Gutteridge, C. v. J3 Energy Group

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2017 PA Super 150CHRISTOPHER GUTTERIDGE AND IN THE SUPERIOR COURT OF
APPLIED ENERGY PARTNERS, LLC PENNSYLVANIA
Appellee
v.
J3 ENERGY GROUP, INC., T/D/B/A J3
ENERGY GROUP AND STEPHEN RUSSIAL
Appellants No. 3397 EDA 2013
Appeal from the Judgment Entered November 25, 2013
In the Court of Common Pleas of Chester County
Civil Division at No(s): 2009-09160-CA
BEFORE: GANTMAN, P.J., FORD ELLIOTT, P.J.E., BENDER, P.J.E.,
BOWES, J., PANELLA, J., SHOGAN, J., LAZARUS, J., OLSON, J.,
and OTT, J.
OPINION BY LAZARUS, J.: FILED MAY 17, 2017
J3 Energy Group, Inc. (J3) and Stephen Russial (Russial) (collectively
Appellants/Defendants) appeal from the judgment entered in the Court of
Common Pleas of Chester County in favor of Christopher Gutteridge
(Gutteridge) and Applied Energy Partners, LLC (AEP) (collectively
Appellees/Plaintiffs), in the amount of $343,887.00. After careful review, we
affirm.1
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1
Appellant/Defendant J3 filed a motion to withdraw the appeal as to J3 only,
averring J3 is now “under common ownership with Plaintiff/Appellee [AEP].”
We grant J3’s motion to withdraw the appeal. See Pa.R.A.P. 1973.
Additionally, Appellees/Plaintiffs have filed a motion to strike portions of
Appellants’/Defendants’ brief. We deny this motion.
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The underlying facts of the case are as follows. In 2004, Gutteridge
formed AEP, which sold electronic motor controls and energy saving lighting
products to commercial and industrial customers. AEP conducted its
business through approximately fifteen sales agents known as channel
partners. Channel partners who had their own businesses would buy
products from AEP at discounted prices and sell them to their customers at
higher prices. Channel partners who did not have their own businesses were
paid a commission by AEP for the sales they generated.
The case before us arises out of business dealings between AEP and
J3. Gutteridge formed AEP in 2004, and Russial founded J3, a corporation,
in 2002. J3 provides energy procurement2 and demand response services3
to commercial and industrial clients.
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2
At trial, Gutteridge defined “procurement” as follows:
The business of helping the end-user consumer buy their
electricity or natural gas most advantageously. Ten or 15 years
ago all utilities were fully regulated and you had no choice. Over
the last ten or 15 years various states have become deregulated,
so now end[-]user consumers can buy their own electricity from
ten to 15 different potential suppliers.
N.T. Trial, 6/12/12, at 31.
3
At trial, Gutteridge defined “demand response” as follows:
The business where a utility will pay a large electrical user to
curtail their usage on days when the electrical grid has a high
load, which are nearly always summer afternoons. If the load on
the grid gets too high, they send out a message. And those
people who have signed up for demand response, and who will
(Footnote Continued Next Page)
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Gutteridge and Russial met in 2007; in March 2008, they developed a
plan whereby AEP would use its channel partners to provide J3’s services to
its customers. They discussed forming a joint venture called the Energy
Buyers Group (the Group); the Group’s members would benefit from lower
electric supply costs that the Group would negotiate for them. Gutteridge,
through AEP, had a sales network that called upon manufacturers, which
Russial did not have, and Russial had technical knowledge and expertise
within the energy procurement industry, which Gutteridge did not have.
See N.T. Trial, 6/12/12, at 36, 44.
Gutteridge and Russial agreed that they would divide the revenue
generated by the Group as follows: 60% to J3 and 40% to AEP. However,
in the beginning, the revenue would be divided 65% to J3 and 35% to AEP
because J3 would be heavily involved in closing the sales, while the AEP
channel partners were learning about energy procurement and demand
response services. Additionally, AEP would pay the channel partners 20%
of the total revenue, and retain a net commission of 15%.
At an AEP meeting in January 2008, Gutteridge introduced the channel
partners to Russial and J3. At training sessions in January and May 2008,
the Group concept was discussed, and Russial explained how J3’s services
_______________________
(Footnote Continued)
be paid for doing it, agree to curtail their use during those
periods.
