GMW Organization v. Atlass, S. ( 2015 )

J-A28037-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GMW ORGANIZATION, LLC, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
STEVEN B. ATLASS, PENNSYLVANIA
BANCSHARES, INC., HOWELL
ACQUISITION PARTNERS, L.P., AND
KREBS PARTNERS, LLC,
Appellees No. 304 EDA 2015
Appeal from the Judgment Entered February 19, 2015
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): 01597 August Term, 2012
BEFORE: GANTMAN, P.J., PANELLA, and SHOGAN, JJ.
MEMORANDUM BY SHOGAN, J.: FILED NOVEMBER 24, 2015
This is a contract dispute between Appellant, GMW Organization, LLC
(“GMW”), an organization that provides strategic advisory services and
business advice that is owned by Gregory Weinberg (“Weinberg”), and
Appellees, Steven B. Atlass (“Atlass”) and his related entities, Pennsylvania
Bancshares, Inc. (“Bancshares”), Howell Acquisition Partners, L.P.
(“Howell”), and Howell’s general partner, Krebs Partners, LLC (“Krebs”) (also
collectively “Appellees”). We affirm.
The trial court summarized the factual and procedural history of the
case as follows:
On August 16, 2012, GMW . . . commenced the instant
action by way of a complaint against . . . Atlass, . . . Bancshares,
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. . . Howell, and . . . Krebs . . .; businesses which were all
alleged to be affiliated with Atlass. The complaint asserted a
number of causes of action against [Appellees] related to a
written compensation agreement [(“Agreement”)] . . . [the]
parties entered into after Atlass approached GMW’s President
and owner, Gregory Weinberg . . . in early April 2011 regarding
GMW finding funding for two hospital projects [that] Atlass was
involved in.
On July 16, 2014, [GMW’s] causes of action for breach of
contract and declaratory relief proceeded to bench trial before
this court.1
1
[GMW’s] cause of action for unjust enrichment,
which was asserted in the alternative, also
proceeded to trial.
At trial, the following facts were adduced and arguments were
made.
On July 20, 2011, GMW and Atlass, Bancshares, and
Atlass’s “affiliates,” which were collectively referred to as
“Atlass,” entered into the [Agreement] whereby GMW would
provide “investment banking services to Atlass with regards to
capital raising events (‘Transaction(s)’)” for two hospitals, the
two hospitals being: (1) Northeastern Hospital, which Atlass had
recently purchased through certain entities and (2) St. Agnes
Hospital, which Atlass was planning to purchase through another
entity, Howell. Atlass’ idea was to raise capital with the goal of
ultimately converting the hospitals into medical office buildings.
On or about December 16, 2010, Northeastern Hospital,
also known as City Center at Northeastern Hospital, was
purchased by Haskell Acquisitions Partners I, L.P., Haskell
Acquisitions Partners II, L.P., and Haskell Acquisitions Partners
III, L.P. (collectively “Haskell”). On or about July 29, 2011,
Saint Agnes Hospital was purchased by Howell. Atlass formed
Howell to purchase Saint Agnes Hospital. Howell is owned
and/or controlled by entities in which Atlass and Atlass’
immediate family members have a majority ownership stake,
including, but not limited to, its general partner Krebs, which is
100% owned and controlled by Atlass. Haskell, Howell, and
Krebs are all Atlass “affiliates” within the meaning of the
[Agreement].
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Trial Court Opinion, 4/21/15, at 1–2 (internal citations omitted).
GMW contracted with Atlass to assist with raising funds for a joint
venture concept that Weinberg “believed would be effective for funding
development of the [h]ospital [p]rojects that Atlass had described to
Weinberg” at a prior meeting. Complaint, 8/16/12, at ¶ 11. Weinberg
allegedly explained to Atlass that the joint venture concept likely would
provide Atlass and the Atlass affiliates “with liquidity, would enable Atlass to
buy out his partner at Northeastern Hospital, . . . could enable Atlass and
the Atlass affiliates to share in operational profits and profits from
refinancing . . . and would allow them to earn a management fee and an
asset management fee.” Id. at ¶ 12.
The parties exchanged drafts of a compensation agreement,
Complaint, 8/16/12, at ¶ 30, negotiated terms over several days, id. at 33,
and ultimately entered into the Agreement on July 20, 2011. Id. The terms
of the Agreement are relevant herein, and it is reproduced infra.
GMW’s claims for breach of contract and a declaratory judgment were
based on its contention that the Agreement entitled it to $250,000 and
twenty-five percent interest in the entity that owned or controlled St. Agnes
Hospital. The case proceeded to a two-day bench trial on July 16 and 17,
2014. On September 26, 2014, the trial court found for GMW, awarding it
$0.00 and a twenty-five percent interest in Krebs, per the Agreement.
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On October 8, 2014, GMW filed a post-trial motion, which the trial
court denied by order filed on December 18, 2014. GMW filed a notice of
appeal on January 8, 2015.1 Both GMW and the trial court complied with
Pa.R.A.P. 1925.
GMW presents the following issues, which are identical to the issues
raised in GMW’s Pa.R.A.P. 1925(b) statement:
I. Whether the Trial Court erred in failing to enter a specific
declaration concerning Plaintiff’s rights and interest in the
carried interest/profit share (also known as the “Promote”
or the “Carry”) with respect to a real estate investment
transaction know[n] as the St. Agnes Transaction (both
“St. Agnes” and the “St. Agnes Transaction” are defined
below), where: (a) the Court recognized the importance of
the Promote to the parties; (b) undisputed extrinsic
evidence existed to support Plaintiff’s interest in the
Promote; and (c) the Court only awarded Plaintiff an
interest in Krebs Partners, LLC (“Krebs”) without any
declaration concerning Plaintiff’s rights to the Promote,
thereby permitting Defendant to manipulate the
disbursement of Promote money (including but not limited
to altering the entity types in the St. Agnes Transaction)
such that Krebs receives only a minimal amount and
Defendant avoids having to pay Plaintiff his share of the
Promote money.
II. Whether the Trial Court erred in ruling that the terms of
parties’ [A]greement concerning Plaintiff’s entitlement to
$250,000 from the St. Agnes Transaction was clear and
unambiguous, where Plaintiff satisfied the conditions
precedent to its receiving the $250,000, and, in construing
____________________________________________
1
Because judgment had not been entered on the docket as required by
Pa.R.A.P. 301, we directed GMW to praecipe the trial court to enter
judgment. Judgment was entered on February 19, 2015, and the previously
filed notice of appeal was treated as filed after the entry of judgment. See
Pa.R.A.P. 905(a).
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such terms, the Court was required to borrow and insert
clauses from other inapplicable sections of the
[A]greement to support its conclusion that Plaintiff was not
entitled to receive $250,000 from the St. Agnes
Transaction.
III. Whether the Trial Court erred in failing to award Plaintiff
$250,000 based on the “amount” received by Defendants
in the St. Agnes Transaction (i.e. $2,500,000), where: (a)
all “debt” considerations were irrelevant to the St. Agnes
Transaction because the provisions in the [A]greement
relating to Plaintiff’s payment entitlements from the St.
Agnes Transaction did not contain a term allowing for
“debt” to reduce Plaintiff’s entitlements, and the Court
found that a capital-raising event (i.e. a “Transaction” (as
defined in the parties[’ A]greement)) took place; (b) even
the inapplicable “debt” terms which the Court borrowed
from other provisions in the [A]greement not relating to
the St. Agnes Transaction called for using pre-existing debt
of which the St. Agnes Transaction had none since all
existing debt was eliminated in the St. Agnes Transaction
and the $2,500,000 was net of such debt (as admitted by
Atlass at trial); and (c) there was no genuine debt from
the St. Agnes Transaction which could be used to reduce
Plaintiff’s $250,000 payment entitlement.
IV. Whether the Trial Court erred in construing the
[A]greement of the parties against Plaintiff contrary to the
doctrine of contra proferentem such that it failed to award
Plaintiff $250,000 and the Promote pursuant to the St.
Agnes Transaction where the [A]greement was drafted by
the Defendants with the assistance of counsel[,] and
Plaintiff had no counsel.
GMW’s Brief at 4–6.
The Agreement provides as follows:
Compensation Letter Agreement
July 20, 2011
Gregory Weinberg, President
GMW Organization, LLC
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1650 Market Street, 53rd Floor
Philadelphia, PA 19103
Dear Greg,
This letter agreement (“Agreement”), dated July 20, 2011 (the
“Effective Date”), confirms the terms and conditions between
GMW Organization, LLC (“GMW”) and Pennsylvania Bancshares,
Inc., myself, and/or my affiliates (collectively “Atlass”) whereby
GMW will be providing investment banking services to Atlass
with regards capital raising events (“Transaction(s)”) for North
East Hospital located at 2301 East Allegheny Avenue,
Philadelphia, PA 19134 (“NE Hospital”) and St. Agnes Hospital
located at 1930 South Broad Street, Philadelphia, PA 19145 (“St.
Agnes”). Atlass and GMW are hereinafter referred to individually
as a “Party” and together as the “Parties.”
