Swart v. Pawar et al
Filing
162
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT 117 AND GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT 119 : It is ORDERED that Defendants' [11 7] Motion for Summary Judgment is GRANTED IN PART as to Count III of Swart's claims and DISMISSES WITH PREJUDICE certain claims; Plaintiff's 119 Motion for Summary Judgment is GRANTED IN PART as to Counts I, II, III, IV, and V of Pawar an d MRA's counterclaim and DISMISSES WITH PREJUDICE certain claims; Pawar and PRA's Motion for Summary Judgment is DENIED on Count III of their claim against Eric Johnson, and also on Count III of Johnson's counterclaim. Signed by District Judge Irene M. Keeley on 11/19/15. (cnd) Modified relationship on 11/19/2015 (cnd).
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
STEPHANY SWART, M.D.,
Plaintiff,
v.
//
CIVIL ACTION NO. 1:14CV10
(Judge Keeley)
SURENDRA PAWAR, M.D., MONONGALIA
RADIOLOGY ASSOCIATES, P.C.,
Defendants.
SURENDRA PAWAR, M.D., and MONONGALIA
RADIOLOGY ASSOCIATES, P.C.,
Counter-Claimants,
v.
STEPHANY SWART, M.D.,
Counter-Defendant.
SURENDRA PAWAR, M.D., and MONONGALIA
RADIOLOGY ASSOCIATES, P.C.,
Third-Party Plaintiffs,
v.
ERIC D. JOHNSON, M.D., and
CYNTHIA JOHNSON,
Third-Party Defendants.
ERIC D. JOHNSON, M.D., and
CYNTHIA JOHNSON,
Counter-Claimants,
v.
SURENDRA PAWAR, M.D., and MONONGALIA
RADIOLOGY ASSOCIATES, P.C.,
Counter-Defendants.
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
I. INTRODUCTION
Pending for the Court’s consideration are competing motions
for summary judgment. The first was filed by the defendants,
counter claimants, and third-party plaintiffs, Surendra Pawar, M.D.
(“Pawar”), and Monongalia Radiology Associates, P.C. (“MRA”). (Dkt.
No. 117). Pawar and MRA seek summary judgment on all counts of
Swart’s complaint against them, as well as Counts I and II of their
counterclaim against Swart. Further, Pawar and MRA seek summary
judgment in MRA’s favor on Count III of its third-party complaint
against Eric Johnson, M.D. (“Johnson”), as well as Count I of
Johnson’s counterclaim against both Pawar and MRA. The second
motion was filed by the plaintiff and counter defendant, Stephany
Swart, M.D. (Dkt. No. 119), seeking summary judgment in her favor
on all Counts of Pawar and MRA’s counterclaim. For the reasons that
follow, the Court GRANTS IN PART and DENIES IN PART both motions
for summary judgment.
I. BACKGROUND
This case rises from the ashes of a failed Professional
Corporation founded by Swart and Pawar to provide radiological
services for certain hospitals in north central West Virginia. As
2
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
it must, the Court construes the facts in the light most favorable
to the non-movant.1 See Ussery v. Manfield, 786 F.3d 332, 333 (4th
Cir. 2015).
A.
Factual Background
As recounted by the parties, the actions in this case span a
time-frame from 2008 until 2012.
parties’
motions
includes,
Evidence filed in support of the
among
others,
emails,
letters,
contracts, loan documents, and testimony from no less than nine
depositions.
Gleaned from the evidence are certain facts that are either
confirmed by all parties, undisputed by the opposing party, or
self-evident
from
the
exhibits.
Nevertheless,
the
parties
vigorously dispute a significant number of material facts.
1.
Undisputed Facts
a.
Corporate Formation and the Beginnings of MRA
In mid-2008, Pawar was working as a radiologist for Amerirad,
Inc. at Monongalia General Hospital (“MGH”) in Morgantown, West
1
Thus, pertaining to Swart’s motion for summary judgment, the
Court will construe the facts in the light most favorable to Pawar
and MRA, and when considering Pawar and MRA’s motion, the Court
will construe the facts in the light most favorable to Swart and
Johnson.
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SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Virginia. Due to Amerirad’s
approached
Pawar
and
pending bankruptcy, MGH management
another
Amerirad
radiologist,
Dr.
Teppe
Popovich (“Popovich”), about forming a practice group to provide
radiological services at MGH (Dkt. No.
122-2 at 3-4).
Pawar and
Popovich embraced the idea and formed MRA as a Pennsylvania
corporation on August 28, 2008. Id. at 7. Just days later, the two
interviewed Swart, who joined the group on September 4, 2008. Id.
at 6.
As initially formed, Pawar was MRA’s president, Popovich its
treasurer, and Swart its secretary. Each doctor owned one-third of
MRA’s shares and served as a Director (Dkt. Nos. 122-2 at 5; 125-5
at 20). Shortly after MRA was formed, Popovich left the group,
leaving Swart and Pawar as co-equal 50% shareholders and codirectors of MRA. Pawar retained his position as president of MRA,
while Swart kept her position as secretary, and also assumed the
position of treasurer vacated by Popovich (Dkt. No. 125-2 at 7).
After Popovich’s departure, Swart and Pawar executed an Amended
Shareholders’
conditioned
Agreement
any
future
(the
“Shareholder
dilution
of
their
Agreement”)
interest
in
that
the
corporation through the issuance of new shares upon both parties
providing written consent (Dkt. No. 122-1 at 5).
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SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Although incorporated in Pennsylvania, MRA established its
principal place of business at MGH in order to provide the hospital
with radiological services (Dkt. No. 118 at 5). In furtherance of
that objective, MRA entered into a “Radiology Agreement” with MGH
on November 12, 2008 (the “2008 Agreement”), with an effective date
retroactive to September 5, 2008 (Dkt. No. 122-1 at 46-73). The
2008 Agreement had a term of three years and contained a provision
requiring MRA to maintain Pawar as its Medical Director. Id. at 54,
64. The lone MRA signatory to the 2008 Agreement was Pawar, who
signed in his capacity as president of MRA. Id. at 69.
In addition to serving as directors of MRA, Swart and Pawar
were
also
employees
of
the
corporation.
Each
signed
written
employment contracts, effective September 1, 2008. Id. at 88-107.
Pawar signed both contracts as President and Swart signed as
Secretary. Each also signed their respective contracts in their
personal capacity, and both contracts were witnessed and signed by
Cathy Berkshire. Id. at 99, 107. Swart’s contract provided that MRA
would pay her an annual salary of $450,000. Id. at 100. Pawar’s
contract provided that MRA would pay him $500,000 per year, of
which $50,000 was designated as payment for Pawar as Medical
Director of Radiology at MGH. Id. at 88.
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SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Approximately
one
year
after
contracting
with
MGH,
MRA
executed a “Physician Services Agreement” for radiology services
with Preston Memorial Hospital (“PMH”) (the “PMH Agreement”). Id.
at 78-87. The term of the PMH Agreement extended from November 20,
2009 through February 2, 2013, and it too contained a provision
requiring MRA to maintain Pawar as Medical Director for Radiology
at PMH. Id. at 80, 82. As with the MGH Agreement, Pawar was the
lone MRA signatory to the PMH Agreement. Id. at 87.
As a consequence of the PMH Agreement, MRA and Pawar executed
a “Second Addendum to Employment Contract” that increased Pawar’s
pay by $2,500 per month for every month he served as Medical
Director, as required in the PMH Agreement. Id. at 98-99. Swart
signed the second addendum to Pawar’s contract in her capacity as
secretary, and it was witnessed and signed by Cathy Berkshire. Id.
at 99.
b.
Employment of Dr. Eric Johnson
Performing
the
contract
with
MGH
required
MRA
to
hire
additional radiologists to handle the workload.2 Accordingly, on
2
Attached to each of the MGH Agreements was a list of approved
radiologists. The list attached to the 2008 Agreement listed only
Pawar, Swart, and Popovich (Dkt. No. 122-1 at 70). The list
attached to the 2011 Agreement had expanded to include Pawar,
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SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
March 27, 2009, MRA entered into an employment contract with Eric
Johnson,
M.D.
(“Johnson”).
Id.
at
108-14.
Johnson’s
contract
provided that MRA would pay him an annual salary of $400,000. In
addition, the contract contained an ownership option clause that
permitted Johnson to join MRA as a co-equal shareholder after
completing one year of employment. Id. at 113. The contract was
signed by Pawar, Swart, and Johnson, and witnessed by Cindy
Berkshire.
Sometime in mid to late 2010, after completing one year of
employment with MRA, Johnson verbally informed Pawar that he
intended to exercise his ownership option (Dkt. No. 118 at 9; Dkt.
No.
122-8
at
8).
The
contract
conditioned
execution
of
the
ownership option as follows: “A prerequisite for the acquisition of
shares by [Johnson] shall be [Johnson’s] acceptance and execution
of the Shareholders' Agreement executed by the other shareholders
of [MRA]” (Dkt. No. 122-1 at 113).3 Swart, however, did not want to
Swart, Eric Johnson, Melissa Johnson, Harry Bishop, and Jeffrey
Yost. Id. at 149.
3
The Court does not read this provision to mean that Pawar and
Swart could wait until after Johnson exercised the option to then
decide whether they wanted to allow him to become a co-equal
shareholder. Rather, the condition merely required Johnson to sign
an agreement containing the same provisions already agreed to by
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SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
provide Johnson with voting shares (Dkt. No. 122 at 13). Johnson
did not give formal written notice that he was exercising his
ownership option until July, 2011 (Dkt. No. 122-8 at 8).