Id. at 30.
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worked and how to sell them. Only two of the channel partners, Lori Porreca
(owner of A1 Restoration, Inc., and A1 Energy, Inc.) and Herb Keaton
(owner of Plastic Machinery Sales), sold the Group’s services; they were the
sole channel partners with customers in the PPL 4 utility area, which was
scheduled to become deregulated in January 2010.5
At the initial meetings in 2008, Russial told the channel partners that it
was important for the Group to reach 50 megawatts of purchasing volume
because that was the amount needed to secure optimum pricing from
energy suppliers. On February 25, 2009, Russial sent an email confirming
that the Group had reached this threshold.
Although Gutteridge maintained that he and AEP made significant
efforts to market the Group, Russial became dissatisfied with AEP’s
performance with respect to AEP’s efforts to develop and train a sales force
to market J3’s energy services. On March 9, 2009, Russial sent Gutteridge
an email setting forth a proposal that J3 compensate A1 Restoration, Plastic
Machinery Sales and AEP channel partner Mark Burton directly for any sales
they close. Under the new proposal, J3 would pay AEP a 10% or 20%
referral fee for any sales generated by channel partners other than Porreca,
____________________________________________
4
PPL, formerly known as PP&L, or Pennsylvania Power and Light, is an
energy company headquartered in Allentown, Pennsylvania.
5
The other large utilities in Pennsylvania, PECO and MetEd, were scheduled
to deregulate in January 2011.
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Keaton or Burton, depending on the extent of Appellants’/Defendants’
involvement. This referral fee was less than the share being paid to AEP
under the existing arrangement. The proposal also included a requirement
that AEP sign a non-compete agreement for any existing or new clients of
the Group.
On April 21, 2009, Russial sent an email to Gutteridge informing him
that Russial would not make any payments to AEP from J3 unless
Appellees/Plaintiffs agreed to sign a document prepared by Russial that
would include a non-compete clause for any customers secured by Porreca,
Keaton or Burton. AEP never signed a new agreement with J3, and J3 never
paid AEP for any of the revenues generated from the Group joint venture.
Appellants/Defendants voluntarily paid channel partners Porreca and
Keaton directly for their services, rather than Appellees/Plaintiffs. They also
had Porreca and Keaton sign non-compete agreements, which caused
Appellees/Plaintiffs to lose two key channel partners, and resulted in the
customers Porreca and Keaton had obtained for the Group becoming direct
customers of J3. Despite the fact that the parties manifested intentions to
ultimately reach an agreement to form Energy Buyers Group and then
market that entity to prospective clients for the sale of energy procurement
and demand response services, Russial unilaterally transformed the
relationship in order to develop a direct association with the most committed
AEP channel partners, Porreca and Keaton.
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Gutteridge and AEP commenced this action against Russial and J3 by
filing a writ of summons on August 14, 2009. They filed a complaint on May
10, 2010, raising several counts against Appellees/Defendants, including
promissory estoppel, breach of contract, unjust enrichment, breach of
implied duty of good faith and tortious interference with contractual rights.
Following a four-day non-jury trial before the Honorable William P. Mahon,
the court issued a verdict on June 30, 2013, in favor of Appellees for
$343,887.00 on the counts of unjust enrichment and promissory estoppel. 6
All parties filed motions for post-trial relief. The trial court did not rule
on the post-trial motions within 120 days, and on November 25, 2013,
Appellants filed a praecipe for entry of judgment on the verdict. Judgment
was entered, and this timely appeal followed.7
Appellant Stephen Russial has filed a substituted brief on appeal
before this Court en banc. He raises the following issues for our review:
1. Did the trial court abuse its discretion and/or commit an
error of law in holding Appellant, Stephen Russial, who was the
shareholder and corporate officer of J3[], personally liable for
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6
The trial court entered judgments in favor of Appellants/Defendants on
Appellees/Plaintiffs’ claims for breach of contract/implied duty of good faith
and tortious interference with contractual relations. See Verdict, 7/3/13.
The court found no mutual assent. Id. at n.4. See Bair v. Manor Care
of Elizabethtown, PA, LLC, 108 A.3d 94, 96 (Pa. Super. 2015) (touchstone
of any valid contract is mutual assent and consideration). Those judgments
have not been appealed.