This Agreement is an exclusive engagement for a period of 120-
days commencing on the Effective Date. All GMW prospective
sources of capital for a Transaction shall be identified by GMW
and listed on Schedule “A” attached hereto, as such schedule will
be updated from time-to-time by the Parties. Additions and
updates to Schedule “A” shall be discussed and agreed to by the
Parties, and such updates and additions shall be submitted in the
form of electronic mail, and Atlass’ receipt and confirmation (by
way of electronic mail) of the updates and additions set forth in
such electronic mail submission constitutes acceptance of any
such addition and update to Schedule “A”. Expiration of this
Agreement shall not affect GMW’s right to receive compensation
(as described below) if a Transaction takes place with a GMW
prospective source of capital, and takes place subsequent to, but
within a period of 24-months (the “Tail Period”) from the end of
the term of this Agreement.
GMW shall:
1) Assist Atlass on structuring the
Transaction;
2) Assist in the preparation and creation of
appropriate documentation (e.g. teaser
and information memorandum (“Sales
Materials”)); Sales Materials for NE
Hospital shall [be] prepared by GMW on or
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before twenty-one days from the Effective
Date;
3) Initiate contact with prospective investors
and arrange introductions with prospective
investors by way of teleconference, in-
person meetings and/or email
communication;
4) Assist Atlass in its evaluation of a
Transaction proposal;
5) Assist in negotiations.
COMPENSATION
NE HOSPITAL
1) 3% of a NE Hospital Transaction (irrespective of
who identifies the source of capital; i.e. GMW or
Atlass);
2) 10% of any funds Atlass receives from an NE
Hospital Transaction (net of debt and costs) (to
be paid only if a Transaction effects with a GMW
prospective source (or sources) of capital, or if a
Transaction effects by way of the new general
partner of NE Hospital, and Atlass receives funds
from such Transaction); and
3) 25% of the general partnership (“GP”) of the
entity controlling NE Hospital (to be granted only
if a Transaction effects with a GMW prospective
source (or sources) of capital[)].
By way of example, should GMW raise $20 million dollars in a
joint venture (“JV”) structure for NE Hospital from a prospective
source of capital, GMW’s compensation will be as follows:
1) 3% of $20 million (i.e. $600,000.00);
2) 10% of what Atlass receives (e.g. $20,000,000
less debt of $12 million, less $2 million buyout of
partners, less expenses); the net amount of $6
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million would equal a $600,000 fee payable to
GMW; and
3) 25% of the GP of the entity controlling (e.g. JV)
of NE Hospital.
ST AGNES HOSPITAL
Upon closing of the initial St. Agnes Transaction (e.g. $2 million
bridge financing), irrespective of who identifies the source of
capital, GMW will receive $30,000.00.
Upon the closing of a subsequent St. Agnes Transaction, GMW
will receive:
1) 3% of the Transaction amount (irrespective of
who identifies the source of capital; i.e. GMW or
Atlass);
2) 10% of the amount Atlass would receive from a
St. Agnes Transaction (see above example) (to be
paid only if a Transaction effects with a GMW
prospective source (or sources) of capital); and
3) 25% of the GP in the entity that controls St.
Agnes (to be granted only if a Transaction effects
with a GMW prospective source (or sources) of
capital).
GMW is affiliated (GMW’s President is a registered
representative) with Grant Williams, LP (“GWLP”), a Philadelphia,
Pennsylvania broker-dealer who is a member of FINRA and the
Securities Investor Protection Corporation (“SIPC”). GMW,
through GWLP, will comply with all applicable laws, rules, and
regulations of the Securities and Exchange Commission (the
“SEC”), the conduct rules of FINRA, and any state securities laws
and regulations.
Neither Party shall have the right to assign its rights or delegate
its obligations under this Agreement without the prior written
consent of the other Party; provided however, that GMW may
assign its rights or obligations hereunder to GWLP or any other
FINRA broker-dealer that GMW may associate with during the
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Term, Tail Period, and any extension thereof, without the prior
written consent of Atlass.
This Agreement shall be binding on the Parties and their
successors, assignees, designees or acquired businesses.
If you agree with the terms and conditions of this Agreement,
please sign and return. It is understood that you will prepare a
more formal document as soon as practicable.
Sincerely,
PENNSYLVANIA BANCSHARES, INC
Steven B. Atlass
President
Accepted: Signature of Steven B. Atlass
Date: July 20, 2011
Accepted and agreed as of this 20th day of July, 2011
GMW Organization, LLC
By: Signature of Gregory Weinberg
Gregory Weinberg
President
Complaint, 8/16/12, at Exh. A.
In reviewing a decision after a nonjury trial, “we will reverse the trial
court only if its findings are predicated on an error of law or are unsupported
by competent evidence in the record.” Deutsche Bank Nat. Trust Co. v.
Gardner, 2015 PA Super 219, slip op. at 2 (Pa. Super. filed October 14,
2015) (citing Boehm v. Riversource Life Ins. Co., 117 A.3d 308, 321 (Pa.
Super. 2015)). We may interfere with the trial court’s conclusions only if
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they are unreasonable in light of its findings. Zappile v. Amex Assur. Co.,
928 A.2d 251, 254 (Pa. Super. 2007).
GMW’s issues relate to the trial court’s interpretation of the
Agreement. “[T]he ultimate goal [of contract interpretation] is to ascertain
and give effect to the intent of the parties as reasonably manifested by the
language of their written agreement.” Southwestern Energy Production
Co. v. Forest Resources, LLC, 83 A.3d 177, 187 (Pa. Super. 2013). “In
cases of a written contract, the intent of the parties is the writing itself.”
Lesko v. Frankford Hosp.-Bucks Cnty., 15 A.3d 337, 342 (Pa. 2011).
“[I]n determining the intent of the contracting parties, all provisions in the
agreement will be construed together and each will be given effect.” LJL
Transp., Inc. v. Pilot Air Freight Corp., 962 A.2d 639, 647 (Pa. 2009).
We have made clear:
Determining the intention of the parties is a paramount
consideration in the interpretation of any contract. The intent of
the parties is to be ascertained from the document itself when
the terms are clear and unambiguous. However, as this Court
stated in Herr Estate, 400 Pa. 90, 161 A.2d 32 (1960),
“[W]here an ambiguity exists, parol evidence is admissible to
explain or clarify or resolve the ambiguity, irrespective of
whether the ambiguity is created by the language of the
instrument or by extrinsic or collateral circumstances.”
We first analyze the contract to determine whether an ambiguity
exists requiring the use of extrinsic evidence. A contract is
ambiguous if it is reasonably susceptible of different
constructions and capable of being understood in more than one
sense. The court, as a matter of law, determines the existence
of an ambiguity and interprets the contract whereas the
resolution of conflicting parol evidence relevant to what the
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parties intended by the ambiguous provision is for the trier of
fact.
Keystone Dedicated Logistics, LLC v. JGB Enterprises, Inc., 77 A.3d 1,
6–7 (Pa. Super. 2013).
GMW first argues that the trial court erred in failing to enter a specific
declaration concerning GMW’s rights and interest “in the carried
interest/profit share (also known as the “Promote” or the “Carry”)” with
respect to the St. Agnes Transaction. GMW’s Brief at 4. The trial court
defined “promote” as “‘a carried interest . . . or what’s also known as a profit
share whereby . . . a person who’s putting a deal together can share in the
upside as the property or the entity becomes successful’ and the limited
partners have been paid back with interest.” Trial Court Opinion, 4/21/15,
at 16–17 (citing N.T. Volume I, 7/16/14, at 68–69). Appellees assert that
the term “promote,” as utilized by GMW, is not contained in the Agreement;
rather, the Agreement addressed GMW’s compensation “without any
reference to a ‘promote.’” Appellees’ Brief at 7–8. The trial court agreed
that the Agreement made no mention of a “promote”; rather, the Agreement
provided that GMW would be entitled to twenty-five percent of the general
partnership in the entity that controls St. Agnes Hospital. Trial Court
Opinion, 4/21/15, at 17.
The trial court concluded that Howell controlled St. Agnes Hospital
within the meaning of the Agreement. Thus, GMW was entitled to twenty-
five percent interest in Howell’s general partner, Krebs. While
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acknowledging that GMW argued that it was entitled to twenty-five percent
of Howell, the trial court concluded that the Agreement’s terms are clear and
unequivocal. Therefore, the precept that a court may examine the
surrounding circumstances to ascertain the intent of the parties when the
words used in a contract are ambiguous, see, e.g., Keystone Dedicated
Logistics, 77 A.3d at 6, never came into play. Even if the provision in the
Agreement was ambiguous, the trial court found that the undisputed
extrinsic evidence did not support GMW’s interest in the promote. Trial
Court Opinion, 4/21/15, at 18. After careful review, we conclude that the
trial court did not err in its determination.
The second issue concerns the trial court’s conclusion that GMW was
not entitled to $250,000, or ten percent of the $2.5 million Howell received
as part of the St. Agnes Hospital transaction because the $2.5 million was
debt; the Agreement excluded debt from funds to which GMW’s ten percent
compensation was applicable. GMW argues that the trial court erred in
determining that the Agreement was clear and unambiguous, yet it utilized
clauses from other sections of the Agreement to support its conclusion that
GMW was not entitled to $250,000. GMW’s Brief at 36. GMW alleges the
trial court “supplied a term that was intentionally excluded from the St.
