3
The Court also dismisses Reville Tire’s argument that Mr. Lanci was only a shareholder
for a short time and the misrepresentation was remedied soon after the APA was executed.
UAS’s allegation is that had it known before the APA was executed that the Reville Principals
were not in fact shareholders as required by the APA, and that another person was the sole
shareholder, then UAS would not have entered into the APA. Failing to provide accurate
information about ownership deprived UAS with full and complete knowledge affecting the
APA’s central purpose of transferring assets. Thus, Reville Tire’s argument it was only
obligated to ensure that assets were not encumbered at closing is irrelevant. ECF No. 109 at 13;
ECF No. 126 at 18-19. Similarly, UAS claims that Reville Tire failed to inform UAS of the
Lanci encumbrance before the APA was executed, and this information was a material fact that
would have caused UAS not to enter into the APA.
Reville Tire implicitly addresses UAS’s argument that it was fraudulently induced to

3

Reville Tire’s argument also concerns matters extraneous to UAS’s fraud claim, such as discussion of
representations regarding the value of Reville Tire’s inventory and how the inventory was conducted, but these
allegations are not relevant to UAS’s fraud, fraudulent inducement, and negligent misrepresentation counterclaims.
See ECF No. 109 at 16-19.

32

enter into the APA by Reville Tire’s failure to inform UAS of the encumbrance by recharacterizing UAS’s allegation as alleging that Reville Tire failed to inform UAS that it was
Mr. Lanci who was involved with Reville Tire. ECF No. 109 at 14. Reville Tire’s recharacterization of UAS’s claim, so as to focus on knowledge of who the encumbrance was in
favor of, is irrelevant to UAS’s actual claim that Reville Tire failed to inform UAS of the
encumbrance on its’ assets at all. Finally, Reville Tire has not produced sufficient evidence of
record to show that there is no genuine dispute that UAS has not suffered damages, whereas
UAS has produced record evidence establishing that it did suffer damages.
UAS and Reville Tire engaged in an arm’s length negotiation regarding the terms of the
APA. The APA required that the individual shareholders represent and warrant that they were in
fact the owners of Reville Tire’s stock, and that no other party had any rights in the stock, but in
truth they were not shareholders and someone else had rights in Reville Tire’s stock. The
Reville Principals did not disclose this information to UAS prior to execution of the APA. These
misrepresentations are material as who actually owns the stock in a company in a negotiation for
sale of the assets of the company is a material consideration for a potential buyer. Similarly, the
parties negotiated a term in the APA that required that the shareholders represent and warrant
that there is no fact or circumstance that adversely affects the Reville Tire’s business.
Regardless of Reville Tire’s motives in not disclosing the intention to encumber assets, this is a
material fact a potential buyer would want to be informed of prior to entering into an agreement
to purchase the assets.
UAS has established that Reville Tire knowingly made material misrepresentations by
omission with the intent that UAS would rely on the misrepresentations. UAS has also
33

introduced undisputed evidence that had Reville Tire informed UAS before execution of the
APA that each of them was not a shareholder, that Mr. Lanci was the sole shareholder, and that
they intended to enter into an agreement with Mr. Lanci whereby an interest in the company’s
assets would be transferred to him, UAS would not have entered into the APA. ECF No. 115 at
529, ¶ 11. UAS has also produced evidence showing that it did suffer monetary injury as a result
of its reliance on Reville Tire’s misrepresentations. Therefore, summary judgment in favor of
UAS and against Reville Tire will be granted as to UAS’s fraudulent inducement counterclaim.
Reville Tire’s motion for summary judgment will be denied as to UAS’s fraudulent inducement,
fraud, and negligent misrepresentation 4 counterclaims.
2. UAS’s Breach of Contract Counterclaim
“It is well-established that three elements are necessary to plead a cause of action for
breach of contract: (1) the existence of a contract, including its essential terms, (2) a breach of
the contract; and (3) resultant damages.” Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v.
Law Firm of Malone Middleman, P.C., 137 A.3d 1247, 1258 (Pa. 2016) (citing J.F. Walker Co.,
Inc. v. Excalibur Oil Grp., Inc., 792 A.2d 1269, 1272 (Pa. Super. Ct. 2002).
UAS argues that there are no genuine issues of material fact that Reville Tire and the
Reville Principals who signed the APA materially breached the APA in the following ways:
a. by misrepresenting that the Reville Principals were the owners of the
stock of Reville Tire when in fact, they were not;
b. by representing that there were no material changes to Reville Tire’s
financial condition or assets since its last financial statement when in fact,
it pledged its assets to Lanci;

