Christian Hyldahl v. Janet Denlinger , 661 F. App'x 167 ( 2016 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 15-3328
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CHRISTIAN R. HYLDAHL,
Appellant
v.
JANET DENLINGER; ENDRE BALAZS
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On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-14-cv-03918)
District Judge: Eduardo C. Robreno
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Submitted Under Third Circuit LAR 34.1(a)
June 7, 2016
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Before: CHAGARES, KRAUSE, and SCIRICA, Circuit Judges
(Opinion Filed: September 7, 2016)
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OPINION*
______________
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
KRAUSE, Circuit Judge
Christian Hyldahl appeals the dismissal of his tortious interference claim and the
entry of summary judgment on his Dragonetti Act claim. For the reasons set forth below,
we will affirm.
I. Background
Because we write primarily for the parties, we provide background only as
relevant to the issues on appeal. Plaintiff-Appellant Hyldahl and Defendant-Appellees
Janet Denlinger and Endre Balazs met in 2002 when Hyldahl was employed at Stanley-
Laman Group and assisted them in the management of their investment portfolio. In
2005, Hyldahl left that firm and, by 2007, he had started a hedge fund called Archstone
Investment Partners. He approached Denlinger and Balazs about investing with
Archstone, and they ultimately invested $1,048,725.22.
Over the course of the next year, Denlinger and Balazs lost virtually all of their
investment due to declining market value of the securities in which their money was
invested.1 As a result, Denlinger and Balazs filed arbitration proceedings against Hyldahl
with the Financial Industry Regulatory Authority (FINRA), claiming Hyldahl engaged in
misrepresentations and invested their funds in unsuitable investment vehicles. They also
sued Morgan Stanley, alleging that it failed to supervise Hyldahl and, alternatively, that it
misrepresented that it would be “overseeing, assisting and/or supervising Hyldahl.” App.
129, 132. In response, Hyldahl filed counterclaims for breach of contract and
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A portion of Denlinger and Balazs’s investment was also used to defend against
unrelated litigation in which Archstone was a defendant.
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defamation. Denlinger and Balazs eventually settled with Morgan Stanley and
subsequently moved to withdraw their remaining claims after Hyldahl represented to
them he had no assets from which to pay a verdict and sent them emails containing
perceived threats. FINRA granted the request and closed the case, including Hyldahl’s
counterclaim.
During the pendency of the FINRA proceedings, both parties raised allegations of
intimidation. Hyldahl claimed Denlinger and Balazs hired “a couple of thugs” who
threatened him while he was driving to a friend’s house. App. 212, 227. He admitted
that he “did not report the incident to the police because [he] did not believe that any
crime had actually taken place, nor [did he believe he] could . . . prove that anything had
transpired.” App. 227. For their part, Denlinger and Balazs aver that, before they moved
to withdraw their claim, Hyldahl threatened them by e-mail when he told their lawyer
that they were “walking a dangerous line,” App. 212, and told Denlinger that he would
pursue all available legal channels and would “fight with a ferocity [they] cannot
imagine” if they refused to settle their claims, App. 215. And in response to their attempt
to withdraw their FINRA claims, Hyldahl informed their attorney that he “train[s]
regularly for all types of potentially violent scenarios” and is “legally licensed to carry a
concealed weapon.” App. 227. Hyldahl denied threatening Denlinger and Balazs,
explaining his statements were intended to show them “that [having him followed]”
would “not scare [him] or make [him] settle [the] case.” App. 227.
After the FINRA case was closed, Hyldahl filed suit in the Court of Common
Pleas, Philadelphia County, raising, among other things, a claim for tortious interference
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with contractual relations on the grounds that the FINRA action led to his termination
from his then-current employer, Merion Wealth Partners. Denlinger and Balazs removed
the case to the U.S. District Court for the Eastern District of Pennsylvania, see 28 U.S.C.
§ 1441, and filed a motion to dismiss, which the District Court granted after ruling,
among other things, that the tortious interference claim was barred by the statute of
limitations. Hyldahl filed an amended complaint raising only a claim under
Pennsylvania’s Dragonetti Act for wrongful use of civil proceedings, which requires a
litigant to prove that a lawsuit was filed for an improper purpose and that the underlying
action terminated in favor of the Dragonetti plaintiff. Denlinger and Balazs filed a
second motion to dismiss, which the Court converted to a motion for summary judgment.
After granting the parties an opportunity to file supplemental briefing and denying
Hyldahl’s request for discovery, the District Court concluded that Hyldahl failed to
demonstrate the FINRA case was terminated in his favor as a matter of law and issued
judgment in favor of Denlinger and Balazs. Hyldahl filed a timely appeal.
II. Jurisdictional & Standard of Review
The District Court had jurisdiction to hear this case under 28 U.S.C. § 1332, and
we have jurisdiction under 28 U.S.C. § 1291.
We exercise plenary review over the District Court’s dismissal of Hyldahl’s
tortious interference claim and its entry of summary judgment on his Dragonetti claim.
Fleisher v. Standard Ins. Co., 679 F.3d 116, 120 (3d Cir. 2012) (plenary review over
Rule 12(b)(6) dismissal); Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir.