Meanwhile, on March 17, 2011, Pawar and Johnson executed a
second employment contract containing essentially the same terms as
Johnson’s first contract with three exceptions. The second contract
increased Johnson’s annual salary to $450,000, provided that any
shares acquired under the ownership option would be non-voting
shares, and conditioned the effectiveness of the contract on
Johnson “purchasing and maintaining a home in Morgantown, West
Virginia” (Dkt. No. 122-1 at 155-62). The new contract also stated
that it superceded the 2009 employment contract. Id. at 155. Swart
refused to sign Johnson’s new contract, asserting that the language
in it differed from the original contract by allowing Pawar to fire
Johnson unilaterally (Dkt. No. 122 at 13).
Swart and Pawar in the then existing Shareholder’s Agreement.
Support for this reading is found in the fact that the ownership
option contained language clearly establishing how the parties
would determine the price of the shares and how Johnson would pay
for them. It does not provide that they may think about it or
negotiate it later. In addition, the language is clear: The
“employee shall have the option.” Thus, the condition is on Johnson
agreeing to terms of a shareholder agreement that Pawar and Swart
would also be subject to, not whether Pawar and Swart could decide
whether they would allow Johnson to exercise the option.
8
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Prior to this, on February 11, 2011, Johnson and MRA had
executed a “Physician Loan Agreement” and related promissory note
(collectively “the loan documents”), under which MRA agreed to loan
Johnson $90,000 for a term of five years at 5% interest annually
(Dkt. No. 122-8 at 11-17). The loan documents provided for 1/60 of
the loan to be forgiven for each month that Johnson worked for MRA.
Id. at 11, 14. By its language, the loan could be terminated for a
variety of reasons, including any material breach of the loan
agreement or default under the note. Id. at 12, 14. Furthermore,
the note prescribed that, should Johnson no longer be eligible for
forgiveness because he was no longer employed by MRA, any remaining
principal and accrued interest would become immediately due and
payable. Id. at 14. Pawar and Johnson were the only signatories to
the loan agreement, and Johnson was the sole signatory to the
promissory note. Id. at 13, 15.
Ultimately, Pawar terminated Johnson’s employment with MRA in
July or August of 2011 (Dkt. No. 118 at 11; Dkt. No. 122-8 at 3).
c.
MRA’s 2011 Renewed Agreement with MGH and the Breakup
In late 2010, MGH’s Chief Financial Officer, Darryl Duncan
(“Duncan”), initiated discussions with Pawar on behalf of MRA to
negotiate the renewal of the 2008 Agreement. Duncan expressed
9
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
concerns that Pawar, who was in his early 60s at that time, might
not continue as medical director for the duration of the renewed
agreement (Dkt. No. 122-9 at 5). Confirming Duncan’s concerns,
Pawar indicated that he might change to part-time status, which
would preclude his eligibility to serve as medical director. Id.
Based on these discussions, Pawar and Duncan recognized that
the necessity of identifying a successor to Pawar. Id. Although
Duncan acknowledged that it was MRA’s responsibility to suggest a
successor, he believed neither Swart nor Johnson would be an
acceptable candidate, and that MRA would need to seek an outside
person to assume the position. Id.
Historically,
during
the
course
of
the
2008
Agreement,
management at MGH had from time to time, expressed concerns about
MRA’s overall performance, including backlogs, turnaround time, and
staffing levels (Dkt. No. 122-9 at 3, 2; Dkt. No. 122-6 at 8; Dkt
No. 122-3 at 6). Duncan nevertheless felt that MGH and MRA could
have a long term relationship, despite the performance issues, so
long as MRA could recruit “another two or three physicians who
would join them and make the group solid going forward” (Dkt. No.
122-9 at 7).
10
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
When it came time to renegotiate the 2008 Agreement, MGH and
MRA executed a “Radiology Agreement,” effective January 1, 2011
(the “2011 Agreement”) that essentially renewed the 2008 Agreement
with a term extending through December 31, 2015. (Dkt. No. 122-1 at
123-48). The 2011 Agreement also contained a clause similar to that
in the 2008 Agreement, requiring MRA to retain Pawar as medical
director, but further requiring MRA, within 30 days, to submit a
succession plan for approval by MGH in the event of Pawar’s
departure. (Dkt. No. 122-1 at 132).
Attached as “Exhibit A” to the 2011 Agreement was a list of
approved physicians, which included full-time radiologists Pawar,
Swart, and Johnson, as well as part-time radiologists Melissa
Johnson, M.D., Harry Bishop, M.D., and Jeffrey Yost, M.D. Id. at
149. As with the 2008 Agreement, Pawar was the only MRA signatory
to the 2011 Agreement. Id. at 148.
Sometime during the first year under the 2011 Agreement, MGH
became so dissatisfied with MRA’s performance, id. at 10, that MCH
terminated the 2011 Agreement and the services of MRA on December
31, 2011 (Dkt. No. 10 at 1). Duncan noted several reasons for MRA’s
termination, including the group’s failure to recruit new members,
which had led to stagnation in performance and inability to keep up
11
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
with the workload. Id. 122-9 at 10, 12, 20. He also noted that
Swart and Pawar had “reached an impasse” that was preventing MRA
from signing contracts and recruiting additional doctors. Id. at
12, 19, 20. Finally, he noted that MRA had not submitted a
satisfactory succession plan as required under the 2011 Agreement.
Id. at 20.
With the looming void resulting from the premature termination
of MRA’s 2011 Agreement, MGH issued “Requests for Proposal” (“RFP”)
in October, 2011, seeking applicants to provide radiology services
to the hospital (Dkt. No. 122-2 at 5). The RFP sought proposals
from practice groups to provide radiological services under a new
contract to commence July 1, 2012. Id. In the mean time, because
MGH
still
needed
radiology
services
for
the
period
between
December 31, 2011, and July 1, 2012, Pawar, through a newly formed
entity, agreed to provide radiological services for that six month
period. Id.
Further, he responded to the RFP and, through his new
entity, placed a bid to win the new radiology contract. Id. Swart
and Johnson also responded to the RFP, placing a bid for the new
contract through their own newly formed entity. (Dkt. No. 125-1 at
36-38). Neither of these new entities won the contract, however,
12
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
which was awarded to a wholly unrelated entity, Radiological
Physicians Associates (Dkt. No. 122-9 at 20).
d.
Dr. Joseph Ridgeway
In November, 2010, Pawar and Swart interviewed Dr. Joseph
Ridgeway (“Ridgeway”) for a position with MRA (Dkt. No. 122 at 6).
When Ridgeway applied, he informed Swart, Pawar, and Duncan that
his Ohio license had been suspended as a result of a previous DUI
conviction (Dkt. No. 122-9 at 11, 16). Shortly thereafter, Swart
became
aware
including
that
multiple
Ridgeway
DUIs,
had
additional
incidents
of
criminal
domestic
history,
violence,
and
cocaine abuse. (Dkt. No. 122 at 7, 16). Based on this information,
Swart refused to sign Ridgeway’s employment contract. Id. at 6-7.
Pawar, however, did sign the employment contract with Ridgeway in
November, 2010, and the parties moved forward to finalize his
employment.
In
order
for
Ridgeway
to
perform
professional
radiology
services, he needed to submit to a lengthy approval process by MGH
and receive proper state licensing. Id. at 14. Part of the process
required Ridgeway’s appearance before the hospital’s Board to
explain any previous professional issues (Dkt. No. 122-9 at 14).
During their meetings with Duncan, the Board discussed the subject
13
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
of Ridgeway’s checkered past as well as the fact that Swart had not
signed Ridgeway’s employment contract. Id. at 14, 21.
Duncan and Pawar “speculated” that the only way the Board
could have known about Ridgeway’s past, other than the admitted DUI
and license suspension, would have been if Swart had discussed it
with her neighbor and MGH board member, Dr. Wade Stoughton. Id. at
14. While Swart has acknowledged that she spoke to Stoughton about
Ridgeway’s past, she claims the information she discussed was a
matter of public record (Dkt. No. 122 at 17). Unhappy about Swart’s
actions, Pawar suggested that Ridgeway’s attorney send Swart a
letter telling her to stop (Dkt. No. 120-4 at 2).
MGH continued its internal review of Ridgeway and ultimately
concluded that he was satisfactory to perform services at the
hospital (Dkt. No. 122 at 11, 16). Ridgeway received his West
Virginia State Medical License and staff privileges at MGH in June,
2011, roughly seven months after signing his employment contract,
at which point he began performing radiology services for MRA. Id.
at 6-7.
14
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
e.
Bookkeeping and the Accounting Firm of Kline, Koppel, and
Koryak, P.C.
The “Bylaws of Monongalia Radiology Associates P.C.” (the
“Bylaws”) provide that the treasurer shall “have custody” of the
company’s funds, keep accurate accounts, deposit all corporate
monies, and disburse funds as ordered by the Board (Dkt. 122-1 at
20). Among other things, the corporation must keep “correct and
complete books and records of account.” Id. Furthermore, MRA’s
Bylaws specify that it is for the Board of Directors to determine
the
conditions
and
regulations
regarding
inspection
of
the
corporate books (Dkt. No. 122-1 at 21).
From its inception, however, MRA contracted for all accounting
services and related functions to be performed by the accounting
firm of Kline, Keppel & Koryak, P.C. (“the Kline firm”).4 The Kline
firm made all disbursements to Swart and Pawar, and prepared all
necessary corporate tax filings. One of the duties of the Kline
firm was to reimburse the parties for their expenses. Both Swart’s
and Pawar’s employment contracts provided that MRA would reimburse
them up to a maximum of $10,000 per year “for all reasonable
4
It appears that the Kline firm also prepared Pawar’s and
Swart’s personal tax returns. See e.g., Dkt. No. 122-7 at 4; Dkt.
No. 118 at 9.
15
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
business and professional expenses incurred ... in connection with
[their] employment” (Dkt. No. 122-1 at 89). Swart and Pawar,
however, often submitted expenses for reimbursement that ran well
beyond the $10,000 limit (Dkt. No. 122-5 at 6-18). In such cases,
the Kline firm and MRA utilized a system of “evening-up,” under
which the Kline firm would provide a check to the shareholder with
the lower amount of reimbursed expenses so that the amount given to
each shareholder was the same (Dkt. No. 122-5 at 4-5; Dkt. No. 1227 at 8).5
At least as early as January, 2011, Swart began to request
financial information from the Kline firm (Dkt. No. 122 at 14; Dkt.