4

UAS’s negligent misrepresentation counterclaim is not barred by the gist of the action doctrine as asserted by
Reville Tire because UAS’s counterclaim concerns Reville Tire’s conduct prior to the execution of the APA.

34

c. by misrepresenting that they were not aware of any pending litigation
despite the existence of the PNC lawsuit;
d. by misrepresenting that they had complete power to convey the assets to
UAS despite the fact that they had previously granted a security interest in
the same assets to Lanci;
e. by misrepresenting that they had the power to own and sell the assets
and to vest marketable title in them despite that the Reville Principals did
not own shares in Reville Tire and that the assets were subject to a security
interest granted to Lanci;
f. by failing to comply with their continuing obligation of disclosure,
including the representation that Reville Tire would not incur debt,
encumber assets or take any other action that would cause their
representations to be untrue; and
g. by failing to indemnify UAS as a result of their material breaches of the
APA.
ECF No. 113 at 21-22. 5 UAS contends that the above described conduct breached APA
provisions in which Reville Tire and each shareholder represented and warranted as follows:
•

that the Reville Principals were the owners of the stock of Reville Tire, ECF No.
86-1 ¶ 4(l);

•

that there were no material changes in Reville Tire’s financial condition or assets
since its last financial statement, id. ¶ (k)(i);

•

that they were not aware of any pending litigation against Reville Tire or any of
the Reville Principals, id. ¶ (f); and

•

that Reville Tire had “good and marketable title to all of the Assets,” and had the
power to own and sell the assets and to vest good and marketable title in them, id.
¶ 4(b) (Reville Tire warrants and represents that it had “complete power to own
and to sell, transfer and deliver all Assets to be transferred hereunder”); and id. ¶
4(d)(ii) (Reville Tire warrants and represents that it had “good and marketable
title to all of the Assets,” and “complete and unrestricted power and right to sell,
assign, convey and deliver the Assets to Buyer”).

5

UAS does not seek summary judgment on its counterclaim allegations that Defendants breached the APA by
misrepresenting (i) they were not in breach of any other contract, (ii) that the APA did not contain untrue statements,
and (iii) that no representation in the APA was untrue. ECF No. 101 ¶¶ 73(b), (g) & (h).

35

UAS also contends that Reville Tire’s conduct results in two additional breaches. First,
the conduct is a breach of the APA’s requirement that Reville Tire and the Shareholders have a
continuing obligation of disclosure “to promptly notify [UAS] in writing” of any matter
discovered after execution of the APA, which if it had been known on the date of execution
“would have been required to be” disclosed. ECF No. 86-1 ¶ 6(c). The conduct is also alleged
to be a breach of Reville Tire and the Reville Principals’ duty to indemnify UAS for “any
material breach of any representation, warranty or covenant of [Reville Tire] and/or Shareholders
contained herein.” Id. ¶ 10(b)(ii). Both of these APA provisions require a finding of materiality
to qualify as a breach. Paragraph 6(c)’s materiality language is implicit in imposing a continuing
obligation to disclose matters that “would have been required to be” disclosed on the date of
execution. In other words, an obligation to disclose “material matters.” The indemnification
provision is explicit in that it is requires a “material breach” for the indemnification obligation to
be imposed.
UAS seeks affirmative summary judgment in its favor on its breach of contract
counterclaim as to liability only. Reville Tire seeks summary judgment as a matter of law on
UAS’s breach of contract claim arguing that the APA is an illusory contract and thus cannot be
breached. ECF No. 109 at 22-29. The Court finds that the APA is not illusory and that UAS has
established that Reville Tire breached the APA.
a.

