Horbal, A. v. Giant Eagle, Inc. ( 2018 )

J-A18013-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
ANTHONY HORBAL AND HERC IN THE SUPERIOR COURT OF
MANAGEMENT SERVICES, LLC. PENNSYLVANIA
v.
GIANT EAGLE, INC., GIANT EAGLE OF
DELAWARE INC., DANIEL SHAPIRA,
DAVID SHAPIRA AND LAURA KARET
Appellants No. 1454 WDA 2016
Appeal from the Order June 30, 2016
In the Court of Common Pleas of Allegheny County
Civil Division at No(s): GD-14-013654
BEFORE: BOWES, LAZARUS, AND OTT, JJ.
MEMORANDUM BY BOWES, J.: FILED JANUARY 17, 2018
Giant Eagle, Inc., Giant Eagle of Delaware, Inc., Daniel Shapira, David
Shapira, and Laura Karet (collectively “Giant Eagle”), appeal from the June
30, 2016 order sustaining in part, and overruling in part, their preliminary
objections to the second amended complaint filed by Anthony Horbal and
HERC Management Services, LLC (“Horbal”).1 We reverse in part, affirm in
part, and remand for proceedings consistent herewith.
____________________________________________
1
As set forth in the text, infra, Giant Eagle successfully petitioned for review
of this interlocutory order.
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Horbal commenced this action against Giant Eagle by filing a complaint
on August 6, 2014. The complaint alleged the following. Horbal and Giant
Eagle were both investors in an automated guided vehicle company, Seegrid
Corporation (“Seegrid”). Seegrid achieved some success, but failed to
sustain the revenue necessary to continue operations without regular
infusions of capital. In addition to providing capital, Horbal and Giant Eagle
also purchased debt from the corporation, eventually becoming Seegrid’s
two largest creditors. However, by late 2013, Horbal could no longer
continue investing additional capital in Seegrid. Horbal alleged that, in
November 2013, Giant Eagle began taking steps to ensure that Seegrid
remained undercapitalized so that it could increase its stake in the company
at Horbal’s expense.
Horbal contended that, in furtherance of this endeavor, Giant Eagle
denied Seegrid the opportunity to raise capital from outside investors,
fraudulently removed Anthony Horbal from the Board of Directors, prepared
term sheets to provide Seegrid with added capital which inured solely to
Giant Eagle’s benefit, presented those offers at the last possible instant to
preclude the Board from properly scrutinizing them, and prepared, if
necessary, to force Seegrid into bankruptcy. Horbal averred that Giant
Eagle pursued this course of action in order to gain full control over Seegrid
while diluting Horbal’s ownership interest. Horbal maintained that Giant
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Eagle, as Seegrid’s controlling shareholder, breached its fiduciary duties to
the other minority shareholders.
In addition, Horbal contended that Giant Eagle tortiously interfered
with Anthony Horbal’s consulting and management services agreement with
Seegrid. Anthony Horbal was the company’s President, and then its CEO,
from 2010 until July 2014. Horbal alleged that Giant Eagle exerted undue
influence over the Board of Directors not only to facilitate its fraudulent
conduct, but also to remove Anthony Horbal from his management position
and seat on the Board of Directors.
On August 8, 2014, two days after filing the instant complaint, Horbal
filed a derivative complaint on behalf of Seegrid raising substantially the
same claims in the Court of Chancery of the State of Delaware. Thereafter,
on October 21, 2014, Seegrid commenced a Chapter 11 bankruptcy case in
the Bankruptcy Court for the District of Delaware, and this Pennsylvania
case and the Delaware action were stayed pending the resolution of the
bankruptcy case. Before the Bankruptcy Court, Seegrid sought confirmation
of its prepackaged reorganization plan wherein, inter alia, Giant Eagle would
purchase $10 million in Series A preferred shares for a 40% interest in a
new company (“New Seegrid”), to which Seegrid would convey all of its
operating assets. In exchange for conveying its operating assets, Seegrid
would acquire shares of New Seegrid common stock amounting to a 45%
interest. The remaining 15% interest would be reserved for management
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and employees of New Seegrid. Additional Series A shares beyond Giant
Eagle’s initial $10 million would be offered to Seegrid’s other stockholders
and convertible debt holders.
