Brown, K. v. Rite Aid Corporation

J-A07038-20
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
KAREN BROWN : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
RITE AID CORPORATION : No. 1340 MDA 2019
Appeal from the Order Entered July 11, 2019
In the Court of Common Pleas of Lackawanna County Civil Division at
No(s): 2017-3965
BEFORE: OLSON, J., DUBOW, J., and McLAUGHLIN, J.
MEMORANDUM BY McLAUGHLIN, J.: FILED JULY 01, 2020
Karen Brown (“Brown”) appeals from the order entered in this breach of
contract action granting the summary judgment motion filed by Rite Aid
Corporation (“Rite Aid”). We conclude that Brown commenced this action after
the statute of limitations expired and therefore affirm the order.
Franklin Brown (“Franklin”) worked at Rite Aid for many years, as
counsel and vice chairman. Brown is his wife. In October 1996, Franklin,
Brown, and Rite Aid executed a deferred compensation agreement based on
Franklin’s employment with Rite Aid. The agreement provided, in part, that
after Franklin’s retirement, Rite Aid would pay a retirement allowance to
Brown, which would continue “until the later of the following dates: (a) the
date of the death of [Brown]; (b) two hundred forty (240) months after the
Retirement Date.” Brown’s Mot. for Partial Summ. J., filed Dec. 13, 2018, at
Ex. 1, Deferred Compensation Agreement, at 3. It also provided that Rite Aid
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would maintain life insurance on Franklin for the rest of his life, with a death
benefit of no less than $1,500,000. Id. at 9. The deferred compensation
agreement provided that the payments could be forfeited:
(5) Forfeiture Under Certain Circumstances.
Notwithstanding the foregoing, Corporation shall have no
further obligation to make Retirement Allowance payments
to Brown if either of the following shall occur:
(a) Employee is discharged by Corporation for good
cause (as hereinafter defined) by order of the Board
of Directors, or it is found by the Board of Directors
that Employee has committed an act which would
have resulted in his discharge for good cause had it
been brought to the attention of the Board of
Directors. As used herein, “good cause” shall mean
and be limited to Employee’s conviction of a felony
involving his personal dishonesty materially injurious
to Corporation.
Id. at 8.
Franklin retired in 2000, and Rite Aid started to make payments under
the deferred compensation agreement. In June 2002, a federal grand jury
indicted Franklin on numerous felony charges related to his role as chief
counsel of Rite Aid. In October 2003, Franklin was convicted of ten counts,
including, among other convictions, conspiracy to defraud Rite Aid, filing false
Security Exchange Commission forms and other documents, obstruction of
justice, and witness tampering.
In June 2002, Rite Aid sent notice to Franklin that it would cease the
payments due under the deferred compensation agreement, and did in fact
cease the payments. It also instituted an action in Cumberland County against
Franklin alleging various causes of action, including a breach of contract action
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seeking damages under the deferred compensation agreement (“Cumberland
County action”). It further sought a declaratory judgment declaring that Rite
Aid had no obligation to Franklin under the deferred compensation agreement.
In March 2010, the court granted partial summary judgment on the breach of
contract claim, concluding the criminal action would have given the Board
good cause to discharge Franklin and that he therefore forfeited any right to
compensation under the agreement. However in 2015 or 2016, Franklin filed
in federal court a motion to enforce a bar to litigation based on a settlement
agreement previously entered into between the parties in federal court. The
federal court enjoined Rite Aid from proceeding with its affirmative claims,
including the breach of contract claim under the deferred compensation
agreement.
In the Cumberland County action, Franklin asserted a counterclaim
asserting that Rite Aid breached a Restated Certification of Corporation, which
required Rite Aid to advance to Brown the expenses he incurred in connection
with civil and criminal proceedings. The counterclaim sought a declaration that
Rite Aid breached the Restated Certificate and ordering Rite Aid to advance
the expenses he incurred in connection with the criminal and civil proceedings.
