Trident Mortgage v. CrossCountry Mortgage

J-A21020-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
TRIDENT MORTGAGE COMPANY, LP : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
IAN CLARDY, CROSSCOUNTRY :
MORTGAGE, LLC, TIM ROACH, :
BRIAN JOHNSTON AND CONNOR : No. 1026 EDA 2022
KRIEG :
:
:
APPEAL OF: CROSSCOUNTRY :
MORTGAGE, LLC
Appeal from the Order Entered April 5, 2022
In the Court of Common Pleas of Chester County
Civil Division at 2020-03581-CT
BEFORE: LAZARUS, J., MURRAY, J., and McCAFFERY, J.
MEMORANDUM BY MURRAY, J.: FILED SEPTEMBER 30, 2022
CrossCountry Mortgage, LLC (Appellant),1 appeals from the order
denying Appellant’s petition to strike the praecipe to discontinue filed by
Trident Mortgage Company, LP (Trident). We affirm.
The trial court summarized the case history as follows:
Trident brought this action by complaint filed June 5, 2020 seeking
legal and equitable remedies (“First Action”). Trident alleged that
three individual defendants, Tim Roach, Ian Clardy and Brian
Johnston, had resigned their employment at Trident to accept
employment with a competitor in the residential mortgage
business, [Appellant], at an office managed by former Trident
employee and defendant, Connor Krieg. On the same day, Trident
____________________________________________
1Defendants Tim Roach, Ian Clardy, Brian Johnston, and Connor Krieg are not
parties to this appeal.
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petitioned for injunctive relief pursuant to Pa. R.C.P. No. 1531(a)
and moved for expedited discovery. Trident sought, inter alia, to
enjoin 1.) the misappropriation, use and disclosure of confidential
information and trade secrets; 2.) the misappropriation, use and
disclosure of the personal information of Trident’s clients[;] 3.)
the solicitation of Trident’s clients; and 4.) further recruitment of
Trident’s employees. [The trial court] entered an order
[scheduling] June 29, 2020 for hearing. … [Appellant] answered
the petition and motion on June 22, 2020. On or about June 25,
2020, the parties signed a Standstill Agreement and Trident
withdrew its petition. Thereafter, on February 11, 2021, Trident
discontinued the First Action without prejudice by praecipe.
On January 29, 2021, Trident commenced an action against only
[Appellant] seeking legal and equitable remedies; the action is
docketed at 2021-00679-TT (“Second Action”). In the Second
Action, Trident alleged that the First Action had been discontinued
because the parties had reached a Standstill Agreement. As part
of the Standstill Agreement, [Appellant] purportedly promised
that it would not access, use, disclose or reveal Trident’s trade
secrets and Trident agreed to discontinue the action. In the
Second Action, Trident accused [Appellant] of hiring away
additional employees and continuing to misappropriate trade
secrets and confidential information. Trident accuses [Appellant]
of breaching the Standstill Agreement. [T]he Second Action was
… reassigned to [the trial court] on July 13, 2021.
On March 29, 2021, [Appellant] petitioned in the First Action to
strike the discontinuance and a standard rule order was entered
permitting discovery by deposition. Disputes arose concerning
discovery related to the petition that resulted in motion practice.
A dispute arose concerning the filing of a reply brief that also
resulted in motion practice. Eventually, the petition was listed for
argument on January 20, 2022. Inadvertently, an order was not
entered denying the petition to strike until April 5, 2022, and from
that order [Appellant] appeals. [Appellant and the trial court have
complied with Pa.R.A.P. 1925.]
Trial Court Opinion, 5/10/22, at 1-2.
Appellant raises a single issue on appeal:
Did the trial court commit reversible error in denying [Appellant’s]
Petition to Strike [Trident’s] Praecipe to Discontinue, where the
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discontinuance effectively deprived [Appellant] of its procedural
rights under Rules 229(b)(1) and 1033(a) of the Pennsylvania
Rules of Civil Procedure?