On November 17, 2014, Horbal instituted a complaint in adversary
action in the Bankruptcy Court on behalf of itself and other creditors and
non-controlling shareholders seeking subordination of Giant Eagle’s claims
against Seegrid. That complaint raised substantially similar allegations as
those outlined above regarding Giant Eagle’s conduct prior to the
commencement of the bankruptcy action, including alleged breaches of
fiduciary duties owed to Seegrid’s minority shareholders. Horbal
subsequently withdrew its complaint for equitable subordination.
Nevertheless, it retained its objection to the reorganization plan, and it
raised allegations against Giant Eagle in its objections to Seegrid’s disclosure
statement as to the valuation utilized in that statement and the one-sided
benefit that Giant Eagle positioned itself to receive for its participation in the
plan.
Subsequently, the Bankruptcy Court held a combined disclosure
statement and confirmation hearing in which multiple witnesses testified.
On January 20, 2015, the Bankruptcy Court filed its final order approving
Seegrid’s disclosure statement and confirming its reorganization plan. In so
finding, the Bankruptcy Court determined that, pursuant to 11 U.S.C. §
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1129(a)(3), Seegrid proposed the plan in good faith, and that the plan was
the product of arm’s length negotiation with Giant Eagle.
Following this determination, Horbal began litigating its shareholder
derivative suit before the Delaware Chancery Court. After a hearing on July
14, 2015, the Chancery Court found that the Bankruptcy Court’s ruling
collaterally estopped Horbal from asserting the factual complaints regarding
Giant Eagle’s purported misconduct, and dismissed the matter with
prejudice. Horbal v. Shapira, 2015 WL 4401337 (Del.Ch. 2015), aff’d 133
A.3d 201 (Del. 2016).
Meanwhile, the Pennsylvania litigation resumed. Prior to the
commencement of the bankruptcy case, Giant Eagle had filed preliminary
objections to Horbal’s initial complaint. Horbal filed an amended complaint
on October 28, 2014, before the matter was stayed. On November 17,
2014, Giant Eagle filed preliminary objections to Horbal’s first amended
complaint. Thereafter, on January 29, 2015, Giant Eagle filed a reply brief in
support of its preliminary objections to Horbal’s first amended complaint
asserting, for the first time, that the Bankruptcy Court’s factual findings in
confirming Seegrid’s reorganization plan collaterally estopped Horbal from
pursuing claims against it in Pennsylvania. Horbal argued that collateral
estoppel was an affirmative defense, and thus, could not be raised in
preliminary objections. Nonetheless, by order dated February 6, 2015, the
trial court noted that Horbal had waived its procedural objection to Giant
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Eagle’s preliminary objections on the basis of collateral estoppel and
scheduled a hearing on the issue. On May 12, 2015, the trial court filed an
order overruling Giant Eagle’s preliminary objections.
Giant Eagle filed a notice of appeal from the trial court’s May 12,
2015 order. On July 8, 2015, this Court quashed the appeal as
interlocutory. Horbal v. Giant Eagle, Inc., 815 WDA 2015 (Order, July 8,
2015). On August 15, 2015, Giant Eagle filed an answer and new matter to
Horbal’s first amended complaint largely denying the allegations lodged
therein and raising as new matter its claim that Horbal’s averments were
barred by collateral estoppel. After Horbal replied to Giant Eagle’s new
matter, Giant Eagle moved for judgment on the pleadings. The trial court
denied Giant Eagle’s motion and scheduled the matter for trial beginning on
November 9, 2015. However, the matter did not proceed to trial as the
parties waited for the Delaware Supreme Court to rule on Horbal’s appeal
pending there, which subsequently affirmed the Delaware Chancery Court’s
ruling that Horbal’s derivative suit was barred by collateral estoppel.