7
Appellee/Defendant J3 has withdrawn its appeal from the judgment
entered against it.
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any amount under the theories of unjust enrichment/promissory
estoppel or any other basis?
2. Did the trial court abuse its discretion and/or commit an
error of law in finding liability against Appellant, Stephen Russial,
under the theory of unjust enrichment?
3. In the event Appellant, Stephen Russial, or both
Appellants, did in fact have liability to the Appellees under the
legal theory of unjust enrichment, did the trial court abuse its
discretion and/or commit error an of law and apply the wrong
measure of damages?
4. Did the trial court abuse its discretion and/or commit an
error of law in finding liability against Appellant, Stephen Russial,
or both of the Appellants, under the theory of promissory
estoppel?
5. In the event Appellant, Stephen Russial, or both of the
Appellants, did in fact have liability to the Appellees under the
legal theory of promissory estoppel, did the trial court abuse its
discretion and/or commit an error of law and apply the wrong
measure of damages?
6. In the event the Superior Court affirms liability of
Appellant, Stephen Russial, or both the Appellants, under unjust
enrichment and/or promissory estoppel and affirms that the
Appellees were entitled to damages based on lost commissions
as opposed to reliance damages, was the amount of the trial
court’s verdict excessive and an abuse of discretion and/or an
error of law?
Substituted Brief of Appellant Stephen Russial, at 4-6.
Our standard of review in non-jury cases is limited to:
a determination of whether the findings of the trial court are
supported by competent evidence and whether the trial court
committed error in the application of law. Findings of the trial
judge in a non-jury case must be given the same weight and
effect on appeal as a verdict of a jury and will not be disturbed
on appeal absent error of law or abuse of discretion. When this
Court reviews the findings of the trial judge, the evidence is
viewed in the light most favorable to the victorious party below
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and all evidence and proper inferences favorable to that party
must be taken as true and all unfavorable inferences rejected.
Company Image Knitwear, Ltd. v. Mothers Work, Inc., 909 A.2d 324,
330 (Pa. Super. 2006) (citation omitted). Additionally, this Court has stated
that we will respect a trial court’s findings with regard to the credibility and
weight of the evidence “unless the appellant can show that the court’s
determination was manifestly erroneous, arbitrary and capricious or
flagrantly contrary to the evidence.” J.J. DeLuca Co. v. Toll Naval
Associates, 56 A.3d 402, 410 (Pa. Super. 2012), quoting Ecksel v.
Orleans Const. Co., 519 A.2d 1021, 1028 (Pa. Super. 1987).
Russial first asserts that the trial court abused its discretion and
committed an error of law by holding Russial personally liable for the
judgment entered against J3. For the following reasons, we find no error.
At trial, Gutteridge testified that he and Russial had done business
together in the first half of 2007, and that during a road trip to Pittsburgh in
the fourth quarter of 2007, they discussed forming the Group. See N.T.
Trial, 6/12/12, at 160.
Q: At your deposition I remember asking you[,] when you
met Steve Russial[,] were you aware of his company, J3 Energy
Group, Inc., were you aware of that company?
A: Yes.
Q: And were you aware that the company was a corporation?
A: No, not specifically, but I assumed so.
...
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Q: Mr. Gutteridge, I’m handing you your deposition on
January 6, 2012 of this year. I’m bringing your attention to
page 26, lines 14 through 21. Would you read those and let me
know when you’re finished?
A: “Let’s talk about that. One of my clients is J3 Energy
Group[,] Inc. Were you aware of J3 Energy Group, Inc. when
you started dealing with Mr. Russial?”
“Yes.”
“Were you aware that that was a corporation?”
“Yes.”
...
Q: I also asked you if, when you were dealing with Mr.
Russial, were you dealing with him in his capacity as president of
this corporation – of his corporation. You don’t remember what
your answer was?
A: I don’t remember what my answer was, but when I first
met Mr. Russial, I was dealing with him personally. At the point
that we started setting up the Energy Buyers Group, it was
Applied Energy Partners[-] J3 venture.
Q: I’m going to approach you one more time.
If I show you, again, page 26, the last three lines, and
then your answer on the top of your deposition testimony?
A: Yes. You asked me in my dealings with Mr. Russial was he
always dealing as president of J3 and I said I assumed so.
