PPG Industries, Inc. v. Zurawin

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
10-11-2002
PPG Ind Inc v. Zurawin
Precedential or Non-Precedential: Non-Precedential
Docket No. 01-4417
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-4417/4491
PPG INDUSTRIES, INC.;
PPG ARCHITECTURAL FINISHES, INC.
v.
MICHAEL ADAMS ZURAWIN, individually
d/b/a
NATIONAL HARDLINES MARKETING ASSOCIATES;
NATIONAL HARDLINES MARKETING ASSOCIATES, INC.,
Appellants/Cross-Appellees
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN
DISTRICT OF PENNSYLVANIA
(Dist. Court No. 95-cv-02078)
District Court Judge: Robert J. Cindrich
Argued on September 19, 2002
Before: SCIRICA, ALITO, and McKEE, Circuit Judges.
(Opinion Filed: October 11, 2002)
DAVID E. SPRINGER (argued)
Skadden, Arps, Slate, Meagher &
Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606
Counsel for Appellants/Cross-
Appellees
WILLIAM M. WYCOFF (argued)
KIMBERLY A. BROWN
KEVIN P. ALLEN
Thorp, Reed & Armstrong, LLP
One Oxford Centre
301 Grant Street, 14th Floor
Pittsburgh, PA 15219-1425
KEVIN C. ABBOTT
Reed Smith, LLP
435 Sixth Avenue
Pittsburgh, PA 15219
Counsel for Appellees/Cross-
Appellants
OPINION OF THE COURT
2
PER CURIAM:
Appellants and Cross-Appellees Michael Adams Zurawin and National
Hardlines Marketing Associates, Inc. (“Zurawin”), and Appellees and Cross-Appellants
PPG Industries, Inc. and PPG Architectural Finishes, Inc. (“PPG”), appeal from a judgment
entered by the United States District Court for the Western District of Pennsylvania on
February 28, 2001. For the reasons stated below, we affirm the judgment of the District
Court in all respects.
Because we write for the parties only, the background of the case need not be
set out. In sequence, we will discuss the issues of the alleged oral modifications to the
written agreement between the parties; Zurawin’s request for discovery sanctions; the
alleged “Hechinger agreement”; the District Court’s rulings regarding the cross-
examination of Mr. Adams; Zurawin’s defamation claim; the “prevailing party” provision of
the written agreement between PPG and Zurawin; and the question of whether PPG has the
right to prejudgment interest on attorneys’ fees.
I.
Zurawin first appeals the District Court’s grant of judgment as a matter of law
in favor of PPG on Zurawin’s breach of contract claims concerning alleged oral
modifications (“Oral Modifications”) to the written agreement of December 15, 1989
(“December Agreement”) between the parties. The alleged Oral Modifications at issue in
Zurawin’s appeal are the purported agreements pertaining to the Olympic and Rickel
accounts and the purported agreement extending the period of time for which Zurawin
3
could collect commissions on the sales he made. Our review of the District Court’s
decision to grant judgment as a matter of law is plenary. See Lightning Lube, Inc. v. Witco
Corp., 4 F.3d 1153, 1166-67 (3d Cir. 1993).
Pennsylvania law provides that “when parties to a contract have reduced their
agreement to writing, that writing will be the sole evidence of their agreement, and parol
evidence may not be admitted to vary the terms of the contract in the absence of fraud,
accident or mistake.” Hershey Foods Corp. v. Ralph Chapek, Inc., 828 F.2d 989, 994 (3d
Cir. 1987). “Parol evidence” means oral or written statements by the parties made prior to
or contemporaneous with the written agreement that such statements purport to modify.
See Martin v. Monumental Life Ins. Co., 240 F.3d 223, 233 (3d Cir. 2001). A writing
represents the entirety of the agreement between the parties if “it appears to be a contract
complete within itself couched in such terms as import a complete legal obligation.”
Gianni v. R. Russel & Co., 126 A. 791, 792 (Pa. 1924). An oral statement is related to the
subject matter of a written agreement if the statement and the agreement are “so
interrelated that” one would expect that “both would be executed at the same time, and in
the same contract.” Id.
