NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 14-3564
____________
DOMMEL PROPERTIES LLC;
LAND OF BELIEVE FARM INC;
WILLIAM J. DOMMEL; ROBERT DOMMEL,
Appellants
v.
JONESTOWN BANK AND TRUST COMPANY,
n/k/a JBT; LEBANON COUNTY TAX CLAIM BUREAU;
SALLIE A. NEUIN
____________
On Appeal from United States District Court
for the Middle District of Pennsylvania
(M.D. Pa. No. 1-11-cv-02316)
District Judge: Honorable Christopher C. Conner
____________
Submitted Pursuant to Third Circuit LAR 34.1(a)
April 28, 2015
Before: FISHER, HARDIMAN and ROTH, Circuit Judges.
(Filed: September 16, 2015)
____________
OPINION*
____________
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
1
FISHER, Circuit Judge.
William J. Dommel, Dommel Properties, LLC, and Land of Believe Farm, Inc.
(collectively, the “Dommels”), sued the Jonestown Bank and Trust Company (the
“Bank”) for negligence, fraud, and intentional interference with contract, among other
claims, involving alleged misrepresentations made to Mr. Dommel and a third party in
connection with a tax sale of Mr. Dommel’s horse-breeding farm. The United States
District Court for the Middle District of Pennsylvania entered summary judgment in
favor of the Bank. We affirm in part and vacate in part in light of the Supreme Court of
Pennsylvania’s intervening decision in Bruno v. Erie Insurance Co.1
I.
We write principally for the parties, who are familiar with the factual context and
legal history of this case. Therefore, we will set forth only those facts that are necessary
to our analysis.
Mr. Dommel and his late father, Robert Dommel,2 entered into three loan
agreements with the Bank, borrowing in excess of $4,330,000. The loans were secured
by mortgages on the Dommels’ commercial horse-breeding farms (hereinafter, “Farm
1
106 A.3d 48 (Pa. 2014).
2
Robert Dommel, deceased, was dismissed as a plaintiff pursuant to Federal Rule
of Civil Procedure 25(a)(1). See J.A. at 3-4.
2
One” and “Farm Two”). The loan agreements authorized the Bank to, among other
things, foreclose on the properties in case of default and confess or enter judgment.3
The Dommels were unable to make payments on their loans, and the Bank issued
a notice of default on April 10, 2008. The parties agreed to auction Farm One, and they
entered into a forbearance agreement on May 28, 2008, whereby the Dommels
acknowledged their default and the Bank’s ability to proceed with its rights and remedies
contained in the loan agreements. After the auction of Farm One failed,4 the Bank
confessed judgment on the loans in the total amount of $5,173,659. The parties
attempted to reach a debt workout agreement, but they were unable to do so, and the
Bank bought Farm One at a sheriff’s sale in execution of the judgment.
The parties continued negotiations and entered into a second forbearance
agreement on August 10, 2009, whereby the Dommels again acknowledged their default
and the Bank’s right to pursue its remedies under the loan agreements. The Dommels
remained in default, and the Bank proceeded to execute the judgment by listing Farm
Two for a sheriff’s sale scheduled for October 11, 2011. However, the Dommels had
also failed to pay taxes on Farm Two, and, after they defaulted on an agreement with the
Tax Claim Bureau, a tax sale was scheduled a month prior to the sheriff’s sale.
3
See J.A. at 407, 466-67, 477-78.
4
Allegedly, the Dommels threatened to sue the Bank if the Bank accepted the low
bid price it received. See J.A. at 12.
3
On September 9, 2011, three days prior to the tax sale, Mr. Dommel met with
Roger Jeremiah, then-Head of Lending, and Richard Rollman, Vice President of
Commercial Lending, and provided them a $5,000 check. According to the Dommels,
the check constituted consideration for the Bank’s agreement not to bid on Farm Two at
the tax sale. According to the Bank, however, the $5,000 went toward repayment of the
Dommels’ outstanding loan obligations. Mr. Dommel was given a letter explaining that
the Bank’s acceptance of the check “in no way constitutes an agreement by the Bank to
forbear” on its ability to pursue its rights and remedies under the loan agreements.5 Mr.