The APA is not an Illusory Contract

The Pennsylvania Superior Court has addressed the issue of an illusory term in a contract
as follows:
A contract is evidenced by a mutuality of obligation. A mutuality of obligation
exists when both parties to the contract are required to perform their respective
36

promises. If a mutuality of promises is absent, the contract is unenforceable. A
promise to perform or to forebear from performing must be supported by
consideration. If the promise is entirely optional with the promisor, it is said to be
illusory and, therefore, lacking consideration and unenforceable. The promisor
has committed him/herself to nothing.
Geisinger Clinic v. Di Cuccio, M.D., 606 A.2d 509, 512 (Pa. Super. Ct. 1992) (internal citations
omitted). “‘The fact that one party is given an option not accorded to the other does not per se,
render such contract void for lack of mutuality of obligation.’” In re Estate of Rosser, 821 A.2d
615, 623 (Pa. Super. Ct. 2003)(quoting Best v. Realty Management Corp., 101 A.2d 438, 440
(Pa. Super. Ct. 1953).
Reville Tire bases its argument on two admittedly one-sided provisions in the APA
contending that they provide UAS with “entirely optional” promises. Reville Tire points to
paragraph 11(b) of the APA, regarding termination of the agreement, which provides in part as
follows:
This Agreement may be terminated without further liability of any party at any
time prior to the Closing: . . . (b) by [UAS] on or prior to the end of the Due
Diligence Period if [UAS] is not satisfied with the results of its due diligence
investigation in [UAS’s] sole discretion . . . .
ECF No. 86-1 ¶ 11(b). Reville Tire also contends that paragraph 6(f), regarding Inventory,
contains an “entirely optional” promise, as follows:
[Reville tire] shall permit [UAS] . . . to take a physical count of the Inventory for
purposes of confirming the existence of and valuing such Inventory. The manner
of conducting such physical count of the Inventory shall be determined by [UAS]
in its sole discretion. Notwithstanding the foregoing, the parties agree that the
inventory audit shall be conduct[ed] using Pronto Pricing, including discounts.
Id. ¶ 6(f).
The APA is not an illusory contract. Neither of the provisions are “entirely optional” nor
do they provide UAS with discretion to completely avoid liability. The termination provision in
37

paragraph 11(b) includes options for termination of the agreement by both parties. The
subsection singled out by Reville Tire provides UAS with an option to terminate that is not
accorded to Reville Tire, and does so by affording discretion to UAS. The parties engaged in an
arms-length negotiation that included agreeing to a provision that UAS could terminate the
agreement if it is “not satisfied with the results of its due diligence investigation in [UAS’s] sole
discretion.” Id. ¶ 11(b). This term does not give UAS “the unfettered choice of whether to
perform and the absolute, arbitrary right to cancel the agreement without further liability.” Starr
v. O-I Brockway Glass, Inc., 637 A.2d 1371, 1373 (Pa. Super. Ct. 1994).
Before exercising the option to terminate UAS must have conducted a good faith due
diligence investigation and be prepared to articulate a reasonable basis for claiming that it is “not
satisfied” with the results of the investigation if it wants to avoid liability for breaching the
contract. Thus, the provision itself includes terms that are not optional and are subject to
challenge by Reville Tire. In addition, UAS could not rely on paragraph 11(b) to successfully
defend a lawsuit by merely stating that it did not desire to conduct a due diligence investigation
or by refusing to state a basis for its “not satisfied” conclusion. Id. (defendant could not
successfully defend suit to compel it to purchase land by stating that it did not desire to do so, but
could defend by proving it was unable to secure the third-party transaction that he had the
discretion to obtain).
The provision in paragraph 6(f) that UAS conduct a physical count of the Inventory is
even more straightforward. UAS must actually take a physical count of the Inventory such that it
is able to “confirm[] the existence” of the Inventory and place a reasonable value on the
Inventory. ECF No. 86-1 ¶ 6(b). UAS does not have the option not to conduct a physical count
38