Agnes compensation terms.” Id. at 39. GMW maintains that the trial court
should have examined the St. Agnes Hospital provision in isolation, without
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reference to any other language of the Agreement. Thus, GMW avers that
the trial court erred in its interpretation of the Agreement.
The trial court rightly concluded that it was obligated to view the
Agreement as a whole and not “in discrete units.” Bethlehem Steel Corp.
v. MATX, Inc., 703 A.2d 39, 42 (Pa. Super. 1997). The trial court looked to
the entire Agreement and correctly determined there was no ambiguity.
Moreover, the trial court found that Weinberg’s testimony that the $2.5
million was structured as a loan at his suggestion for tax reasons was not
credible. Trial Court Opinion, 4/21/15, at 24. See Prieto Corp. v.
Gambone Const. Co., 100 A.3d 602, 609 (Pa. Super. 2014) (“Concerning
questions of credibility and weight accorded the evidence at trial, we will not
substitute our judgment for that of the finder of fact.”). Therefore, this issue
lacks merit.
GMW’s third claim is that the trial court misconstrued the debt terms
of the Agreement, maintaining that the trial court erred in finding that
“because Iron Point[2] provided Howell with a loan, that loan was debt that
should have been deducted from the ‘amount’ received by [Appellees] in
calculating what [GMW] was due under the Compensation Agreement.”
GMW’s Brief at 40. Thus, GMW posits that the debt referred to in the
____________________________________________
2
Iron Point Partners, LLC is a private equity company that was interested in
investing in both Northeastern Hospital and St. Agnes Hospital but ultimately
invested solely on St. Agnes Hospital. Trial Court Opinion, 4/21/15, at 5.
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Agreement was only pre-existing debt. The trial court found that GMW did
not identify any evidence that the terms “net of debt” and “less debt” used
in the Agreement referred only to existing debt paid off through a hospital
transaction rather than funds received by Atlass or an affiliate as new debt.
The trial court determined that Iron Point dictated the “$2.5 million would be
structured as a loan in order to provide itself with more protection.” Trial
Court Opinion, 4/21/15, at 24. The trial court’s conclusions are well
supported by the record.
Finally, GMW asserts that the trial court should have applied the
doctrine of contra proferentem. Under that rule, “any ambiguous language
in a contract is construed against the drafter and in favor of the other party
if the latter’s interpretation is reasonable.” Municipal Authority of
Borough of Midland v. Ohioville Borough Municipal Authority, 108
A.3d 132, 139 (Pa. Cmwlth. 2015). This issue has been discussed in the
context of the first and second issues; we have noted that the trial court’s
conclusion that the Agreement lacked ambiguity has record support. Thus,
the ambiguity issue has no merit. Moreover, the doctrine has no application
herein because the evidence of record supports the conclusion that the
Agreement was a freely negotiated instrument. See Kozura v.
Tulpehocken Area Sch. Dist., 791 A.2d 1169, 1175 n.8 (Pa. 2002) (“The
principle that a contractual ambiguity is to be construed against the drafter
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does not apply where, as here, the contract is the result of the joint efforts
of negotiators.”).
In summary, the trial court provided an exhaustive analysis and
correct disposition of all of the issues raised by GMW. Accordingly, we affirm
the judgment, and we do so on the basis of the comprehensive April 21,
2015 opinion of the Honorable Patricia A. McInerney.3
Judgment affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/24/2015
____________________________________________
3
The parties are directed to attach a copy of that opinion in the event of
further proceedings in this matter.
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IN THE COURT OF COMMON PLEAS OF PMLADELPBIA COUNTY
FIRST JUDIC~ DISTRICT OF PENNSYLVANIA
CIVIL TRIAL DIVISION
GMW ORGANIZATION, LLC, •• AUGUST TERM, 2012
``
Plaintiff, N0.1597 r;.,.;• '•
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STEVEN B. ATLASS. ET AL.,
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Defendant1.
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QPffilON
BY: Patricia A. Mcinerney, J. April 21, 2015
Judarne.nt having been entered. this is an appeal from the order denying the plaintiff's
motion for post-trial relief.
L BACKGROUND
On August 16. 2012, GMW Organization, LLC ('1GMW'1 or "Plaintiff') commenced the
instant action by way of a complaint against Steven B. Atlass ("Atlass1'). Pennsylvania
I
Bancshares, Inc. (''Bancshares,.), Howell Acquisition Partners, L.P. f'Howell"), and Howell's
general partner Krebs Partners, LLC ("Krcbs' (oollectively, "'Defendants'');businesses which
1)
were all alleged to be affiliated with Atlass. (Pl. 's Compl. fl' 2..s.) The complaint asserted a
I
number of causes of action against Defendants related to a written compensation agreement
("Contract")these parties entered into after Atlass approached GMW's Presidentand owner, i
Gregory Weinberg ("Weinberg"), in early Aprll 2011 regarding GMW finding funding for two I
hospital projects Atlass was involved in. (See id. atfl 9-1 J, 33, 46--73.) I
On July 16, 2014, Plaintiff's causes of action for breach of contract and declaratory relief
Cimw Olp,,iulian, Lie VaA1f-Efil.0PFLD
1
COPIES SENT PURSUANT TO Pa.R.C.P. 236{b) D. SPARACINO 04/21/2015
111111111111111111
Circulated 10/30/2015 03:56 PM
proceeded to bench trial before this court. 1 At 1rial, the following facts were adduced and
arguments were made.
On July 20, 2011, GMW and Atlas~ Bancshares, and Atlass's "affiliates.° which were
collectively referred to as "Atlass.'' entered into the Contract whereby OMW would provide
"inv~ent banking services to AtJass with regards to capital raisin& events ('Transaction(s)')"
for two hospitals, the two hospitals being: (1) NortheasternHospital. which Atlass bad recently
purchased through· certain entities end (2) St. Agnes Hospital, which AtJass was planning to
purchase through another entity, Howell. (See Pl.'s Ex. I; N.T .• Vol. 1, 40-44, 216~18.} Atlass'
idea was to raise capital with the goal of ultimately converting the hospitals into medical office
buildings. (See N.T., Vol. 1, 53-54, 204-JO; Pl.'s Ex. 22.)
On or about December 16, 2010, Northeastern Hospital, also known as City Center at
Northeastern Hospital, was purchased by Haskell Acquisitions ·Partners I, L.P., Haskell
Acquisitions Partners II, L.P., and Haskell Acquisitions Partners Ill, L.P. (collectively
"Haskelr'). (See N.T., Vol. I, 206-07; Defs. Bxs. Sl-52.) On or about July 29, 2011, Saint
Agnes Hospital was purchased by Howell (N.T .• Vol. 1, 146, 208.) Atlass formed Howell to
purchase Saint Agnes Hospital, (Ste Id. at 205, 208.) Howell is owned and/or controlled by
entities in which Atlass and AtJass' immediate family members have a majority ownership stake, I
including, but not limited to, its general partner Krebs, which is I 00% owned and controlled by
Atlass. (Id. at 128-32; Pl!s Ex. lS.) Haskell, Howell, and Krebs are all Atlass "affiliates" within
the meaning of the Contract. (N.T~ Vol. r, 129, 208-09; N.T., Vol. 2, 84, 133.)
1 Plaintifrs cause of action for unjust enrichmen'1 which was asserted in the alternative,
also proceeded to trial.
2
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The Contract provided:
GMWsball:
l) Assist Atlass on structurin& the Transaction;
2) Assist in the preparation and creation of appropriate documentation
(e.g., teaser and information memorandum ('•Sales Materials',); Sales
Materials for NE Hospital shall [be] prepared by GMW on or before
twenty-one days from the Effective Date; ·
3) Initiate contact with prospective investon and arrange in1Toductions
with prospective investors by way of teleconference, in-person
meetings and/or email communications;
4) Assist Atlass in its evaluation of a Transaction proposal;
5) Assist in negotiations.
(Pl. 's Ex. I, at p. 1.) The Contract then set forth nearly identical compensation structures for
GMW for both Northeastem Hospital and St. Agnes Hospital, specifically providing:
COMPENSATION
NE HOSPITAL
1) 3% of a NE Hospital Transaction (irrespective of who identifies the
source of capital; l.e. OMW or Atlass);
2) 10% of any funds Atlass receives from aD NB Hospital Transaction
(net of debt and costs) (to be paid only if a Transaction effccm with a
GMW prospective source (or sources) of capital, or if a Transaction
effects by way of a new general partner of NE Hospital. and Atlass
receives funds from such Transaction); and
3) 25% of the general partnership ("OP") of the entity controlling NE
Hospital (to be granted only if a Transaction effects with a OMW
prospective source (or sources) of capitalD].
By way of example. should OMW raise $20 million dollars in a joint venture
(nN") structure for NE Hospital from a prospective source of capital, GMW's
compensation will be as follows:
I) 3% of $20 million (i.e. $600,000.00);
2) 10% of what Atlass receives (e.g. $20,000,000 leas debt of $12
million, less $2 million buyout of partners, less expenses); the net amount
of $6 million would equal a $600,000 fee payabJe to GMW; and
3) 25% of the GP of the entity controlling ... NE Hospital.