Q: Thank you.
N.T. Trial, 6/13/12, at 8-10 (emphasis added).
The trial court credited Gutteridge’s testimony that, when he first met
Russial, Gutteridge believed that he “was dealing with him personally.” N.T.
Trial, 6/13/12, at 10. The court also heard Gutteridge’s deposition
testimony in which he stated that he assumed he was dealing with Russial as
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president of J3. Id. Gutteridge testified that “[a]t the point that we started
setting up the Energy Buyers Group, it was Applied Energy Partners[-] J3
venture.” N.T., 6/13/2012, at 10.
The court specifically notes in its Pa.R.A.P. 1925(b) opinion that,
“Gutteridge initially entered into the business relationship with . . . Russial.”
Trial Court Opinion, 6/11/14, at 4. Clearly, the court believed Gutteridge’s
testimony that he was dealing with Russial personally. The court stated that
it “finds credible the testimony of . . . Gutteridge when considered against
that of . . . Russial.” Id. at 1.
The court found further support for its conclusion of personal liability in
the following exchange that took place during Gutteridge’s cross-
examination:
Q: Would you admit that neither you nor your company
AEP has a written contract with either J3 Energy Group,
Inc. or Mr. Russial?
A: Formal written contract, no.
Q: In your dealings with J3 Energy Group, did J3 Energy
Group make it clear several times to you that it wanted a
written contract in order to continue a business
relationship with AEP?
A: Yes, and I made the same representations in reverse.
THE COURT: Mr. Gutteridge, I thought I heard testimony
earlier on direct examination that Mr. Russial said to you
that there was no need to do this in written form, as long
as the respective obligations of the parties were well
defined?
A: Yes, Your Honor.
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THE COURT: So at what point in time did the idea of
having a written document come into being? Because
apparently early on there wasn’t one, and it wasn’t being
pursued.
A: No. You’re right. After, I guess, March or so of 2008, is
when the issue came up of should we form a separate
legal entity to run the Energy Buyers Group. And [counsel
for Appellants’/Defendants’] advice at the time was we
didn’t need that. But into the fall and the rest of the year
2009, the issue of how we should formalize the
relationship came up a number of times over.
N.T. Trial, 6/13/12, at 10-11.
The court found that Russial and Gutteridge discussed the formation of
the Energy Buyers Group as a joint venture between AEP and J3, but never
executed written contracts. The court found no express contract, as there
was insufficient evidence of “mutual assent.” Based on this testimony, the
court concluded that, once the parties were unable to come to a written
agreement with respect to the Group, it was “perfectly reasonable for . . .
Gutteridge to believe that the formation of the sales and marketing
relationship between himself and . . . Russial was ongoing and continued
despite their inability to formalize the creation of the Energy Buyers Group.”
Trial Court Opinion, 6/11/14, at 4 (emphasis added).
“In a non-jury trial, the factfinder is free to believe all, part, or none of
the evidence, and the Superior Court will not disturb the trial court’s
credibility determinations.” Triffin v. Dillabough, 716 A.2d 605, 607 (Pa.
1998). See also Miller v. C.P. Centers, Inc., 483 A.2d 912, 915 (Pa.
Super. 1984). “Assessments of credibility and conflicts in evidence are for
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the trial court to resolve; this Court is not permitted to reexamine the weight
and credibility determinations or substitute our judgments for those of the
factfinder.” Turney Media Fuel v. Toll Bros., 725 A.2d 836, 841 (Pa.
Super. 1999). “The test is not whether this Court would have reached the
same result on the evidence presented, but rather, after due consideration
of the evidence the trial court found credible, whether the trial court could
have reasonably reached its conclusion. Terletsky v. Prudential Prop. &
Cas. Ins. Co., 649 A.2d 680, 686 (Pa. Super. 1998).
Here, the court’s conclusion, that Gutteridge was dealing with Russial
individually and that Gutteridge and Russial were parties to a failed business
deal, is supported by evidence that the trial court deemed credible. Mindful
of our limited role as an appellate court, we may not disturb that conclusion.
See Turney Media Fuel, supra; Terletsky, supra. See also Company
Image Knitwear, supra (when reviewing findings of trial judge in non-jury
trial, evidence is viewed in light most favorable to victorious party below and
all evidence and proper inferences favorable to that party must be taken as
true and all unfavorable inferences rejected).