of the Inventory. By providing that the sole means of conducting the Inventory are left to UAS’s
discretion does not render the APA illusory. Again, UAS cannot avoid liability solely by
pointing to the discretion vested in it by paragraph 6(b), nor could UAS successfully defend itself
by claiming that it chose to conduct the Inventory in a fanciful or plainly ineffective manner.
Reville Tire may pursue a cause of action based on an allegation that UAS breached the
terms of the APA by failing to properly terminate the agreement, failing to act in good faith in
conducting a due diligence investigation, failing to properly conduct a physical Inventory, or by
failing to provide good faith support for the methods and actions used to take the Inventory. In
any of the above hypothetical claims the contract “is sufficiently definite . . . and . . . a
reasonably certain basis exists upon which a court could grant an appropriate remedy.”
Geisinger, 606 A.2d at 512. The Court concludes that the discretionary terms “are sufficiently
definite to withstand a claim of illusoriness or indefiniteness.” Id. Accordingly, the Court will
deny Reville Tire’s motion for summary judgment on UAS’s breach of contract claim.
b.

UAS’s Affirmative Motion for Summary Judgment

UAS’s breach allegations are based on a connected series of events beginning with PNC
Bank filing the May 21, 2015 lawsuit against Reville Tire. PNC Bank held a perfected security
interest in Reville Tire assets, including but not limited to its inventory and general intangibles.
Reville Tire defaulted on a line of credit it had with PNC Bank. On May 28, 2015, judgment
was entered against Reville Tire in favor of PNC Bank in the amount of $1,406,398.31, plus
interests and costs. The day after the lawsuit was filed, May 22, 2015, the Reville Principals
assigned shares to Mr. Lanci’s company so that Mr. Lanci, as sole shareholder of Reville Tire,
had authority to negotiate with PNC Bank about Reville Tire’s defaulted line of credit and
39

eventual judgment.
On June 23, 2015, Reville Tire, in furtherance of seeking settlement of the judgment
against it by PNC Bank, executed a promissory note in favor of Mr. Lanci in which it promised
to pay Mr. Lanci $925,000, and granted to Mr. Lanci a security interest in Reville Tire’s assets,
including its inventory. On June 24, 2015, Reville Tire and PNC Bank entered into a
confidential settlement agreement whereby Reville Tire agreed to pay PNC Bank $925,000 in
exchange for a full and final settlement of the judgment that had been entered against Reville
Tire. June 23, 2015 was also the date the APA was executed.
The above undisputed facts are the basis of UAS’s breach of contract claim. Reville Tire
implicitly and explicitly admits to the factual conduct supporting the alleged breaches. As
discussed below, the Court finds that Reville Tire committed the individual breaches alleged by
UAS and that the breaches were material. Central to this finding is the connected events in light
of the obligations of the APA. A company contemplating entering into a contract to purchase
essentially all of another company’s assets and assume nearly all of its liabilities requires
accurate and timely information regarding matters such as ownership of the company, ability to
convey assets, the financial condition of the company, and its true debts and encumbrances on
assets. In this case, Reville Tire’s plan appears to have been to surreptitiously and quickly
resolve problems it knew would hinder a deal with UAS. Rather than delaying negotiations until
it was able to resolve its problems or informing UAS of its true circumstances during
negotiations, Reville Tire gambled that it would be able to proceed to the Closing Date without
being found out. A reasonable assumption is that Reville Tire did not reveal its conduct because
it knew that if it did UAS would not have signed the APA. In addition, besides being denied the
40