ST AGNES HOSPITAL
Upon closing of the initial St. Agnes TI11I1S2ction ( e.g. $2 million bridge
3
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financing), itTCspective of who identities the source of capital, OMW will receive
$30,000.00.
Upon the closing of a subsequent St. Agnes Transaction, OMW will receive:
I) 3% of the Transaction amount (irrespective of who identifies the
source of capital; Le, OMW or Atlass);
2) 10% of the amount Atlass would receive from a St. Agnes Transaction
(see above example) (to be paid only if a Transaction effocts with a GMW
prospective source (or sources) of capital); and
3} 2S% of the OP in the entity that controls St. Aanes (to be granted only
if a Transaction effects with a OMW prospective source (or sources) of
capital).
(Id. at p. 2.) Regarding sources of capital, the Contract provided "[a]ll OMW prospective
sources of capital for a Transaction shall be identified by OMW and listed on Schedule 'A'
attached hereto, as such schedule will be updated from time-to-time by the Parties," (Jd. at p. J .)
On June 30, 20111 Atlass prepared the first draft of the Contract and sent it to Weinberg.
(PJ. 's Ex. 11.) Weinberg then made "somewhat substantial" edits to the first draft and provided
Atlass with several subsequent drafts. (N. T., Vol. l, 98; Oefs/ Exs. 6-9.)
Before entering into the Contract, Weinberg sought to bring in a co-lnvestment banker.
(N.T., Vol. 1, 103-04, 169-72, 219·20.) To that end, on or about April 2011, Weinberg.
introduced Atlass to Steve Goldberg ("Ooldberg'1) who was working at Friedman, Billings and
Ramsey ("FBR"). (Id. at 169-70, 219.) However, on or about May 2011, Goldberg notified
Weinberg that he was resignina from FBR and moving to a new firm. Robert W. Baird & Co.
('·Baird"). (Id. at 169.) As he was resigning from FBR and moving to a new firm, Goldberg
mentioned that he could not work with Atlass or Weinberg/OMW until his industry-required
"garden leave" expired in Au&USf. (Id. at 169.) A "garden leave" is a set period of time where
an investment banker may not work between transitioning from one finn to another. (See id.
169.)
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Knowing that resignin; from FBR would cause an inconvenience, Goldberg
recommended Weinberg speak with .Jim O'Brien (''O'Brien") at FBR regarding pursuing a JV
opportwuty. (Id. at 32·33, 49-50; N.T., Vol. 2, p. 12.) To that end, Goldberg offered that
O'Brien could provide Weinberg with a list of potential investors Weinberg could contact in the
event FBR or Baird did not engage with Atlass to effect a JV. (N.T., Vol. 2, 4647; Pl. 's Ex. 36.)
Weinberg diligently pursued a conference call between himself, Atlass, and O'Brien, and
the call eventually took place on or about May 18, 2011. (See N.T., Vol. 1, SO; N.T., Vol. 2, 48-
49; Pl. 's Ex. 34.) On June 13, 2011, O'Brien sent a contact list to Weinberg that included Iron
Point Partners, UC ("Iron Point"), a private equity company. (N.T., Vol. 2, 46-47; Pl. 's Ex.
36.) Shortly thereafter, O'Brien notified Weinberg that he too was resigning from FBR and
moving to Baird and could not discuss any opportunity with Weinberg or Atlass during his 90.
day garden leave, which would expire in mid..SCptembcr 2011. (See N.T., Vol 2, 6, 49-54; Pl.'s
Ex. 37.)
After entering into the Contract, Weinberg began preparing teaser/executive summary
materials and financial projections. (See N.T., Vol. 1, SS-S8; PJ!s Exs, 22, 25.) During the
period of time following execution of the Contract, Weinbera also contacted numerous investors i
I
regarding the JV opportunities with Atlass. (N.T .• Vol. I, 35·36.) And during the momhs of I
J
September, October, and November of 2011, Weinberg worked diligently with Goldberg and
.
O'Bnen, after their respective "'garden leave" periods expired, and other representatives of Baird
whereby Weinberg created and provided due diligence infonnation (e.g .. an organizational chart,
financials, etc.) and answered detailed due diligence questions to enable Baird to assess the
viability of a joint venture. This work culminated with Atlass entering into a separate investment
banking services agreement with Baird on November 14, 2011 (the "Howell-Baird Agreement"}. !
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(See, e.g., N.T., Vol. 1. 63·67 Pl.'s Bxs., 27, 37; Defs.' Ex. 13.)
From October through November 2011, Weinberg was involved in negotiating the
HoweU·Baird Agreement (N.T., Vol.], 46> 70-71. 103-04.) This involvement included
"advising ... Atlass on how to negotiate and edit" the Howell-Baird Agreement. (Id. at 46.)
The Howell-Baird Agreement is similar to the Contract in that it sets forth
Baird's obligations "in connection with the possible ••. investment in or commitment of capital
to [Howell] or the St Agnes Continuing Care Center owned by [Howell).n (Defs. • Ex. I 3, at p.
1.) One y,ay, however, that the Howell-Baird Agreement differs from the Contract is that it
specifies 41[1}or the avoidance of doubt, an investment or commitment of capital in the JV, the
Company or any project, property or business affiliatt.d with the Company may include equity,
equity ..finked or senior, mezzanine, subordinated 9r convertible debt financing." (Id.)
On November JS, 201 I, Weinberg and Atlass amended the Con1ract to include the
following as GMW prospective sources of capital: "(i) Any and all persons or entities identified
by Robert W. Baird & Co. lncorpomted ('Baird') during the term of the agreement between
Baird and Howell Acquisition Partners. LP ('Howell Agreement' dated and executed by Atlass
November 14, 2011); and (ii) any and all persons or entities identified by Baird dming the term I
of the agreement between Baird and Haskell Acquisition Partners, LP and its affiliates {'Haskell
Agreement' -to be executed as soon as practicable}; •.. " (PJ.'sEx. 3.) Stated another way, the
parties agreed that GMW would be credited with any SOUIW of capital idcntifiod by Baird so
long as Baird identified that source between November 141 2011 and some future date. (See id.}
Certain aspects of the Contract required OMW to find the source or sources of capital ifit
was to be compensated forfmding that capital. (See Pl.'s Ex. 1.) As used in the Contract, Atlass
believed the term "capital" includes equity, but not debt (N.T., Vol. 1! 217.) Weinberg. on the
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other hand, argued the tenn "capital" as used In the Contract included equity and debt. (Id. at
99-100.)
Upon receiving the Howell-Baird Agreement, which specified .. for the avoidance of
doubt., capital includes equity and debt with res~t to the services to be provided by Baird,
Weinbera did not clarify with At)ass that the word "capital~ as used in the Contract also included
debt. (Id. at I 13-15.) In negotiating the Howell-Baird Aareement, Weinberg marked up the
drafts proposed by Baird. In doing so, Weinberg at one point proposed to rewrite the terms of
the agreement such that it would have read "for the avoidance of doubt, an investment or
commitment of capital in the JV, [Howell] or the St. Agnes Continuing care Center owned
[Howell] must be an equity investment, not debt." (Dcfs. • Ex. 83.) Thus, Weinberg understood
prior to trial that the word "capital" could include only equity, and even asserted this position in
his dealinis with Baird.
After it was formally engaged by Howell, Baird eneaged in due diligence, prepared pre-
marketing materials such as "teasers," contacted 'prospective investors, responded to due
diligence requests from investors, and negotiated letters of intent. (N.T., Vol. 2, J 4-16.) In
January 2012, Baird began to make phone calls to capital sources, including, but not limited to,_
Iron Point. On January 20, 2012, a representative from Baird (Kathleen Chekan) sent Weinberg
and AtJass tbe list of the people that Baird was contacting ( or desired to contact). (See Pl.' s Ex.
40.) This was the first time Iron Point was identified to AtJass and the Atlass affiliates during the
tenn of the Contract and durina the tenn of the Howell-Baird Agreement.
During January. Febnwys and March of 2012, Weinberg participated in conference calls
and/or in-person meetings/tours with Iron Point, among others. Weinberg also provided, among
other things, a summary outline to Atlm in preparation for an Iron Point call and recommended
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and participated in conference calls to prepare for the Iron Point caU. (N.T., Vol. l. 77·82; N.T .•
Vol. 2, 227; Pl. •s Bxs. 4043.) Weinberg also provided comments on multiple iteration., of a
draft term sheet/letter of intent from Iron Point, which culminated with Iron Point submitting its
first proposed term sheet to Atlass on Maroh 6, 2012. (N.T., Vol. 1, 80-81; Pl. 's Ex. 43; Deis!
Ex. 2S.)
Weinberg received a copy of the first term sheet. (N.T.1 Vol. l, 125.) The first term
sheet proposed fonnins a new limited liability company or c.ompanies to own the hospimls and
real property at both St. Agnes Hospital and Northeastern Hospital. (Defs.' Ex. 2S, at p. 2.) Iron
Point was the entity that proposed the limited liability company form rather than the limited
partnership form. (N.T •• VoL 1, 20, 121.)