Appellant’s Brief at 2.
Rule 229 provides, in relevant part, as follows:
Rule 229. Discontinuance
(a) A discontinuance shall be the exclusive method of voluntary
termination of an action, in whole or in part, by the plaintiff before
commencement of the trial.
(b)(1) Except as otherwise provided in subdivision (b)(2), a
discontinuance may not be entered as to less than all defendants
except upon the written consent of all parties or leave of court
upon motion of any plaintiff or any defendant for whom plaintiff
has stipulated in writing to the discontinuance.
...
(c) The court, upon petition and after notice, may strike off a
discontinuance in order to protect the rights of any party from
unreasonable inconvenience, vexation, harassment, expense, or
prejudice.
Pa.R.Civ.P. 229(a), (b)(1) and (c).
A discontinuance in strict law must be by leave of court, but it is
the universal practice in Pennsylvania to assume such leave in the
first instance. However, the discontinuance is subject to be
stricken for cause shown:
The causes which will move the court to
withdraw its assumed leave and set aside the
discontinuance are addressed to its discretion,
and usually involve some unjust disadvantage to
the defendant or some other interested party[.]
A discontinuance that is prejudicial to the rights of others should
not be permitted to stand even if it was originally entered with the
expressed consent of the court.
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In determining whether to strike a discontinuance, the trial court
must consider all facts and weigh equities. Further, the trial court
must consider the benefits or injuries which may result to the
respective sides if a discontinuance is granted. In Foti [v.
Askinas, 639 A.2d 807 (Pa. Super. 1994)], the case had been
pending for approximately five years at the time of the
discontinuance. Depositions had been taken, interrogatories
exchanged and several motions ruled on by the court. This Court
ultimately held that the trial court had abused its discretion in
granting the discontinuance where appellants, who endured the
burden of litigating the initial suit for almost five years, may again
be subjected to the same litigation. [Foti, 639 A.2d 809-10.]
Additionally, discontinuances may be improper where there is a
dispositive motion pending. In Nichols [v. Horn, 525 A.2d 1242(Pa. Super. 1987)], this Court concluded the trial court abused its
discretion by refusing to strike a discontinuance where a motion
for summary judgment was pending. This Court explained:
We think prejudice has been shown where, as here, a
motion for summary judgment has been filed and the
party seeking to strike the discontinuance would be
entitled to summary judgment if the discontinuance
was not allowed. Under these circumstances, the
court abused its discretion in refusing to find
prejudice.
Our courts have also held that discontinuances are improper
where it is apparent that the purpose of plaintiffs’ discontinuance
is to “forum shop.” In Brown [v. T.W. Phillips Gas & Oil Co.,
74 A.2d 105, 108 (Pa. 1950)], the plaintiffs sought to discontinue
their case in an effort to pursue a similar action that had begun in
federal court. The Court explained, “[O]nce the jurisdiction of a
competent court has attached, discontinuance of the action ought
not to be permitted over objection of the adversary if the only
reason for discontinuing is the plaintiffs’ desire to institute action
for the same cause in another forum.” Id. at 108.
Pohl v. NGK Metals Corp., 936 A.2d 43, 46–47 (Pa. Super. 2007) (some
citations omitted).
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A party challenging a trial court’s exercise of discretion bears a “heavy
burden.” Marra v. Smithkline Beecham Corp., 789 A.2d 704, 706 (Pa.
Super. 2001) (citation omitted).
It is not sufficient to persuade the appellate court that it might
have reached a different conclusion under the same factual
situation. An abuse of discretion is not merely an error of
judgment, but if in reaching a conclusion the law is overridden or
misapplied, or the judgment exercised is manifestly unreasonable,
or the result of partiality, prejudice, bias or ill-will, as shown by
the evidence or the record, discretion is abused.
Id. (citation omitted).