ability to consider its options and analyze the contemplated purchase armed with complete
information, UAS was also unable to consider Reville Tire’s actions as part of an overall
judgment of whether it wanted to go into business with a party who would choose to hide such
critical information during negotiations. For all of these reasons, and for the detailed reasons
stated below, the Court finds that UAS has demonstrated that there are no genuine issues of
dispute that Reville Tire breached the specific provisions of APA as alleged and that Reville
Tire’s breaches of the APA are material.
i. Breach of Paragraph 4(f) of the APA
Reville Tire admits that it did not inform UAS of the PNC Bank litigation, but argues that
there was no obligation to disclose the information because the litigation was no longer pending
on the date the APA was executed. According to Reville Tire, the litigation ceased when
confession of judgment was entered against it on May 28, 2015.
The Court disagrees that the entry of a confessed judgment means that litigation has
ceased. First, once judgment is entered an appeal period begins, which at a minimum renders
any purported claim of finality premature. More significantly, the judgment itself was pending
and unsatisfied at the time the APA was signed. Satisfaction of Judgment was entered on the
docket on June 26, 2015, two days after the settlement agreement had been reached and three
days after the APA was signed. PNC Bank Nat. Assoc., No. 5:15-cv-01024 (N.D. Ohio) (ECF
No. 10). In context of this case and under the APA, the Court concludes that the phrase
“pending litigation” covers an unsatisfied judgment that included a perfected security interest in
Reville Tire assets and inventory such that it was incumbent upon Reville Tire to disclose the
litigation at the time of execution of the APA. Therefore, Reville Tire breached paragraph 4(f)
41

of the APA by failing to disclose to UAS the ongoing litigation.
ii. Breach of Paragraphs 4(b) and 4(d)(ii) of the APA
Next, Reville Tire admits that it did not disclose to UAS that it had previously granted a
security interest to Mr. Lanci in certain of its assets, and thus Reville Tire admits that it did not
have complete power to convey the same assets to UAS when the APA was executed. It also
admits that at the time of execution of the APA it did not disclose to UAS that Reville Tire did
not have the power to own and sell the assets and to vest marketable title in them.
Reville Tire opposes the entry of summary judgment as to these alleged breaches by
arguing that under the APA, Reville Tire was only required to have good and marketable title to
its assets on the closing date. Specifically, Reville Tire points to paragraph 4(d)(ii), which states
that “[o]n the Closing Date, [Reville Tire] shall have good and marketable title to all of the
Assets . . . .” ECF No. 126 at 21. Because UAS terminated the agreement prior to the closing
date, Reville Tire argues that there can be no breach based on its failure to disclose its ownership
of, and power to convey, the Assets. The Court disagrees.
Paragraph 4 of the APA, titled “Seller’s and Each Shareholder’s representations and
Warranties,” begins with the following general provision:
Seller and each Shareholder make the following representations and warranties to
Buyer, each of which is true and correct on the date hereof [and] shall remain true
and correct to and including the Closing Date . . .
ECF No. 86-1 ¶ 4 (emphasis added). Paragraph 4(b) concerns Reville Tire’s representation and
warranty as to Reville Tire’s “Status,” which includes a statement that Reville Tire “has
complete power to own and to sell, transfer and deliver all Assets to be transferred hereunder.”
Id. ¶ 4(b). Read together these provisions mean that on the date of execution, and throughout the
42

existence of the APA, Reville Tire was obligated to represent and warrant that it had good and
marketable title to its assets, and the power to own and sell its assets.
Paragraph 4(d)(ii) does state that Reville Tire represent and warrant that “[o]n the
Closing Date” it shall have good and marketable title to all of the Assets. Reville Tire would
have this provision read in isolation and interpreted to mean that Reville Tire was permitted to
encumber its assets in anyway it chose, not disclose the encumbrance, and only be in breach if it
were unable to unencumber the assets the day before Closing. Such an interpretation would
permit Reville Tire to surreptitiously gamble with the Assets at the heart of the APA in the hopes
that it would be able to make things right prior to the Closing Date.
The provision must be read in context of the APA, which was a contract for UAS to
purchase Reville Tire’s assets and assume its liabilities. In context, this provision means that so
long as Reville Tire had previously and completely identified any encumbered assets whether by
debt, lien, or otherwise, that Reville Tire had good and marketable title in the encumbered assets
on the closing date. Critical to UAS’s decision to enter into such a contract is the extent to which
Reville Tire in fact had the power to convey the assets at the heart of the APA. Because of
Reville Tire’s misrepresentations, however, UAS was denied the opportunity to consider the lien
in favor of Mr. Lanci, as well as the fact that Reville Tire did not have complete power to own
and sell the assets, before coming to a final conclusion as to whether to enter into the APA.
Finally, the Court concludes that UAS’s exercise of its option to terminate the APA in
accordance with the Termination provision does not implicate Reville Tire’s initial and
continuing obligations regarding representations of Reville Tire’s power to own and sell the
Assets.
43