On March J 9, 2012, Iron Point submitted a revised proposed term sheet for both
hospitals. (Defs.' Ex. 26.) Weinberg received a copy of the revised term sheet. (N.T., Vol. 1,
127-28.) Weinberg knew Iron Point proposed structuring the new entity or entities as a limited
liabilitywmpany or companies. (N.T., Vol. 1, 127.) Weinberg also understood a limited
liability company does not have a general partner. (N.T., VoL l, 127-28.) The revised tenn
sheet valued Northeastern Hospital at St 2~SO,OOO and St. Agnes Hospital at $5,086,500 and
I
proposed providing Atlass with a $2.S00,000 "distribution." (Defs.' Ex. 26, at 3-4.) I
I
Iron Point dictated the structure of the deal; the dollar amount; and how the money would j
I
be allocated. (N.T., Vol. 2, 20. 30; Defs. 's Exs. 2S-26.) There were only limited negotiations I
II
I
between Atlass and hon Point. (N.T., Vol. t, 126--27, 225-26.) And for those limited
I
negotiations, Baird took the lead in neaotiating on Atlass' behalf (Id. at 88, 226-21; N.T., Vol. I
2. 14, 22.) Weinbera had no involvement with these negotiations with Iron Point. (N.T., Vol. 2, I
27-28.)
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At some point inith.c ncaotiations, Iron Point decided against pursuing a joint venture
with Northeastern Hospital and focused solely on St Aanes Hospital. (N.T., Vol. 1, 230.)
As a result, instead of pursuing a deal for the two hospitals Jn the S 17 ,000,000 range. Iron Point
decided to only pursue a deal for the one in the $5,000,000 range. (Id. at 232-34.) It was also at
this point Iron Point restructured the proposal such that the $2.S00,000 distribution was changed
to a proposed $2.5 million loan. (Id. at 230-34; N.T., Vol. 2, 30.)
On Jtme 1, 2012, Iron Point and Howell closed a transaction whereby they formed St.
Agnes MOB, LLC, a limited liability company that would own and operate the St ASIJes
Hospital business and real property formerly owned and operated by Howell. (N.T., Vol. 1, 229-
31; Pl.'s Ex. IS.) Pursuant to the terms of the Transaction, Iron Point contributed $6..027,579 of
which a little over $2 million was used to pay off Howell's existing lender BasilicataCapital and
$2.5 million was loaned to Howell. (See N.T., Vol. I, 66-67, 146, 230; Pl. 's Ex. 15.) In return,
Howell contributed the property and Iron Point took a 90% ownership position in St. Agnes
MOB, LLC, while Howen took a 1 ()OA, ownership interest. (See Id.)
Iron Point is a GMW prospective source of capital in accordancewith the Contract and I
the email amendment dated November 15, 201 l. (See N.T., Vol. 2, 87; Pl.'s Ex. 3.) But for
GMW's relationship with. Baird, Iron Point would never have funded the St. Apes MOB JV
Transaction. (N.T., VoJ. 1, 175-76; N.T •• Vol 2, 90.)
The St. Agnes MOB~ LLC operating agreement specifies that except as otherwise
provided in the agreement, the new LLC would be controlled by a five-member Board of
Managers dominated by Iron Point. (Pl. 's Ex. 15, at§§ 5.01, S.02(a).) Howe)~ however, was
designated as the initial managing member. (Id. at § S.OS(a).) While Howell was to ••rt to,
l
I
and be subject to the direction and controJ of, the Board of Managers," Howell was "responsible I
I
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for the implementation of the decisions of the Board of Managers and for conducting the day-to-
day- business and affairs of the Company in accordauce with the Annual Plan and Budget." (Id.
at § S.OS(a).) Howell currently remains the managing member of St. Agnes MOB, LLC and
receives $15,000 per-month to manaae St. Agnes MOB. (See, e.g., N.T., Vol. 2, 126-27.)
In accordance with the term of the Contract that OMW would receive "2S% of the GP in
the entity that controls St. Agnes,. if a Tr:ansaction effected ''with a GMW prospective source ...
capital[,)'' GMW sought a 25% interest in Howell. (N.T., Vol. I, 5, 121.) Atlass and his
affiliates, on the other hand argued, the entity that controls St. Agnes MOB, LLC is the Board of
Managers, which does not have a GP. (Id. at 16, 247-48.) Atlass and bis affiliates further argued
even if it was asswned that Howell controls St. Anges MOB, LLC. the Contract provided GMW
would only be entitled to a 25% interest in the general pamer of Howell, which is Krebs. (N.T.,
Vol. 2, 141, 198.)
In accordance with the term of the Contract that GMW would receive "10% of the
amount Atlass would receive from a St. Agnes Transaction (see above example) (to be paid only
if a Transaction effects with a GMW prospective source •.. of capital)(,f' OMW also sought
10% of the $2,500,000 that was loaned to Howell, or $250,000. (Su, e.g., N.T., Vol. 2, 158-60.)
OMW argued lt was entitled to be compensated as such. in part, because "the word 'amount' was
not defined in any limited way, and any type of capital, including any form of debt. capital, was
clearly subsumed by the term 'amount"' and ''Mr. Steven Grant (President of Grant Williams,
I
LP; the FINRA broker dealerwhezc Weinberg is a registered representative) testified that debt is
always considered a form of capital." (Pl.1s Proposed Findings of Fact and Conclusions of Law
158 (citations to the record omitted).) Atlass and his affiliates, on the other hand, argued OMW II
I
was "not entitled to any monetary compensation in connection with the $2,500,000 loan because
':
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the Joan was not a capital-raisilli event," (Dcfs/ Proposed Findinas of Fact and Conclusions of
Law 1149.) Moreover, Atlass and his affiliates argued GMW wu not entitled to any monetary
compensation in connection with the $2,500.000 loan because "[t]he $2,S00,000 loan from Iron
Point to Howell was debt0; Atlass did not believe capital included debt under the contract; and
Weinberg's testimony on the issue was not credible. (Id. at fl 131-40, 148-49.)
While Baird had been formally engaged by Howell on November 14. 201), it was not
until April 20, 2012 that GMW entered into a written fee-splitting arrangement with Baird (the
"GMW-Baird Agreement"). (Pl.'s Ex. 30.) The GMW-Baird Agreement stated "Baird shall pay
GMW a fee of twenty-five (25%) of Net Fees." (Id.atp.213.) The OMW-Baird Aareement
further included certain acknowledgments regarding the fact that OMW had already entered into
a separate compensation agreement with Atlass. Specifically, it was acknowledged that GMW
was contracted to receive additional compensation, "(i.e., OMW shall be paid by Mr. Steven
Atlass and his Affiliates (4 Atlass') 100~ of the proceeds •.. which Atlass receives by way of the
JV Formation; additionally, GMW is contracted by Atlass to receive a 25% position in the
general partnership of [Howell and/or Haskell]." (Jd. at pp. 1-2.)
Prior to the spring of 2012, Weinberg did not tell Baird that OMW was already
I
contracted to receive compensation directly ftom Adass in connection with a Northeastern
Hospital and/or St. Ago.es Hospital Transaction. (N.T., Vol 1. 180-82; N. T., Vol. 2. 64-65.) I
i
Before Baird learned from Atlass that OMW was already contracted to receive compensation
directly from Atlass, Baird had agreed to split the fees so that OMW would get 500/o of the net
revenues Baird received from any Transaction. (N.T., Vol. I, 91-92, 180-82.)
Upon Jeaming Weinberg had not disclosed OMW's pre-existing compensation agreement
with Atlass, Baird reduced the fee splitting agreement so that GMW would only get 25% of the
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net revenues Baird received ftom any Transaction. (N.T., Vol. 1, 180-82; N.T., Vol. 2, 45.) As a
result of the non-disclosure, Goldbergtestified Weinberg was ..disingenuous" and engaged in an
''inappropriateform of business dealings ••.• (N.T., Vol. 1, 182.)
0
Prior to the bench trial and the filing ofits complaint, OMW had already received
$108,000 in compensation under the Contract and the OMW·Baird Agreementin connection
with the St. Agnes Hospital Transaction.2 Following the conclusion of the bench trial, this court
issued findings of fact and conclusions of law regarding any a.ddJtional compensation OMW may
have been due under the Contract.
Regarding whether GMW was entitled to 1 OOAi of the $2.S million Iron Point loaned to
Howell, this court concluded OMW was not entitled to such additional compensation because the
$2.5 million Jron Point loaned to Howell was debt. In reaching that conclusion, we noted! (1)
the Contract provides OMW would be entitled to "10% of the amount Atlass would receive from
a St. Agnes Transaction (see above ex.ample) {to be paid only if a Transaction effects with a
11;
GMW prospective source (or sources) of capital) ••. (2) the example the Contract references,
however, then provides the amount for purposes of the 10% is "less debt"; and (3) the identicaJ
compensationstructure for Northeastern Hospital also specificallyprovides the amount for
purposes of the "100.4 of any funds Atlass receives" is "net of debt," Thus, while having
determined Iron Point was a GMW prospective source of capital, this court concluded pursuant
to the Wlambipous terms of the Contract. OMWwas not entided to the additional $250,000 in
compensationas the funding Howell/Atlass received from Iron Point was debt in the form of a
loan.