Zurawin argues that the December Agreement and its subsequent amendments
did not express the complete agreement between the parties, but the text of those
instruments suggests otherwise. The December Agreement specifies the accounts for
which Zurawin was entitled to commissions and states that it represents the entirety of the
agreement between PPG and Zurawin. Thus, the December Agreement “appear[ed] to be a
4
contract complete within itself,” as required by Gianni, at the time the parties signed it.
Moreover, the First and Second Amendments to the Agreement both state that, aside from
the modifications worked by those Amendments, the initial December Agreement remains
in full force and effect. Thus, the December Agreement continued to appear complete
within itself as of the date of the Second Amendment’s execution.
Contrary to Zurawin’s view, the alleged Oral Modifications also met the
requirement – stated in Gianni – that modifications purportedly falling within the scope of
a written agreement be “so interrelated” with the written agreement that “both would be
executed at the same time.” Like the December Agreement, the alleged Oral Modifications
concerned the customers to which Zurawin was to sell PPG products and the commissions
he would receive for such sales. Any oral statements that concerned the subject matter of
the December Agreement and that were made prior to the execution of the Second
Amendment were therefore inadmissible under the parol evidence doctrine for the purpose
of establishing the terms of the contract between the parties. The evidence at trial
demonstrated that all of the alleged Oral Modifications occurred prior to the signing of the
Second Amendment by the parties. Hence, the Pennsylvania parol evidence doctrine, in the
absence of any exception to that doctrine, prevented the District Court from considering
the Oral Modifications in ascertaining the terms of the contract between PPG and Zurawin.
Zurawin argues, however, that the “admission” exception to the parol
evidence rule under Pennsylvania law permits consideration of the Oral Modifications in
defining the terms of the contract between the parties. Under Pennsylvania law, the
5
“admission” exception permits the introduction of oral statements made prior to or
contemporaneously with the execution of a written agreement where the plaintiff shows by
“clear, precise, and convincing evidence” that the defendant admitted, after the execution of
the written agreement, that the written agreement does not contain all of the terms of the
contract between the parties. See Scott v. Bryn Mawr Arms, Inc., 312 A.2d 592, 595-96
(Pa. 1973). Zurawin relies on Mr. LaFond’s deposition testimony for the proposition that
PPG admitted that the December Agreement, as amended by the First and Second
Amendments, did not constitute the full agreement between PPG and Zurawin. LaFond
gave his deposition testimony, however, after his employment relationship with PPG ended.
Since LaFond was not an agent of PPG at the time he made the statements to which Zurawin
refers, LaFond was incapable of making admissions on PPG’s behalf. Therefore, the
“admission” exception did not permit the District Court to consider the Oral Modifications
in interpreting the contract between Zurawin and PPG.
For the foregoing reasons, the District Court did not err in granting summary
judgment in favor of PPG on Zurawin’s breach of contract claims concerning the Oral
Modifications.
II.
Zurawin claims that the District Court wrongly denied his motion for
discovery sanctions excluding LaFond’s affidavit (the “LaFond Affidavit”) from evidence
pursuant to Federal Rule of Civil Procedure 37(c)(1). We review the District Court’s
6
decision to deny Zurawin’s motion for abuse of discretion. See Compagnie des Bauxites
de Guinea v. INA, 651 F.2d 877, 885 (3d Cir. 1981).
Zurawin argues that the District Court erred in limiting its Rule 37(c)(1)
inquiry to the issue of whether PPG’s failure to produce certain documents regarding
PPG’s termination of LaFond (the “Severance Documents”) was prejudicial to Zurawin, and
that even if the District Court applied the correct test it erroneously determined that
Zurawin was not prejudiced. We treat these arguments in turn below.