After that extended delay, Horbal filed a second amended complaint
identical to its previous complaints in all relevant regards, but adding Daniel
Shapira, David Shapira, and Laura Karet as additional defendants.2 Giant
____________________________________________
2
Giant Eagle appointed Daniel Shapira, who served as its outside counsel, to
Seegrid’s Board of Directors. At various times, David Shapira served as
(Footnote Continued Next Page)
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Eagle then filed preliminary objections to Horbal’s second amended
complaint, contending, inter alia, that the decisions by both the Delaware
Bankruptcy Court and also the Delaware Supreme Court collaterally
estopped Horbal from proceeding with its suit. On June 30, 2016, the court
partially sustained Giant Eagle’s preliminary objections as to certain
scandalous and impertinent material, but overruled, without explanation, the
preliminary objections in all other regards, including that the matter was
barred by collateral estoppel. The trial court did not respond to a request by
Giant Eagle to certify that ruling for immediate appeal pursuant to 42
Pa.C.S. § 702(b), and thus, it was deemed denied on July 30, 2016.
Subsequently, Giant Eagle petitioned this Court for review of the trial court’s
failure to certify for immediate appeal its decision to overrule Giant Eagle’s
preliminary objections based on its allegation that the matter was barred by
collateral estoppel. We granted Giant Eagle’s petition for review. The trial
court declined to issue a Rule 1925(a) opinion,3 and this matter is now
before us.
Giant Eagle raises seven questions for our consideration:
_______________________
(Footnote Continued)
CEO, President, and Executive Chairman of Giant Eagle. At all times
relevant to this matter, Laura Karet served as CEO of Giant Eagle.
3
The trial court declined to issue an opinion based on its belief that the
record as it stands was sufficient for review.
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I. Whether Pennsylvania courts must follow the Delaware
Supreme Court’s lead in applying collateral estoppel to
dismiss a breach of fiduciary duty claim identical to the
one asserted here based on findings made by the
Bankruptcy Court during a plan confirmation?
II. Whether [Horbal] lacks standing to assert a direct claim for
breach of fiduciary duty where the only loss alleged is a
diminution of the value of its investment in [Seegrid]?
III. Whether [Horbal’s] conclusory allegation that Giant Eagle
controlled Seegrid must yield to the Bankruptcy Court’s
findings that Giant Eagle was only a minority investor in
Seegrid who, at all times, dealt with Seegrid on an arm’s
length basis?
IV. Whether the conclusory allegation by [Horbal] that
Defendant-Appellants Daniel Shapira, David Shapira, and
Laura Karet (collectively, the “Shapiras”) control Giant
Eagle is fatally deficient given the undisputed fact that
they have only a small fractional ownership interest in
Giant Eagle?
V. Whether the ratification of the Bankruptcy Plan by all
Seegrid investors, except Mr. [Anthony] Horbal, precludes
[Horbal’s] breach of fiduciary duty claim based on the
allegedly unfair treatment they received under the plan?
VI. Whether an allegedly controlling shareholder, like Giant
Eagle, is immune from a claim that it breached its fiduciary
duty to a minority shareholder by funding a Bankruptcy
Plan when all other shareholders are offered the
opportunity to invest in the Plan on precisely the same
terms and conditions?
VII. Whether the Pennsylvania Supreme Court’s decision in
Hilbert v. Roth, 149 A.2d 648 ([Pa.] 1959) precludes
[Horbal] from pursuing a claim for punitive damages based
on alleged tortious interference given that it no longer has
a claim for compensatory damages after having fully
recovered them in a prior proceeding?
Appellant’s brief at 4-5.
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As a preliminary matter, Horbal contends that our review should be
limited to the single issue Giant Eagle raised in its petition for review. Giant
Eagle filed a petition for review pursuant to Pa.R.A.P. 1511, seeking our
consideration of the trial court’s refusal to certify its June 30, 2016
interlocutory order for immediate appeal. It argued that the trial court’s
partial overruling of its preliminary objections presented a controlling
question of law as to which there was substantial ground for difference of
opinion and that an immediate appeal from the order would materially
advance the ultimate termination of the matter. See 42 Pa.C.S. § 702(b).