2
This compensation was paid either directly t.o OMW or to its broker-dealer, Grant
Williams.
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This court. however, did conclude OMW was entitled to a 25% interest in Krebs,
because: ( 1) the Contract provided OMW would be entitled to "25% of the OP in the mtey that
controls St. Agnes ... if a Transaction effects with a OMW prospective source ..• of capitalO";
(2) a Transaction effected with a GMW prospective source of capital, Iron Point; and (3) while
the Board of Managers of St. Agnes MOB, LLC has the ultimate authority and control over St
Agnes Hospital, Howell as its managing member controls St. Agnes Hospital wi1hin the meaning
of the Contract by virtue of its responsibility for implementing the decisions of the Board and for
conductina the day-to-day· business and affairs of the company. As such, this court concluded
;
i
OMW was entitled to a 25% interest in the genentl partner of Howell (the entity which controls
St. Agnes Hospital within the meaning of the Contract) and that general partner is Krebs.
On October 8. 2014, OMW filed a timely motion for posMrial relief. In its motion,
I
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GMW argued "[t]bis [c]oun should clarify its decision under Rule 227;1 to award ••• 25% of the I
promote [or carried interest in the project] to Plaintill'as part of its interest in Krebs." (Pl.9s
Post-Trial Mot. 'i 2.) GMW also argued this court "imported a tenn from the NB Hospital
compensation agreement {'net of debt and costs') into the St. Apes Hospital transacti~ where
I
I
Plaintiff's compensation on the St. Agnes Hospital transaction never included the 'net of debt'
term." (Id. 131 (emphasis removed).) As such, OWM argued this court erred in not awarding it
a "I 0% fee on ftbe} $2,S00,000 transaction .... " (Id. at 1 S.)
On November 7, 2014, Defendants ftled a response in opposition to Plaintiff's motion for
post-trial relief. Therein, Defendants argued "[)this [c]ourt need not 'clarify' its decision, which
clearly states both (P]laintiff's entitlement to onJy a 25% beneficial interest in Krebs and the
basis for that determination-the unambiguous terms of the [Contract]." (Defs.' Resp. 12.)
Citing Jar/ Investment, L.P. v. Fleck, 931 A.2d l l J 3 (Pa. Super. Ct. 2007), among others.
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Defendants also argued '"[a] court should not look at a single sentence or even provision of
agreement in isolation to det.ermine if an ambiguity exists, but should look to the entire
agreement." (Defs.' Resp. 14.) As such, Defendants argued "[this] [c]ourt correctly found that
no ambiguity existed. as the compensation provision unambiguously provides that [P]laintiff is
not entitled to 10% o[n] amounts received by {Defendants} as debt.. as "there was one [Contract]
that governed compensation for both hospitals" and "the reference in the St. Agnes Hospital
provision to the example above, which was for the North East Hospital compensation structure,
included a deduction for debt and costs, demonstrating the parties' intent that the St. Agnes
Hospital compensation provision also include a deduction for debt and costs." (Id. at fl 4 i3 l,
34.)
On December 18, 2014, this court entered an order denying OMW's motion for post-trial
relief Thereafter, OMW filed a timely notice of appeal and this court <>rdered it file a Pa. R.
App. P. 192S(b) statement. In its l 92S(b) statement. Plaintiff set forth the following four
complaints of error:
I. The Trial Court erred in failing to enter a s~ific declaration
· concerning Plaintiff's rights and interest in the "promote', with respect to the St.
Agnes tnmsaction, where: (a) the Court recoanized the importance of the
66promotc1•
to the parties; (b) undisputed extrinsic evidence existed to support
I
PJaintilrs interest in the ''promote;" and (c) the Court only awardc:cl Plaintiff an
interest in Krebs ... without any declaration concerning Plaintiff's rights to the i
'*promote/• thereby permitting Defendant to manipulate the disbursement of
4'promote" money (including but not limited to altering the entity types in the St.
I
Agnes Transaction) such that Krebs receives only a minimal amount and
Defendant[s] avoidO having to pay PJaintUfhis share of the "promote., money.
I
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I
2. The Trial Court erred in ruling that the terms of [the] parties' !
agreement concerning Plaintiff's entitlement to $250,000 &om the St Agnes
Transaction was clear and unambiguous, where Plaintiff satisfied the conditions
precedent to its receiving the $250,000, and, in construing such terms, the Court
was required to borrow and insert clauses from other sections of the agreement to
support its conclusion that Plaintiff was not entitled to receive $250,000 from the
St Agnes Transaction.
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3. The Trial Court erred in failing to award Plaintiff S2SO,OOO based
on the 0amount" received by Defendants in the St. Apes Transacdon, where: (a)
all "debt .. considerations were irrelevant to the St, Agnes Transaction because the
provision., in the agreement relating to Plaintiffs payment entitlements frorn the
St. Agnes Transaction did not contain a term allowing for "debt" to reduce
Plainti~s entitlements and the Court found that a capital-raising event took place;
(b) even the inapplicable "debt" terms which the Court borrowed from other
provisions in the agreement not rel.atina to the St. Agnes Transaction called for
using pre-existing debt of which the St. Agnes Transaction had none; and (e) there
was no genuine debt from the St. Agnes transaction which could be used to
reduce PJaintifrs $2SO,OOO payment entidement.
4. The Trial Court erred in construing the agreement of the parties
against Plaintiff contrary to the doctrine of contraprofere,,tem such that it failed
to award Plaintiff $250,000 pmsuant to tbe St. Agnes Transaction where the
agreement was drafted by .•. Defendants with tho assistance of counsel and
Plaintiff had no counsel.
(Pl.'s 192S(b} Statement fl J 4 (emphasis altered).)
II. DISCUSSION
All ofGMW's complaints oferrorreJateto this court's interpretation of the Contract.
"When interpreting a contract, the court's paramount goal is to ascertain and give effect to the
intent of the parties ... _., BsthleMm Steel Corp. v. MA.TX. Inc .• 703 A.2d 39, 42 (Pa. Super. Ct.
.
1997) (quotations omitted). Ininterpreting a written contract, "the intent of tM parties is the
writing itself" Kripp v. Krlpp. 849 A.2d I 159, 1163 (Pa. 2004). In interpreting such a contract,
"each and every part of it must be taken into consideration and given effect, if possible, and the
intention of the parties must be ascertained from the entire instrument." Bethlehem Steel, 703
A.2d at 42 (quotations omitted).
"lf left undefined, the words of a contract are to be given their ordinary meaning." Kripp,
849 A.2d at 11633. "When the terms of a contract are clear and unambiguous, the intent of the
parties is to be ascertained from the document itself." Id. ''The intent of the parties ... is
deemed to be embodied in 'what the agreement manifestly expressed, not what the parties may
lS
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have silently intended."' Greater Nanticoke Area Sch. Dist. v. Greater NanticolreArea Educ.
Ass'n, 760 A.2d 1214, 1219 (Pa. Commw. Ct. 2000), quoting Delaware County». Delaware
County Prison Employees Indep. Union, 713 A.2d 113S, 1138 {Pa. 1998).
When, howeYer, ''the words used in a contract are ambiguous, a court may examine the
swroWlding circumstances to ascertain the intent of the parties." Bethlehem Ste,/, 703 A2d at
42, qut>ting Halpin 11. Lasalle Univ., 639 A.2d 37. 39 (Pa. Super. Ct. 1994). "When detennining
whether a contract is ambiguous, a court must view the contract as a whole and not in discrete
units," Bethlehem Steel, 703 A.2d at 42, quoting Halpin, 639 A.2d 37 at 39. uA contract is
ambigu0tm if it is reasonably susceptible of different constructions and capable of being
understood in more than one sense." Kr/pp, 849 A.2d at 1163. "When ... an ambisuity exists,
parol evidence is admissible to explain or clarify or resolve the ambjguity, iJTespective of
whether the ambiguity is patent, created by the language of the instrument, or latent, created by
extrinsic or collateraJ circumstances. n Id.
Fint, OMW complains this court:
erred in tailing to enter a specific declaration concerning Plainillr s rights and
interest in the "promote" with respect to the St. Agnes Transaction, [because) (a)
the (c]ourt recognized the importance of the ''promote" to the parties; (b)
undisputed extrinsic evidence existed to support Plainillrs interest in the
"promote;" and (c) the [c]ourt only awarded Plaintiff an interest in Krebs ...
without any declaration concerning Plaintiffs rights to the "promote," thereby
pennittin,g Defendant to manipulate the disbursement of "promote" money
(including but not limited to altering the entity types in the St. Apes Transaction)
such that Krebs receives only a minimal amount and Defendant[s) avoid[) having
to pay Plaintiff"his share of the "promote,. money.
(Pl.'~ l 925(b) Statement 11.) As explained by Weinberg at trial, ''{g)enerally speaking, in ...
real estate limited partner/general partner structures, there is a carried interest or promote or
what's also known as a profit share whereby ..• a person who's putting the deal together[] can
share in the upside as the property or the entity becomes successful" and the limited partners
16
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have been paid back with interest. (N.T., Vol. 1, 68..69.)