First, Zurawin argues that the District Court was required to apply the four-
part test recently discussed by this Court in In re TMI Litig., 193 F.3d 613 (3d Cir. 1999),
to determine whether the sanction of excluding the LaFond Affidavit from evidence was
warranted. See TMI, 193 F.3d at 721 (stating that “certain factors . . . must be considered in
evaluating whether the District Court properly exercised its discretion” in ruling on a Rule
37 motion to exclude evidence as a discovery sanction, including “(1) the prejudice or
surprise in fact of the party against whom the excluded witnesses would have testified, (2)
the ability of that party to cure the prejudice, (3) the extent to which waiver of the rule
against calling unlisted witnesses would disrupt the orderly and efficient trial of the case . .
., and (4) bad faith or willfulness in failing to comply with the district court’s order”). The
test enunciated in TMI is inapplicable to the instant case. This Court’s decision in Newman
v. GHS Osteopathic, 60 F.3d 153 (3d Cir. 1995), makes it clear that the TMI formulation
applies only to review of a District Court’s decision to exclude evidence as a Rule 37(c)(1)
discovery sanction, and that a prejudice analysis is appropriate where a District Court’s
7
refusal to exclude evidence as a discovery sanction is at issue. In Newman, this Court held
that a District Court does not abuse its discretion in refusing to exclude evidence as a Rule
37(c)(1) sanction where the non-moving party’s failure to produce the information
requested in discovery is harmless to the movant. See Newman, 60 F.3d at 156. This
approach accords with the plain language of Rule 37(c)(1). See Fed. R. Civ. P. 37(c)(1)
(prohibiting the exclusion of evidence based on the non-moving party’s failure to disclose
information during discovery where “such failure is harmless”).
Second, Zurawin contends that the introduction of Mr. LaFond’s affidavit (the
“LaFond Affidavit”) prejudiced Zurawin because PPG “made prejudicial use” of that
affidavit during the opening and closing statements by its counsel and the affidavit’s
introduction caused the jury to inquire as to why LaFond experienced his alleged
“blackouts.” It appears that Zurawin wished to use the contents of the Severance
Documents to support his contention that LaFond had issued the LaFond Affidavit in return
for severance benefits from PPG beyond what he would otherwise have received. As the
District Court pointed out, however, there is no reason why the fact that Zurawin did not
possess the Severance Documents at the time of LaFond’s deposition should have
prevented Zurawin’s counsel from asking LaFond whether he obtained additional benefits
from PPG in exchange for producing the LaFond Affidavit. Nor, we would add, did the
absence of the Severance Documents prevent Zurawin’s counsel from arguing to the jury –
as he did – that LaFond made such a bargain. Thus, it is unlikely that PPG’s failure to
disclose the Severance Documents prejudiced Zurawin. For these reasons, we cannot find
8
that the District Court abused its discretion in denying Zurawin’s motion for discovery
sanctions.
III.
Zurawin’s next contention pertains to an alleged contract between PPG and
Zurawin (the “Hechinger Agreement”) providing that Zurawin would solicit business from
Hechinger Stores (“Hechinger”) in exchange for commissions. Zurawin first argues that
the District Court erred in instructing the jury that Zurawin had to prove all of the elements
of his claim that PPG breached the alleged Hechinger Agreement by clear, precise, and
convincing evidence. Second, Zurawin claims that the District Court erred by failing to
give Zurawin’s proffered instruction regarding partial performance of a contract. Finally,
Zurawin argues that PPG is estopped from arguing that the clear, precise, and convincing
standard applies. We treat Zurawin’s arguments in turn below.
Zurawin first argues that the District Court gave erroneous instructions
regarding Zurawin’s burden of proof on his claim that PPG breached the alleged Hechinger
Agreement. Our review of the correctness of the District Court’s instructions to the jury is
plenary. See Hopp v. City of Pittsburgh, 194 F.3d 434, 440 (3d Cir. 1999).
The oral statements that allegedly resulted in the formation of the Hechinger
Agreement occurred after the execution of the Second Amendment. Under Pennsylvania
law, a plaintiff seeking to show that oral statements made subsequent to the execution of a
written agreement contained in an integrated document modified that agreement must show,
by “clear, precise, and convincing” evidence, that the parties intended such a result.
