BENIGNO v. FLATLEY, (E.D.Pa. 2002)

Citation Codes

Equivalent Citations

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Docket Number

Civil Action No. 01-CV-2158

Motions

Motion to strike : In Part

Motion to strike : Granted

Judges

Edmund V. Ludwig

Acts

Judiciary And Judicial Procedure — District Courts; Jurisdiction — Jurisdiction And Venue — Diversity Of Citizenship; Amount In Controversy; Costs

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Smart Summary

Factual and Procedural Background

Plaintiff Edward Benigno, Jr. filed a lawsuit in the United States District Court for the Eastern District of Pennsylvania. The defendants—Thomas F. Flatley, American Financial Enterprise, Inc. (AFE), and K Cabo, Inc.—filed counterclaims alleging breach of contract and fraud. Plaintiff moved to dismiss or strike these counterclaims under Federal Rules of Civil Procedure 12(b)(6) and 12(f). The court exercises diversity jurisdiction under 28 U.S.C. § 1332 and applies Pennsylvania substantive law. The motion concerns the sufficiency and appropriateness of the defendants’ counterclaims and certain specific allegations and claims therein.

Legal Issues Presented

Whether the defendants’ breach of contract counterclaim should be dismissed for failure to state a claim under Rule 12(b)(6).
Whether specific allegations within the breach of contract counterclaim—such as plaintiff’s alleged "legal incapacity" and failure to act with reasonable professional competence—should be stricken under Rule 12(f).
Whether the request for judgment in favor of certain defendants is properly pleaded.
Whether the fraud counterclaim satisfies the heightened pleading requirements of Rule 9(b) and should be dismissed.
Whether claims for compensatory damages, punitive damages, and attorney’s fees should be stricken.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
General Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 325 (3d Cir. 2001)	Standard for dismissal under Fed.R.Civ.P. 12(b)(6): Accept factual allegations as true and draw all reasonable inferences in favor of non-movant; dismissal appropriate only if no relief could be granted under any set of facts.	Used to frame the standard for evaluating the motion to dismiss the counterclaims.
Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984)	Heightened pleading requirements for fraud claims under Fed.R.Civ.P. 9(b): fraud allegations must be stated with particularity, providing precision and some substantiation.	Applied to determine that the fraud counterclaim met the Rule 9(b) standard.
Kinnel v. Mid-Atlantic Mausoleums, Inc., 850 F.2d 958, 968 (3d Cir. 1988)	Pennsylvania law prohibits punitive damages for breach of contract claims.	Supported the court’s partial grant of the motion to strike punitive damages as to the breach of contract claim.
Hess v. Hess, 580 A.2d 357, 359 (Pa.Super. 1990) (quoting Rizzo v. Haines, 520 Pa. 484, 506, 555 A.2d 58, 69 (1989))	Under Pennsylvania law, punitive damages may be awarded for fraud claims.	Justified denial of motion to strike punitive damages as to the fraud claim.
Wright v. Philadelphia Gas Works, No. CIV.A.01-2655, 2001 WL 1169108, at *2 (E.D. Pa. Oct. 2, 2001)	Standard for motions to strike under Rule 12(f): motions are disfavored and should be granted only if allegations have no possible relation to the controversy and may prejudice a party.	Supported denial of motion to strike compensatory damages claim and other allegations.

Court's Reasoning and Analysis

The court applied the Rule 12(b)(6) standard by accepting the factual allegations of the defendants’ counterclaims as true and drawing all reasonable inferences in their favor. It found that dismissal of the breach of contract counterclaim was inappropriate because defendants may plead alternative claims without establishing a nexus between the alleged wrong and the relief sought. The court noted that attachments of certain agreements to the original complaint obviated the need to attach them again to the counterclaim.

Regarding the motion to strike, the court held that allegations of plaintiff’s "legal incapacity" and failure to act with reasonable professional competence were sufficiently pleaded and thus not subject to striking. The request for judgment in favor of multiple defendants was proper given the counterclaim’s language and headings.

For the fraud counterclaim, the court found that the heightened pleading standard of Rule 9(b) was met, as the allegations contained the necessary particularity and substantiation.

The court denied the motion to strike compensatory damages, reasoning that although the phrasing about damages being "determined by the Court" was inartful, it did not warrant striking. The court partially granted the motion to strike punitive damages, striking them as to the breach of contract claim in accordance with Pennsylvania law, but denied the motion as to the fraud claim where punitive damages are allowed. Finally, the court granted the motion to strike the claim for attorney’s fees, finding no cognizable basis for that claim.

Holding and Implications

The court’s rulings were as follows:

Denied the motion to dismiss the breach of contract counterclaim.
Denied the motion to strike allegations of plaintiff’s "legal incapacity" and failure to act competently.
Denied the motion to strike the request for judgment in favor of defendants Thomas F. Flatley and K Cabo, Inc.
Denied the motion to dismiss the fraud counterclaim.
Denied the motion to strike the claim for compensatory damages.
Granted in part and denied in part the motion to strike punitive damages: punitive damages were stricken as to the breach of contract claim but allowed as to the fraud claim.
Granted the motion to strike the claim for attorney’s fees.

The direct effect of this decision is that the defendants’ counterclaims for breach of contract and fraud will proceed, with certain claims and requests narrowed as described. The opinion does not establish new precedent but applies existing federal and Pennsylvania law standards to the pleadings before the court.

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Edward Benigno, Jr. v. Thomas F. Flatley, et al.

MEMORANDUM

EDMUND V. LUDWIG, J.