2014) (plenary review over Rule 56 entry of summary judgment). We review the Court’s
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denial of Hyldahl’s discovery request for abuse of discretion. Murphy v. Millennium
Radio Grp. LLC, 650 F.3d 295, 310 (3d Cir. 2011).
III. Discussion
Hyldahl raises several challenges on appeal. First, he argues the District Court
improperly calculated the statute of limitations for his tortious interference claim.
Second, he argues the District Court erred in granting summary judgment on his
Dragonetti claim by engaging in impermissible factfinding and erroneously concluding
that the FINRA case did not terminate in his favor. Finally, he argues the District Court
erred by refusing to grant him discovery. We address these arguments in turn.
A. Tortious Interference with Contractual Relations
The District Court dismissed Hyldahl’s tortious interference claim on statute of
limitations grounds after concluding that the limitations period began to run in January
2012 when Merion Wealth Partners terminated Hyldahl’s employment contract. On
appeal, Hyldahl argues the statute of limitations did not begin to run until Denlinger and
Balazs’s allegedly unlawful interference was complete—here, the date on which their
FINRA case was withdrawn.
Under Pennsylvania law, the “statute of limitations begins to run only once a
plaintiff can assert and maintain an action”—i.e., when all elements of the claim have
been met. CGB Occupational Therapy, Inc. v. RHA Health Servs. Inc., 357 F.3d 375,
384 (3d Cir. 2004). The limitations period for a claim of tortious interference with
contractual relations is two years. Id. at 383; see also 42 Pa. Cons. Stat. § 5524. The
elements of the claim are
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(1) the existence of a contractual relationship between the complainant and
a third party; (2) an intent on the part of the defendant to harm the plaintiff
by interfering with that contractual relationship; (3) the absence of privilege
or justification on the part of the defendant; and (4) the occasioning of
actual damage as a result of defendant’s conduct.
Walnut St. Assocs., Inc. v. Brokerage Concepts, Inc., 982 A.2d 94, 98 (Pa. Super. Ct.
2009) (quoting Restatement (Second) of Torts § 766 (1979)). Because the fourth element
of a tortious interference claim requires a causal link between the tortious conduct and the
asserted damage, id., Hyldahl must be able to show that the allegedly tortious conduct
caused his termination.
Hyldahl now argues that the statute of limitations did not begin to run until his
Dragonetti claim accrued on October 15, 2013, the date on which the FINRA claim was
dismissed. But the legal damage for which he seeks compensation, the termination of his
employment with Merion Wealth Partners, occurred in January 2012. Conduct occurring
after Hyldahl’s termination could not have caused that termination. Instead, the
limitations period began to run in January 2012 when his employment was terminated
and the last element of his tortious interference claim was fulfilled. Because Hyldahl
filed suit more than two years later on February 25, 2014, his claim is barred by the
statute of limitations.
B. Dragonetti Act Claim
Hyldahl asserts that Denlinger and Balazs’s FINRA suit constituted the wrongful
use of civil proceedings pursuant to the Dragonetti Act. The Dragonetti Act creates a
cause of action “when a party institutes a lawsuit with a malicious motive and lacking
probable cause.” Rosen v. Am. Bank of Rolla, 627 A.2d 190, 191 (Pa. Super. Ct. 1993).
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A defendant is not liable under the act unless the underlying “proceedings have
terminated in favor of the person against whom they are brought.” 42 Pa. Cons. Stat.
§ 8351(a)(2).
Denlinger and Balazs moved for dismissal on Hyldahl’s Dragonetti claim on the
ground that the FINRA proceedings were not terminated in Hyldahl’s favor. The District
Court agreed, noting that when Denlinger and Balazs’s voluntarily withdrew the lawsuit,
they had already settled with Morgan Stanley, “the deep pocket in the case,” and Hyldahl
had no assets with which to pay a verdict. App. 40. It added that Hyldahl had sent
threatening communications and promised to “pursu[e] all available legal channels
against [Denlinger and Balazs].” App. 40. On appeal, Hyldahl maintains the FINRA
case was terminated in his favor and the District Court engaged in improper factfinding.
“Generally, . . . whether a withdrawal or abandonment constitutes a favorable,
final termination of the case against who the proceedings are brought initially depends on
the circumstances under which the proceedings are withdrawn.” D’Elia v. Folino, 933
A.2d 117, 122 (Pa. Super. Ct. 2007). A voluntary withdrawal of civil proceedings does
not constitute a favorable termination unless the withdrawal was “tantamount to the
unbidden abandonment of a claim brought in bad faith.” Majorsky v. Douglas, 58 A.3d
1250, 1270 (Pa. Super. Ct. 2012). Thus, Pennsylvania courts have concluded that a
withdrawal of proceedings is a favorable termination when the withdrawal occurred “on
the eve of trial” and the circumstances indicated that the withdrawal was a “last-second
dismissal in the face of imminent defeat.” Bannar v. Miller, 701 A.2d 242, 245, 248 (Pa.