As a pieliminary matter, this court did not err in failina to enter a specific declaration
concerning Plaintiff's riahts and interest in the promote because Plaintiff did not ask for such a
specific declaration in its count for declaratory relief in its complaint. nor in its proposed findings
of fact and conclusions of law. The reason Plaintiff did not ask for such a declaration was
because it was seeking a 25% beneficial interest in Howell it.self. in part because it argued Atlass
controls whether Krebs would receive any of the promote. (See, e.g., Pl. 's Proposed Findings of
Fact and Conclusions of Law r,J 75, 94.) The Contract, however, only provided GMW was
entitled to "25% of the OP in the entity that controls St. Aenes (Hospital]" and made no mention
of the ''promote." AtJ such, this court correctly concluded OMW was only entitled to a 25%
beneficial interest in Krebs pursuant to the unambiguous temts of the Contract and as a primary
matter made no error in failing to enter a specific declaration concerning Plaintiff's rights and
interest in the "promote."
As this was a breach of conuact case, this court was focused on the language of the
pm1ies' written agreement. That agreement provided OMW would be entitled to "2S% of the GP
in the entity that controls St. Agnes [Hospital]" and made no mention of a "promote." While
I
Defendants argued Plaintiff was not entitled to a 25% interest in any Atlass affiliate because it is I
I
the Board of Managers of St Agnes MOB, LLC that "controls" SL Agnes, and the Board does I
not have a general partner, di.is court concluded Howell as the managing member also has a
significant amount of control over the business by virtue of its responsibility for implementing I
the decisions of the Board and for conducting the day-to-day business and affairs of the
company. (See Findings of Fact and Conclusions of Law, at 21 11 SS·S6, citing Black's Law
Dictionary (9th ed. 2009) (defining control as "exercis[lng] power or influence over .... ").) A1>
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such, this court concluded Howell controls St. Agnes Hospital within the meaning of the
Contract, and the Contract provided OMW was entitled to a 25% interest in the general partner I
l;
of Howell, which is Krebs.
In reaching this conclusion, this court was fully aware of Plaintiffs argwnent that it was
entitled to 25% of Howell itself because Atlass controls whether Krebs would receive any of the
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promote. However. u the tenns of the Contract were clear and unequivocalthat Plaintiffis only
entitled to"25% of the OP in the entity that con1rols St. Agnes [Hospital]" and made no mention
of a promote, this court was not examining the surrounding circumstancesto ascertain the intent
of the parties regarding the promote. see, i.g., Bethlehem Steel, 703 A.2d at 42 {stating, [w]hen
14
the words used in a contract are ambiguous, a court may examine the surrounding circumstances
to ascertain the intent of the parties.>'), nor ~[ing] the importance of the •promote' to
the parties .•. "as asserted by Plaintiff, (Pl. 's 1925(b) Statement11). Rather, in reaching its
conclusion that Plaintiff was only entitled to a 25% interest in Krebs, it was enforcing the clear
and unequivocal terms of the Contract the parties actually entered into.
Moreover, even if the provision was ambiguous and required the use of extrinsic
evidence, see, e.g., K~ystone Dedicattd Logistics, LLC v. JGD Enterprises, Ine., 77 A.3d 1, 6
(Pa. Super. Ct. 2013) (stating before the court admits parol evidence "to explain or clarify or
resolve.. an ambiguity, the court ..first anal>'=fsJ the contract to determine whether an ambiguity
exists requiring the use of extrinsic evidencej, it is not true undisputed extrinsic evidence
existed to support Plaintiff's interest in the promote. Rather, what the extrinsic evidence showed
in this n,gard was that the parties intended for OMW to receive a 25% interest in a pewly formed
genemJ partnershipthat would control St. Agnes Hospital after a Transaction was affected, not a
25% interest in the existing Howell AcquisitionPartners, L.P., which Atlass fonned to purchase
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the hospital in the first place. (Su Findings of Fact and Conclusions of Law, at 21 l 0, 21-22 ,1
S9.) However, as this court concluded in its findings of fact and conclusions of law, by the plain
and unequlvoeel terms of the Contract, OMW assumed the risk of whether or not this would
happen. (&e Id. at 21-22 ,159 ..61 (noting it was reasonably foreseeable a private equity
investor might dictate the deal be structured as a limited liability company rather than a limited
partnership).) And it did not happen es Iron Poin._witbout any manipulation on the part of
Atlass--decided the new entity would be a limited liability company as opposed to a limited
partnership with a general partner. (Id. at 21-22 fl S9-60.)
Additionally. the extrinsic evidence also showed that as part of OMW's fee splitting
agreement with Baird, OMW acknowledged it was "contracted by Atlass to receive a 25%
position in the general partnership of the Company." (Pt's Bx. 30 at 13.) As relevant here, the.
term "Company .. was defined in the OMW·Baird Agreement as Howell whose general partner is
Krebs. Thus. the extrinsic evidence also showed OMW understood its compensation was never
to be a 2So.4 interest in Howell itself. Therefore, rather than there being undisputed extrinsic
evidence supporting OMW having a 25% interest in the promote and a specific declaration of the
same, what the extrinsic evidence actually showed was that OMW' s compensation was to be a j
!
25% interest in either Krebs or a newly formed "Howell OP,,, regard.less of whom may receive !
or control the promote, and Weinberg's testimony to the contrary was self-serving and lacked I
credibility. (see, e.g., N.T., Vol. I., 68 (discussing a 1uly 11, 2011 Jetter to an investor, which
provided "Howell becomes the OP (Howell OP} of the N with the following approximate
I
promotes/carried interests ••. (,]n and stating that was generally the structure that was ultimately
used to close the deal with Iron Point)).
In sum, the unambiguous tenns of the Contact entitled Plaintiff to a 2S% beneficial
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interest in Krebs, but not a specific declaration that it is entitled to 25% of the "promote,"
Moreover. even if it is determined extrinsic evidence is relevant to the issue, the extrinsic
evidence is not undisputed and this court's decision that Plaintiff is not entitled to a specific
declaration that it is entitled to 25% of the promote should be affirmed on appeal. See generally
K4ystone Dedicated, n A.3d at 6-7 (stating that while an appellate court has de novo review
over a lower court's interpretation of a contract, "resolution of conflicting parol evidence
relevant to what the parties intended by [an] ambiguous provision is for the trier of fact 'j
Next. Plaintiff complains this court "erred in ruling that the terms of [the} parties'
agreement concerning [its] [lack of an] entitlement to $250,000 from the St. Agnes Transaction
was clear and wambiguous[] where ..• the [c]ourt was required to borrow and insert clauses
from other sections of the agreement to support its conclusion .•. Plaintiff' was not entitled to
receive $250,000 from the St. Agnes Transaction." (Pl.'s 1925(b) Statement 'ti 2.) The court
disagrees.
As stated above, "[w]hen determining whether a contract is ambiguous, a court must
view the contract as a whole and not indiscrete units ••• and the intention of the parties must be
ascertained from the entire instrument.11 Bethlehem Steelt 103 A.2d at 42 (quotations omitted).
Here. there was one agreement that governed compensation for Transactions involving both
hospitals-the Contract-and there was no error in looking at the entire instrument to ascertain
the intentions of the parties regarding that compensation.
Moreover, there was no error in determining that "debt" was relevant to whether GMW
was entitled to the tier-two compensation for both Northeastern Hospital ("10% of any funds
Atlass receives from aO NE Hospital Transaction") and St Agnes Hospital (" 10% of the amount
At)ass would receive from a St Agnes Transaction"], (Cf Pl.'s l925(b) Statement 4V 3 (stating
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the coun erred in failing to award $250,000 ·because "all 'debt' considerations were irrelevant to
the St. Agnes Transaction because the provisions in the agreement relating to •.. the St. Agnes
Transaction did not contain a term allowing for 'debt' to reduce Plaintiff" s (oompemationJ ... ,,
like the provisions in the agreement relating to Northeastern Hospital did).)
As relevant here. the Contract set forth identical compensation structures for both
Northeastern Hospital and St. Agnes Hospital, specifically providing:
COMPENSATION
NE HOSPITAL
1) 3% of a NE Hospital Tnmsaction (izrespective of who idontifies the
source of capital; Le, GMW or Atlass);
2) 10% of any funds Atlass receives fromafl NE Hospital Transaction
(net of debt and costs) (to be paid only if a Transaction effects with a
OMW prospective source ( or sources) of capital, or if a Transaction
effects by way of a new general partner of NE Hospital, and Atlass
receives funds Jiom such Transaction); and
3) 25% of the general partnership ("OP") of the entity controlling NE
Hospital (to be granted only if a Transaction effects with a OMW
prospective source (or somces) of capital DJ.