The gravamen of Appellant’s complaint is that the trial court erred in
considering the facts and weighing the equities; Appellant claims the trial
court “failed to recognize that Trident’s gamesmanship deprived [Appellant]
of its procedural rights under Pennsylvania Rules of Civil Procedure
229(b)(1) and 1033(a).” Appellant’s Brief at 17 (emphasis added). Thus,
Appellant asserts that it does not have to demonstrate actual prejudice,
because “such a deprivation of procedural rights amounts to legal prejudice
that requires the denial of a discontinuance.” Id. Appellant also criticizes the
trial court’s adherence to our decision in Pohl. See id. at 17-18. We are not
persuaded by Appellant’s argument.
As noted above, Pennsylvania Rule of Civil Procedure 229(b)(1) provides
that
a discontinuance may not be entered as to less than all
defendants except upon the written consent of all parties or
leave of court upon motion of any plaintiff or any defendant for
whom plaintiff has stipulated in writing to the discontinuance.
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Pa.R.Civ.P. 229(b)(1) (emphasis added).
Rule 1033(a) provides:
A party, either by filed consent of the adverse party or by leave of
court, may at any time change the form of action, add a person
as a party, correct the name of a party, or otherwise amend the
pleading. The amended pleading may aver transactions or
occurrences which have happened before or after the filing of the
original pleading, even though they give rise to a new cause of
action or defense. An amendment may be made to conform the
pleading to the evidence offered or admitted.
Pa.R.Civ.P. 1033(a).
By its plain terms, Rule 229(b)(1) is applicable in cases involving partial
discontinuances. Here, Trident discontinued the First Action in its entirety.
See Praecipe to Discontinue Without Prejudice, 2/11/21. Moreover, Trident
did not file an amended complaint in the First Action; it filed a new action.
Accordingly, Rule 1033(a) does not apply. As neither Rule of Civil Procedure
relied upon by Appellant is applicable, its claim concerning Trident’s violation
of the two Rules lacks merit. Appellant appears to acknowledge as much, but
emphasizes that Trident engaged in “gamesmanship” and “maneuvering”
which “deprived [Appellant] of its procedural rights.” Appellant’s Brief at 17
and 20. Appellant contends the Second Action, “largely duplicated the
allegations and claims of the First Action.” Id. at 20.
The trial court rejected this contention, stating:
[T]he actions are not identical. Trident has determined not to sue
its former employees. The Second Action raises a breach of
contract claim not available at the time the First Action was filed.
The Second Action cites to events occurring after the First Action
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was filed, including [Appellant’s] purported hiring away of
additional Trident employees. Finally, Trident raises claims for
breach of fiduciary duty by misappropriation of confidential
information and violation of the Pennsylvania Mortgage Licensing
Act that were not raised in the First Action.
Trial Court Opinion, 5/10/22, at 4-5.
We have reviewed the complaints in both actions and agree. The record
reflects the complaint in the First Action concerned events which took place in
and around Memorial Day Weekend 2020, when three of the individual
defendants allegedly acted in concert with Appellant to violate their
employment contracts, misappropriate confidential information, and give the
information to Appellant. See Complaint in First Action, 6/5/20, at 10-18.
The complaint in the Second Action concerns a different set of events, which
occurred more than seven months later, when different Trident employees
allegedly acted in concert with Appellant. See Complaint in Second Action,
1/29/21, at 8-23. Thus, Appellant’s claim that the actions are duplicative
lacks support.
Likewise, Appellant’s contention that the trial court should have
presumed “legal prejudice” lacks support. Appellant’s Brief at 17-18.
Appellant relies on our decision in Hileman v. Morelli, 605 A.2d 377 (Pa.
Super. 1992). See id. at 17-18, 27-32. However, that decision is inapposite
and does not support Appellant’s conclusion that “legal prejudice” occurs when
the Rules of Civil Procedure are violated.