9
Nicolella v. Palmer, 248 A.2d 20, 23 (Pa. 1968). Zurawin first argues that rather than
constituting an oral modification, the alleged Hechinger Agreement is “separate” from the
December Agreement, and thus the burden of proof applicable to an oral modification is
inapplicable. Pennsylvania law dictates that an oral statement constitutes a purported oral
modification of a written contract where the oral statement and the written contract “relate
to the same subject matter, and are so interrelated that both would be executed at the same
time and in the same contract.” Mellon Bank Corp. v. First Union Equity & Mortg. Inv.,
951 F.2d 1399, 1405 (3d Cir. 1991). Like the alleged Oral Modifications discussed above,
the subject matter of the alleged Hechinger Agreement is closely related to that of the
December Agreement. Like the December Agreement, the alleged Hechinger Agreement
concerns Zurawin’s employment as a marketing agent to sell PPG paint products. Hence,
the alleged Hechinger Agreement is a purported oral modification of the December
Agreement.
Zurawin argues, however, that the alleged Hechinger Agreement is not an oral
modification because Zurawin submitted written evidence of the existence of the alleged
Hechinger Agreement. The pertinent issue, however, is the manner in which the alleged
Hechinger Agreement was formed, not the nature of the evidence Zurawin submitted to
prove the existence of the alleged agreement. See Target Sportswear, Inc. v. Clearfield
Foundation, 474 A.2d 1142, 1149 (Pa. Super. 1984) (“The fact that . . . alleged oral
modifications to [a] contract were reduced to writing . . . does not alter their character as
parol.”). Zurawin avers that the Hechinger Agreement was formed by Mr. Adams’ oral
10
statement to Zurawin that Adams had obtained approval from Mr. Rompala to hire Zurawin
to solicit business from Hechinger. Thus, Zurawin claims that the alleged Hechinger
Agreement resulted from oral statements. The Pennsylvania rule that a plaintiff must prove
the occurrence of an oral modification by clear, precise, and convincing evidence therefore
controls. Thus, the District Court did not err in instructing the jury regarding Zurawin’s
burden of proof on the question of whether an oral modification occurred.
Zurawin next argues that the District Court erred in instructing the jury that
Zurawin was also required to prove by clear, precise, and convincing evidence that Zurawin
performed his obligations under the alleged Hechinger Agreement, that PPG breached its
obligations under that Agreement, and that Zurawin suffered damages as a result of PPG’s
breach. Zurawin maintains that Pennsylvania law only requires a plaintiff to prove such
facts by a preponderance of the evidence. PPG responds that since Zurawin failed to prove
the existence of the oral modification by clear, precise and convincing evidence, the
District Court’s instruction constituted harmless error.
Even if we assume that the District Court’s instructions regarding
performance, breach and damages concerning the alleged Hechinger Agreement were
erroneous as a matter of Pennsylvania law, we are convinced that any such error was
harmless. As this Court stated in GMC v. New A.C. Chevrolet, Inc., 263 F.3d 296 (3d Cir.
2001), we consider a District Court’s error harmless if we are “well-satisfied that the error
did not prejudice a party.” GMC, 263 F.3d at 329. Zurawin’s claim that Zurawin and PPG
entered into the alleged Hechinger Agreement was founded on the testimony of Adams.
11
Adams’ statements at trial to the effect that he intended to enter into an agreement with
Zurawin regarding the Hechinger account were contradicted by Adams’ previous statements
in a deposition taken during Adams’ litigation against PPG (the “Adams Deposition”).
Adams’ testimony at trial in the instant case thus lacked credibility, and hence was not alone
sufficient as a matter of law to meet the “clear, precise, and convincing” standard. See In re
Trust Estate of La Rocca, 192 A.2d 409, 413 (Pa. 1963) (stating that a plaintiff’s witnesses
must be credible for their testimony to satisfy the “clear, precise, and convincing”
standard). Since Zurawin failed to adduce clear, precise, and convincing evidence of the
existence of the alleged Hechinger Agreement, any erroneous instructions regarding
breach, performance, and damages concerning that agreement did not prejudice Zurawin.