No. 122-7 at 8, 13). At the direction of Pawar and MRA’s counsel,
Mark Krauland (“Krauland”), the Kline firm declined to provide the
information to Swart, stating that she would have to seek it from
Pawar (Dkt. No. 122 at 15; Dkt. No. 122-7 at 9, 13). When she asked
Pawar,
however,
he
told
Swart
she
would
have
to
sign
a
confidentiality agreement before he would turn the records over,
5
Pawar would often submit significantly higher expense reports
to the Kline firm for reimbursement; however, the evening up
process was designed to provide “evening-up bonuses” to Swart (or
to Pawar if the expense levels were reversed) so that the net
amount received by each shareholder was the same (Dkt. No. 122-5 at
5).
16
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
and that he would have Krauland send one to her (Dkt. No. 122 at 3;
Dkt. No. 122-1 at 115). Swart asserts that she never received, nor
did she ever sign, any such agreement; furthermore, as an equal
shareholder in MRA, she contends that she was not required to do so
(Dkt. No. 122 at 3).
2.
Swart’s Factual Allegations
a.
Pawar’s Unilateral Control of MRA
Swart alleges that Pawar ran MRA as if he were the sole owner
by exercising unilateral control and decision making, even going so
far as to indicate to third parties that he was the sole owner
(Dkt. No. 1-1 at 4, 7). In support of her allegations, Swart points
to a variety of Pawar’s actions. First, Pawar acted beyond his
authority by refusing to allow Swart to review financial records
and employment contracts, despite the fact that she was Treasurer,
Director, and a co-equal owner of MRA. Id. at 5, 15. Second, Pawar
reduced Swart’s pay by falsely telling the Kline firm that she had
not worked on days when she had. Id. at 5, 8. Third, without her
input or agreement, Pawar hired several physicians, including one
with a criminal past and suspended license, thereby requiring MRA
to pay expensive tail insurance. Id. at 14. Fourth, Pawar executed
the 2011 Agreement with MGH, provided MGH with a succession plan,
17
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
and unilaterally named Johnson as the Vice-Chairman of the Imaging
Services Department, all without her approval or agreement. Id. at
7. Fifth, Swart alleges that Pawar fraudulently benefitted by
repeatedly funneling unauthorized personal and business expenses
through MRA. Id. at 9-14. Finally, according to the complaint,
Pawar intentionally omitted Swart’s name as a Director of MRA on
multiple
filings
with
the
West
Virginia
and
Pennsylvania
Secretaries of State. Id. at 8.
b.
Pawar’s Efforts to Discredit Swart
Swart’s complaint alleges that, in an attempt to terminate her
relationship with MRA, Pawar made efforts to discredit her with MGH
and PMH. Id. at 7. One of the ways in which Swart claims Pawar
discredited her was by falsely accusing her of failing to keep up
her continuing medical education (“CME”) hours. Swart claims that
Pawar falsely accused her of submitting fraudulent CME hours, and
falsely informed MGH and PMH that she lacked the requisite CME
hours
to
perform
services.
Id.
at
6.
This
resulted
in
MGH
temporarily suspending Swart’s credentials, which prevented her
from reading mammography film. Id.
Another method by which Pawar allegedly discredited Swart was
by manufacturing two fictitious patient complaints. Id. at 6-7.
18
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
According to Swart, Pawar informed others, including hospital
staff, of the fraudulent complaints. Id. She further avers that she
spoke with MGH’s patient advocate, who confirmed that no patient
had ever filed a complaint against her. Id. at 6.
Swart claims Pawar lied to others on multiple occasions when
he told them that she had missed work, had left work early, or had
gone missing for extended periods during her shifts. Id. at 5-6.
According to Swart, she often came into work early, worked late,
and prearranged any time off with Pawar (Dkt. No. 1-1 at 5-6; Dkt.
No. 125-1 at 9-12).
Finally, Swart claims that Pawar wrongfully told third parties
that West Virginia University (“WVU”) had terminated her from her
previous position (Dkt. No. 1-1 at 7). To the contrary, she avers
that she grew tired of the position and left WVU of her own
volition (Dkt. No. 129-9 at 2-3).
c.
Pawar Misrepresented the Contracts with MGH and PMH.
According to Swart, Pawar told her that he was Chairman of the
Radiology Department at PMH and, as such, PMH had required MRA to
pay him a higher salary for that position (Dkt. No. 1-1 at 14).
Pawar also demanded that Swart sign the PMH Agreement the same day
it was presented to her, before she had any opportunity to review
19
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
it with PMH (Dkt. No. 125-1 at 3-4). Moreover, he told her that MGH
also had required MRA to pay him a higher salary (Dkt. No. 1-1 at
14). Swart avers that, when she discussed Pawar’s additional salary
with PMH, the hospital denied it had ever required such, and
informed her that it believed Pawar was the sole owner of MRA (Dkt.
No. 125-1 at 3-4).
3.
Pawar’s Factual Allegations
a.
Swart’s Misrepresentations About her Past Employment
Pawar alleges that Swart misrepresented the facts surrounding
her departure from WVU. Id. at 37. He claims that, although Swart
told him she had resigned, in actuality WVU had terminated her. Had
he known that, Pawar asserts, it would have dissuaded him from
asking her to become an equal shareholder in MRA. Id. Furthermore,
Pawar believes that Swart mislead him on a host of other matters,
including her work ethic, education, skill level, and CME hours.
Id. It was based on these misrepresentations, Pawar contends, that
he asked Swart to join MRA. Id. 37-38.
b.
Swart’s Poor Work Habits
Pawar avers that, sometime during 2009, Swart began to exhibit
poor
work
habits
(Dkt.
No.
10
at
25).
Specifically,
in
his
counterclaim, Pawar alleges that Swart constantly left work early,
20
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
would disappear for long periods in the afternoons, would call off
work, leaving MRA understaffed, and failed to comply with her CME
requirements Id. Moreover, Pawar alleges that, throughout 2009 and
2010, Swart exhibited poor work habits. Moreover, due to shortfalls
in her CME credits, MGH twice was compelled to suspend her medical
privileges to read mammography film. Id. at 26.
In his counterclaim, Pawar lists multiple ways in which Swart
failed to adhere to her employment contract, including generally
failing to work an adequate amount of hours, rendering substandard
service, failing to cooperate in hiring additional personnel,
failing to obtain the required CME credits, failing to be “on-call”
or to respond to calls, and making false statements about MRA to
third-parties at MGH. Id. at 32-33.
c.
Pawar’s Expenses were Legitimate and Swart was Equally
Compensated
Pawar denies that any of his submitted expenses were personal
or in any way otherwise improper (Dkt. No. 10 at 7-12). Regardless,
he avers that the “evening-up” accounting process utilized by the
Kline firm compensated Swart by providing “even up bonuses” for any
differences
in
the
amount
of
reimbursed
21
expenses.
Thus,
he
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
contends, Swart ultimately received the same amount of money that
he did. Id.
d.
Swart’s Disruption of the Hiring and Employment Process
According to Pawar’s counterclaim, Swart repeatedly interfered
in employment matters at MRA. Allegedly, she refused to sign
Johnson’s second contract because she did not want her ownership
share diluted. Id. at 26-27. Pawar asserts that Swart convinced
Johnson that it was Pawar who was blocking Johnson’s exercising of
his
ownership
option.
Id.
at
26-27.
Pawar
posits
that,
subsequently, Swart and Johnson engaged in a concerted effort to
destroy MRA so that they could eliminate him from the relationship
and secure the MGH contract for themselves. Id. at 27. As a result,
Pawar claims Johnson became openly hostile to him, as well as to
other MRA and MGH employees. Id. Ultimately, Pawar claims that he
had no alternative left except to terminate Johnson’s employment.
Id. at 28.
In addition, Pawar claims Swart disrupted the hiring of Dr.
Ridgeway by undertaking a campaign to derail his credentialing
process. Id. at 27. Specifically, Pawar states that Swart raised
objections to Ridgeway with multiple members of the hospital staff
and Board at MGH, including discussing Ridgeway’s criminal past
22
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
with her neighbor and MGH Board member, Dr. Wade Stoughton (Dkt.
No. 10 at 27; Dkt. No. 122-9 at 14).
Finally,
Pawar
claims
he
attempted
to
hire
a
part-time
radiologist, Peter Caruso, M.D. (“Caruso”), but was blocked once
again by Swart (Dkt. No. 10 at 28), who, upon learning of Caruso’s
hiring, telephoned him advising him not to report for work. Id.
e.
Swart and Johnson’s Efforts to Acquire the MGH Contract
Pawar alleges that Swart and Johnson approached Duncan, MGH’s
Chief Executive Officer, seeking to terminate MRA’s contract with
MGH so the two of them could secure it. Id. at 27-28. Furthermore,
Pawar claims that proof of their intent to oust him is evident from
the fact that Swart and Johnson eventually placed a bid for the new
contract through their own independent entity (Dkt. No. 125-1 at
36-38). In furtherance of their plan, Swart, while still a Director
and shareholder of MRA, allegedly attempted to discredit Pawar by
telling MGH board members that he was “culturally different,”
alleging that millions of dollars had gone missing from MRA, and
that Pawar wrongfully had denied her access to MRA’s financial
records. Id. at 29. Further, Pawar avers that, because of Swart’s
negative statements to MGH board members, some board members
23
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
intervened
and
removed
Pawar
from
consideration
of
the
new
contract. Id. at 36.
4.
Johnson’s Factual Allegations
Johnson’s relationship with Pawar was cordial at first (Dkt.
