ARMSTRONG TELECOMMUNICATIONS, INC. v. CHR SOLUTIONS, INC

Filing 162

OPINION and ORDER re 144 MOTION to Deposit Funds Pursuant to Fed. R. Civ. P. 67 filed by ARMSTRONG TELECOMMUNICATIONS, INC. indicating that the Court will permit the escrow deposit of Armstrong's funds. In addition, it is also ORD ERED that upon Armstrong's deposit of funds pursuant to a separately filed Order of Court permitting said deposit, any contract interest accruals upon said funds will cease as against CHR's counterclaim in this matter. Signed by Judge Marilyn J. Horan on 11/05/2020. (rtw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ARMSTRONG
TELECOMMUNICATIONS, INC.,

)
)
)
Plaintiff,
)
)
v.
)
)
CHR SOLUTIONS, INC.
)
)
Defendant/Third Party Plaintiff,
)
)
v.
)
)
VANTAGE POINT SOLUTIONS, INC. )
and VIRGINIA GARDEA
)
)
Third Party Defendants.
)

Civil No. 18-787

OPINION and ORDER
In this commercial dispute, Plaintiff Armstrong Telecommunications, Inc. (Armstrong)
and Defendant CHR Solutions, Inc. (CHR) entered into a Master Services Agreement (“MSA”),
dated May 30, 2017, by which CHR agreed to provide certain specialized engineering services in
furtherance of Armstrong’s contract to provide broadband services to rural markets in New York.
Armstrong alleges that CHR breached the MSA. CHR, in turn, counterclaims that Armstrong
breached the contract and alleges that any perceived problems with CHR’s performance of the
contract was due to Armstrong’s own conduct. In addition, CHR alleges that its former
employee, Third-Party Defendant Virginia Gardea, unlawfully conspired with Third-Party
Defendant Vantage Point Solutions, Inc. and Armstrong, in a scheme to usurp CHR’s contract
from Armstrong.

The Complaint was filed on June 15, 2018. CHR Answered the Complaint, filed
Counterclaims against Armstrong, and filed Third-Party Claims against Gardea and Vantage
Point. Thereafter, the Court resolved three motions to dismiss filed by the Third-Party
Defendants. The initial case management conference was held on December 20, 2018. Fact
discovery was set to be completed by June 21, 2019. Several discovery disputes occurred during
the course of discovery, which extended the time for completing fact discovery. In March 2020,
the initial effect of the COVID-19 pandemic on Court operations occurred. The pandemic
created obstacles for the parties in scheduling and completing depositions that also extended
discovery. Ultimately, fact discovery was completed on June 1, 2020. By the time of the June
20, 2020 Post Discovery Status Conference, the Court explained to counsel the then-known
difficulties with conducting a jury trial in light of the COVID-19 pandemic and informed counsel
that a trial could not be scheduled anytime soon. June 20, 2020 Text Minute Entry (entered
without an ECF Number). At the time of said conference, the Chief Judge of this Court had
issued a third Administrative Order continuing all civil and criminal jury selections and jury
trials until September 8, 2020. The Court notes that CHR filed a Notice on February 20, 2020
stating that it was committed to having the dispute resolved through a trial by jury. ECF No.
118. In response, the Court directed that, in light of the administrative delay for scheduling a
jury trial, the parties should confer with their clients about the possibility of an alternate form of
resolution. The parties submitted a Joint Report on July 22, 2020, stating that they do not agree
on a form of alternate resolution of this case, meaning that the present course of this action, after
resolution of summary judgment motions, is to proceed to a jury trial.

2

Presently before the Court is Armstrong’s Motion to Deposit Funds Pursuant to Fed. R.
Civ. P. 67 and Brief in Support. ECF Nos. 144 & 145. Armstrong requests leave to make a
deposit of $2,250,000 under Rule 67 to halt the accrual of interest and as permitted under New
York Practice Rule 3219. Armstrong’s Motion is premised, in part, on the pandemic-related
suspension of jury trials and its allegation that CHR’s insistence on its right to a jury trial results
in a potential windfall to CHR in light of the present COVID-19 circumstances. CHR has filed a
Response and Brief in Opposition to the Motion. ECF Nos. 146 & 147. Armstrong has also
filed a Reply Brief. ECF No. 161. CHR’s assertion of its right to a trial by jury cannot be
viewed in any manner as a delay tactic, and the Court does not rely on such an assertion in its
discussion or resolution of Armstrong’s Motion. CHR also contends that Armstrong’s funds to
be deposited are not “in dispute” as contemplated by Rule 67, in that ownership of the funds is
not at issue. CHR objects to the Motion, explaining that, this is a contractual dispute and case
law favors a denial of motions to deposit funds in such cases.
“The issue of whether to allow a Rule 67 deposit lies within the discretion of the Court.”
Progressive Cas. Ins. Co. v. Drive Trademark Holdings LP, 680 F. Supp. 2d 639, 641 (D. Del.
2010) (citing Cajun Elec. Power Co-op., Inc. v. Riley Stoker Corp., 901 F.2d 441, 445 (5th
Cir.1990) and Browning Ferris, Inc. v. Montgomery County, Civ. A. No. 90–3258, 1990 WL
131937, at *2 (E.D. Pa. Sept. 4, 1990)). For the following reasons, the Court, pursuant to Rule
67, and cognizant of New York Rule 3219, and the Court’s inherent1 and equitable powers, will
exercise its discretion in deciding Armstrong’s Motion.