Zurawin’s second overarching contention regarding the District Court’s
instructions concerning the alleged Hechinger Agreement is that the District Court
erroneously failed to give Zurawin’s proffered instruction regarding partial performance of
a contract. We review the District Court’s refusal to give an instruction offered by a party
for abuse of discretion. See United States v. Pitt, 193 F.3d 751, 755 (3d Cir. 1999). Even
if the District Court’s failure to instruct the jury on partial performance was an abuse of
discretion, it was harmless error for the same reasons applicable to the District Court’s
instruction on performance, breach and damages concerning the alleged Hechinger
Agreement. Zurawin presented insufficient evidence to make a “clear, precise, and
convincing” showing that the alleged Hechinger Agreement existed, and thus the question
of whether Zurawin presented sufficient evidence to show that he fulfilled all or some of
12
his obligations under that agreement is moot.
Finally, Zurawin contends that since PPG claimed from the outset of the case
that the alleged Hechinger Agreement was not a “separate contract,” it is now estopped
from arguing that the Hechinger Agreement was a purported oral modification. In support
of this argument, Zurawin cites Ohio & Mississippi Ry. Co. v. McCarthy, 96 U.S. 258
(1877), and Rainier v. Champion Container Co., 294 F.2d 96 (3d Cir. 1961). Those cases
are inapposite, however, because they held that a person who provides one justification for
his conduct prior to litigation regarding that conduct cannot assert another in the course of
the suit. See McCarthy, 96 U.S. at 267 (“Where a party gives a reason for his conduct . . .,
he cannot, after litigation has begun, change his ground, and put his conduct upon another
and a different consideration.”) (emphasis added). PPG’s position that the alleged
Hechinger Agreement was not a “separate contract” does not contradict the position that it
was not an “oral modification” either. Moreover, even assuming that such positions are
inconsistent, Zurawin only alleges that PPG modified its previous stance regarding the
alleged Hechinger Agreement in the course of litigation, not that PPG offered one
justification for its conduct prior to the litigation and another after it began. Thus, PPG is
not barred from raising the issue of whether the Hechinger Agreement constituted an oral
modification of the December Agreement.
IV.
Zurawin next contends that the District Court erred in overruling two
objections made by Zurawin during Adams’ cross-examination. First, Zurawin argues that
13
the District Court should have sustained Zurawin’s objection to the introduction of the
Adams Deposition into evidence. Second, Zurawin contends that the District Court should
have sustained Zurawin’s objections to PPG’s questions concerning whether Adams
believed that he had entered into any “contracts” with Zurawin. We address Zurawin’s
contentions in turn below.
We first address Zurawin’s argument that the District Court should have
excluded the Adams Deposition. We review the District Court’s decision to admit
evidence during trial for abuse of discretion. See Fiat Motors of North America, Inc. v.
Mellon Bank, N.A., 827 F.2d 924, 928 (3d Cir. 1987).
Zurawin claims that since his counsel was not present at the Adams
Deposition, Federal Rule of Civil Procedure 32(a) bars the introduction of Adams’
testimony at that deposition. Rule 32(a) permits the introduction of deposition testimony
against “any party who was present or represented at the taking of the deposition or who had
reasonable notice thereof.” Fed. R. Civ. P. 32(a). Zurawin acknowledges that his counsel
in the instant action, Mr. Sweitzer, was present at the Adams Deposition, but argues that
Sweitzer was serving as counsel for Adams and not for Zurawin, and thus Sweitzer was not
“representing” Zurawin for the purposes of Rule 32(a). Even if the District Court erred in
admitting Adams’ deposition testimony, however, such error was harmless. Zurawin’s
counsel had notice of the Adams Deposition, and had the opportunity to question Adams
about his testimony in the Adams Deposition when PPG deposed him in the present action.
Hence, Zurawin was not prejudiced by his counsel’s absence from the Adams Deposition.
