Edward Baim v. Joel Dukart ( 2023 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 23-1424
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EDWARD S. BAIM; 9970 BUSTLETON, LLC; OREGON AVENUE, LLC;
CASTOR & ARAMINGO, LLC; 749 LINCOLN HIGHWAY, LLC
v.
JOEL DUKART; MICHAEL DUKART,
Appellants
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On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:21-cv-01696)
District Judge: Honorable Gerald J. Pappert
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Submitted Under Third Circuit L.A.R. 34.1(a)
on November 6, 2023
Before: RESTREPO, BIBAS, and SCIRICA, Circuit Judges
(Filed: November 16, 2023)
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OPINION*
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BIBAS, Circuit Judge.
Risky deals can fall through. When a prospective buyer takes a chance, agreeing to a
condition that lets another buyer swoop in and steal the deal, he cannot complain later
when the condition is met.
* This disposition is not an opinion of the full Court and, under I.O.P. 5.7, is not binding
precedent.
Edward Baim owned more than twenty McDonald’s fast-food restaurants. But after
running them for half a century, he was ready to retire. In 2019, he sold three McDonald’s
in New Jersey to George Skylass and his son Grant. But he was not yet ready to sell his
four McDonald’s in and around Philadelphia. So, as part of the New Jersey deal, Baim
and his companies gave the Skylasses a right of first refusal to buy those four. Under this
right, if Baim got a bona fide offer for those restaurants, the Skylasses would have two
weeks to buy them on the same terms.
The next year, Baim got a letter of intent from Joel and Michael Dukart, who already
owned six other McDonald’s restaurants. He told the Dukarts that the Skylasses had a
right of first refusal. So if they exercised that right, then Baim could not sell to the Du-
karts.
Baim forwarded the Dukarts’ letter to the Skylasses. They expressed interest in exer-
cising that right and threatened “to seek redress in court” if Baim did not honor it.
App. 66. Undeterred, a few days later, Baim entered into a final agreement to sell the four
Philadelphia McDonald’s to the Dukarts. But the agreement had a necessary condition:
neither party had to perform if there was a “pending or threatened claim and/or suit by
any party challenging this agreement or the consummation of the transactions contem-
plated herein.” App. 80 (lowercased).
Because this contract was a bona fide offer, Baim immediately forwarded it to the
Skylasses. Four days later, they exercised their right of first refusal, so Baim sold them
those four restaurants. Upset, the Dukarts threatened to sue Baim. But Baim sued first,
seeking a declaratory judgment that he had not breached the contract.
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After a bench trial, the District Court ruled for Baim. It found that Baim’s testimony
was credible but the Dukarts’ was not. The court concluded that the pre-agreement threats
did not trigger the necessary condition. So it focused instead on whether the Skylasses’
exercise of their right after the Dukarts signed the agreement counted as a threatened liti-
gation claim. After finding “threatened claim[s]” ambiguous, the court looked to parol
evidence. As that evidence showed, all the parties understood that they would not con-
summate their contract if the Skylasses exercised their right. Thus, once they did so,
Baim no longer had to perform under the Dukarts’ agreement.
The Dukarts now appeal, again claiming that Baim breached his sales agreement. We
review the District Court’s factual findings for clear error and its construction of the con-
tract de novo. McCutcheon v. Am.’s Servicing Co., 560 F.3d 143, 147 (3d Cir. 2009); In re
Cendant Corp. Prides Litig., 233 F.3d 188, 193 (3d Cir. 2000).
The court got it right. First, the Dukarts argue that the contractual term “threatened
claim” is unambiguous. Under Pennsylvania law, a contract term is ambiguous if it is
“reasonably susceptible” to different readings. Murphy v. Duquesne Univ. of the Holy
Ghost, 777 A.2d 418, 430 (Pa. 2001) (internal quotation marks omitted). “Threatened
claim[s]” could mean just direct threats of litigation or could also include contingent
threats, like exercising a right of first refusal. Because both readings fit, the term is am-
biguous. Id.The court thus properly considered parol evidence. Yocca v. Pittsburgh Steelers
Sports, Inc., 854 A.2d 425, 437 (Pa. 2004). And that evidence supports Baim’s reading.
For one, the Dukarts entered the deal “knowing the Skylasses could exercise their right of
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first refusal and would sue if that right wasn’t honored.” App. 21. For another, they in-
sisted that Baim defend and indemnify them against the Skylasses’ anticipated lawsuit.
So the Dukarts signed the sales agreement “with their eyes wide open.” App. 23. Every-
one understood that the Skylasses could exercise their right of first refusal and that, if
Baim refused to honor it, the Skylasses would sue to stop the sale. Thus, exercising the
right amounted to a threatened claim within the meaning of the contract.
This reading makes sense. The parties wanted an agreement firm enough that the Du-
karts would buy the four Philadelphia McDonald’s if the Skylasses did not. But they also
wanted an escape hatch from the Dukarts’ contract if the Skylasses exercised their right
of first refusal. Because both parties knew that the Skylasses had that right and would
surely sue to enforce it, their exercise of that right was a “threatened claim” as understood
in this agreement. This reading “ascertain[s] and give[s] effect to the intent of the con-
tracting parties.” Murphy, 777 A.2d at 429. Thus, Baim did not breach the contract.
As a last-ditch defense, the Dukarts claim this reading makes the contract illusory.
Not so. Under the contract, unless the Skylasses exercised their right, Baim had to sell the
Philadelphia restaurants to the Dukarts. Because the contract constrained Baim’s “liberty
of action,” it was not illusory. App. 24 (quoting 1 Corbin on Pennsylvania Contracts
§ 5.10 (2022)).
The Dukarts took a risk that did not pay off: they signed a deal knowing that the Sky-
lasses could parachute in and take it. So Baim did not breach his contract with the Du-
karts. We will affirm.
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