No. 122-8 at 2, 6); Johnson socialized with Pawar and acknowledges
that
Pawar
recommended
that
Johnson
replace
him
as
Medical
Director. Id. at 2, 5. In May, 2011, however, after Johnson had
tried to enforce the ownership option in his employment contract,
their relationship began to deteriorate. Id. at 2. Pawar told
Johnson that, under the terms of his 2009 employment contract, he
was required to buy a home in Morgantown. Id. at 2, 10. When
Johnson told Pawar that this requirement was never discussed and
that the contract contained no such language, Pawar stormed around
his office yelling and screaming. Id. at 2. Johnson claims that
Pawar subsequently wrote a letter falsely claiming that Johnson was
the one who had yelled. Id.
Johnson
was
aware
that
Swart
opposed
signing
the
2011
employment contract, but believed it was due to a provision
allowing Pawar to unilaterally fire Johnson. Id. at 5, 9. Indeed,
he acknowledges that it was Swart who, as early as late 2010, had
blocked
his
ownership
effort.
24
Id.
at
5.
Nonetheless,
his
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
relationship with Swart was a good one; they even continued to work
together at PMH for a year-and-a-half after the collapse of MRA.
Id. at 2. Johnson also disagrees with Pawar’s allegations regarding
Swart’s
work
hours,
purported
issues
with
alcohol
use,
or
disappearing during the day. Id. at 6. By the early part of 2011,
Johnson believes that it was Pawar who blocked his ownership
interest in MRA based on Johnson’s failure to purchase a house in
Morgantown (Dkt. No. 122-8 at 5,8; Dkt. No. 124-1 at 16-17).
Johnson also disputes facts surrounding the MRA loan. He
acknowledges receiving the proceeds under the loan in February or
March, 2011, but maintains he only received $86,000 (Dkt. No. 122-8
at 3,10). While admitting he made no payments on the loan, Johnson
disputes his liability for the remaining principal because MRA had
terminated him “illegal[ly],” given that such action required that
both Pawar and Swart agree to it. Id. at 3-4. Further, MRA breached
the employment contract by refusing Johnson’s exercise of the
ownership option it contained. Johnson contends that MRA is liable
to him for an amount far greater than any liability he might be
subject to under the loan contract (Dkt. No. 60 at 11, 15; Dkt. No.
124-1 at 22).
25
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
In addition, Johnson alleges several other improper actions by
Pawar and MRA. First, when Pawar presented Johnson with the 2011
employment agreement, he allegedly stated that it had to be signed
right away, effectively forcing Johnson to sign it under duress
(Dkt. No. 60 at 13; Dkt. No. 122-8 at 4). Johnson further questions
whether the 2011 employment contract produced in discovery is the
actual contract he signed (Dkt. No. 124-1 at 27). Second, Johnson
claims that Pawar sent him a termination email at 8 o’clock on a
Sunday night that falsely accused him of threatening to kill Pawar,
and directed him not to report for work the following morning (Dkt.
No. 124-1 at 17). Finally, Johnson alleges that MRA and Pawar
withdrew money from his pay checks to contribute to a retirement
fund, but only deposited the money into the fund after Johnson
threatened legal action. Id. at 24-25. Johnson further claims that
it was after he first raised the issue of the missing funds that
Pawar unilaterally terminated him. Id. at 25-26.
B.
Procedural Background
On December 23, 2013, Swart filed her complaint in Monongalia
County
Circuit
Court,
asserting
26
claims
against
Pawar,
MRA,
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Krauland,
the
Kline
firm,
and
James
Bolt
(“Bolt”)6.
Swart’s
complaint sets forth five causes of action: (1) fraud against all
defendants, (2) breach of fiduciary duty against all defendants,
(3) conversion against Pawar only, (4) legal malpractice against
Krauland only, and (5) accounting malpractice against the Kline
firm and Bolt. Krauland filed a notice of removal with the Court on
January 15, 2014, and included as attachments notices of consent
from
all
the
other
defendants.
All
defendants
answered
the
complaint by January 30, 2014.
With their answer, MRA and Pawar filed a counterclaim against
Swart that pleads five causes of action against Swart: (1) breach
of fiduciary duty by MRA and Pawar, (2) breach of contract by MRA
only, (3) contractual interference by MRA only, (4) interference
with a prospective contract by Pawar only, and (5) fraud and
misrepresentation by Pawar only.
In addition, on February 13, 2014, Pawar and MRA filed a
third-party complaint against Stoughton, Johnson, and Mrs. Johnson.
The third-party complaint asserts four causes of action: (1)
interference with a prospective contract against Stoughton only,
6
Bolt was employed at the Kline firm and, along with Craig
Koryak, was the primary accountant assigned to MRA.
27
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
(2) interference with a contractual relationship against all thirdparty defendants, (3) breach of the loan contract against Johnson
only, and (4) breach of the 2009 employment contract against
Johnson only.
Swart moved to remand for lack of diversity on February 14,
2014, and to dismiss Pawar and MRA’s counterclaim for lack of
jurisdiction on February 19, 2014. The Court denied both motions by
summary order on April 22, 2014.7
On October 27, 2014, the Johnsons answered Pawar and MRA’s
third-party
complaint,
and
asserted
their
own
counterclaim.
Johnson’s counterclaim asserts one cause of action for breach of
the 2009 employment contract against MRA and Pawar for failing to
allow him to his exercise his ownership option.
7
Pawar and MRA’s summary judgment motion claims that Swart’s
answer to their counterclaim failed to respond to MRA’s claims and
responded only to Pawar (Dkt. No. 10 at 35). Thus, according to
Pawar and MRA, Swart has admitted the allegations contained in the
motion. Id. For reasons explained later, the Court need not address
that issue; however, it must clarify one misconception. In her
response, Swart contends that she has a pending motion to dismiss
MRA’s counterclaims for lack of jurisdiction and that, because it
remains pending, she need not answer the counterclaims. Swart is
incorrect (Dkt. No. 125 at 28). The Court denied Swart’s motion to
dismiss (Dkt. No. 14) during the scheduling conference held on
April 21, 2014, and confirmed the dismissal in its Summary Order
entered April 22, 2015 (Dkt. No. 30).
28
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Along
the
way,
this
case
shed
several
defendants.
Dr.
Stoughton was voluntarily dismissed on April 9, 2015. Krauland,
Bolt, and the Kline firm’s dismissal followed on August 21, 2015.
As a consequence, Swart, Pawar, and MRA are the only parties to the
original complaint and counterclaim who remain, while Pawar, MRA,
and the Johnsons are the only parties to the third-party complaint
and counterclaim.
On August 21, 2015, Swart, along with Pawar and MRA, filed
their respective motions for summary judgment, which are fully
briefed8 and ripe for review.
III. LEGAL STANDARD
Summary
documents,
judgment
is
electronically
appropriate
stored
where
the
information,
“depositions,
affidavits
or
declarations, stipulations ..., admissions, interrogatory answers,
or other materials” show that “there is no genuine dispute as to
8
It should be noted that Pawar and MRA moved the Court for
leave to exceed the page limit in their reply to Swart’s response
to their summary judgment motion on September 25, 2015, the day of
the deadline (Dkt. No. 128). They filed the reply contemporaneous
with the motion (Dkt. No. 130). The reply was thirty-nine pages,
far in excess of the limit, and mostly less than double spaced. The
Court denied the motion for leave to exceed the page limit (Dkt.
No. 133). To date, Pawar and MRA have not re-filed a compliant
reply nor moved for leave to re-file past the deadline.
29
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
any material fact and the movant is entitled to judgment as a
matter of law.” Fed R. Civ. P. 56(a), (c)(1)(A). When ruling on a
motion for summary judgment, the Court reviews all the evidence “in
the light most favorable” to the nonmoving party. Providence Square
Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846, 850 (4th Cir.2000).
The Court must avoid weighing the evidence or determining the truth
and limit its inquiry solely to a determination of whether genuine
issues of triable fact exist. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 249 (1986).
The moving party bears the initial burden of informing the
Court
of
the
basis
for
the
motion
and
of
establishing
the
nonexistence of genuine issues of fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Once the moving party has made the
necessary showing, the nonmoving party “must set forth specific
facts showing that there is a genuine issue for trial.” Anderson,
477 U.S. at 256 (internal quotation marks and citation omitted).
The “mere existence of a scintilla of evidence” favoring the
nonmoving party will not prevent the entry of summary judgment; the
evidence
must
be
such
that
a
rational
trier
of
fact
reasonably find for the nonmoving party. Id. at 248–52.
30
could
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
IV. DISCUSSION
Pawar and MRA seek summary judgment on all counts of Swart’s
complaint, and Counts I and II of their counterclaim. Further, they
seek summary judgment on Count III of their third-party complaint
against Johnson, as well as Count I of Johnson’s counterclaim.
Swart seeks summary judgment on all counts of Pawar and MRA’s
counterclaim against her. Despite the plethora of motions, the
parties vehemently dispute a myriad of material facts that bear
directly
on
their
claims
for
breach
of
contract,
breach
of
fiduciary duty, fraud, and conversion.
Among
competing
the
breach
many
disputed
facts
of
contract
claims
bearing
are
(1)
on
the
whether
parties’
certain
contracts are enforceable, (2) whether the actions in questions
equate to a breach, (3) whether breach by one party excused
performance by the other, (4) whether certain actions fall within
their fiduciary duty, (5) whether those actions were, in fact, a
breach of that duty, and (6) what damages, if any, were a result of
any breach. The parties also dispute facts surrounding Swart’s
claim of conversion, notably, what property, if any did Swart own
personally, and how Pawar exercised dominion over it so as to
deprive Swart of its possession and use. Finally, there are factual
31
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
disputes about whether the parties did or said anything that might
give
rise
to
claims
of
fraud,
whether
any
of
the
allegedly
fraudulent statements were material and false, and whether the
claimant justifiably relied on it to their detriment.