Accordingly, having admitted that it misrepresented to UAS that it had complete power
to convey the assets to UAS, and misrepresented that it had the power to own and sell the assets
and to vest marketable title in them, Reville Tire has breached paragraph 4(b) and 4(d)(ii) of the
APA.
iii. Breach of Paragraph 4(l) of the APA
Next, Reville Tire admits, as alleged by UAS, that it misrepresented that the Reville
Principals were the owners of the stock of Reville Tire when they executed the APA, when in
fact, they had assigned their shares to Mr. Lanci. Reville Tire does not argue that this is not a
breach of the APA but, instead, argues that it is not a material breach because the Reville
Principals were again shareholders one day after the execution of the APA. Putting aside the
lack of record evidence that Mr. Lanci transferred his sole ownership in the company back to the
Reville Principal’s on June 24, 2015 or later, whether the breach was material is only pertinent as
to UAS’s allegation that Reville Tire breached its obligation to indemnify UAS for “material”
breaches. Here, the breach was material as the misrepresentation at the date of execution
concerned a matter central to the APA: the power of the Reville Principals to transfer ownership
of its assets to UAS. Reville Tire’s assertion that the breach was cured within one day (if it can
be proven) goes, at best, to damages, which is not at issue in the instant motion. Reville Tire’s
admission that the Principals mispresented their ownership status to UAS at the date of execution
is a breach of paragraph 4(l) of the APA.
iv. Breach of Paragraph 4(k)(i) of the APA
UAS alleges that Reville Tire represented that there were no material changes to Reville
Tire’s financial condition or assets since its last financial statement when in fact, it had pledged
44

its assets to Lanci. The argument Reville Tire presents in opposition is based on a
mischaracterization of UAS’s breach allegation and irrelevantly focuses on the result achieved
by its hidden conduct rather than on Reville Tire’s obligations under the APA. 6
Reville Tire mischaracterizes UAS’s allegation as a failure “to disclose that it incurred
more debt as a result of the note in favor of Lanci.” ECF No. 126 at 22 (emphasis added).
UAS’s actual allegation is that the undisclosed lien to Mr. Lanci was a material change to Reville
Tire’s financial condition or assets that Reville Tire was required to disclose. UAS makes no
allegation regarding the amount of debt, disclosed or undisclosed.
Reville Tire next argues that UAS is in no position to complain about an alleged breach
because the overall net effect of the transactions with Mr. Lanci (and Mr. Lanci’s with PNC
Bank on behalf of the company) was to lower the company’s overall debt. Id. at 23. Reville Tire
argues that a lowered debt, even though the debt was undisclosed and tied to encumbered assets,
is not a “material adverse change” to Reville Tire’s financial condition or assets and thus there
was no breach. This is not accurate. As noted by UAS, Reville Tire “retired a disclosed debt
and lien [to PNC Bank], and replaced it with a separate, undisclosed debt and lien in favor of
Lanci . . . .” ECF No. 135 at 5 (emphasis in original). Reville Tire hid from UAS all
information regarding the debt and lien. The undisclosed debt and lien qualify as a material
change to Reville Tire’s financial condition and assets. Under the APA, it is not Reville Tire’s
decision to make that the undisclosed debt and lien place the company in a better position and
therefore there is no requirement to disclose. By keeping this information from UAS, Reville
Tire denied UAS the opportunity to perform due diligence on the true value of Reville Tire’s
6

Inexplicably, Reville Tire asserts that UAS knew of the PNC Bank debt prior to executing the APA. This has no
relevance to UAS’s allegation that it was not informed about Reville Tire’s debt to Lanci, regardless of the
connection between it and the PNC Bank debt known only to Reville Tire.