“The inherent powers of federal courts are those which ‘are necessary to the exercise of all others.’” Roadway
Exp., Inc. v. Piper, 447 U.S. 752, 764 (1980) (quoting United States v. Hudson, 7 Cranch 32, 34, 3 L.Ed. 259
(1812)).
1

3

To be sure, Armstrong’s Motion to Deposit Funds under Rule 67, in the circumstances of
this case, is atypical. It is doubtful that such a Motion would have been filed absent the COVID19 pandemic. In fact, but for the COVID-19 pandemic, it is likely that dispositive motions
would have been decided and this case would have already been tried and the dispute resolved.
The COVID-19 pandemic is an unprecedented superseding event that could not have been
contemplated in the parties’ contract. Therefore, the overriding reason for granting relief
through disposition of Armstrong’s Motion is the impact of the COVID-19 pandemic on Court
operations and the resulting administrative delays in jury trials.
As of October 30, 2020, all civil and criminal jury selections and jury trials have been
continued to February 8, 2021, pending further order of court. Administrative Order, Oct. 30,
2020, Misc. No. 2:20-mc-394-MRH. Thereafter, and when conditions are such that jury trials
can be scheduled, such trials will be conducted in a drastically reduced number. Specifically, the
Western District’s plan is to hold no more than one jury trial at a time. In addition, criminal jury
trials will take precedence over civil jury trials. Obviously, the entire Court had and will have a
backlog of civil cases to be tried. Given these circumstances, it is highly unlikely that a jury trial
in this case will take place for a considerable period of time.
Furthermore, “[w]hile there are relatively few decisions discussing Rule 67, courts have
noted that ‘the rule’s purpose is to relieve the depositor of responsibility for [a] fund in dispute
while the parties hash out their difference with respect to it.’” Krambeck v. Fishbone, No. CV
17-3934, 2019 WL 398936, at *8 (E.D. Pa. Jan. 30, 2019) (quoting Cajun Elec. Power Co-op.,
Inc., 901 F.2d 441, 444-445 (5th Cir. 1990)). In Krambeck, the Court recognized, as CHR states,
that “courts have cautioned against applying Rule 67 in a way that would alter the contractual
rights that the parties bargained for, including by depriving a party of its cause of action for

4

breach of contract.” Krambeck, 2019 WL 398936, at *8 (citing Progressive Cas. Ins., 680 F.
Supp. 2d at 640-42). Nonetheless, the Krambeck Court granted plaintiff’s motion to deposit
funds, over defendant’s objection, “with the explicit caveat that [the] granting [of] the motion
would ‘in no way impact[ ] the merits of any claims that have been brought, or will be brought,
in this action, nor prevent[ ] any party from asserting any claims or seeking any relief.’”
Krambeck, 2019 WL 398936, at *8 (quoting the Court’s 10/27/17 Order).2 In the present case,
the interest issue is not related to a merits determination relative to the breach of contract claims.
The interest element of the contract will only apply once the merits of the case and the amount of
damages are determined. In addition, a Rule 67 deposit with this Court is in accord with the
purposes of New York Rule 3219. The Practice Notes to Rule 3219 explain that such remedy is
available only on contracts. N.Y. C.P.L.R. 3219 (Practice Notes).
In this case, with Armstrong’s deposit of funds, Armstrong will not be able to otherwise
utilize the funds. While CHR is likewise not able to access or utilize said funds, they are
available and payable depending upon the resolution of the dispute. Resolution of this dispute is
delayed solely due to the COVID-19 pandemic and its consequential administrative trial delays.
Neither party should solely benefit or suffer from contract interest accruals where such pandemic
circumstances could not have been contemplated at the time of contracting. The fairest and most
equitable interim disposition for both parties is accomplished through this decision.
Consequently, this Court will order the escrow deposit of Armstrong’s funds, based upon Rule
67 and in light of the MSA’s choice of New York law. A separate Order will be entered to

2

The Krambeck Court explained that “while [plaintiff] sought and obtained leave to make the payments into this
Court's registry, [defendant] is not precluded from asserting counterclaims for breach of contract or unjust
enrichment based on [plaintiff’s] failure to make payments.” Krambeck, 2019 WL 398936, at *8.

5

permit a Rule 67 deposit with the Clerk of Court. Upon Armstrong’s payment of said funds to
the Clerk, no additional contract interest upon said escrowed funds will accrue.
Accordingly, it is hereby ORDERED that upon Armstrong’s deposit of funds pursuant to
the separately filed contemporaneous Order of Court permitting said deposit pursuant to Rule 67,
any contract interest accruals upon said funds will cease as against CHR’s counterclaim in this
matter.

IT IS SO ORDERED:
Dated:_November 5, 2020

______________________
______________________
_
__ ____
____
Marilyn J Horan
J. Horan
a
United States District Judge

6