14
Zurawin next argues that the District Court improperly allowed PPG to ask
Adams questions calling for legal conclusions as to whether PPG formed the alleged
Hechinger Agreement with Zurawin. Under Pennsylvania law, the statements of lay
witnesses involved in the making of an alleged contract are admissible to determine
whether the parties intended to form a contract and the terms they intended to include
therein. See Z&L Lumber Co. of Atlasburg v. Nordquist, 502 A.2d 697, 701 (Pa. Super.
1985). Zurawin cites Bohler-Uddelholm America, Inc. v. Ellwood Group, Inc., 247 F.3d 79
(3d Cir. 2001), in favor of the proposition that the admission of Adams’ testimony was
improper, but that decision is inapposite. The testimony sought to be introduced in Bohler-
Uddelholm was from a witness who – in contrast to Adams – was not involved in the making
of the alleged contract. See Bohler-Uddelholm, 247 F.3d at 114. Adams was primarily
responsible for negotiating the alleged Hechinger Agreement on behalf of PPG, and thus
his testimony regarding whether he believed that PPG had entered into the Hechinger
Agreement with Zurawin was admissible. The District Court therefore did not abuse its
discretion in admitting Adams’ statements regarding his intent to form a contract with
Zurawin.
V.
Both PPG and Zurawin appeal aspects of the District Court’s disposition of
Zurawin’s defamation claim. PPG appeals the District Court’s failure to grant PPG
judgment as a matter of law on Zurawin’s defamation claim, while Zurawin appeals the
District Court’s refusal to instruct the jury on the criteria that must be fulfilled to warrant
15
an award of punitive damages in a defamation action. We treat PPG’s and Zurawin’s appeals
in sequence below.
PPG argues on two grounds that the District Court erred in denying PPG’s
motion for judgment as a matter of law on Zurawin’s defamation claim. First, PPG
contends that the District Court erred in rejecting PPG’s defense of consent. Second, PPG
claims that the District Court wrongly found that there was sufficient evidence that Zurawin
suffered damages because of Mr. LeBoeuf’s statements. Our review of the District Court’s
refusal to grant judgment as a matter of law is plenary. See Lightning Lube, Inc. v. Witco
Corp., 4 F.3d 1153, 1166-67 (3d Cir. 1993).
PPG first claims that Zurawin consented to the statements made by LeBoeuf
during his meeting with Adams (the “LeBoeuf Meeting”) because Zurawin sent Adams to
meet with LeBoeuf with the goal of ascertaining LeBoeuf’s opinion of Zurawin. Under
Pennsylvania law, consent is an absolute defense to a defamation claim. See Sobel v.
Wingard, 531 A.2d 520, 522 (Pa. Super. 1987). Pennsylvania adheres to the Restatement
(Second) of Torts (“Restatement”)’s definition of consent in defamation actions. See
Walker v. Grand Cent. Sanitation, Inc., 634 A.2d 237, 244 (Pa. Super. 1993). Under the
Restatement’s definition of consent in defamation actions, a plaintiff consents to the
making of defamatory statements if the plaintiff “knows the exact language” that the
defendant will use in those statements or “has reason to know that” such language “may be
defamatory.” Restatement (Second) of Torts § 583 (1977). The testimony of Adams and
Mr. Bunch suggested that LeBoeuf had not intimated prior to the LeBoeuf Meeting that
16
LeBoeuf’s dissatisfaction with Zurawin stemmed from anything other than the
unprofitability of accounts on which Zurawin had worked. Therefore, viewing the evidence
in the light most favorable to Zurawin, we believe that the District Court correctly held that
a reasonable trier of fact could have found that Zurawin did not have reason to anticipate
LeBoeuf’s allegations that Zurawin distributed “payoffs” to win business opportunities, and
thus that Zurawin did not consent to LeBoeuf’s statements.