Plaintiff Edward Benigno, Jr. moves to "dismiss/strike" the counterclaims of defendants Thomas F. Flatley, American Financial Enterprise, Inc., and K Cabo, Inc. for breach of contract and fraud under Fed.R.Civ.P. 12(b)(6) and 12(f). Jurisdiction is diversity, 28 U.S.C. § 1332; Pennsylvania law governs the substantive issues. The motion is ruled on as follows.

Under Rule 12(b)(6), the factual allegations of a claim are accepted as true, and all reasonable inferences are drawn in the light most favorable to non-movant, and dismissal is only appropriate if it is certain that no relief could be granted to non-movant under any set of facts which could be proven. General Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 325 (3d. Cir. 2001) (deciding a motion under Rule 12(b)(6) to dismiss a counterclaim). Rule 12(f): "the court may order stricken from any pleading any . . . redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f).

Count I: Breach of Contract

a. Motion to dismiss — denied. A defendant may plead in the alternative. Fed.R.Civ.P. 8(e)(2) ("A party may . . . state as many separate claims or defenses as the party has regardless of consistency. . . ."); 5 Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1257 (2d ed. 1990) ("[T]he pleader may find it necessary to demand relief in the alternative when he is uncertain about the factual background or legal bases for his right to recovery."). Moreover, a defendant need not establish a "nexus" between the legal wrong alleged and the relief sought. Id. at § 1255 ("The sufficiency of a pleading is tested by the statement of the claim and the demand for judgment is not considered part of the claim."). Furthermore, since copies of the "master agreement" and "letter of intent" were exhibits to the complaint, their attachment to the counterclaim is unnecessary.

The counterclaim alleges that plaintiff did not have legal possession of the restaurant and bar, although defendants' answer denies having "knowledge or information sufficient to form to belief as the truth [sic] of this averment." Defendants' Counterclaim at 32; Defendants' Answer at 2.

b. Motion to strike allegations of plaintiff's "legal incapacity" to serve as general counsel and failure to act with reasonable professional competence — denied. These allegations are sufficiently pleaded in defendants' breach of contract counterclaim.

Some of the breach of contract allegations are set forth in defendants' answer and affirmative defenses. "Counterclaim-Plaintiffs, by this reference, incorporate all of the responses contained in the forgoing [sic] answer and all of the allegations made in the foregoing affirmative defenses." Defendants' Counterclaim at 32.

c. Motion to strike request for judgment in favor of defendants Thomas F. Flatley and K Cabo, Inc. — denied. While the heading of the breach of contract counterclaim refers only to defendant AFE, this is preceded by the heading, "Counterclaim by all defendants against plaintiff," and by a listing of "Thomas F. Flatley, K-Cabo, Inc. and AFE" as "Counterclaim-Plaintiffs." Defendants' Counterclaim at 31. All three defendants are named in the request for judgment on the breach of contract counterclaim. Id. at 33.

The heading: "Action by AFE for breach of contract"

Count II: Fraud

a. Motion to dismiss — denied. The counterclaim satisfies the heightened pleading requirements of Fed.R.Civ.P. 9(b) ("[A]ll averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity."). A claimant must inject "precision and some measure of substantiation into [his] allegations of fraud."Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). That standard is met here.

Both Counts

a. Motion to strike claim for compensatory damages — denied. While it is perhaps inartful to say that damages in a jury trial are "determined by the Court," the nature of the proceeding and the functions of the court and jury are beyond dispute. This objection, while perhaps well taken literally, serves little, if any, useful purpose.

"Motions to strike matters from pleadings, pursuant to . . . Rule . . . 12(f), are disfavored by the courts and should not be granted, even in cases where averments complained of are literally within provisions of federal rule providing for striking of redundant, immaterial, impertinent or scandalous matter, in absence of demonstration that allegations attacked have no possible relation to controversy and may prejudice other party." Wright v. Philadelphia Gas Works, No. CIV.A.01-2655, 2001 WL 1169108, at *2 (E.D.Pa Oct. 2, 2001); See 5A Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1382 (2d ed. 1990) (reiterating this standard and noting that "motions to strike on these grounds are not favored, often being considered `time wasters'").

b. Motion to strike claim for punitive damages — granted in part and denied in part. Under Pennsylvania Law, punitive damages are not awardable for breach of contract, Kinnel v. Mid-Atlantic Mausoleums, Inc., 850 F.2d 958, 968 (3d Cir. 1988), but may be recovered for fraud,Hess v. Hess, 580 A.2d 357, 359 (Pa.Super. 1990) (quoting Rizzo v. Haines, 520 Pa. 484, 506, 555 A.2d 58, 69 (1989)).

Defendants' request to strike plaintiff's claim for punitive damages and attorney's fees is not properly asserted in a brief.

c. Motion to strike claim for attorney's fees — granted. There is no cognizable basis on which this claim may proceed.

ORDER

AND NOW, this 29th day of January, 2002, plaintiff Edward Benigno, Jr.'s motion to "dismiss/strike" defendants' counterclaims is ruled on as follows:

1. Motion to dismiss Count I (Breach of Contract) — denied.

2. Motion to strike allegations of plaintiff's "legal incapacity" — denied.

3. Motion to strike request for judgment in favor of defendants Thomas F. Flatley and K Cabo, Inc. — denied.

4. Motion to dismiss Count II (fraud) — denied.

5. Motion to strike claim for compensatory damages — denied.

6. Motion to strike claims for punitive damages — granted in part and denied in part. The phrase "2. For punitive damages;" is stricken from page 33 of Defendants' Answer, Affirmative Defenses, and Counterclaim.

7. Motion to strike claims for attorney's fees — granted. The phrase "3. For attorney's fees and the costs of defending against the Plaintiff's action and prosecuting the counterclaims;" is stricken from pages 33 and 36 of Defendants' Answer, Affirmative Defenses, and Counterclaim.