After careful review, it is clear that summary judgment on
most of the parties’ claims for breach of contract, breach of
fiduciary duty, fraud, and conversion is inappropriate at this
juncture. There are, however, three specific claims that are
susceptible to disposition on summary judgment: (1) Swart’s claim
of conversion as it pertains to Pawar’s reimbursed expenses; (2)
Pawar’s claim of interference with a prospective contract; and (3)
Pawar’s claim of fraud and misrepresentation as it pertains to his
claims that Swart was fired from WVU. Furthermore, the motions
present the legal question of whether Pawar has the authority to
bring suit on behalf of MRA against either Swart or Johnson. This
question requires the Court, as a first priority, to determine
whether Pennsylvania or West Virginia law applies to the corporate
operations of MRA.
A.
Pawar’s Authority to Bring Suit on Behalf of MRA
Swart asserts that Pawar has no legal authority to bring suit
on behalf of MRA, either in his capacity as MRA’s President or as
32
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
a shareholder through a derivative action. Further, she claims that
any such action by Pawar would be ultra vires because MRA is a
defunct corporation. Finally, she disagrees with Pawar as to which
state law governs these issues.
1.
Applicable State Law
Pawar asserts that, based on the so-called “internal affairs
doctrine,” Pennsylvania law should control on matters regarding the
internal operations of MRA. Swart, however, claims that West
Virginia
law
should
apply
based
on
the
“more
significant
relationship” exception to the internal affairs doctrine.
The internal affairs doctrine has been described by the
Supreme Court of the United States as
“a conflict of laws principle which recognizes that only
one State should have the authority to regulate a
corporation's internal affairs——matters peculiar to the
relationships among or between the corporation and its
current officers, Directors, and shareholders——because
otherwise a corporation could be faced with conflicting
demands.”
Atherton v. F.D.I.C., 519 U.S. 213, 224 (1997) (quoting Edgar v.
MITE Corp., 457 U.S. 624, 645 (1982). Under the doctrine, the law
of the state of incorporation is presumptively controlling. See id.
at 224 (citing Restatement (Second) Conflict of Laws § 309). Blind
adherence to the presumption, however, has been rejected by the
33
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Fourth Circuit. Resolution Trust Corp. v. Everhart, 37 F.3d 151,
153 (4th Cir. 1994) (citing RTC v. Chapman, 29 F.3d 1120 (7th Cir.
1994)) (“In cases of Directors' liability, automatic reference to
the law of the state of incorporation is rejected.”). Indeed,
“[t]he presumption can be rebutted by reference to (among other
things) ‘justified expectations,’ ‘certainty,’ and ‘ease in the
determination and application of the law to be applied.’” Id.
(quoting Chapman, 29 F. 3d. at 1127).
One may rebut the doctrine by showing that another state bears
a more significant relationship to parties and their claims.
F.D.I.C. v. Baldini, 983 F.Supp.2d 772 (S.D.W.Va. July 14, 2013).
The district court in Baldini quoted the Restatement (Second)
Conflict of Laws § 302(2) in recognizing the more significant
relationship exception:
The internal affairs doctrine states that “[t]he local
law of the state of incorporation will be applied to
determine such issues, except in the unusual case where,
with respect to the particular issue, some other state
has a more significant relationship to the occurrence and
the parties, in which event the local law of the other
state will be applied.”
34
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
F.D.I.C. v. Baldini, 983 F.Supp.2d 772, 777 (S.D.W.Va. Nov. 14,
2013). Swart relies exclusively on this excerpt from Baldini to
support her argument.
The district court in Baldini, however, went on to explain
that the more significant relationship exception applies only in
“unusual cases,” and “the presumption that the internal affairs
doctrine will apply is not easily overcome.” Id. at 779. It further
narrowed the exception by recognizing the distinct nature of a
breach of fiduciary duty claim, notably that such claims are among
those most central to a corporation’s internal affairs. Id. at 77778 (quoting In re Fedders North America, Inc., 405 B.R. 527, 539
(Bankr.D.Del. 2009)); see also Fry v. Trump, 681 F.Supp. 252,
255–56 (D.N.J. 1988) (“Claims involving the ‘internal affairs' of
corporations, such as breach of fiduciary duty and the like, are
subject to the laws of the state of incorporation.”). Moreover, “an
officer's alleged breach of fiduciary duty to a corporation is a
matter
peculiar
corporation
and
to
its
the
...
relationships
officers
among
and,
and
between
accordingly,
the
favors
application of the law of the state of incorporation.” Id. at 778
(internal quotation omitted).
35
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
In Baldini, one party sought to apply the law of the state of
incorporation, West Virginia, while the other party wanted to apply
the law of Florida, where the business relationship was centered.
The
business
was
headquartered
and
managed
in
Florida,
loan
documents were executed in Florida, and the purpose of the business
was to expand the Florida market. The court, however, concluded
that, “notwithstanding Florida's connection to the [business]
relationship, the facts and circumstances here are not so unusual
that Florida law should govern defendants' duties and liabilities
as officers of [the company].” Baldini, 983 F.Supp.2d at 778-79.
The court also observed that the case was not unusual and did not
clear the bar to rebut the presumption, particularly for claims of
breach of fiduciary duty. Consequently, it concluded that West
Virginia law applied. Id. at 78-79.
Here, Swart asserts that there are a number of reasons why
West Virginia has a more significant relationship with the claims
and parties than does Pennsylvania. Swart’s argument, however,
ignores the parties’ significant relationship with Pennsylvania.
For example, Pennsylvania is where Pawar lives, where MRA was
lawfully incorporated, where all of the accounting, payments, and
disbursements were handled, and where MRA’s legal services were
36
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
rendered. Furthermore, because the language in MRA’s articles of
incorporation and Bylaws was so clear,9 the parties should have had
the “justifiable expectation” that the laws of the state of
incorporation would apply to MRA.
Resolution Trust Corp., 37 F.3d
at 153.
Notwithstanding Swart’s legitimate assertions that MRA and the
parties have a significant relationship to West Virginia, this
case, like Baldini, is not unusual and does not overcome the
presumption that the law of the state of incorporation should apply
to the internal affairs of MRA. Accordingly, the Court will apply
the law of Pennsylvania to the parties’ claims regarding breach of
fiduciary duty and to determine whether Pawar may bring suit on
behalf of MRA.
2.
Authority to Bring Suit as President
Under Pennsylvania law, a corporation’s management is solely
the province of its Board of Directors. Section 1721(a) of the
Pennsylvania Business Corporation Law of 1988 (the “PABCL”) defines
the management role of a corporation’s Board:
9
Paragraph 16 of the “Amended and Restated Agreement of
Shareholders of Monongalia Radiology Associates, P.C.” states
clearly that, “This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.” (Dkt. No. 122-1 at 7).
37
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
General rule.--Unless otherwise provided by statute or in
a bylaw adopted by the shareholders, all powers
enumerated in section 1502 (relating to general powers)
and elsewhere in this subpart or otherwise vested by law
in a business corporation shall be exercised by or under
the authority of, and the business and affairs of every
business corporation shall be managed under the direction
of, a Board of Directors. If any such provision is made
in the bylaws, the powers and duties conferred or imposed
upon the Board of Directors by this subpart shall be
exercised or performed to such extent and by such person
or persons as shall be provided in the bylaws. Persons
upon whom the liabilities of Directors are imposed by
this section shall to that extent be entitled to the
rights and immunities conferred by or pursuant to this
part and other provisions of law upon Directors of a
corporation.
(emphasis added). Among the general powers under PACBL § 1502 is
the power “to sue and be sued, complain and defend and participate
as
a
party
or
otherwise
in
any
judicial,
administrative,
arbitrative or other proceeding in its corporate name.” 15 Pa.C.S.
§ 1502(a)(2). Thus, the power to file a lawsuit in MRA’s name is
squarely
within
its
Board’s
discretion
unless
specifically
delegated to an individual officer under the Bylaws.
Looking
to
MRA’s
Bylaws,
the
parties
disagree
on
which
provision of the Bylaws controls. Swart argues that Article II,
§ 11, titled “Vote or Consent of Shareholders,” limits Pawar’s
authority. That section of the Bylaws reads as follows:
38
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Whenever any corporate action, other than the election of
Directors, is to be taken by vote of the shareholders, it
shall, except as otherwise required by law, be authorized
by a majority of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote
thereon.
(Dkt. No. 120-1 at 5). Swart asserts that this language “provides
that a majority vote is required for corporate action.” (Dkt. No.
120 at 3.
This section, however, simply provides that when a corporate
action requires a vote of the shareholders, a simple majority will
authorize the action—-as opposed to a super majority or unanimous
vote. It does not speak to the power of the Board of Directors or
corporate officers under the Bylaws.10 Thus, the relevant premise
is that general powers are the Board’s, which may exercise them or
delegate them to corporate officers.
Pawar
contends
that
Article
IV,
§
5,
of
MRA’s
Bylaws
specifically confers upon him the power to sue in MRA’s name. That
provision provides in pertinent part:
The President shall be the chief executive officer of the
Corporation, shall have general and active management of
the business of the Corporation and shall see that all
10
To be sure, this provision applies to the election of
Directors, as well as the adoption and any subsequent changes to
the Bylaws, but those actions are not at issue here.
39
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
orders and resolution of the Board of Directors are
carried into effect ...
(emphasis
added).
According
to
Pawar,
“general
and
active
management” includes the ability to sue in the corporate name
without Board approval. In support, he cites a 1978 decision by the
Pennsylvania Court of Common Pleas. Harcourt Wells, Inc. v. Cohen,
6 Pa. D&C 3d 183 (Pa. Com. Pl., Phila. Cty. 1978).
In Harcourt, the president filed suit in the name of the
company against, inter alia, a corporate officer and Harcourt’s
majority shareholders. The court noted that,
[a]lthough this appears to be a case of first impression
in Pennsylvania, in other jurisdictions it is an accepted
principle that where there has been no direct
prohibition, the president of a corporation has
presumptive authority, in the discharge of his duties, to
defend and prosecute suits in the name of the
corporation.
