Court: United States Bankruptcy Court, M.D. Pennsylvania; July 20, 1995; Us Bankruptcy; United States Bankruptcy Court
The legal matter involves Plaintiffs A. Barletta. Sons, Inc. and A. Barletta. Sons (a partnership) filing an adversary complaint against Defendants Tribble. Stephens Co. and others on September 16, 1994, concerning a subcontract for site work at the Mount Pocono Plaza project in Pennsylvania. The Plaintiffs' subcontract, initiated on August 31, 1989, was originally valued at $1,435,610.00, later adjusted to $1,509,535.00 due to change orders. The Plaintiffs claim to have received $1,062,598.01 for work performed from August 1988 to September 1990, which included the installation of a ductile iron line system costing approximately $569,588.93. They assert various claims exceeding $1,000,000.00, including breach of contract and unjust enrichment against Tribble. Stephens Co. and CenterPoint Properties, Inc., along with allegations of intentional interference with contractual relations and equitable subordination. Additionally, the Plaintiffs seek to equitably subordinate the Defendants’ claims under 11 U.S.C. § 510 of the Bankruptcy Code, citing the Defendants' actions that allegedly hindered their ability to secure performance and payment bonds. The Defendants counter that Texas law applies to the contract, claiming the statute of limitations has expired, thus barring the lawsuit.
Plaintiffs' breach of contract claim is challenged by Defendants as being barred by Texas' four-year statute of limitations under Texas Civil Practice and Remedy Code Section 16.051, while Plaintiffs' unjust enrichment and contractual interference claims are argued to be barred under the two-year statute of limitations found in Section 16.003. Defendants assert that the project was completed by July 1990, and the complaint was filed on September 16, 1994, exceeding both limitations periods.
Defendants alternatively argue that Pennsylvania's four-year statute of limitations (42 Pa.C.S.A. 5525) applies to the breach of contract, unjust enrichment, and quantum meruit claims, while the two-year statute (42 Pa.C.S.A. 5524) would bar the contractual interference claim. The court must first determine whether Texas or Pennsylvania law governs this case.
In response, Plaintiffs contend that Pennsylvania law should apply according to its conflict of laws principles, citing that the contract's choice of law provision favoring Texas should be overruled due to the lack of connection between Texas and the contract's performance. They characterize the sub-contract as one of adhesion, claiming that the Texas law provision is unenforceable. Plaintiffs reference LCI Communications, Inc. v. Wilson, which states that Pennsylvania courts respect choice of law provisions unless they significantly impair a plaintiff's ability to pursue their claim.
The court finds that the sub-contract does not impose a foreign forum and that Plaintiffs have effectively chosen their forum by filing complaints in Pennsylvania. Although there are significant contacts with Pennsylvania, the court sees no compelling reasons to override the contract's Texas law provision, especially given that one party is a Texas corporation. The argument that the contract is an adhesion contract is dismissed, as the court observes that the only non-negotiated part relates to the choice of law. The court concludes that Texas law applies and will now assess the relevant statutes of limitations under Texas law.
The four-year statute of limitations for breach of contract claims has been tolled due to a prior action filed by the corporate Debtor against Tribble, Stephens Co., and CenterPoint Properties in May 1991. However, the current complaint seeks damages related to events up to September 1990, while the Defendants assert that any breaches must have occurred by July 1990. The court cannot yet determine when the breach occurred, leaving the statute of limitations unresolved for the corporate and partnership Debtors. In contrast, a two-year statute of limitations applies to unjust enrichment claims, which the court finds are not recognized as independent causes of action under Texas law, leading to a Motion for Summary Judgment being granted for those counts but reserving a decision on whether unjust enrichment could serve as a measure of damages.
For the quantum meruit claim, the court denies the Motion for Summary Judgment as it pertains to that claim, noting that it could be applicable if the breach of contract claim fails. The court addresses the two-year statute of limitations on the Debtors’ contractual interference claim, determining it is barred since it was filed four years after the alleged breach in September 1990. The Plaintiffs' argument that the claim is not time-barred because it was raised as a defense in prior claims is dismissed, as the limitations period has expired. The court notes that while the expiration cannot negate the Debtors' affirmative defense in this litigation, it does affect the intentional interference claim.
Lastly, the Defendants request the application of judicial estoppel based on prior allegations in a separate case, which could bar the Plaintiffs from denying liability for certain costs related to a replacement line installation, potentially entitling the Defendants to a Motion for Summary Judgment on that claim.
Judicial estoppel is deemed inapplicable in this case, as the court determines that the Defendants did not successfully assert an inconsistent position in prior proceedings. Judicial estoppel requires that a party's previous position must have been accepted by the court, which was not the case here since the state court action was dismissed by mutual agreement and not adopted by any court. The Plaintiffs' count for equitable subordination is considered valid; the court acknowledges that such subordination under 11 U.S.C. § 510(c) may occur without creditor misconduct and retains discretion to subordinate claims under certain circumstances. The court will not dismiss this count at this time and will evaluate the equitable subordination request at trial. The Defendants' arguments regarding the Debtors' role in the water line system failure do not demonstrate a lack of material facts in dispute, leading the court to reject these arguments. Consequently, the court partially grants and partially denies the Defendants' Motion for Summary Judgment, dismissing the counts for unjust enrichment and intentional interference with contractual relations, while allowing other counts to proceed to a Pre-Trial Conference scheduled for September 22, 1995.
