Strohm v. MFS, Inc.

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
8-3-2005
Strohm v. MFS Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-1422
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"Strohm v. MFS Inc" (2005). 2005 Decisions. Paper 745.
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NOT PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Case No: 04-1422
BARRY STROHM,
Appellant
v.
MFS, INC.
Case No: 04-1570
BARRY STROHM
v.
MFS, INC.,
Appellant
_________________________________
On appeal from the United States District Court
for the Eastern District of Pennsylvania
District Court No.: 01-cv-05478
District Judge: The Honorable Robert F. Kelly
__________________________________
Submitted pursuant to LAR 34.1(a)
June 28, 2005
Before: NYGAARD*, SMITH, and FISHER, Circuit Judges
(Filed: August 3, 2005)
_______________________
*Honorable Richard L. Nygaard assumed senior status on July 9, 2005.
_____________________
OPINION OF THE COURT
_____________________
SMITH, Circuit Judge.
We are presented with cross-appeals from Barry Strohm and MFS, Inc., in which
each party challenges certain aspects of the jury verdict returned following trial in
Strohm’s lawsuit against MFS for breach of contract. The trial followed the District
Court’s denials of the parties’ cross-motions for summary judgment. MFS filed a motion
for judgment as a matter of law at the close of the evidence. That motion was denied.
The jury entered a verdict in favor of Strohm and against MFS in the amount of $360,044.
After the verdict, Strohm filed a motion for judgment notwithstanding the verdict, in
which he argued in favor of a larger damage amount, and asked that judgment be entered
in his favor in the amount of $743,082.59. The District Court denied this motion as well.
The parties have filed cross-appeals challenging the District Court’s denial of their
respective motions. We will affirm the judgment of the District Court.
Because we write only for the parties, we restrict our discussion to the facts and
legal principles necessary to resolve this appeal. The dispute in this case concerns a
March 19, 1991, Consulting and Deferred Compensation Agreement (the “Agreement”)
between Strohm and MFS. The Agreement is governed by Maryland law. The jury found
in favor of Strohm with respect to his claim that MFS had breached the contract by failing
to make certain payments to Strohm as required under Section 2(b) of the Agreement.
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MFS argues on appeal that it was entitled to judgment as a matter of law based upon
Strohm’s alleged failure to fulfill a condition precedent established in Section 2(b).
Specifically, MFS argues that Strohm breached the contract and failed to act in good faith
by filing suit prior to agreeing with MFS on the identity of an appraiser who would
determine the value of certain MFS assets. (The parties agree that Section 2(b) called for
Strohm to receive a payment equal to 5 percent of the fair market value of these assets).
We review the District Court’s denial of MFS’s motion for judgment as a matter of
law under a plenary standard of review. See W.V. Realty v. Northern Ins. Co. of N.Y., 334
F.3d 306, 311 (3d Cir. 2003). MFS’s motion for judgment as a matter of law may be
granted only if the record is critically deficient of the minimum quantum of evidence
necessary to prove the validity of Strohm’s claim under Section 2(b). See Johnson v.
Campbell, 332 F.3d 199, 204 (3d Cir. 2003). A directed verdict is not permissible unless
“the facts and the law will reasonably support only one conclusion.” See Northview
Motors, Inc. v. Chrysler Motors Corp., 277 F.3d 78, 88 (3d Cir. 2000).
We believe the District Court correctly denied MFS’s motion for judgment as a
matter of law. MFS argues that selection by Strohm of an appraiser who would assess the
value of properties owned by MFS was a condition precedent to MFS’s obligation to pay
Strohm under Section 2(b). We think this misstates the requirements of Section 2(b),
which indicates that Strohm was to receive his payment of 5 percent of the fair market
value of MFS’s assets at the conclusion of the consulting period identified in the
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Agreement. Section 2(b) goes on to state that “[i]n the event that Mr. Strohm and the
Corporation [MFS] cannot agree on such fair market value, it shall be determined by an
appraiser mutually acceptable to Mr. Strohm and the Corporation.” (Emphasis added).
MFS offers no meaningful response to Strohm’s argument that it was MFS, rather than
Strohm, that acted improperly, in that MFS did not make the 5 percent payment to Strohm
on the appointed date, and more importantly, that MFS never provided Strohm with its
own estimate of the fair market value of MFS’s assets. The record contains
correspondence from Strohm in which Strohm asked MFS for its own estimate of fair
market value, in hopes that if Strohm and MFS could agree on an acceptable estimate, the
parties would not have to proceed to the next step and incur the delay and expense
associated with obtaining outside appraisals. The record also contains a letter from an
MFS representative, in which MFS declines to provide a fair market value estimate, and
instead asserts that “since I do not think that you and I will be able to agree on values of
the properties, I think we should move ahead to each identify appraisers and then let them
select a third appraiser.”