Dommel contends that he never received the reservation of rights letter; yet, a copy of the
letter was emailed to the Dommels’ attorney.6 In alleged reliance on their expectation
that the Bank would not bid on Farm Two, the Dommels did not take any action to ensure
that Farm Two was not sold. At the tax sale held on September 12, 2011, the Bank
ultimately purchased Farm Two as the sole bidder.
After the tax sale of Farm Two and before the Bank obtained the deed, the Bank
sent a letter to Thomas McClay, one of the Dommels’ largest clients, asserting that Farm
Two now belonged to the Bank and demanding that all boarding agreements and
5
J.A. at 791. The Notes for two of the loans also stipulated that “[n]o course of
dealing between Borrowers and Bank or any holder of this Note, nor any delay on the
part of Bank or any holder of this Note in exercising any rights under this Note or any of
the other loan documents shall operate as a waiver of any rights of Bank or any other
holder of this Note.” J.A. at 466, 477.
6
J.A. at 794-95.
4
payments were to be sent to the Bank as the current owner.7 The Dommels allege that
Mr. McClay subsequently decreased the number of horses he boarded at Farm Two.
The Dommels sued the Bank on December 14, 2011. After certain claims not
relevant to this appeal were dismissed, both parties moved for summary judgment. On
July 9, 2014, the District Court denied the Dommels’ motion and granted the Bank’s
motion as to the claims for, inter alia, negligent misrepresentation, fraud, and intentional
interference with contract. It held that the Dommels’ claims for negligent
misrepresentation and fraud8 were barred by the “gist of the action” doctrine, since the
alleged misrepresentations were made in pursuit of the Bank’s rights and remedies under
the contract, i.e., loan agreements. As to intentional interference with contract, the
District Court concluded that it could “find[] no evidence that the letter from the Bank to
Mr. McClay resulted in a breach or non-performance of the boarding contract.”9 The
Dommels timely appealed.
II.
The District Court exercised jurisdiction pursuant to 28 U.S.C. § 1331 and
supplemental jurisdiction pursuant to 28 U.S.C. § 1367. This Court exercises appellate
jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over the District
7
J.A. at 1256.
8
For purposes of determining whether the gist of the action doctrine applies, the
Court will assess the Dommels’ negligent misrepresentation and fraud claims together, as
both claims arise from the same course of conduct (i.e., the Bank’s alleged
misrepresentations).
9
J.A. at 33.
5
Court’s grant of a motion for summary judgment and, in doing so, “view the underlying
facts and all reasonable inferences therefrom in the light most favorable to the party
opposing the motion.”10
III.
We discuss the Dommels’ claims for (A) negligent misrepresentation and fraud
and (B) intentional interference with contract in turn.
A.
The gist of the action doctrine precludes tort claims where the true gravamen, or
gist, of the claim sounds in contract.11 Because the Pennsylvania Supreme Court had not
yet adopted the doctrine, the District Court and the parties relied on the Pennsylvania
Superior Court’s decision in eToll, Inc. v. Elias/Savion Advertising, Inc., which bars a tort
claim where it, inter alia, “aris[es] solely from a contract between the parties,”
“concern[s] the performance of contractual duties,” or is “inextricably intertwined” with
the contract.12 Accordingly, the District Court barred the Dommels’ fraud claim because
“[t]he Bank made the allegedly fraudulent misrepresentations in pursuit of its rights and
10
Blunt v. Lower Merion Sch. Dist., 767 F.3d 274, 265 (3d Cir. 2014) (internal
quotation marks omitted).
11
See Bruno v. Erie Ins. Co., 106 A.3d 48, 68 (Pa. 2014).
12
811 A.2d 10, 19, 21 (Pa. Super. 2002); cf. Bruno, 106 A.3d at 67 n.14
(explaining that “[b]oth the Third Circuit Court of Appeals, as well as some federal
district courts, have looked to eToll as the controlling statement of Pennsylvania law in
this area”).