PPG next avers that Zurawin was not damaged by LeBoeuf’s statements to
Adams concerning Zurawin at the LeBoeuf Meeting. Pennsylvania law requires a plaintiff
in a defamation action to prove that the defendant’s statements caused “actual harm” to the
plaintiff’s reputation. See Walker, 634 A.2d at 241. “Actual harm” includes, inter alia,
“impairment of reputation and standing in the community.” Brinich v. Jencka, 757 A.2d
388, 397 (Pa. Super. 2000) (quoting Restatement (Second) of Torts § 621 (1977)). In
Agriss v. Roadway Express, Inc., 483 A.2d 456 (Pa. Super. 1984), the Pennsylvania
Superior Court held that discussions among the plaintiff’s coworkers regarding the
possibility that the plaintiff might be fired were sufficient to constitute an impairment of
the plaintiff’s reputation. In the instant case, Adams testified that he ceased to work with
Zurawin at least in part because of LeBoeuf’s statements at the LeBoeuf Meeting. A
reasonable jury could have found that Zurawin suffered greater “actual harm” than the
plaintiff in Agriss due to LeBoeuf’s statements, since Adams not only contemplated
terminating his business relationship with Zurawin but also did so. Thus, the District Court
did not err in submitting Zurawin’s defamation claim to the jury.
17
In his appeal, Zurawin argues that the District Court erred in withdrawing his
claim for punitive damages from the consideration of the jury. By declining to instruct the
jury on the issue of punitive damages, the District Court effectively granted PPG judgment
as a matter of law on that issue. As noted above, our review of a grant of judgment as a
matter of law is plenary.
Zurawin raises two objections to the District Court’s withdrawal of Zurawin’s
request for punitive damages from the consideration of the jury. First, Zurawin claims that
if there was sufficient evidence to allow a reasonable jury to find that LeBoeuf’s statements
in the LeBoeuf Meeting were made with “actual malice,” there was necessarily sufficient
evidence to allow a reasonable jury to find that LeBoeuf also made those statements with
“common law malice.” Second, Zurawin maintains that there was sufficient evidence to
permit a reasonable jury to find that LeBoeuf acted with common law malice even if that
element cannot be established by mere proof of actual malice.
Pennsylvania law requires a plaintiff seeking punitive damages in a
defamation action to prove that the defendant made the allegedly defamatory statement with
two types of malice: “actual malice,” meaning that the defendant made the statement with
the “knowledge that the statement was false or with reckless disregard for its truth or
falsity”; and “common law malice,” meaning that the defendant’s conduct was “outrageous
(because of the defendant’s evil motive or his reckless indifference to the rights of others,)
and . . . malicious, wanton, reckless, willful, or oppressive.” Sprague v. Walter, 656 A.2d
890, 922 (Pa. Super. 1995). Zurawin claims that the “reckless disregard” for the truth of
18
the allegedly defamatory statement that is required to prove actual malice is equivalent to
the “reckless indifference to the rights of others” that a plaintiff must demonstrate to prove
common law malice. This argument incorrectly collapses the distinction between actual
and common law malice. Common law malice requires the existence of an unfavorable
“disposition toward the plaintiff at the time of the wrongful act.” Di Salle v. P.G. Pub. Co.,
544 A.2d 1345, 1369 (Pa. Super. 1988). The “[i]ll will toward the plaintiff” a defendant
must possess to act with common law malice is “not [an] element[] of the actual malice
standard.” Id. (quoting Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 52 n.18 (1971)
(plurality opinion)). Therefore, Zurawin did not submit sufficient evidence to allow a
reasonable jury to conclude that LeBoeuf acted with common law malice merely by
submitting sufficient evidence to permit the conclusion that LeBoeuf acted with actual
malice.
Zurawin next argues that there was sufficient evidence to allow a reasonable
jury to conclude that LeBoeuf made the allegedly defamatory statements during the
LeBoeuf Meeting with common law malice. We agree with the District Court that where
an alleged defamation occurs “in a business context, where the comments the jury could
find were evoked . . . by the party claiming the defamation, [and] where the comments
related specifically to the performance [of] that party . . . as opposed to any kind of
extraneous or outside comment that had nothing to do with the inquiry,” it does not possess
the outrageousness necessary to support a finding of common law malice. App. II at 490.