In this vein, Giant Eagle contended that the trial court erred in failing
to bar Horbal’s claim based on the Delaware Supreme Court’s determination
that the bankruptcy order collaterally estopped the claims asserted by
Horbal. Giant Eagle argued that “[a]n irreconcilable conflict exists between
the Delaware Supreme Court – which relied on the same Bankruptcy Order
to estop the same Horbal Group Plaintiffs from asserting the same claims in
Delaware Chancery Court – and the trial judge’s refusal to apply collateral
estoppel to [Horbal’s] identical claims in this action.” Petition for Review,
8/11/16, at 2 (emphasis omitted). Essentially, Giant Eagle posited that both
the Bankruptcy Court’s findings and the Delaware Supreme Court’s
determination that Horbal was collaterally estopped by those findings,
provided independent bases for determining that Horbal was precluded from
proceeding herein. We granted Giant Eagle’s petition for review based on
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our determination that this argument satisfies the dictates of 42 Pa.C.S. §
702(b) to permit our review of an otherwise interlocutory order.
The scope of our review following the grant of a petition for review is
limited to the issues raised before the trial court. Pa.R.A.P. 1551.
Previously, if an issue was not included in the petition for review, or fairly
comprised by it, that issue was waived. See North Hills Passavant Hosp.
v. Department of Health, 674 A.2d 742, 745 (Pa.Cmwlth. 1996).
However, this rule, and the case law interpreting it, was based on a prior
formulation of Pa.R.A.P. 1513. See Graystone Academy Charter School
v. Coatesville Area School Dist., 99 A.3d 125, 132 (Pa.Cmwlth. 2014)
(noting “Issues not raised or ‘fairly comprised’ within the petition for review
are deemed waived.”)).
The relevant subsection of the Rule was amended in 2014. The
current formulation of Rule 1513 reads, in pertinent part, “[a]n appellate
jurisdiction petition for review shall contain . . . a general statement of the
objections to the order or other determination, but the omission of an issue
from the statement shall not be the basis for a finding of waiver if the court
is able to address the issue based on the certified record.” Pa.R.A.P.
1513(d)(5). Hence, contrary to Horbal’s protestations, we may consider
Giant Eagle’s additional six additional issues if they are otherwise preserved
for our review and the certified record permits us to address those claims.
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Nevertheless, in light of our disposition of this matter, as discussed infra, we
need only consider Giant Eagle’s primary contention.
Giant Eagle challenges the trial court’s overruling of its preliminary
objection that Horbal’s suit is barred by collateral estoppel. Thus, we adhere
to the following guidelines:
Our standard of review of an order of the trial court overruling or
granting preliminary objections is to determine whether the trial
court committed an error of law. When considering the
appropriateness of a ruling on preliminary objections, the
appellate court must apply the same standard as the trial court.
Perelman v. Perelman, 125 A.3d 1259, 1263 (Pa.Super. 2015) (citation
omitted).
As noted above, Giant Eagle premised its preliminary objections on the
preclusive effects of the Delaware Supreme Court’s decision in Horbal’s
derivative suit, and the Delaware Bankruptcy Court’s findings of facts and
conclusions of law enunciated when it confirmed Seegrid’s Chapter 11
reorganization plan. We have previously observed, “[c]ollateral estoppel, or
issue preclusion, is a doctrine which prevents re-litigation of an issue in a
later action, despite the fact that it is based on a cause of action different
from the one previously litigated.” Weissberger v. Myers, 90 A.3d 730,
733 (Pa.Super. 2014) (citation omitted). Collateral estoppel applies to bar
re-litigation of an issue where
(1) the issue decided in the prior case is identical to one
presented in the later case; (2) there was a final judgment on
the merits; (3) the party against whom the plea is asserted was
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a party or in privity with a party in the prior case; (4) the party
or person privy to the party against whom the doctrine is
asserted had a full and fair opportunity to litigate the issue in the
prior proceeding and (5) the determination in the prior
proceeding was essential to the judgment.
Id. (citation omitted); Century Indemnity Company v. OneBeacon
Insurance Company, 2017 Pa. Super. 328 (Pa.Super. 2017) at *17-18.
Finally, “[t]he judgments of the federal courts are owed their full force and
effect in state courts.” Weissberger, supra at 733 (citing In re
Stevenson, 40 A.3d 1212, 1222 (Pa. 2012)).