While the parties accuse each other of less than good faith in connection with the
ensuing appraiser selection process, the fact remains that selection of appraisers may not
even have been necessary if MFS had first agreed to provide a good faith estimate
concerning the fair market value of its assets. The absence of such an estimate deprived
Strohm of the ability to determine whether there was a genuine disagreement concerning
4
fair market value, and forced Strohm prematurely into the appraiser selection process that
was contemplated in Section 2(b) as a contingency measure in the absence of a mutually
satisfactory estimate of fair market value. Given this sequence of events, we believe at a
minimum there was a triable issue concerning whether and to what extent MFS’s actions
may have breached the Agreement prior to any alleged breach by Strohm, and thus we
find that the District Court correctly denied MFS’s motion for judgment as a matter of
law, electing instead to leave the issue to the jury.*
*MFS also argues that Strohm displayed bad faith by asking for suggestions from MFS
concerning potential appraisers, and then later complaining that MFS had violated Section 2(b)
by naming multiple appraisers in its responsive letter to Strohm. The record, however, is more
ambiguous than MFS portrays. Strohm’s April 2, 2001 letter to MFS suggests that MFS identify
“a list of appraisers” suitable to MFS, and indicates that Strohm will review the list to see if one
of the appraisers would be mutually acceptable. MFS responded with an April 26, 2001 letter
designating two separate appraisers, each of whom would act in connection with a designated
subset of the disputed MFS properties. This letter requests from Strohm names of an appraiser or
appraisers who would then act in concert with the appraisers named by MFS to select a third,
independent appraiser who would perform the necessary appraisals. Strohm responded to MFS’s
letter by (a) indicating continued disappointment in MFS’s earlier failure to provide its own
estimate of fair market value; and (b) indicating disappointment that MFS had, in Strohm’s view,
skipped over the chance to identify a single mutually acceptable appraiser, and instead proceeded
to the following step in Section 2(b), by calling for Strohm to identify an appraiser who would
join MFS’s appraisers in selecting a third, independent appraiser to assess the value of MFS’s
properties. It is in this context that the concluding portion of Strohm’s letter asserts that MFS
failed to comply with Section 2(b), by naming multiple appraisers instead of one.
We believe that competing inferences can permissibly be drawn from the parties’
correspondence concerning the appraiser selection process. Strohm’s initial request for a “list”
of appraisers can reasonably be interpreted as seeking a list of multiple candidates for a single
available slot. This view is consistent with Section 2(b), which appears to contemplate that in
the absence of agreement between Strohm and MFS on fair market value, all MFS properties
would ultimately be appraised by a single appraiser. MFS’s April 26, 2001 letter to Strohm can
reasonably be read as contravening this requirement, by proffering two different appraisers, each
of whom would be separately tasked with appraising a particular subset of MFS’s properties.
The sort of “list” provided by MFS, in other words, does not appear to have been the same sort of
“list” contemplated by Strohm’s letter of April 2, 2001. In these circumstances, we believe the
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We now turn to Strohm’s appeal of the District Court’s denial of his motion for
judgment notwithstanding the verdict. Strohm’s appeal is predicated on the argument that
Section 2(b) called for Strohm to receive a severance payment equal to 5 percent of the
fair market value of MFS’s “assets.” Strohm contends that the term “assets” plainly
means “gross assets,” and that the jury’s verdict was impermissibly calculated on a “net
asset” basis, in which the fair market value of MFS’s assets was offset by MFS’s
outstanding liabilities. Based on our review of the record and the pertinent Maryland
authorities, we believe the District Court properly held that the term “assets” standing
alone was ambiguous, thus creating a fact issue concerning whether the parties had
intended to calculate Strohm’s severance payment using a “gross asset” or a “net asset”
methodology. We further hold that MFS introduced ample evidence in support of its
position that the parties intended to employ a “net asset” methodology under the
Agreement. In light of this analysis, we find that the jury was within its rights to calculate
the severance payment owed to Strohm on a “net asset” basis, and thus the District Court
properly denied Strohm’s motion for judgment notwithstanding the verdict.
For the foregoing reasons, the cross-appeals are denied, and the judgment of the
District Court will be affirmed.
District Court quite correctly left the jury to make determinations concerning which of the parties
had or had not acted in good faith.