45

assets and liabilities, and what risk Reville Tire created by the lien in favor of Mr. Lanci.
Accordingly, Reville Tire breached paragraph 4(k)(i) of the APA.
v. Breach of Paragraphs 6(c) and 10(b)(ii) of the APA
UAS contends that once it is determined that Reville Tire breached the APA, if such
breaches are material, then Reville Tire and the Shareholders also breached its continuing
obligation of disclosure and obligation to indemnify UAS for material breaches. The Court has
found that the above breaches occurred and also finds that the breaches were material.
To determine materiality, Pennsylvania courts refer to the Restatement (Second)
of Contracts § 241 (1981), which sets forth the following factors to guide the
inquiry:
a) the extent to which the injured party will be deprived of the benefit
which he reasonably expected;
b) the extent to which the injured party can be adequately compensated for
that part of the benefit of which he will be deprived;
c) the extent to which the party failing to perform or to offer to perform
will suffer forfeiture;
d) the likelihood that the party failing to perform or offer to perform will
cure his failure, taking account of all the circumstances including any
reasonable assurances;
e) the extent to which the behavior of the party failing to perform or offer
to perform comports with standards of good faith and fair dealing.
Int'l Diamond Importers, Ltd. v. Singularity Clark, L.P., 40 A.3d 1261, 1271 (Pa. Super. Ct.
2012) (citing Widmer Eng'g, Inc. v. Dufalla, 837 A.2d 459, 468 (Pa. Super. Ct. 2003).
The Reville Principals were not the owners of the stock at the time of signing the APA
and did not have power to convey the assets to UAS or the power to own and sell the assets and
to vest marketable title in them. The reason why the Principals did not have ownership was
46

because they transferred ownership to a third party to allow him to negotiate settlement of a nonfinal judgment that encumbered Reville Tire assets and inventory. Part of that transaction
entailed granting a security interest in the same assets and inventory to the third party. The entire
interconnected sequence of events comprising the breaches was conducted secretly and occurred
before and after execution of a contract that had as its central purpose the transfer of assets and
liabilities from Reville Tire to UAS. For these reasons, and for the reasons explained throughout
this Opinion, the Court concludes that all of the breaches committed by Reville Tire were
material to the APA. Accordingly, Reville Tire has breached its continuing obligation of
disclosure under paragraph 6(c) of the APA, and its obligation to indemnify UAS for material
breaches under paragraph 10(b)(ii) of the APA.
vi. Conclusion
Having found that Reville Tire has breached the APA, UAS’s motion for summary
judgment will be granted. Summary judgment in favor of UAS and against Reville Tire will be
granted as to UAS’s breach of contract counterclaim as to liability only.
3. Reville Tire’s Motion for Summary Judgment on UAS’s Conversion and
Unjust Enrichment Counterclaims
a. Conversion
“Conversion is a tort by which the defendant deprives the plaintiff of his right to a chattel
or interferes with the plaintiff's use or possession of a chattel without the plaintiff's consent and
without lawful justification.” Pittsburgh Const. Co. v. Griffith, 834 A.2d 572, 581 (Pa. Super.
Ct. 2003).
UAS asserts a counterclaim for conversion alleging that it had “provided Reville, at its
request, with access to various parts and supplies . . . to ensure Reville Tire could continue to
47

supply its customers,” and that UAS owned the parts and supplies at all times. ECF No. 101 ¶¶
92, 93. UAS alleges that upon termination of the APA, Reville Tire returned some of the parts to
suppliers AP Exhaust Products and Centric Parts, in order to reduce Reville Tire’s debts to these
suppliers. Id. at ¶ 94. UAS further alleges that Reville Tire did not compensate UAS for the
parts and supplies it provided (except for the sum of $26,000); that Reville Tire had no
justification for the conversion; and that UAS did not consent to the conversion. Id. ¶¶ 94-96.
Reville Tire argues that summary judgment is appropriate because UAS’s inventory was
placed voluntarily into Reville Tire’s warehouse with UAS’s consent. Reville Tire also asserts,
without documentary support and contrary to facts it has admitted, that all UAS parts and
supplies were returned to UAS after termination of the APA. Consistent with establishing a
conversion claim, however, UAS alleges that it did not consent to Reville Tire taking a portion of
UAS’s parts and supplies after termination of the APA and shipping them to other companies to
reduce Reville Tire’s debt. The conversion claim is not based on an allegation that Reville Tire
failed to return parts and supplies to UAS. Reville Tire has not demonstrated that there are no
disputed issues of material fact and therefore its motion for summary judgment as to UAS’s
conversion counterclaim will be denied.
b. Unjust Enrichment
“The elements of unjust enrichment under Pennsylvania law have been defined as
follows: (1) benefits conferred on defendant by plaintiff; (2) appreciation of such benefits by
defendant; and (3) acceptance and retention of such benefits under such circumstances that it
would be inequitable for defendant to retain the benefit without payment of value.” Sovereign
Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162, 180 (3d Cir. 2008) (citing Limbach Co. LLC v.
48