Super. Ct. 1997); see also Majorsky, 58 A.3d at 1269-70. On the other hand, a
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withdrawal of civil proceedings is not a favorable termination when the issues in the
underlying litigation became moot before any determination of liability, Rosenfield v.
Penn. Auto. Ins. Plan, 636 A.2d 1138, 1141 (Pa. Super Ct. 1994), where the parties
settled the underlying litigation, D’Elia, 933 A.2d at 122, or when it would be impossible
to bring an accused to trial, Elec. Lab. Supply Co. v. Cullen, 712 A.2d 304, 310 (Pa.
Super. Ct. 1998).
Hyldahl argues that the question of whether the proceedings terminated in his
favor should have been reserved for the jury because it involves an inquiry into Denlinger
and Balazs’s motive for withdrawing FINRA proceedings.2 While a defendant’s
admissions could be among the circumstances that inform a determination of whether a
withdrawal was a “last-second dismissal in the face of imminent defeat,” see Majorsky,
58 A.3d at 1270, we perceive no error in the District Court’s legal conclusion that
Denlinger and Balazs’s withdrawal of their FINRA claim did not constitute a termination
favorable to Hyldahl. As the District Court observed, Denlinger and Balazs withdrew
their case after they had settled with Morgan Stanley. Further, it is undisputed that
Hyldahl had told them that he had no savings, so Denlinger and Balazs had every reason
to think that he could not pay a verdict. Cf. Elec. Lab. Supply Co., 712 A.2d at 310
(stating that the voluntary withdrawal of a claim is not a favorable termination when it
2
In Pennsylvania, “the jury has only the function of finding the circumstances
under which the defendant acted” and “[t]he court determines whether, under those
circumstances, the termination was sufficiently favorable to the accused.” Dravo Corp.
v. Ioli, 584 A.2d 1011, 1013 (Pa. Super Ct. 1991) (quoting Miller v. Pa. R. Co., 89 A.2d
809, 812 (Pa. 1952)); see also Georgiana v. United Mine Workers of Am., 572 A.2d 232,
235 (Pa. Super. Ct. 1990).
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would be impossible to bring the claim). It is also undisputed that Hyldahl sent
communications indicating that, by maintaining their claims, Denlinger and Balazs were
“walking a dangerous line” and that, shortly after they sought to withdraw their claims,
Hyldahl stated that he carries a concealed weapon and trains for “violent scenarios.”
Because the suit served no purpose and in the face of Hyldahl’s perceived threats, it is
impossible to say that Denlinger and Balazs’s withdrawal was “tantamount to the
unbidden abandonment of a claim brought by bad faith,” Majorsky, 58 A.3d at 1270.
Accordingly, the FINRA case was not terminated in Hyldahl’s favor as a matter of law,
and the District Court did not err in granting summary judgment on his Dragonetti claim.
C. Denial of Hyldahl’s Discovery Request
The District Court converted Denlinger and Balazs’s motion to dismiss into a
motion for summary judgment. Hyldahl requested discovery to “further illuminate issues
in the [summary judgment] motion and the case.” App. 361. The District Court denied
Hyldahl’s request for discovery because he “failed to show how any additional discovery
would assist him in [opposing summary judgment].” App. 38 n.4. On appeal, Hyldahl
maintains that denial of discovery constituted an abuse of discretion.
The “decision to convert a motion to dismiss to a motion for summary judgment is
generally committed to the district court’s discretion,” Kulwicki v. Dawson, 969 F.2d
1454, 1463 n.11 (3d Cir. 1992), but in making this decision, a court must give the parties
notice so that they may respond, In re Rockefeller Ctr. Props., Inc. Sec. Litig., 184 F.2d
280, 287-88 (3d Cir. 1999). Because “the summary judgment process presupposes the
existence of an adequate record,” Doe v. Abington Friends Sch., 480 F.3d 252, 257 (3d
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Cir. 2007), courts are “obliged to give a party opposing summary judgment an adequate
opportunity to obtain discovery,” Dowling v. City of Phila., 855 F.2d 136, 139 (3d Cir.
1988). However, there is no obligation to grant discovery when the information sought
“would not have precluded summary judgment.” Id. at 140.
We conclude the District Court did not abuse its discretion in converting the
motion to dismiss into one for summary judgment and denying discovery. The District
Court gave Hyldahl adequate notice that it was converting the motion and a reasonable
opportunity to respond. Further, in view of the undisputed circumstances surrounding the
termination of the FINRA proceedings, Hyldahl has failed to show that the requested
discovery—regarding (1) whether Denlinger and Balazs believed their FINRA
allegations were true, (2) whether another investment advisor had personal animus
against Hyldahl, (3) whether the FINRA litigation led to his termination and affected his
ability to attract clients, (4) the subject of discussions between Denlinger, Balazs,
Hyldahl, and others leading up to Denlinger and Balazs’s decision to invest with Hyldahl,
and (5) the result of an SEC investigation initiated by Denlinger and Balazs—would have
precluded summary judgment.
IV. Conclusion
For the reasons set forth above, we will affirm the District Court’s judgment.
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