Appellants/Plaintiffs next assert that the trial court abused its
discretion or committed an error of law by finding liability against Russial
under the theory of unjust enrichment. We find no error or abuse of
discretion.
“Unjust enrichment” is essentially an equitable doctrine. Styer v.
Hugo, 619 A.2d 347 (Pa. Super. 1993). It is well-established that “[c]ourts
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sitting in equity hold broad powers to grant relief that will result in an
equitable resolution of a dispute.” Williams Twp. Bd. of Supervisors v.
Williams Twp. Emergency Co., Inc., 986 A.2d 914, 921 (Pa. Cmwlth.
2009). In addition, “a trial court must formulate an equitable remedy that
is consistent with the relief requested . . .” Id. (citing North Mountain
Water Supply Co. v. Troxell, 81 A. 157 (Pa. 1911)).
In Stoeckinger v. Presidential Financial Corp. of Delaware
Valley, 948 A.2d 828 (Pa. Super. 2008), this Court held that:
A claim for unjust enrichment arises from a quasi-contract. “A
quasi-contract imposes a duty, not as a result of any agreement,
whether express or implied, but in spite of the absence of an
agreement, when one party receives unjust enrichment at the
expense of another.” AmeriPro Search, Inc. v. Fleming Steel
Co., 787 A.2d 988, 991 (Pa. Super. 2001).
The elements of unjust enrichment are benefits conferred
on defendant by plaintiff, appreciation of such benefits by
defendant, and acceptance and retention of such benefits
under such circumstances that it would be inequitable for
defendant to retain the benefit without payment of value.
Whether the doctrine applies depends on the unique
factual circumstances of each case. In determining if the
doctrine applies, we focus not on the intention of the
parties, but rather on whether the defendant has been
unjustly enriched.
Styer v. Hugo, 619 A.2d 347, 350 (Pa. 1993) (quotation marks
omitted).
Stoeckinger, 948 A.2d at 833.
“To sustain a claim of unjust enrichment, a claimant must show that
the party against whom recovery is sought either wrongfully secured or
passively received a benefit that it would be unconscionable for her to
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retain.” Torchia v. Torchia, 499 A.2d 581, 582 (Pa. Super. 1985)
(quotation marks and citation omitted). The application of the doctrine
depends on the particular factual circumstances of the case at issue. In
determining if the doctrine applies, our focus is not on the intention of the
parties, but rather the most critical element of this equitable doctrine, which
is whether the enrichment of the defendant is unjust. “The doctrine does
not apply simply because the defendant may have benefited as a result of
the actions of the plaintiff.” Styer, 619 A.2d at 350.
Here, the trial court found credible evidence that Russial committed
wrongful acts by breaking his promises to Appellees/Plaintiffs after
Appellees/Plaintiffs performed services in reliance on those promises. As a
result, Russial kept all of the revenues from the Group, obtained through
Appellees’ efforts, and secured exclusive relationships with AEP’s most
productive channel partners.
The trial court found credible the evidence that Appellees/Plaintiffs
expended considerable efforts attempting to develop the Energy Buyers
Group and to persuade its AEP partners and their customers to market and
purchase Appellants’/Defendants’ services. The court found that, despite the
fact that Russial had expressed disappointment with AEP’s sales and
marketing efforts, Russial had promised Appellees/Plaintiffs 35% of the
revenues, and
[a]fter AEP and its partners produced considerable income
for [them, Russial and J3] then decided that a relationship
could be formed directly with AEP Partners Porreca and
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Keaton without the need for AEP or Gutteridge. Russial
had obtained the services of the most committed AEP
Partners and set out to develop a direct relationship with
them and impact adversely their relationship with AEP.
Russial unilaterally determined that he would pay directly
to Porreca and Keaton the percentage of sales commission
that AEP was obligated to pay them as a result of their
sales efforts for [Russial and J3’s] services.
Trial Court Opinion, 6/11/14, at 4-5 (emphasis added).