Thus, the District Court correctly declined to submit the issue of punitive damages to the
19
jury.
VI.
Zurawin next appeals the District Court’s determination that, under the
attorneys’ fee provision of the December Agreement, PPG was the “prevailing party” and
thus entitled to attorneys’ fees and costs. Our review of the District Court’s construction
of a contract provision is plenary. See Ram Constr. Co. v. American States Ins. Co., 749
F.2d 1049, 1053 (3d Cir. 1984).
Although there is little binding precedent on the subject, we agree with the
District Court that the proper standard for determining which litigant is a “prevailing party”
under a contractual provision regarding attorneys’ fees should compare the relief sought by
each litigant to the relief each litigant actually received. We endorsed a similar approach in
Institutionalized Juveniles v. Sec’y of Pub. Welfare, 758 F.2d 897 (3d Cir. 1985), in which
we employed a “common-sense comparison between relief sought and relief obtained” in
applying the fee-shifting provision of 42 U.S.C. § 1988. Institutionalized Juveniles, 758
F.2d at 911. Since the “prevailing party” clause, by its terms, applies only to litigation
related to the subject matter of the December Agreement, only the relief awarded by the
District Court concerning the parties’ claims alleging breaches of the December
Agreement is relevant to the “common-sense comparison” here. As the District Court
observed, Zurawin recovered a small portion of the total damages he sought for breach of
the December Agreement and its purported oral modifications. By contrast, PPG’s main
goal in this litigation was to obtain a declaration that it was not liable on any potential
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claims by Zurawin arising out of the December Agreement, and PPG substantially achieved
the result it desired by obtaining a judgment that PPG was not liable for the majority of the
relief Zurawin sought. PPG thus obtained a significantly greater portion of the relief it
sought than did Zurawin. Hence, the District Court did not err in finding that PPG was the
“prevailing party” under the attorneys’ fee provision of the December Agreement.
VII.
Finally, PPG appeals the District Court’s refusal to grant PPG prejudgment
interest on the attorneys’ fees it garnered as a result of its status as the “prevailing party”
under the attorneys’ fee provision of the December Agreement. In an action such as this
one in which federal subject matter jurisdiction is premised on the parties’ diversity of
citizenship, the question of whether a party is entitled to prejudgment interest is one of
state law. See Jarvis v. Johnson, 668 F.2d 740, 741 (3d Cir. 1982). Our review of the
District Court’s interpretation of Pennsylvania law is plenary. See Staff Builders of Phila.,
Inc. v. Koschitzki, 989 F.2d 692, 694 (3d Cir. 1993).
Under Pennsylvania law, the right to prejudgment interest in a contract
dispute “begins at the time payment is withheld after it has been the duty of the debtor to
make such payment.” Fernandez v. Levin, 548 A.2d 1191, 1193 (Pa. 1988). PPG avers that
prejudgment interest on the attorneys’ fees it obtained pursuant to the “prevailing party”
clause began accruing at the time of the jury’s verdict, because PPG “prevailed” under the
December Agreement as soon as the jury rejected the majority of Zurawin’s claims against
PPG. However, PPG’s view does not accord with the language of the December
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Agreement, which provides that the prevailing party acquires the right to attorneys’ fees
“upon any final judicial determination.” We agree with Zurawin that the most natural
reading of this phrase makes attorneys’ fees available once the court adjudicating the
dispute between the parties has reached a final judgment. See also Sinajini v. Board of
Educ., 233 F.3d 1236, 1241 (10th Cir. 2001) (equating the terms “final judicial
determination” and “final judgment”). Hence, Zurawin had no contractual obligation to pay
attorneys’ fees to PPG during the time interval between the jury’s verdict and the District
Court’s final judgment. Thus, the District Court did not err in denying PPG’s motion for
prejudgment interest on the attorneys’ fees it collected pursuant to the “prevailing party”
provision.
For the foregoing reasons, we affirm the judgment of the District Court in all
respects.