Id. at 187-88. (citing Cicero Industrial Dev. Corp. v. Roberts, 312
N.Y.S. 2d 893 (Sup. Ct. Onandaga Co. 1970)). Further, the court
opined that “‘[i]f the president is the general manager of the
corporation, there is little doubt that he has broad powers to sue
under orthodox agency rules.’” Id. at 188 (quoting Cicero, 312
N.Y.S. 2d at 898).
40
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Pawar’s reliance on Harcourt is misplaced. In the nearly forty
years since Harcourt was decided, courts have been reluctant to
afford corporate presidents broad authority to sue in the corporate
name, particularly in instances where the suit would be against a
co-equal 50% shareholder.11 In fact, since 2006, it appears that
Pennsylvania courts have rejected outright such a broad presumption
of power. See McGuire Performance Solutions, Inc. v. Massengill,
904
A
2d
971
(Pa.
Super.
Ct.
2006)
(rejecting
Harcourt’s
presumption that a president has presumptive power to sue in
corporation’s name).
The
court
in
McGuire
also
made
the
following
important
distinction:
Further, it must be noted that Appellant had not been
sued in his capacity as a shareholder, nor did he bring
11
Indeed, the United States District Court for the District of
New Jersey, applying New York law, rejected Cicero, the case on
which Harcourt largely relied. See Ono v. Itoyama, 884 F. Supp 2d
892 (D.N.J. 1995) (“Hence, defendants argue, where the president is
a 50% shareholder and sues the other 50% shareholder, the action
must be brought derivatively. Indeed, there is ample authority for
this proposition.” (citing Executive Leasing Company, Inc. v.
Leder, 191 A.D.2d 199, 200 (N.Y. 1993)(“where there are only two
stockholders each with a 50% share, an action cannot be maintained
in the name of the corporation by one stockholder against another
with an equal interest and degree of control over corporate
affairs; the proper remedy is a stockholder's derivative
action”))).
41
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
a countersuit in the nature of a shareholder's derivative
action challenging the actions of McGuire's corporate
officers. Rather, McGuire sued Appellant as a third-party
debtor to the corporation who had defaulted on his debt
and security instruments. Even if McGuire's board of
directors had not passed a resolution authorizing
McGuire's president to institute the present lawsuit,
Appellant cites no authority that this circumstance gives
him standing to assert as a legal defense that McGuire's
president acted beyond his authority, where the lawsuit
was instituted to recover monies owed to the corporation
by Appellant in Appellant's role as a third-party debtor
to the corporation.
Id. at 977 (emphasis in original). Thus, McGuire recognized the
difference between a suit against another shareholder, and the
typical sort of suit to collect third-party debts that one might
pursue in the general and active management of a corporation.
Other
courts
have
followed
suit
in
rejecting
Harcourt’s
presumption. See e.g. Amramsky v. Zmirli, 2013 WL 373274 (E.D.Pa.
Jan. 31, 2013) (unpublished) (explicitly rejecting, albeit in a
footnote, any presumptive authority under Harcourt). In fact, the
court in Amramsky opined that any such presumption is “contrary [to
the] language of the Pennsylvania Business Corporation law” and
“does
not
appear
to
be
a
generally
accepted
principle
in
Pennsylvania law.”12 Id. at n. 2. This Court agrees.
12
Other states have also accepted the distinct nature of a suit
initiated by a 50% co-equal owner against the other 50% co-equal
42
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
The PACBL is clear; the general powers listed under PACBL §
1502(a), including the authority to bring suit, rest solely with
the Board of Directors “[u]nless otherwise provided . . . in a
bylaw adopted by the shareholders . . . .” The confusion stems from
the ambiguous language in Article IV, § 5, of MRA’s Bylaws, and
whether the power to bring a suit of this nature is within the
“general and active management of the business of the Corporation.”
This is where the distinction between suits against a 50% co-equal
owner, or any shareholder for that matter, and suits against thirdparties to enforce the rights of the corporation is critical.
Even if this Court were to accept the premise that the
language of Article IV, § 5, grants the president the power to
bring
suit,
it
doubts
this
is
the
type
of
suit
it
would
presumptively, rather than explicitly, authorize. It is selfevident that suits to enforce the corporation’s rights against
third parties, such as debt collection and contract enforcement
owner. See e.g. Barry v. Curtin, 993 F.Supp.2d 347, 352-53
(E.D.N.Y. Jan. 31, 2014) (“‘Under New York law, a shareholder
derivative action is an appropriate method for one fifty-percent
shareholder to obtain relief in the name of the corporation against
the other fifty-percent shareholder.’”) (quoting Tuscano v.
Tuscano, 403 F.Supp.2d 214, 222 (E.D.N.Y. Dec. 12, 2005)).
43
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
actions,
are
related
to
the
“business
of
the
Corporation.”
Accordingly, suits on behalf of the corporation in these instances
can rationally be considered to be within the general and active
management of that business.13 On the contrary, suits grounded in
claims against actions by shareholders, such as breach of fiduciary
duty and breach of loyalty, are not part and parcel of the business
of the corporation. Consequently, these types of suits are not
within the general and active management of the business.14
13
Under this premise, Pawar, as President of MRA, has the
presumptive power under his general and active management duties to
bring suits against third-party debtors, which is exactly what he
has done by bringing the third-party complaint on behalf of MRA
against Johnson. Of course, should MRA secure a judgment against
Johnson, any disbursement of those proceeds as profit would be
split between Pawar and Swart as co-equal shareholders.
14
In addition, one questions the presumption allowing a
President to bring suit against a 50% co-equal shareholder when
both have equal authority by virtue of their equal ownership and
equal position as the two sole Directors. See L.W. Kent and Co.,
Inc. v. Wolf, 143 A.D.2d 813, 814 (N.Y.A.D. 2 Dept., 1988) (citing
Tidy–House Paper Corp. of N.Y. v. Adlman,4 A.D.2d 619, 621 (N.Y.
1957)(“[t]he query then is whether such a presumption applies when
the president seeks to maintain an action against one who has as
much control over the plaintiff corporation as the president
himself”)). Further, the Bylaws provide that the President “shall
see that all orders and resolutions of the Board of Directors are
carried into effect.” Query whether there is an inverse presumption
prohibiting the President from bringing this type of suit because,
presumptively, there would never be an order or resolution agreed
to by one of the two directors authorizing the other to bring suit
against himself on behalf of the corporation.
44
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
In
conclusion,
the
Court
adopts
the
reasoning
of
those
jurisdictions holding that suits cannot be brought by one 50% coequal shareholder against the other 50% co-equal shareholder.
Accordingly, it concludes that Pawar cannot sue on behalf of MRA in
his capacity as its president, and that the proper avenue for such
a lawsuit is through a derivative action.15
3.
Bringing a Derivative Action as Shareholder
Under Federal Rule of Civil Procedure 23.1, “one or more
shareholders or members of a corporation or an unincorporated
association bring a derivative action to enforce a right that the
corporation or association may properly assert but has failed to
enforce.” Compliance with Rule 23.1 requires that the complaint
“state with particularity: (A) any effort by the plaintiff to
obtain
the
desired
action
from
the
directors
or
comparable
authority and, if necessary, from the shareholders or members; and
(B) the reasons for not obtaining the action or not making the
effort.” Fed. R. Civ. P. 23.1(b)(3). “Under Pennsylvania law, a
15
Interestingly, the court in Amramsky allowed the plaintiffs
to join the corporation as a defendant with its president. However,
the court ordered the corporation to secure its own counsel
separate from the president’s because of possible conflicts of
interest. Amramsky,2013 WL 373274 at *4.
45
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
shareholder cannot ordinarily bring an action on behalf of the
corporation without first making demand on the board of directors
to pursue the action.” Warden v. McLelland, 288 F.3d 105, 110 (3rd
Cir. 2002) (citing Cuker v. Mikalauskas, 692 A.2d 1042, 1049–50
(Pa. 1997)); see also Kamen v. Kemper Financial Services, Inc., 500
U.S. 90, 96 (1991) (“[Rule 23.1] clearly contemplates both the
demand requirement and the possibility that demand may be excused
. . . .”).
In Kamen, however, the Supreme Court noted that the “demand
requirement
of
Rule
23.1
shareholder
representative's
relates
to
pleadings,’
the
and
‘adequacy
does
not
of
the
itself
necessarily require demand.” Kanter v. Barella, 489 F.3d 170, 176
(3rd Cir. 2007) (quoting Kamen, 500 U.S. at 96). “Furthermore, ‘the
function of the demand doctrine in delimiting the respective powers
of the individual shareholder and of the directors to control
corporate litigation clearly is a matter of “substance,” not
“procedure.”’” Id. (quoting Kamen, 500 U.S. at 96-97).
Accordingly, “federal courts hearing shareholders' derivative
actions involving state law claims apply the federal procedural
requirement of particularized pleading, but apply state substantive
law to determine whether the facts demonstrate demand would have
46
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
been futile and can be excused.” Id. (citing Kamen, 500 U.S. at 9899; see also Gomes v. American Century Companies, Inc., 710 F.3d
811 (8th Cir. 2013) (holding that, when a claimant fails to make a
pre-suit demand prior to pursuing derivative claims that arise
under state law, a federal court must apply state law to determine
whether the demand is excused). Moreover, “what must be shown in
the complaint to justify excusing compliance with the requirement
is a matter of judicial discretion.”
7C Charles Alan Wright &
Arthur Miller, Fed. Prac. & Proc. Civ. § 1831 (3d ed. 2015) (citing
Garber v. Lego, 11 F.3d 1197 (3rd Cir. 1993) and compiling cases).