The court found Appellees/Plaintiffs also presented credible evidence
that the benefits that Appellants/Defendants secured unjustly were equal to
the amount of money Appellees/Plaintiffs would have received had
Appellants/Defendants not unilaterally altered the agreed 65%/35% revenue
split arrangement. See Exhibit P-64 (showing total revenue for both
procurement and demand services through December 31, 2011, totaling
$982,537.00). The trial court determined that Gutteridge and AEP had an
expectation of payment for services performed, that Russial wrongfully kept
revenues obtained through Appellees/Plaintiffs’ efforts, and that it would be
inequitable for Appellants/Defendants to retain the benefits of that revenue
without payment of value. See Wiernik v. PHH U.S. Mortgage Corp., 736
A.2d 616, 622 (Pa. Super. 1999). Accordingly, the trial court determined
that Appellants/Defendants were unjustly enriched by retaining 35% of that
amount, or $343,887.00.
Russial also argues that even if the trial court did not err in finding
liability under unjust enrichment, the court abused its discretion and/or
committed an error of law by applying the wrong measure of damages.
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Russial argues the verdict was excessive and improperly calculated, and that
the court improperly awarded damages “based on unpaid commissions, as
opposed to reliance damages[.]” Appellant’s Brief, at 26. Russial contends
that, at most, Appellees/Plaintiffs were entitled to a commission of fifteen
percent, which is the net they would have earned after paying commissions
to A1 and/or Plastic Machinery Sales. Additionally, Russial notes that “J3
did, in fact, pay the twenty (20%) percent commission to A1 Energy and
Plastic Machinery Sales.” Appellant’s Brief, at 27. Russial claims that the
court’s damages award is “perplexing” because it awarded damages on a
“contract basis of 35% of gross revenues, instead of trying to determine a
reasonable value for whatever services, if any, the Appellees[/Plaintiffs]
provided” to Appellants/Defendants. Id. at 45. Accordingly, Russial asserts
“the court’s verdict of $343,887.00, which was calculated by the trial court
by taking 35% of the gross sales of $982,537.00, should be reduced to no
more than $147,380.55, which is 15% of the gross sales figure of
$982,537.00.” Id. We find no error.
Russial has been enriched, unjustly, and the measure of damages is
the value of the benefits conferred; that is, Russial must make restitution to
Appellees/Plaintiffs in quantum meruit. AmeriPro Search Inc. v.
Fleming Steel Co., 787 A.2d 988 (Pa. Super. 2001). The value was 35% of
the revenue, which included Appellees’/Plaintiffs’ obligation to compensate
the channel partners for their commissions on those revenues. The fact that
Russial may have unilaterally decided to pay directly to Porreca and Keaton
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the 15% commission that AEP was obligated to pay them is, as the trial
court noted, “not part of this litigation.” See Verdict, 7/3/13, at n.4.
“[Appellants’/Defendants’] willingness to pay AEP’s sales commissions to
Porreca and Keaton [does] not entitle them to a ‘credit’ against any claims
that [Appellees/Plaintiffs] have against [Appellants/Defendants,] nor does it
relieve [Appellants/Defendants] of any sales commission obligations that
[they] may have to Porreca and Keaton.” Trial Court Opinion, 6/11/14, at 5.
Russial has produced no evidence that the channel partners have
released Appellees/Plaintiffs from their commission obligations. Therefore,
had the trial court discounted the damages award to offset the commissions
Appellants/Defendants paid to the channel partners, Appellees/Plaintiffs
would be left responsible for paying commissions without having received
full compensation.
Russial next asserts that the trial court abused its discretion or
committed an error of law by finding liability under the theory of promissory
estoppel.
Our Supreme Court has explained the doctrine of promissory estoppel
as follows:
Where there is no enforceable agreement between the parties
because the agreement is not supported by consideration, the
doctrine of promissory estoppel is invoked to avoid injustice by
making enforceable a promise made by one party to the other
when the promisee relies on the promise and therefore changes
his position to his own detriment. [Restatement (Second)
Contracts] § 90; see, e.g., Shoemaker v. Commonwealth
Bank, 700 A.2d 1003, 1006 (Pa. Super. 1997). In order to
maintain an action in promissory estoppel, the aggrieved party
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must show that 1) the promisor made a promise that he should
have reasonably expected to induce action or forbearance on the
part of the promisee; 2) the promisee actually took action or
refrained from taking action in reliance on the promise; and 3)
injustice can be avoided only by enforcing the promise. Id. As
promissory estoppel is invoked in order to avoid injustice, it
permits an equitable remedy to a contract dispute.