6
remedies under the loan documents,”13 and, therefore, it was “plainly linked to the
contracts between the parties.”14 Similarly, it barred the negligent misrepresentation
claim because it was “inextricably intertwined with the parties’ contractual obligations”
and because “the duty of care would not arise but for the contractual relationship between
the Dommels and the Bank.”15
In its intervening decision in Bruno, the Supreme Court of Pennsylvania
expounded upon the gist of the action doctrine for the first time.16 It clarified that “[t]he
general governing principle which can be derived from” its synthesis of state court
decisions is that “the nature of the duty alleged to have been breached . . . [is] the critical
determinative factor in determining whether the claim is truly one in tort, or for breach of
contract.”17 “If the facts of a particular claim establish that the duty breached is one
created by the parties by the terms of their contract—i.e., a specific promise to do
13
J.A. at 42.
14
J.A. at 43-44.
15
J.A. at 45-46.
16
While the Pennsylvania Supreme Court has applied the gist of the action
doctrine previously, it noted in Bruno that it had not formally adopted the doctrine and
did not necessarily do so in Bruno itself. See 106 A.3d at 56, 60 & n.10. Rather, it
explained that “[a]s part of our determination of the issue we accepted for review, we
must, necessarily, explicate the governing legal principles.” Id. at 60 n.10.
17
Id. at 68 (emphasis added). This is not the first time the duty-based standard has
been articulated. See id. at 69 (noting that the “duty-based” demarcation was first
recognized over a century and a half ago); see, e.g., Bash v. Bell Telephone Co., 601 A.2d
825, 829 (Pa. Super. 1992) (“Tort actions lie for breaches of duties imposed by law as a
matter of social policy, while contract actions lie only for breaches of duties imposed by
mutual consensus agreements between particular individuals.”) (internal quotation marks
omitted). The District Court itself mentioned the standard as articulated in Bash, but it
did not apply it. See J.A. at 41.
7
something that a party would not ordinarily have been obligated to do but for the
existence of the contract—then the claim is to be viewed as one for breach of contract.”18
On the other hand, “[i]f . . . the facts establish that the claim involves the defendant’s
violation of a broader social duty owed to all individuals, which is imposed by the law of
torts and, hence, exists regardless of the contract, then it must be regarded as a tort.”19 In
summary, the court “reaffirm[ed]” the “duty-based” analytical framework “as the
touchstone standard for ascertaining the true gist or gravamen of a claim.”20
The court then applied the standard to the facts in Bruno. There, David and
Angela Bruno (the “Brunos”) purchased an insurance policy requiring Erie Insurance
Company (“Erie”) to inspect for mold and pay up to $5,000 for the cost of removal.
Erie’s inspectors confirmed mold in the Brunos’ home on two separate occasions, but
they erroneously determined that the mold was non-toxic and need not be removed. The
Brunos subsequently became ill and sued Erie for negligence in conducting the
investigation.
The Bruno court first explained that whether Erie found toxic or non-toxic mold
was “quite simply . . . not based on Erie’s violation of any of [its] contractual
commitments,” since the Brunos did not allege that Erie failed to inspect or pay up to
18
Bruno, 106 A.3d at 68.
19
Id.
20
Id. at 69.
8
$5,000 for removal per its obligations under the policy.21 Rather, “the Brunos’ claim
against Erie is predicated on the allegedly negligent actions taken by its agents on behalf
of Erie while they were performing Erie’s contractual obligation to investigate the claim
made by the Brunos under their policy.”22 “Consequently, [the Brunos’] allegations of
negligence facially concern Erie’s alleged breach of a general social duty, not a breach of
any duty created by the insurance policy itself,”23 and, therefore, the claim was not barred
by the gist of the action doctrine.
While the Bruno court did not explicitly overrule eToll or its progeny, it explained
that eToll creates a divide in the gist of the action jurisprudence,24 did not rely on any of
the eToll factors in reaffirming the duty-based standard from which eToll departs,25 and
cabined reliance on eToll’s “inextricably intertwined” language.26 There are also
inconsistences that the Bruno decision did not explicitly mention. In particular, Bruno
provides that “a negligence claim based on the actions of a contracting party in
performing contractual obligations is not viewed as an action on the underlying contract
21
Id. at 70.
22
Id.
23
Id. at 71.
24
See id. at 56-57, 66-67.
25
See id. at 69.