In sum, a claim fails if it is inadequately pleaded under Fed.
R. Civ. P. 23.1; if adequately pleaded, the inquiry then becomes
whether the actual demand is adequate under state law. Here,
Pawar’s counterclaim fails to plead with particularity any effort
by the plaintiff to secure the desired action from the directors of
MRA. Moreover, the counterclaim is silent as to the reasons for
failing to do so, or not making the effort as required under Rule
23.1. Therefore, Pawar has not adequately pleaded his derivative
action claim, and it therefore fails as a matter of law.
Notwithstanding the inadequacy of the counterclaim, Pawar
insists that demand was excused due to futility. This claim also
47
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
fails. In 1997, the Supreme Court of Pennsylvania abandoned the
futility exception to the demand requirement when it “specifically
adopt[ed] §§ 7.02-7.10, and § 7.13 of the ALI Principles.” Cuker v.
Mikalauskas, 692 A.2d 1042, 1049 (Pa. 1997). Section 7.03 of the
ALI Principles is clear:
Exhaustion of Intracorporate Remedies: The Demand Rule
(a) Before commencing a derivative action, a holder or a
director should be required to make a written demand upon
the board of directors of the corporation, requesting it
to prosecute the action or take suitable corrective
measures, unless demand is excused under § 7.03(b). The
demand should give notice to the board, with reasonable
specificity, of the essential facts relied upon to
support each of the claims made therein.
Id. at 1050 (emphasis added). Section 7.03(b) provides that the
lone situation when demand may be excused is when “the plaintiff
makes a specific showing that irreparable injury to the corporation
would otherwise result, and in such instances demand should be made
promptly after commencement of the action.” Id.; see also Warden v.
McLelland, 288 F.3d 105, 111 (3rd. Cir . 2002) (“But Cuker, which
established that a demand is excused only if irreparable harm to
the corporation is shown, changed the law on demand requirements in
derivative actions.’” (quoting Drain v. Covenant Life Ins. Co., 712
A.2d 273, 278 (Pa. 1998))).
48
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Pawar made no such written demand, has made no showing
whatever that irreparable injury would have resulted by making such
a demand, and failed to do so promptly after the suit was filed.
Therefore, even if Pawar’s claims had been adequately pleaded, his
failure to make demand, or to excuse the need for such, precludes
the derivative action.16 Accordingly, the Court CONCLUDES that Pawar
lacked the authority to sue Swart on behalf of MRA, and GRANTS
Swart’s motion for summary judgment as to the counterclaims of
Pawar and MRA for breach of fiduciary duty, breach of contract, and
contractual interference insofar as they pertain to MRA.
B.
Conversion
Pawar seeks partial summary judgment on Count III as it
pertains to the allegations in paragraph 129, subsections(c), (d),
(e), and (f) of Swart’s complaint. Subsection (c) of Paragraph 129
of Swart’s complaint asserts a claim of conversion against Pawar
based on allegations that MRA, through the Kline firm, reimbursed
Pawar for a long list of personal expenses couched as business
16
Swart’s motion also asserts that Pawar acted ultra vires by
unilaterally initiating suit on behalf of a “defunct corporation”
(Dkt. No. 120 at 2). As the Court has found Pawar unable to bring
suit on behalf of MRA in either his capacity as its president or
through his own derivative action, it need not address here the
question of whether Pawar acted ultra vires.
49
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
expenses. For his part, Pawar contends that the expenses were
legitimate business expenses and, nevertheless, Swart was equally
compensated through the “even-up” accounting process. Pawar further
asserts that any such claims are barred by the two-year applicable
statute of limitations.
Subsections
(d)
and
(e)
of
Count
III
accuse
Pawar
of
conversion by misrepresenting to Swart that both MGH and PMH
required him to receive a higher salary. Subsection (f) accuses
Pawar of conversion through his unilateral hiring of doctors who
required
expensive
tail
insurance.
Pawar
claims
that
the
accusations in subsections (d), (e), and (f) do not state claims
for conversion and, he therefore is entitled to summary judgment on
those claims.
The
Supreme
Court
of
Appeals
of
West
Virginia
defines
conversion as
[a]ny distinct act of dominion wrongfully exerted over the
property of another, and in denial of his rights, or
inconsistent therewith, may be treated as a conversion and it
is not necessary that the wrongdoer apply the property to his
own use. And when such conversion is proved the plaintiff is
entitled to recover irrespective of good or bad faith, care or
negligence, knowledge or ignorance.
Long v. M & M Transp., LLC, 44 F.Supp.3d 636, 651 (N.D.W.Va. Sept.
5, 2014) (quoting Syl. Pt. 17, Rodgers v. Rodgers, 399 S.E.2d 664,
50
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
668 (1990)). As a threshold issue, the Court must determine whether
any of the property that is the subject of Swart’s claims was
actually her property.
It is well settled that “the property and rights of an
incorporated company belong to the united association, acting in
the corporate name, and not to the stockholders.” Syl. Pt. 4, Moore
v. Schoppert, 22 W.Va. 282, 283 (1883). Furthermore, the Supreme
Court of Appeals of West Virginia “has held that ‘[a]n action for
conversion of personal property cannot be maintained by one without
title or right of possession.’” Thompson Development, Inc. v.
Kroger Co., 413 S.E.2d 137, 142 (W.Va. 1991) (quoting Syl. Pt. 1,
Kisner v. Commercial Credit Co., 174 S.E. 330 (W.Va. 1934)).
All of the monies that are the subject of Swart’s conversion
count in the complaint were the property of MRA, regardless of the
theory of conversion espoused by Swart. Pursuant to Fed. R. Civ. P.
17(a), “[a]n action must be prosecuted in the name of the real
party in interest,” which, in the case of the monies Swart claims
were converted, is MRA. Thus, the proper avenue would have been for
Swart to bring a derivative suit on behalf of MRA.17
17
Similar to Pawar, Swart, as Treasurer and a Director of MRA,
did not have the power to bring suit on behalf of MRA directly. See
51
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Swart, of course, could bring other causes of action seeking
damages
from
Pawar
for
the
effects
his
actions
had
on
her
personally. Indeed, this is exactly what she has done in her claims
for fraud and breach of fiduciary duty in Counts I and II.
Based
on
the
foregoing,
Swart’s
conversion
claim
fails.
Accordingly, the Court GRANTS in PART Pawar’s motion for partial
summary judgment on Swart’s claim for conversion as it pertains to
Paragraph 129, subsections (c)-(f). Furthermore, while the Court
declines to dismiss the entirety of Swart’s conversion claim, it
notes that Swart will have to make a showing that she personally,
as opposed to MRA, had title to the allegedly converted property.
Finally, as a consequence of this ruling, the Court need not
address Pawar’s statute of limitation defense.
C.
Interference with Prospective Contract
“In
West
Virginia,
to
state
a
claim
for
intentional
interference with a prospective business contract, ‘[a] plaintiff
must prove:
(1)
(2)
existence of a contractual or business relationship
or expectancy ...;
an intentional act of interference by a party
outside that relationship or expectancy ...;
generally, supra Part IV.A.2.
52
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
(3)
(4)
proof that the
sustained; and
damages.’”
interference
caused
the harm
Backwater Properties, LLC. v. Range Resources-Appalachia, LLC, 2011
WL 1706521, at *8 (N.D.W.Va. May 5, 2011) (quoting Torbett v.
Wheeling Dollar Sav. & Trust Co., 314 S.E.2d 166, 173 (W.Va.
1983)).
Pawar alleges that Swart interfered with his prospective
contract with MGH to provide radiology services after the implosion
of MRA. According to Pawar, Swart made false statements and
misrepresentations to certain members of MGH’s Board about Pawar’s
“ethnicity,
management
style,
professional
abilities,
trustworthiness, and alleged financial mishandlings” (Dkt. No. 10
at
36).
Pawar
asserts
that
those
Board
members
subsequently
“intervened in the selection process of a new provider for MGH
radiology services and Pawar was excluded from consideration.” Id.
Swart contends that there are no material facts that can support
Pawar’s allegation, and that, notably, Pawar’s response does not
refute any of those assertions. Indeed, Pawar’s response does not
defend his claim.
Even when the facts presented are considered in the light most
favorable to Pawar, his claim of interference with prospective
53
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
contract clearly is doomed. First, he has admitted that he has no
evidence of anyone to whom Swart made the disparaging remarks:
Q.
Okay. Can you give me -- can you give me the names
of people that you know for a fact Dr. Swart called
and, for lack of a better phrase, said something
bad about you?
A.
I do not have list of people, but hopefully, during
the discovery process, we can find out.
Q.
Can you give me one name today?
A.
I could not
speculative.
and
will
not
because
it
will be
(Dkt. No. 120-6 at 1-2). Pawar thus can do no more than speculate
as to whom Swart might have made disparaging remarks, let alone
whether such person was involved with the contract selection
process. His failure to respond to Swart’s motion for summary
judgment on this claim underscores that the discovery process has
revealed no such person.
Furthermore, Pawar has presented no evidence of the “existence
of a contractual or business relationship or expectancy” (beyond
his six month contract with MGH) following MRA’s collapse in
December, 2011. Further, the evidence adduced during discovery
establishes that Pawar garnered a six-month interim contract to
provide services to MGH through his newly formed entity, and that
54
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
he submitted an unsuccessful bid to provide future services through
the RFP process. When he did not win the bid, Pawar made no further
attempts to contract with MGH and began working from home:
Q.
Okay. Have you -- since MRA ceased functioning, did
you attempt to secure contracts with any hospital or
group?
A.
Mon General Hospital was the only place where I -Mon General Hospital was the only hospital where I
bid for -- through RFP. And subsequent to that,
after MRA ceased business, in December of 2011, I
continued providing services at Mon General
Hospital for six months.
Q.
Okay. Through your new entity?
A.
That is correct.
Q.
And then -- but you didn't obtain a contract?