Crouse v. Cyclops Industries, 745 A.2d 606, 610 (Pa. 2000).
Russial argues “there was no evidence presented by Appellees and the
trial court made no findings in its Verdict or Opinion finding any of the three
elements of promissory estoppel against either Appellant, especially
Appellant Stephen Russial.” Appellant’s Brief, at 46. We disagree.
Here, the court found evidence that Appellants/Defendants made
promises to Appellees/Plaintiffs that were expected to induce action by
Appellees/Plaintiffs. The court found credible testimony that: (1) Russial
personally promised a revenue sharing arrangement to Gutteridge; (2) their
personal business relationship continued while they attempted to formalize
the Group buying arrangement involving their companies; and (3) J3
promised AEP that in exchange for marketing its business, it would pay a
percentage of the revenues generated from AEP so that AEP could pay
commissions to its existing sales force.
There was also evidence that Appellants’/Defendants’ promises
induced Appellees/Plaintiffs to take various actions. As a result of Russial’s
promises, Gutteridge introduced Russial and J3 to the AEP channel partners,
who made several sales calls to potential customers to market the Group.
Furthermore, Gutteridge testified that AEP only sought to become involved in
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the demand response and procurement market based on
Appellants’/Defendants’ promises to enter into the shared revenue
arrangement. N.T. Trial, 6/12/12, at 187.
Lastly, the court concluded that “[e]quity demands that
[Appellees/Plaintiffs] recover on the theory of promissory estoppel to the
extent that [Appellants/Defendants] are unjustly enriched by 35% of the
revenues that would otherwise be paid to [Appellees/Plaintiffs].” Trial Court
Opinion, 6/11/14, at 4. In other words, permitting recovery on the promise
is the only way to avoid injustice. See Crouse, supra.
This conclusion is supported by the testimony deemed credible by the
trial court, that only once the Group met its target of 50 megawatts of
purchasing volume, Appellants/Defendants decided they were unhappy with
Appellees’/Plaintiffs’ work. Appellants/Defendants then refused to pay
Appellees/Plaintiffs unless they signed an agreement that would cut them
out of the Group and allow Appellants/Defendants to use the AEP sales force
for their exclusive gain. Appellees/Plaintiffs rejected this offer, and
Appellants/Defendants then refused to pay the already agreed-to 35% of
the revenues generated by the channel partners, which amounted to
$343,887.
Appellants/Defendants then began paying AEP’s two most productive
and committed channel partners, Porreca and Keaton, directly for their
services and had them sign non-compete agreements to the detriment of
Appellees/Plaintiffs. Appellees/Plaintiffs thus lost the ability to sell to Porreca
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and Keaton’s clients, including the ability to sell them the services of their
new vendor for energy procurement services, World Energy.
Russial argues there was no injustice in this case because
“Appellees[/Plaintiffs] did not perform as they represented they would or
could[.].” Appellants’ Brief, at 47. Relying heavily on his own testimony,
Russial claims “Appellees[/Plaintiffs] failed to identify 12 to 14 sales agents,
as they represented they could do.” Id. Russial also claims that
Appellees/Plaintiffs purported to have a network of agents who could sell
J3’s services without J3 being involved in training or operating the network
or closing sales. However, in light of the trial court’s statement that it “finds
credible the testimony of . . . Gutteridge when considered against that of
[]Russial,” Trial Court Opinion, 6/11/14, at 1, Russial’s contention that no
injustice occurred fails. The court had before it Gutteridge’s credible
testimony that it was only when the 50 megawatt goal was reached, and the
Group was about to realize revenues, that Appellants/Defendants
communicated any dissatisfaction with Appellees’/Plaintiffs’ efforts, and then
engaged in conduct to lure away Appellees’/Plaintiffs’ most successful
channel partners. Under these circumstances, the trial court did not err in
concluding that the doctrine of promissory estoppel applied in this matter.
Russial next argues that even if the trial court correctly found liability
under the theory of promissory estoppel, it should have awarded only
reliance damages to Appellees/Plaintiffs. Russial argues that “any recovery
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under promissory estoppel would be for reliance damages, i.e., damages
incurred in reliance of the alleged promise.” Appellant’s Brief, at 49.
