Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc.

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
3-1-2002
Prudential Real v. PPR Realty Inc
Precedential or Non-Precedential:
Docket 1-2584
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Recommended Citation
"Prudential Real v. PPR Realty Inc" (2002). 2002 Decisions. Paper 144.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-2584
PRUDENTIAL REAL ESTATE
AFFILIATES, INC.
v.
PPR REALTY, INC.; RONALD CROUSHORE;
HELEN SOSSO; KATHY MCKENNA
Kathy McKenna,
Appellant
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 99-cv-00873)
District Judge: Honorable William L. Standish
Submitted Under Third Circuit LAR 34.1(a)
February 8, 2002
Before: SLOVITER, and AMBRO, Circuit Judges
SHADUR*, District Judge
(Opinion filed March 1, 2002)
*Honorable Milton I. Shadur, United States District Judge for the
Northern District
of Illinois, sitting by designation.
OPINION
AMBRO, Circuit Judge:
In this appeal we decide whether the District Court properly denied
Appellant
Kathy McKenna's motion to dissolve the preliminary injunction. We affirm.
I.
Because the facts of this case are well known to the parties, we will
not recite them
in detail. The procedural history of this case is convoluted. While
appeals of the
Pennsylvania arbitration by Helen Sosso and Ronald Croushore were pending,
Prudential
Real Estate Affiliates, Inc. ("PREA") filed suit in the United States
District Court for the
Central District of California (the "Central District") to obtain a
preliminary injunction
against transfer to McKenna of the shares in PPR Realty, Inc. ("PPR") held
by Sosso and
Croushore. Over McKenna's opposition, the motion was granted. McKenna
appealed to
the Ninth Circuit, and then moved that the Central District dissolve the
preliminary
injunction. The Central District held that it lacked jurisdiction to
consider the motion
given the pendency of McKenna's appeal before the Ninth Circuit.
The Ninth Circuit upheld the preliminary injunction and the Central
District's
holding that it lacked jurisdiction to consider the motion to dissolve.
While the appeals
were pending, the underlying case was transferred to the United States
District Court for
the Western District of Pennsylvania (the "District Court"). Eighteen
months later,
McKenna filed a motion with the District Court to dissolve the injunction.
That Court
denied her motion, and McKenna appealed.
II.
This Court has jurisdiction under 28 U.S.C. 1332 because the
parties are citizens
of different states and the amount in controversy exceeds $75,000.
McKenna argues that
this Court lacks subject matter jurisdiction because "the plaintiff and
defendants Sosso,
Croushore, and PPR have been aligned in all motions in this case,"
Appellant's Br. at 1,
thus destroying diversity jurisdiction. The Ninth Circuit considered this
question at
length and determined that "[r]especting the ultimate right to purchase
the stock that is the
primary matter in dispute in this case, Sosso, Croushore, and PPR are
either disinterested,
or have interests antagonistic to PREA, depending on the outcome of the
Pennsylvania
appeal." Prudential Real Estate Affiliates v. PPR Realty, 204 F.3d 867,
874 (9th Cir.
2000). It reasoned that, by virtue of the Pennsylvania arbitration, Sosso
and Croushore
have no claim in the ownership of the stock, and are mere "constructive
trustees with no
stake in the outcome except to be released of their charge." Id. at 873.
McKenna claims that PREA's "exit strategy" is to sell the stock back
to Sosso and
Croushore, but the evidence she offers fails to establish that PREA's
interests are aligned
with Sosso's and Croushore's. On the contrary, the memorandum she cites
indicates
PREA's desire to obtain benefits from the acquisition, and then pursue
"exit options" once
the acquisition is no longer profitable. Because McKenna fails to provide
evidence of
Sosso and Croushore's alignment with PPR, we agree with the Ninth Circuit
that diversity
exists. We therefore possess subject matter jurisdiction.
III.
We review the denial of a motion to dissolve an injunction for abuse
of discretion.
Favia v. Indiana Univ. of Pa., 7 F.3d 332, 340 (3d Cir. 1993); Township of
Franklin
Sewerage Auth. v. Middlesex Co. Util. Auth., 787 F.2d 117, 120 (3d Cir.