Under the Bankruptcy Code, in order to be confirmed, a plan must be
“proposed in good faith and not by any means forbidden by law.” 11 U.S.C.
§ 1129(a)(3). This standard requires that the plan be “proposed with
honesty, good intentions and a basis for expecting that a reorganization can
be effected with results consistent with the objectives and purposes of the
Bankruptcy Code.” In re Hercules Offshore, Inc., 565 B.R. 732, 764
(Bankr. Del. 2016) (citation omitted). The Bankruptcy Court evaluates the
totality of the circumstances, and has “considerable judicial discretion in
finding good faith, with the most important feature being an inquiry into the
fundamental fairness of the plan.” Id. (internal quotation marks and citation
omitted). This determination “is made on the information available to the
court at the confirmation hearing, and is not limited to the information
available when the plan was first proposed.” Id. Thus, “information
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affecting the good faith determination might be added to the record
throughout the process leading up to confirmation.” Id. (brackets omitted).
We begin our analysis by setting forth the relevant findings of the
Bankruptcy Court for the District of Delaware and the Delaware Chancery
Court. During the confirmation hearing, the Bankruptcy Court observed the
following:
I turn first to good faith. The burden rests with [Seegrid],
not Giant Eagle, to demonstrate that [Seegrid] has proposed the
plan in good faith. When evaluating good faith, the Third Circuit
has instructed in the W.R. Grace case [(In re WR Grace & Co.,
et al., 729 F.3d 332 (3rd Cir. 2013)], that the important point of
inquiry is the plan itself, and whether such plan will fairly
achieve a result consistent with the objectives and purposes of
the Bankruptcy Code. And the court finds that [Seegrid] has
carried its burden in this regard.
The record detailing [Seegrid’s] actions in the months and
year leading up to the eventual bankruptcy and solicitation of
the prepackaged plan have been well developed through the
testimony of Messrs. Buchanan, Kalson, and Heilman. It is
undisputed that for a lengthy period of time [Seegrid] needed
additional liquidity to survive. The record reflects that Giant
Eagle, and to a lesser extent [Horbal], provided funding over
many years when Seegrid was in need. [Seegrid] has also
shown that in the months and year leading up to the bankruptcy
filing it pursued numerous alternatives available to it under the
circumstances. The evidence presented details how [Seegrid]
engaged multiple investment bankers or financial advisors . . . to
seek out potential investors or purchasers.
In addition, the record reflects that Adams Capital,
Riverside Capital, Zouk Capital, Plug Power and other investors
from the Middle East have engaged in due diligence, or
expressed at least some interest in investing in [Seegrid].
Despite all of these efforts, [Seegrid] was unable to secure
significant or meaningful third-party financing or to find an
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interested purchaser in a context that would resolve its pressing
economic challenges.
Having exhausted all avenues, the record reflects that
Giant Eagle presented [Seegrid] with a term sheet in July 2014
that ultimately formed the backbone of the existing plan of
reorganization. [Horbal] has attempted to show that because
Giant Eagle devised the plan to create New Seegrid and to
transfer all assets into it and to increase its own control or
position, [Seegrid’s] plan that memorialized this transaction was
not in good faith. The record does not support this assertion.
N.T. Delaware Bankruptcy Court, 1/15/15, at 1035-1037.
The Bankruptcy Court made the following findings in confirming
Seegrid’s reorganization plan:
15. Plan Proposed in Good Faith (11 U.S.C. § 1129(a)(3)). The
record demonstrates that [Seegrid] and its board diligently
searched for other sources of capital, hiring multiple financial
advisors over a period of years and directly approach numerous
sources of financing. No viable alternatives to the Plan were
found; the Plan is the only viable option to continue its business.
The Plan is the product of good faith, arm’s length negotiations
between [Seegrid], by and through its directors, officers and
advisors, and [Giant Eagle]. Following such negotiations,
[Seegrid], by and through its directors, officers and advisors,
proposed the Plan in good faith and not by any means forbidden
by law, thereby satisfying section 1129(a)(3) of the Bankruptcy
Code. [Seegrid’s] and its board’s good faith in connection with
the Plan is evidence from the facts and the record of this
Reorganization Case, the Disclosure Statement and the hearing
thereon, and the record of the Combined Hearing and other
proceedings held in this Reorganization Case. The Plan was
negotiated and proposed with the purpose of maximizing the
value of [Seegrid’s] Estate for the benefit of all stakeholders and
effectuating successful reorganization of [Seegrid].