City of Philadelphia, 905 A.2d 567, 575 (Pa. Cmwlth. 2006)).
In its counterclaim for unjust enrichment UAS alleges that after the APA was terminated
Reville Tire “failed to return the bulk of [the UAS-provided] parts and supplies to UAS.” ECF
No. 101 ¶ 99. Furthermore, UAS alleges that Reville Tire failed to reimburse UAS for paying
certain Reville Tire debts. Id. at ¶ 100. Thus, UAS alleges that it has conferred a benefit on
Reville Tire and that it would be inequitable for Reville Tire to retain the benefit without paying
UAS the value of the benefit. Id. at ¶¶ 101, 103.
Reville Tire argues that UAS’s claim fails as a matter of law because parties to a contract,
like the APA, cannot maintain a claim for unjust enrichment. ECF No. 109 at 29-30. In
response, UAS correctly argues that it can maintain its unjust enrichment claim because it is
premised on Reville Tire’s failure to return the bulk of UAS’s parts and supplies after
termination of the APA, and that no provision of the APA required that UAS provide Reville
Tire with parts and supplies. Moreover, there is no contractual right in the APA for UAS to base
a right to recover for the failure of Reville Tire to return parts and supplies to UAS either before
or after termination of the APA.
Reville Tire next argues that it did not receive any benefit from UAS’s parts and supplies
placed in its warehouses because any proceeds from the sale of such inventory was deposited
into UAS bank accounts. This is a misplaced argument for two reasons. First, the unjust
enrichment counterclaim alleges that Reville Tire failed to return the bulk of UAS equipment to
UAS -- equipment that was never sold and thus no proceeds of sale for such equipment exist. In
addition, it is undisputed, as UAS alleges, that Reville Tire used UAS’s property to settle a
Reville Tire debt, which benefited Reville Tire. Accordingly, Reville Tire’s motion for summary
49

judgment as to UAS’s unjust enrichment claim will be denied.
V.

CONCLUSION
For the foregoing reasons UAS’s motion for summary judgment, ECF No. 112, will be

granted and Reville Tire’s motion for summary judgment, ECF No. 109, will be denied. The
individual Reville Principal Plaintiffs will be dismissed as to all counts asserted in the Second
Amended Complaint. Counts I and IV of the Second Amended Complaint will also be
dismissed. Summary judgment in favor of UAS and against Reville Tire will be granted as to
UAS’s fraudulent inducement counterclaim (Count I) and UAS’s breach of contract
counterclaim (Count II). 7
An appropriate Order will be entered.
BY THE COURT
/s/ Maureen P. Kelly
MAUREEN P. KELLY
Chief United States Magistrate Judge
Dated: September 21, 2017

cc:

All counsel of record via CM/ECF

7

Accordingly, the claims remaining for adjudication are Reville Tire’s claims against UAS for violations of the
Pennsylvania and Ohio Uniform Trade Secret Acts (Count II); tortious interference with contractual/business
relations relative to Reville Tire Employees (Count III); unfair competition (Count V); conversion (Count IV);
unjust enrichment (Count VII); and declaratory relief (Count VIII), and UAS’s counterclaims for fraud (Count III);
negligent misrepresentation (Count IV); conversion (Count V); and unjust enrichment (Count VI).

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