26
Id. at 69 n.17 (“With respect to the Superior Court’s eToll decision, we note
that, because that court acknowledged in its opinion this source of duty distinction and
incorporated it into its analysis, its consideration of whether tort and contract claims
brought together in the same action are ‘inextricably intertwined’ should be viewed in
this context, i.e., as a determination of whether the nature of the duty upon which the
breach of contract claims rest is the same as that which forms the basis of the tort
claims.”).
9
itself, since it is not founded on the breach of any of the specific executory promises
which comprise the contract,”27 whereas eToll provides that “the gist of the action
doctrine should apply to claims for fraud in the performance of a contract.”28
Using eToll as guidance, the District Court did not engage in the duty-based
analysis that Bruno advanced; rather, the basis for the District Court’s decision was that
the Bank’s alleged misrepresentations occurred in pursuit of its rights and remedies under
the loan agreements and were therefore “plainly linked to” or “inextricably intertwined
with” its contractual obligations.29 Because the District Court did not have the
opportunity to conduct its analysis under Bruno, we will allow it to reconsider its analysis
in the first instance.30 Thus, we vacate and remand its order with respect to the negligent
misrepresentation and fraud claims.
B.
As for the Dommels’ intentional interference with contract claim, we agree with
the District Court that summary judgment in favor of the Bank was proper. Section 766
27
Id. at 70.
28
811 A.2d at 20.
29
See J.A. at 42, 43, 45.
30
Cf. In re Blood Reagents Antitrust Litig., 783 F.3d 183, 186 (3d Cir. 2015)
(vacating and remanding where the district court “did not have the opportunity to
consider . . . later-issued guidance [by the U.S. Supreme Court] in the first instance”).
10
of the Restatement (Second) of Torts, which the Supreme Court of Pennsylvania has
adopted,31 provides:
One who intentionally and improperly interferes with the performance of a
contract . . . between another and a third person by inducing or otherwise
causing the third person not to perform the contract, is subject to liability to
the other for the pecuniary loss resulting to the other from the failure of the
third person to perform the contract.
As one lower federal court aptly summarized, “the bulk of the case law, as well as the
plain language of . . . section 766, mandates that a plaintiff bringing an intentional
interference claim must allege breach or nonperformance.”32
In the case at bar, there is no evidence indicating that the letter from the Bank to
Mr. McClay resulted in a breach or nonperformance of the boarding contract. Although
the Bank’s letter did make Mr. McClay fear that his horses would be caught up in legal
proceedings,33 at all times after receipt of the letter Mr. McClay boarded no less than ten
horses at Farm Two and, at several points, he even increased the number of horses he
boarded there. Indeed, as the record makes clear, Mr. McClay’s monthly billing invoices
31
See U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 925 (3d
Cir. 1990); Adler, Barish, Daniels, Levin and Creskoff v. Epstein, 393 A.2d 1175, 1183
(Pa. 1978).
32
Dreiling Millennium Trust II v. Reliant Renal Care, Inc., 833 F. Supp. 2d 429,
434 (E.D. Pa. 2011); see also Windsor Sec., Inc. v. Hartford Life Ins. Co., 986 F.2d 655,
660 (3d Cir. 1993) (explaining that “the paradigm interference tort” under Pennsylvania
law is one “in which a defendant . . . causes a third party to breach its contract with the
promisee-plaintiff”); Al Hamilton Contracting Co. v. Cowder, 644 A.2d 188, 191 (Pa.
Super. 1994) (explaining that an intentional interference claim must show that “the
defendant interfered with the performance of [the] contract by inducing a breach or
otherwise causing the third party not to perform”).
33
See J.A. at 512.
11
demonstrate that the number of horses he boarded significantly fluctuated over the
relevant time period.34 Moreover, nothing in the record shows that the boarding contract
between the Dommels and Mr. McClay required Mr. McClay to maintain a certain
number of horses at Farm Two. Thus, the Dommels fail to establish that Mr. McClay
breached or failed to perform any obligations under the contract and, as a result, fail to
establish a cognizable intentional interference of contract claim.
IV.
For the reasons set forth above, we vacate in part and affirm in part the order of
the District Court.
34
J.A. at 1121-39.
12