....
35. Allowance of Giant Eagle’s Claims. Giant Eagle is
[Seegrid’s] largest shareholder and lender. Giant Eagle owns
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approximately 31.5% of [Seegrid’s] outstanding shares and has
loaned [Seegrid] approximately $34 million. Substantially all of
the loans made to [Seegrid] by Giant Eagle were open to all
investors, including [Horbal] on the same terms as available to
Giant Eagle. None of Giant Eagle’s claims against, or interest in,
[Seegrid] are subject to any objection, recharacterization or
equitable subordination action.
Delaware Bankruptcy Court Final Order, 1/20/15, at ¶ 15, 35.
The Delaware Chancery Court dismissed Horbal’s derivative complaint
on two grounds: that Horbal lacked standing to pursue its claims, and that
its claims were barred by collateral estoppel. In rendering its decision that
Horbal’s derivative action was barred by collateral estoppel, the Delaware
Court of Chancery stated:
A second ground for disposing of the case today is
collateral estoppel. Now, this is an issue that was raised in
reply, but then the plaintiffs filed a sur-reply, such that it was
fully presented. The essential argument here is that through the
course of the bankruptcy proceeding, there were findings and
determinations that have collateral estoppel effects on this
Court.
I did read all of [the bankruptcy court] Judge Shannon’s
rulings, and I looked through the plan. It seemed to me that
one of the key arguments that [Horbal] made in objecting to the
plan was that the plan had been proposed in bad faith,
essentially the culmination of the scheme that he had outlined in
the complaint in front of me.
It was my impression from reviewing Judge Shannon’s
ruling that, during the three-day trial he had – in which there
were seven witnesses, and there was a video deposition of Mr.
Horbal that was played live, and I understand from Mr. Nachbar
that . . . there were also witnesses presented on the papers, for
a total of 12 witnesses – that Judge Shannon considered the idea
that the plan was the culmination of these bad acts by Giant
Eagle. He reviewed the background of the effort. He talked
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about the efforts that were made. He made comments on what
was done during the process by the lead director who was left on
the board. I think that Judge Shannon would not have approved
the plan had he thought that this was all part of a scheme by
Giant Eagle culminating in the bad-faith achievement of what
they ostensibly had sought all along.
I am specifically relying on not just the [bankruptcy court]
transcript, but also two paragraphs of the confirmation order
[(¶¶ 15 and 35)].
....
This seems, to me, to be something that was actually
litigated and necessary to the plan. I don’t think that I could
reach a contrary conclusion in this case as to everything that
happened over the years being a bad-faith breach of a fiduciary
duty or a self-interested scheme and not reach a result contrary
to this finding. . . . If this litigation were to go back now and
undo some of the debt investments made by Giant Eagle on
fiduciary grounds, that would be a finding that would be directly
contrary to paragraph 35 of the confirmation order, which
allowed Giant Eagle’s claims. It’s therefore my view that this
action is barred by principles of collateral estoppel.
N.T. Delaware Chancery Court, 7/14/15, at 75-79; Order, 7/17/15, at
unnumbered 4.
Giant Eagle’s argument is two-fold. First, it asserts that collateral
estoppel applies herein to bar Horbal’s claim that Giant Eagle’s participation
in the formulation, negotiation, and confirmation of Seegrid’s Chapter 11
reorganization plan constituted a breach of its fiduciary duty to other
minority shareholders. It maintains that this inquiry is the same issue
Horbal presented before the Bankruptcy Court, that the Bankruptcy Court’s
ruling constituted a final order, and that the findings contained therein
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directly contradict the factual basis of Horbal’s present complaint. Giant
Eagle claims that Horbal was a party to the plan confirmation proceeding,
and that Horbal had a full and fair opportunity to litigate these issues prior to
the confirmation of the plan since the parties conducted discovery,
depositions, and four days of trial before the Bankruptcy Court. Finally,
Giant Eagle argues that the court’s findings were not merely dicta, but were
essential to the court’s confirmation of the plan.