By way of example, should GMW raise $20 million dollars in a joint venture
("IV'') structure for NE Hospital Jrom a prospective source of capital, GMWs
compensation will be as follows:
l} 3% of$20 million (i.e, $600,000.00); I
2) 10% of what Atlass receives (e.g. $20,000,000 less debt of$12
million, less $2 million buyout of partners. less expenses); the net amount
of$6 million would equal a $600.000 fee payable to OMW; and
3) 25% of the OP of the entity controlling ..• NE Hospital. I
sr AGNES HOSPITAL I
••• I
1) 3% of the Transaction amount (irrespective of who identifies the !
source of capital; i.e. OMW or Atlass); I
2) 10% of the amount Atlass would receive from a St. Agnes Transaction
(see above example) (to be paid only if a Transaction effects with a GMW
prospective source (or sources) of capital); and
3) 25% of the OP in the entity that controls St. Agnes (to be granted only
if a Transaction effects with a OMW prospective source (or sources} of
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capital).
(Pl.'s Ex. I, p. 2.)
The Contract specifically enumerated the same three types of compensation for both a
Northeastern Hospital and a St. Agnes Hospital Transaction. The first type of compensation. or
tier-one compensation, was 3% of a Northeastern Hospital or St. Agnes Hospital Transaction.
The second type of compensation. or tier-two compensation, was 10% of the amount or any
funds Atlass would receive from a Northeastern Hospital or St. Agnes Hospital Transaction.
And the third type of compensation, or tier-three compensation. was 25% of the OP of the entity
that controUed Northeastern Hospital or St Agnes Hospital following a Transaction. I
At issue here is whether OMW was entitled to any tier-two compensation where the
amount Atlass received from the St Agnes Hospital Transaction was debt. While the St. Agnes
Hospital provision did not specifically include net of debt and costs in parentheses like the
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Northeastern Hospital provision did, the St. Agnes Hospital provision for tier-two compensation
specifically referenced in parentheses the oxample above. which was for the Northeastern
Hospital compensation structure and specifically provided the amount for purposes of the 10%
was "l~ debt'• and "Jess expenses." The fact that the example the St. Agnes Hospital provision
express]y referenced provided the amount for purposes of the 10% was "less debt" and "less
expenses," coupled with the fact that the nearly identical Northeastern Hospital provision for
tier-two compensation specifically provided in parentheses the amount for purposes of the "10%
of any funds Atlass receives" is "net of debt and cost," led this court to conclude the parties
unambiguously intended the St. Agnes Hospi1al provision for tier-two compensation was also net
of debt and costs and the Contract unambiguously provided OMW was not enti1led to the 10%
compensation where the amount Atlasa received was debt. This is the only reasonable
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construction of the Contract; is well supported by viewing the Contract as a whole; and should be
affirmed. See generally Bethlehem Steel1 703 A.2d at 42 (stating that in construing a contract
"[t]he intention of the parties is paramo1U1t and the court will adopt an interpretation which under
all circumstances ascribes the most reasonable, probable, and natural conduct [to] the parties,
bearing in mind the objects manifestly to be accomplished. j. 3
Next, Plaintiff complains even if debt was relevant to determining whether it was entitled
to tier-two compensation for the St. Agnes Hospital Transaction, (1) onJy "pre-existing debt"
could be excluded and (2) "there was no genuine debt from the St. Agnes (Hospital] Transaction
which could be used to reduce [its] $250,000 payment entitlement." (Pl. 's 1925(b) Statement,
3.) Regarding the first complaint, Plaintiff argued in its post-trial motion that "[t]he example in
the compensation agreement was used to capture only the existing debt that was tied to the
property ... at the time of the closing ofa (TJransaction.'' (Pl.'s Post-Trial Mot 142.)
Regarding the second complaint, Plaintiff argued ''[i]n actual fact. the .•. $2.S million
distribution to Howell was not truly a loant because the interest was to be (and was) paid for by
the cash flow/distributions of and from St Agnes MOB, LLC and the money was only briefly
'loaned,' and the loan was for tax reasons." (Id. at 144.)
The problem with Plaintifrs first complain~ however, is that there was no evidence,
either inthe unambiguous Contract or in the record (assumina extrinsic evidence was relevant),
that the "net of debt'' and "less debt" terms refe~ to funds used to pay off existing debt, rather
than new debt provided ~s part of a Transaction. Th~ problem with Plamtifrs second complaint
Even if the Superior Court concludes this provision is ambiguous (which it is not), this
court also determined the extrinsic evidence presented at trial demonstrated the parties intended
tier-two compensation for any St. Agnes Hospital Transaction was net of debt and costs. As
such, this court's decision that Plaintiff is not entitled to receive tier-two compensation for the St.
Agnes Hospital Transaction should still ultimately be affinned.
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is very similar.
At trial, Weinberg claimed the $2.S million was structured as a loan on his
recommendation to reduce Atlass' tax burden or, alternatively, by Atlass to avoid paying GMW
100~. (&e,e.g., N. T., Vol. 1, 153-56.) This court as the fact finder, however, found neither
argument to be credible and, rather, determined it was Iron Point that dictated the $2.5 million
would be structured as a loan in order to provide itself with more protection. Nor does 1he fact
that the interest on the $2.S million Joan "was to be (and was) paid for by the cash
flow/distributions of and from St. Agnes MOB, LLC and the money was only briefly 'loaned"'
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support Plaintiff's contention that "the ... $2.S million distribution to Howell was not truly a loan I
I
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I
.... " (Pl.'s Post-Trial Mot. ,i 44.) Rather, the $2.S million loan from Iron Point to Howell was a l
legitimate loan/debt and the fact that some or all of it was paid off through a St. Agnes MOB,
I
LLC refmancing after the St Agnes Hospital Transaction does not somehow retroactively
convert it into equity at the time of the Transaction, and Plaintiff pointed to no law to the
contrary.
Finallyt GMW complains "[this] [c]ourt med in construing the agreement of the parties
against Plaintiffcontrary to the doctrine of contra proferentem such that it failed to award
Plaintiff$250.000 pursuant to the St. Apies Transaction where the arircement was drafted by the
Defendants with the assi~ of coW1SCl and Plaintiff had no counsel," (Pt's 192S(b)
Statement 14 (emphasis altered).) The court disaarees for the following two reasons.
First, the doctrine of contra proferentem allows courts to constnie an ambiguity in a
I
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contract against the drafter. See. e.g., Sun Co. v. Pennsylwinla Tpk. Comm 'n, 708 A.2d 875, I
i
878-79 (Pa. Commw. Ct. 1998), citing Restatement (Second) of Contracts § 206 ("In choosing I
among the reasonable meanings of a promise or apeement or a term thereof, that meanini is I
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generally preferred which operates against the party who supplies the. words or from whom a
writing otherwise proceeds. n); RedevelopmentAuth of CU,, ofPhllfltlelphla v. Ins. Co. of N. Am.,
675 A.2d 1256, 1257 (Pa. Super. Ct. 1996) (providine that "[w]here a provision of a [contract] is
ambiguous, it should be construed against the ... drafter of the docmnentLJ but whbre the
provision "is clear and unambiauous.the court mU&'t give effect to its plain and ordinary
meaning."). Here, the Contract unambiguously provided that GMW was not entitled to any tier-
two compensationwhere the amount Atlass received from the St. Agnes Hospital Transaction
was debt. As such, the doctrine of contraproftrentem was inapplicableto the court's
interpretationof the Contract and there was no error as Plaintiff claims.
Second, even if the provision was ambiguous, courts are reluetan1 to apply the doctrine
where the agreement is between sophisticatedparties or has been negotiated. See, e.g., Kozura v. II
TulpehockenArea Sch. Dist. 791 A.2d 1169, J 175 n.8 (Pa. 2002) (stating "[t]he principle that a I
contractual ambiguity is to be construed against the drafter does not apply where, as here, the
I
contract is the result of the joint efforts of negotiators."); EastcQOst Equip. Co. v. MarylandCas.
i!
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Co., 218 A2d 91, 92 (Pa. Super. Ct 1966) (stating there would little to no reason to apply the
doctrine of contraproferentem to an agreement between two large companies who both had been
I
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advised by competent counsel); Wiiiiston on Contracts§ 32:12 (stating "[a]pplicatlonofthe rule
i
may be fwthcr limited by the degree of sophisticationof the contractingparties or the degree to I
which the contract was negotlated,"), Hore, while Plaintiff chose to negotiate the Contract ·
without the aid of an attorney, Plaintiff and its principal was a self-described sophisticatedparty
and the Contract was the result of substantial negotiations between Weinberg and Atlass, with
Atlass providing the first draft and Weinberg making substantial revisions thereto. As such, even
if the Contract were ambiguous, the doctrine of colfll'aproferentem was still inapplicable to the
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court's interpretation of the Contract and there was no error as Plaintiff claims.
While Plaintiff'may now ~aret negotiating and drafting the Contract on its own, Plaintiff
is a sophisticatedparty and should be held to the plain and unambiguousterms of the Contract it
negotiated and actually entered into. Under the plain and unambiguous turns of that Contract
and the evidence presented at trial, Plaintiffwas not entitled to any tier-two compensation where
the amowit Atlass received from the St. Agnes Hospital Transactionwas debl The $2.S million
loan was a legitimate debt dictated by Iron Point, and not the result of any manipulationon the
part of Atlass to avoid paying Plaintiff 10%. This court's decision that Plaintiff is not entitled
under the C.Ontractto additional compensation in the amount of $250,000 should, therefore. also
be affirmed on appeal.
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BY THE COURT:
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