Understanding the decision in Hileman to be narrow, we stated:
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This case presents a difficult procedural question concerning the
interrelationship between the joinder rules and
discontinuance practice. The question itself can only be
understood in light of the peculiar scenario in which it
arose[.]
Hileman, 605 A.2d at 378-79 (emphasis added).
In Hileman, the plaintiffs filed a wrongful death and survival action
against a hospital and the estate of the decedent’s deceased treating
physician. Id. at 379. Both defendants filed preliminary objections, which
the trial court granted; the trial court directed the plaintiffs to file an amended
complaint with more specific allegations against the defendants. Id. Instead
of complying with this directive, the plaintiffs filed an amended complaint
removing the hospital as a defendant. Id. After procedural maneuvering and
over the physician’s estate’s objections, the trial court granted the plaintiffs’
oral motion to dismiss the hospital pursuant to Pa.R.Civ.P. 229(b)(1), but gave
the physician’s estate 30 days to “file a writ or complaint against [the h]ospital
to preserve any rights of contribution or indemnity.” Id. at 380, see also id.
at 379-80.
On appeal, this Court held that the trial court erred “in granting a
discontinuance as to the hospital without preserving the full battery of
joinder rights provided to the estate under the rules of civil
procedure.” Id. at 381 (emphasis added). We did not discuss much law
regarding discontinuances, but focused on joinder, the statute of limitations,
causes of action, and joint and several liability. Id. at 381-86. In addition,
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we did not use the term “legal prejudice” or conclude that prejudice is
presumed in when the Rules of Civil Procedure are violated. Id. Rather, we
concluded the physician’s estate had demonstrated actual prejudice. Id. at
385-86. We noted that because the statute of limitations for the plaintiffs to
file a complaint against the hospital had passed, the trial court’s dismissal of
the hospital deprived the physician’s estate of its defense that the hospital
was solely liable for the alleged malpractice. Id. We concluded the trial court
should have either denied the request for a partial discontinuance, or allowed
the physician’s estate to join the hospital nunc pro tunc. Id.We see nothing in Hileman of relevance to this case. In the thirty years
since this Court decided Hileman, we have only cited it on five occasions;
none of those occasions has involved the rules regarding discontinuances or
“legal prejudice.” See Sehl v. Neff, 26 A.3d 1130, 1133-34 (Pa. Super. 2011)
(citing Hileman in discussing joint and several liability); L.B. Foster Co. v.
Caracciolo, 777 A.2d 1090, 1095 (Pa. Super. 2001) (citing Hileman briefly
with respect to joint and several liability); Lawrence v. Meeker, 717 A.2d
1046, 1048 n.4 (Pa. Super. 1998) (citing Hileman in footnote reference to
joint and several liability); Gordon v. Sokolow, 642 A.2d 1096, 1099 (Pa.
Super. 1994) (citing Hileman for definition of “cause of action”); Bianculli
v. Turner Const. Co., 640 A.2d 461, 465 (Pa. Super. 1994) (citing Hileman
in string cite as part of discussion of joinder). As such, Appellant’s contention
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that Hileman mandates a presumption of “legal prejudice” in cases involving
a violation of a Rule of Civil Procedure fails.
In contrast, the trial court properly analyzed Appellant’s motion to strike
under the principles articulated in Pohl, supra. The court considered all facts
and weighed equities in finding that Appellant
demonstrated no prejudice through the discontinuance of the First
Action. There is no duplication in effort;1 there is no waste of
resources. Trident has not acted to avoid the outcome of a
dispositive motion. Trident is free to reframe its litigation and to
proceed solely against [Appellant] on its claims, if it so chooses.
1 [Appellant] only responded to the petition for
injunctive relief in the First Action and had not even
answered the complaint.
Trial Court Opinion, 5/10/22, at 5 (footnote in original).
As the trial court did not abuse its discretion, we affirm the order
denying Appellant’s petition to strike the praecipe to discontinue. Marra, 789
A.2d at 706.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/30/2022
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