Second, Giant Eagle asserts that the Delaware Supreme Court’s
affirmance of the Chancery Court’s application of collateral estoppel to
Horbal’s derivative claims also precludes Horbal from maintaining suit
herein. Giant Eagle designates the effect of the Delaware Supreme Court’s
ruling as “double collateral estoppel,” and argues that this Court “should
respect the Delaware Supreme Court’s decision” based on the principle of
judicial comity. Appellant’s brief at 29-30.
Since we find that comity necessitates that this Court should defer to
the decision of the Delaware Supreme Court, we need not analyze whether
the findings of the Bankruptcy Court preclude Horbal from maintaining its
direct claims under Pennsylvania law. Judicial comity “refers to the principle
that one state ‘will give effect to laws and judicial decisions of another state
out of deference and mutual respect, rather than out of duty.’” Neyman v.
Buckley, 153 A.3d 1010, 1017 (Pa.Super. 2016) (citation omitted). In this
vein, we have noted:
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We recognize the demands of comity, and our courts should be,
as they are, always ready to accede to them; but comity
requires us that we administer the laws of another state between
suitors in our courts whenever this becomes necessary to the
proper administration of justice in the particular case. It does
not require us to dismiss the parties with directions to proceed to
Maine or California or some other state in which the contract was
made, or the parties were domiciled, so that the law of a given
state may be administered by the courts of that state, but simply
that we shall apply the same rule that the courts of the proper
state would apply.
Id. (citation omitted). Nevertheless, “application of comity is a matter of
judicial discretion.” Id. (citation omitted).
Instantly, we emphasize that collateral estoppel pertains to issue
preclusion, and that it applies to bar a new cause of action if the factual or
legal predicate underlying those claims has previously been determined by a
court of concurrent jurisdiction. Weissberger, supra. Although Horbal
brought a derivative action on behalf of Seegrid in Delaware, and a direct
action here, the factual basis of those complaints is identical, and thus, there
is no impediment to applying the doctrine of collateral estoppel to bar
Horbal’s direct claims herein. Further, Horbal alleged that Giant Eagle
breached its fiduciary duties to its fellow minority shareholders in Seegrid, a
Delaware corporation. Claims of this nature are subject to Delaware law.
15 Pa.C.S. § 4145(a); In re Estate of Hall, 731 A.2d 617, 622 (Pa.Super.
1999). The Delaware Supreme Court has long been known for its expertise
in corporate matters, which also militates in favor of acceding to the
demands of comity in this case.
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In addition, the law regarding collateral estoppel, as applied by the
Delaware Supreme Court, is substantially similar to the test utilized in this
Commonwealth. Under Delaware law, the “preclusive effect of a foreign
judgment is measured by standards of the rendering forum.” Acierno v.
New Castle Cty., 679 A.2d 455, 459 (Del. 1996). Since the Bankruptcy
Court issued the disputed opinion, the Delaware Supreme Court relied upon
the law of the United States Court of Appeals for the Third Circuit. The Third
Circuit evaluates the following requirements when determining whether
collateral estoppel applies: “(1) the identical issue was previously
adjudicated; (2) the issue was actually litigated; (3) the previous
determination was necessary to the decision; and (4) the party being
precluded from relitigating the issue was fully represented in the prior
action.” Jean Alexander Cosmetics, Inc. v. L’Oreal USA, Inc., 458 F.3d
244, 249 (3rd Cir. 2006). We observe that the test is co-extensive with our
own and, similar to our own standards, dedicated to ensuring that a party’s
due process rights are not violated by the operation of the principle.
Moreover, in light of the extensive resources expended in the litigation
of this matter in Bankruptcy Court, Delaware state court, arbitration, and
now before the courts of this Commonwealth, we find it would not be an
efficient use of judicial assets to permit the continued pursuit of Horbal’s
claims. The parties and our sister jurisdictions have exhausted significant
resources in disposing of the very issues before us. Thus, for this additional
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reason, we defer to the ruling of the Delaware Supreme Court that Horbal’s
claim that Giant Eagle breached its fiduciary duties is barred by collateral
estoppel.