Restatement (Second) of Contracts § 90(1), Comment d, provides, in
relevant part:
A promise binding under this section is a contract, and full-scale
enforcement by normal remedies is often appropriate. But the
same factors which bear on whether any relief should be granted
also bear on the character and extent of the remedy. In
particular, relief may sometimes be limited to restitution or to
damages or specific relief measured by the extent of the
promisee’s reliance rather than by the terms of the promise.
Accordingly, the general rule is that a plaintiff should be awarded the
value of the defendant’s promises unless equity dictates otherwise.
Although Russial cites Banas v. Matthews Int’l Corp., 502 A.2d 637 (Pa.
Super. 1985), for the general proposition that “any recovery under
promissory estoppel would be for reliance damages,” Appellant’s Brief, at 49,
he paints with too broad a brush. Rather, as our Supreme Court noted, a
promissory estoppel remedy may be limited as justice requires. Lobolito,
Inc. v. North Pocono Sch. Dist., 755 A.2d 1287, 1292 n.10 (Pa. 2000).
Therefore, the issue is whether the trial court correctly found that the instant
case does not involve equitable considerations that would justify deviating
from contract damages.
Here, the trial court heard evidence regarding the sales and marketing
activities that Appellees/Plaintiffs performed in reliance on Russial’s
promises. It also heard testimony regarding the losses that
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Appellees/Plaintiffs sustained as a result of relying on those promises.
Under these circumstances, the court concluded that the damages which are
necessary to prevent injustice and to put Appellees/Plaintiffs in the position
in which they would have been had Russial not unilaterally altered his
relationship with Appellees/Plaintiffs, were the benefit of their bargain. We
agree this was appropriate, and Russial has not demonstrated any equitable
concerns that would justify a lesser, alternative calculation of damages.
Lastly, Russial claims that the verdict of $343,887.00 was excessive
and/or improperly calculated. We have disposed of this argument already
and find that Russial’s claim is of no merit.8
As the trial court explained, Russial refused to abide by what had been
agreed upon as the 65%/35% split, and unilaterally altered the arrangement
and developed an exclusive direct relationship with Porreca and Keaton to
Plaintiffs’/Appellees’ detriment. We agree with the trial court’s reasoning
that “[Appellants’/]Defendants’ willingness to [allegedly] pay AEP’s sales
commissions to Porreca and Keaton do[es] not entitle them to a ‘credit’
____________________________________________
8
We also note that in their Answer and New Matter to Plaintiffs’ Second
Amended Complaint, filed 1/26/11, Appellees/Defendants do not allege
“payment” as an affirmative defense. See Pa.R.C.P. 1030(a) (“Except as
provided by subdivision (b), all affirmative defenses including but not limited
to the defenses of . . . payment . . . shall be pleaded in a responsive
pleading under the heading “New Matter[.]” See also Pa.R.C.P. 1032(a)
(“A party waives all defenses and objections which are not presented either
by preliminary objection, answer or reply, except a defense which is not
required to be pleaded under rule 1030(b)[.]”).
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against any claims that [Appellees/]Plaintiffs have against
[Appellants/]Defendants[,] nor does it relieve [Appellees/]Plaintiffs of any
sales commission obligations that it may have to Porreca and Keaton.” Trial
Court Opinion, 6/11/14, at 5 (emphasis added). Russial points to nothing in
the record to support a finding that Porreca and Keaton have released AEP
from its commission obligations. We find no error. See Lesoon v.
Metropolitan Life Ins. Co., 898 A.2d 620 (Pa. Super. 2006) (duty of
assessing damages is for factfinder, whose decision will not be disturbed on
appeal unless record clearly shows caprice, partiality, prejudice, corruption,
or other improper influence); see also Delahanty v. First Pennsylvania
Bank, 464 A.2d 1243, 1257 (Pa. Super. 1983) (“In reviewing the award of
damages, the appellate courts should give deference to the decisions of the
trier of fact who is usually in a superior position to appraise and weigh the
evidence.”).
Judgment affirmed.
President Judge Gantman, President Judge Emeritus Ford Elliott,
President Judge Emeritus Bender, Judge Panella, and Judge Ott join the
Opinion.
Judge Bowes files a Concurring and Dissenting Opinion in which Judge
Shogan and Judge Olson join.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/17/2017
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