1986). In order
to modify an injunction there must be "a change of circumstances between
entry of the
injunction and the filing of the motion that would render the continuance
of the injunction
in its original form inequitable." Favia, 7 F.3d at 337. Similarly, to
dissolve an
injunction a district court must consider "whether the movant has made a
showing that
changed circumstances warrant the discontinuation of the order." Franklin
Sewerage
Auth., 787 F.2d at 121.
McKenna advances many arguments for dissolving the injunction, nearly
all of
which fail to allege the changed circumstances required to dissolve an
injunction. Each
of her arguments was made or could have been made before the Central
District.
The principal changed circumstance she alleges involves the
declaration of Bryan
Shreckengost, the attorney for Sosso and Croushore, who claimed that Judge
Eugene
Strassburger, III, of the Court of Common Pleas for Allegheny County,
Pennsylvania,
"suggested that if the arbitration award was confirmed, it might be
appropriate to allow
the Federal Court in California some reasonable amount of time to be
advised of and to
consider the issues presented to it by PREA." McKenna argued before the
Central
District that this declaration was false, but that Court issued the
injunction anyway, and
McKenna appealed. Judge Strassburger subsequently called the Shreckengost
declaration
"absolutely incorrect." McKenna then petitioned the Central District to
dissolve its
injunction, but the Court declined to consider the motion given the
pendency of
McKenna's appeal of the preliminary injunction. Because the Ninth Circuit
simply
affirmed the Central District's ruling that it lacked jurisdiction to
consider a motion to
vacate a preliminary injunction during the pendency of an appeal,
Prudential Real Estate,
204 F.3d at 880, McKenna argues that no court has considered Judge
Strassburger's
statement. Appellant's Br. at 61.
In identifying Judge Strassburger's statement, McKenna presents this
Court with a
"changed circumstance" to support her motion to dissolve the preliminary
injunction.
The District Court held that Judge Strassburger's statement, although a
"changed
circumstance," did not render the continued imposition of the preliminary
injunction
inequitable, and so did not warrant dissolving the injunction. It was
correct. McKenna
did not support her assertion that this false evidence "tainted" her case
before the Central
District. The Central District's findings of fact make no mention of
Shreckengost's
declaration at all. She was able to argue the declaration's falsity
before the California
federal courts, albeit without the benefit of Judge Strassburger's
statement. In the absence
of any evidence of the Central District's reliance upon Shreckengost's
declaration, the
District Court did not abuse its discretion in holding it equitable to
continue the
injunction.
McKenna next argues that "even PREA's main affiant from the
preliminary
injunction proceedings now admits that Kathy McKenna did not breach the
franchise
agreement." Appellant's Br. at 46. It is true that Elliot S. Rose, Vice
President of
Network Services for PREA, testified at a deposition that occurred after
the Central
District issued the preliminary injunction that he "knew of no instance
where McKenna
was in breach or didn't comply" with her obligations under the franchise
agreement.
Appellant's Br. at 46. McKenna claims that this testimony amounts to an
abandonment of
Rose's prior affidavit, where he stated "Kathy McKenna has objected to the
transfer of
the Disputed Stock to PREA, and is now refusing to allow PREA to exercise
its right of
first refusal." The District Court, far from abusing its discretion,
stated the matter clearly:
This is the only statement in the affidavit that could possibly
be interpreted
as a statement regarding conduct of McKenna that amounts to an
alleged
breach of contract, and regardless of the purported disclaimer of Mr.
Rose,
the statement is true in that McKenna does dispute PREA's right of
first
refusal and does object to the transfer of the disputed shares to
PREA. If
the statement were not true . . . the parties would not presently be
before the
court.
One final changed circumstance does exist. The Ninth Circuit
explained that the
reason for imposing the preliminary injunction was because Sosso,
Croushore, and PPR
wished to "[prohibit] transfer of the stock while their appeal is resolved
in Pennsylvania
state court." Prudential Real Estate, 204 F.3d at 873. The resolution of
the state court
appeal means that this purpose no longer exists. Nonetheless, maintaining
the
preliminary injunction remains necessary to prevent McKenna from
transferring the stock
while the underlying merits of the parties' respective rights are decided.
Hence, we will
not dissolve the injunction.
VI.
For the foregoing reasons, we affirm the District Court's denial of
McKenna's
motion to dissolve the preliminary injunction.
TO THE CLERK:
Please file the foregoing Opinion.
By the Court,
/s/ Thomas L. Ambro
Circuit Judge