Finally, in its second amended complaint, Horbal alleged that Giant
Eagle tortiously interfered with Anthony Horbal’s consulting and
management services agreement with Seegrid. This claim was not raised in
the derivative complaint adjudicated before the Delaware Supreme Court,
and thus, our deference to the Delaware Supreme Court’s determination
does not settle that issue. In this regard, Horbal alleged that Giant Eagle
exercised impermissible control over members of Seegrid’s Board of
Directors, and conspired to terminate Anthony Horbal from his position as
Seegrid’s CEO. Those allegations do not necessarily run counter to the
Bankruptcy Court’s determination that Giant Eagle engaged in fair, arm’s
length negotiations with Seegrid when proposing and formulating the
reorganization plan.
Instantly, Giant Eagle filed with this Court a supplement to the
certified record pursuant to Pa.R.A.P. 1926, which included a settlement and
release agreement. Giant Eagle contends that this agreement “fully and
completely” resolved Horbal’s claim for compensatory damages arising from
this alleged tortious conduct. Appellant’s brief at 44. It maintains that,
because Horbal has been fully recompensed for compensatory damages, it
cannot now proceed on a “naked claim for punitive damages.” Id. at 45.
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Horbal does not dispute the existence of the settlement agreement, but
rather, it claims that it has a basis to seek punitive damages since Giant
Eagle may still be found liable for compensatory damages beyond those
owed by Seegrid pursuant to the Bankruptcy Court order, for attorney fees,
and for consequential damages and disgorgement.
As previously stated, this matter is not disposed of by our analysis
above. We note that the trial court did not have the benefit of the
settlement agreement when it considered Giant Eagle’s preliminary
objections, and therefore, it did not determine the effect of that document
on Horbal’s remaining claim. Further, the settlement agreement arose as a
result of a proof of claim regarding post-termination fees owed to Mr. Horbal
by Seegrid, which was litigated in post-confirmation proceedings before the
Bankruptcy Court. The Bankruptcy Court determined that the consulting and
management services agreement was controlling at the time Mr. Horbal was
terminated from his position of CEO of Seegrid in 2014, and, under the
terms of that agreement, that Mr. Horbal was owed $282,537.66.
Bankruptcy Court Opinion, 10/27/16, at 11-21.
Thereafter, Horbal and Seegrid memorialized Seegrid’s agreement to
remunerate Mr. Horbal according to the terms of the Bankruptcy Court post-
confirmation order. Under the settlement and release agreement, Horbal
agreed to accept $205,843.19 in exchange for the full and complete
resolution of his claim that Seegrid breached the consulting and
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management agreement. However, the settlement and release agreement
expressly provided that the release did “not extinguish or affect [Horbal’s]
claims or allegations asserted or that may be asserted in their Third
Amended Complaint in” this matter. Settlement and Release Agreement,
11/10/16, ¶ 5. Further, the settlement and release agreement indicated that
it did not extend to “any defenses, claims or counterclaims [Giant Eagle in
the present proceeding] may have against [Horbal].” Id. at ¶ 6. Finally,
Horbal argues that the payments made by Seegrid pursuant to the
settlement and release agreement satisfied its breach of contract claim
against Seegrid, but it was not sufficient to satisfy the extent of the alleged
damages caused by Giant Eagle’s tortious interference with that same
contract.
Questions of fact remain undecided by the trial court with regard to
the extent and effect of the consulting and management agreement as well
as the settlement and release agreement between Horbal and Seegrid. We
find that the certified record is not adequate to address the merits of this
issue at the present juncture. Pa.R.A.P. 1551. Accordingly, we affirm the
trial court’s decision to overrule Giant Eagle’s preliminary objections with
regard to Horbal’s claim for tortious interference with a contract, and reverse
with regard to its ruling that collateral estoppel does not bar the claims for
breach of fiduciary duties.
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Order affirmed in part and reversed in part. Case remanded.
Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/17/2018
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