A.
We just had a six months' contract for services.
Our contract was for six months.
Q.
And then after the six months was over, what
happened?
A.
After that I started working from home.
(Dkt. No. 120-5 at 1).
In sum, Pawar’s testimony establishes that (1) he had no
contractual
expectation;
(2)
he
cannot
show
that
Swart
intentionally interfered with any such contract by speaking to a
particular person with input into the contract selection process;
55
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
and (3) he has no evidence that any such alleged statements by
Swart caused his failure to secure the contract with MGH through
the RFP process. This is further supported by Pawar’s failure to
respond directly to this issue. Accordingly, the Court GRANTS
Swart’s motion for summary judgment on Pawar and MRA’s counterclaim
for interference with prospective contract.
D.
Pawar and MRA’s Counterclaim of Fraud and Misrepresentation
In order to maintain a claim of fraud under West Virginia law,
a the claimant must prove
(1)
(2)
(3)
that the act claimed to be fraudulent was the act
of the defendant or induced by him;
that it was material and false; that plaintiff
relied on it and was justified under the
circumstances in relying upon it; and
that he was damaged because he relied on it.
Syl. Pt. 2, Quicken Loans, Inc. v. Brown, 737 S.E.2d 640, 644
(W.Va. 2012) (internal quotations and citations omitted).
Pawar and MRA claim that Swart committed fraud and made false
and misleading misrepresentations on which Pawar relied to his
detriment. Among those misrepresentations, Pawar claims that Swart
told him she had resigned from her previous employment at WVU (Dkt.
No. 10 at 37). Pawar and MRA’s counterclaim asserts that, upon
information and belief, Swart was “either terminated or forced to
56
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
resign as a result of her poor work habits and personal conduct,
which she later exhibited in the performance of her duties with
Pawar and MRA.” Id.
Swart asserts that Pawar cannot affirmatively establish that
she was fired by WVU:
Q:
Okay. So did Dr. Marano say that Dr. Swart was
fired from
WVU?
A:
Do not remember.
(Dkt. No. 123 at 12). Pawar, on the other hand, maintains that his
testimony goes on to raise a dispute as to a material fact:
Q:
Well, that’s pretty important, isn’t it? You’ve got
that in your lawsuit, don’t you? In your
counterclaim in this case you talk about Dr. Swart
and what she said to you to -- so she could come on
board as a shareholder, and part of that relates to
what she said about WVU; right?
A:
That is correct. I do not know if she was asked to
leave or given a termination notice or she was
fired. Fired is a very --very specific word. And --
Q:
What did Dr. Marano say about that?
A:
That she was asked to leave.
Id. Moreover, Pawar points to statements by Peggy Pust, Vice
President of Operations at MGH, for support that Swart was fired:
57
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Q:
Did you ever have any occasion to hear rumor about
her separation from West Virginia, whether she was
terminated or left voluntarily?
A:
Anything I heard in rumor, again, I would never act
on, I – I understand that –
Q.
I’m not –
A.
– that she was terminated.
Q.
You understood that?
A.
Yeah, I can’t tell you who told me that, if that
was just a general understanding, but I do not know
the circumstances.
Q.
That’s all I’m –
A.
Yeah.
Q.
Not if you know any particulars. Just whether that
was rumor or whether that was something that was
discussed or somehow out there in the world of
rumor. That’s all I’m –
A.
Yeah.
(Dkt. No. 123-2 at 4).
To
Swart’s
characterization
that
these
are
“bare
double
hearsay assertions”18 (dkt. no. 120 at 9), Pawar merely reiterates
18
Presumptively, Swart claims the assertions are double hearsay
because Peggy Pust would have had to heard the rumor from someone
else, despite admitting she did not know who, and Murano also would
have had to heard the claim from someone else because he was not in
a supervisory position that would allow him to know the reasons for
her departure. See Dkt. No 129 at 13.
58
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
Dr. Marano’s alleged statement that Swart was asked to leave.19 He
contends that the statements raise an issue of material fact and
that issues of admissibility are not properly determined on motions
for summary judgment. There is no basis for such a broad assertion,
however.
Not
only
has
the
Fourth
Circuit
declined
an
absolute
prohibition on considering hearsay statements on summary judgment
motions, see Whittaker v. Morgan State University, 524 Fed. Appx.
58,
60
(4th
Cir.
2013)
(unpublished),
it
reviews
such
considerations with approbation. In Whittaker, a professor in a
wrongful termination suit sought to avoid summary judgment by
attaching to his own affidavit an unsworn letter by a former
student.
Id.
The
trial
court
concluded
that
the
letter
was
inadmissible hearsay and granted summary judgment against the
professor. Id. On appeal, the Fourth Circuit found “no abuse of
discretion
in
the
district
court's
decision
to
exclude
[the
student’s] letter from its consideration.” Id. (citing Nader v.
Blair, 549 F.3d 953, 963 (4th Cir. 2008) (noting that the district
19
Swart’s reply correctly notes that Pawar did not depose
Marano and did not include an affidavit from Marano with his
response (Dkt. No. 129 at 13).
59
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
court's determination regarding the admissibility of evidence for
summary judgment purposes is reviewed for an abuse of discretion).
The court opined that, “[w]hile a party may support its position on
summary judgment by citing to almost any material in the record,
the party's reliance on that material may be defeated if ‘the
material cited to support or dispute a fact cannot be presented in
a form that would be admissible in evidence.’” Id.
Fed.R.Civ.P. 56(c)(2)); see also
(quoting
Evans v. Techs. Applications &
Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996) (“[S]ummary judgment
affidavits cannot be conclusory or based upon hearsay.” (citations
omitted)).
Here, Pawar’s evidence is even less persuasive than the
hearsay relied on in Whittaker. The statements are hearsay, if not
double hearsay, and Pawar does not argue to the contrary. Indeed,
while implicitly agreeing that the statements are hearsay, he
contends,
erroneously,
that
a
court
ought
not
consider
admissibility at this stage. This Court, however, will not allow
naked hearsay, particularly statements as dubious as those from the
“rumor mill,” to stand alone against summary judgment. Rahrig v.
Alcatel USA Marketing, Inc., 217 Fed. Appx. 189, 193 (4th Cir.
2006)
(noting
that
testimony
based
60
on
“office
rumors”
was
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
“inadmissible hearsay and was properly not considered material
evidence to deny [defendant’s] motion for summary judgment” (citing
Greensboro Prof'l Fire Fighters Ass'n v. City of Greensboro, 64
F.3d 962, 967 (4th Cir. 1995) (“proffered evidence of un-attributed
rumors is inadmissible hearsay. Such evidence is neither admissible
at trial nor supportive of an opposition to a motion for summary
judgment”).
Because Pawar has offered no other credible evidence that
might raise an issue of material fact regarding Swart’s departure
from WVU, the Court GRANTS Swart’s motion for summary judgment
regarding
Pawar
and
misrepresentation
MRA’s
pertaining
counterclaim
to
claims
for
fraud
surrounding
and
Swart’s
departure from WVU.
SUMMARY OF THE COURT’S RULINGS
In summary, for the reasons discussed, the Court:
1.
CONCLUDES that Pennsylvania law applies to: (1) the internal
workings of MRA; (2) the parties’ claims regarding breach of
fiduciary duty; and (3) the issue of whether Pawar may bring
suit on behalf of MRA;
61
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
2.
GRANTS IN PART Pawar and MRA’s motion for summary judgment as
to Count III of Swart’s claim and DISMISSES WITH PREJUDICE the
following claims:
a.
that Pawar converted expenses as described in detail in
paragraph 129, subsection (c) of Swart’s complaint;
b.
that Pawar converted monies received as a result of his
claim that MGH and PMH required him to receive a higher
salary as described in paragraph 129, subsections (d) and
(e) of Swart’s complaint; and
c.
that Pawar converted monies spent on tail insurance
coverage of MRA employees as described in paragraph 129,
subsection (f) of Swart’s complaint;
3.
GRANTS IN PART Swart’s motion for summary judgment as to
Counts I, II, III, IV, and V of Pawar and MRA’s counterclaim
and DISMISSES WITH PREJUDICE the following claims:
a.
MRA’s claim of breach of fiduciary duty;
b.
MRA’s claim of breach of contract;
c.
MRA’s claim of contractual interference;
d.
Pawar’s claim of interference with prospective contract;
and
62
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
e.
Pawar’s
claim
that
Swart
committed
fraud
and
misrepresentation regarding the reasons for her departure
from WVU.
4.
DENIES Pawar and MRA’s motion for summary judgment on Count
III of their claim against Eric Johnson, and also on Count III
of Johnson’s counterclaim.
Summary of Remaining Claims
The following claims remain for trial:
1.
Swart’s claims of:
a.
fraud against Pawar and MRA;
b.
breach of fiduciary duty against Pawar and MRA; and
c.
conversion against Pawar only as to those items not
included in paragraph 129, subsections (c)-(f) of Swart’s
complaint
that
she
may
establish
were
her
personal
property as opposed to property of MRA;
2.
Pawar’s claims of:
a.
breach of fiduciary duty against Swart; and
b.
fraud and misrepresentation against Swart for any alleged
fraudulent statements or misrepresentations other than
those surrounding her departure from WVU;
3.
Pawar and MRA’s third-party claims of:
63
SWART V. PAWAR, ET AL.
1:14CV10
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
[DKT. NO. 117] AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 119]
a.
interference with a contractual relationship by Pawar and
MRA against Cynthia Johnson and Eric Johnson;
b.
breach of the loan contract by MRA against only Eric
Johnson; and
c.
breach of the employment contract by MRA against only
Johnson;
4.
Eric Johnson’s counterclaim of:
a.
breach of contract against Pawar and MRA.
It is so ORDERED.
The Court directs the Clerk to transmit copies of this
Memorandum Opinion and Order to counsel of record.
DATED: November 19, 2015
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
64
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