In August 2016, Franklin voluntarily discontinued the counterclaim.
Therefore, in 2017, the declaratory judgment claim was the sole
remaining claim in the Cumberland County action.
Franklin filed a motion to dismiss the declaratory judgment count for
lack of subject matter jurisdiction. In July 2017, the court granted the motion,
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finding that Brown was an indispensable party to the declaratory judgment
action and that “[a]ssuming . . . the existence of an actual controversy
between the parties when this action was filed almost 15 years ago, it is clear
that the statute of limitations for the purpose of joining Karen Brown has
expired.” Rite Aid’s Mot. for Summ. J., filed Jan. 10, 2019, Ex. S, Trial Ct. Op.,
filed July 13, 2017, at 4.
That same month, July 2017, Brown filed this instant complaint
asserting two breach of contract claims against Rite Aid based on the deferred
compensation agreement.1 Rite Aid filed a motion for summary judgment and
Brown filed a motion for partial summary judgment.
The trial court summarized the summary judgment motions as follows:
In her motion for partial summary judgment, Mrs. Brown
asks this court to find as a matter of law, Rite Aid breached
the agreement. Specifically, Mrs. Brown asserts:
Rite Aid may not resort to the forfeiture provision of
the 1996 amended and restated deferred
compensation agreement because Rite Aid materially
breached the agreement on June 26, 2002 long before
Franklin C. Brown was convicted of anything.
(Plaintiff Brown’s Memorandum of Law In Opposition to
Defendant Rite Aid’s Cross-Motion for Summary Judgment
at pg. 12).
Rite Aid raises four separate grounds in its cross-motion for
summary judgment. They are:
1. Any benefits payable under the Deferred
Compensation Agreement were forfeited by
____________________________________________
1 At least one lawyer who represented Franklin in the Cumberland County
action also represents Brown in this action.
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[Franklin’s] criminal convictions and by his material
breach of that agreement.
2. [Brown’s] claims are time barred[.]
3. [Brown’s] claims are barred by the doctrine of
judicial estoppel.
4. [Brown’s] claims are barred by the doctrine of
collateral estoppel.
(Defendant Rite Aid Corporation’s Memorandum in Support
of its Cross-Motion for Summary Judgment and in
Opposition to Plaintiffs Motion for Partial Summary
Judgment at pgs. 13-22).
Trial Court Opinion (“1925(a) Op.”), filed July 11, 2019, at 2-3.
The court heard argument. It then granted Rite Aid’s motion and denied
Brown’s motion. Brown filed a notice of appeal.
Brown raises the following issues on appeal:
1. Whether the trial court committed an error of law or
abused its discretion by considering a void 2010 ruling from
Cumberland County instead of striking the ruling from the
record as demanded by Plaintiff’s motion to strike
(R.02559a-02564a.) which the trial court did not address or
rule upon.
2. Whether the trial court committed an error of law or
abused its discretion when it modified the plain meaning of
the contract between the parties by ignoring essential
language in the contract, effectively writing the essential
language out of the agreement to have it comport with the
trial court’s asserted interpretation.
3. Whether the trial court committed an error of law or
abused its discretion when it refused to acknowledge
material facts in dispute, that is, whether any of Franklin
Brown’s felony convictions coming more than a year after
Rite Aid’s material breach and refusal to continue payments
under the contract involved Brown’s “personal dishonesty
materially injurious to [Rite Aid] Corporation.”
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4. Whether the trial court committed an error of law or
abused its discretion by finding repudiation proper where
the doctrine’s application is based entirely upon
communications to Franklin Brown’s attorneys, and none of
the communications were made to the sole Plaintiff and sole
obligee under the contract, Karen Brown.
5. Whether the trial court committed an error of law or
abused its discretion by finding that Pennsylvania’s saving
statute, 42 Pa. C.S.A. § 5535(a)(1), did not apply.
6. Whether the trial court committed an error of law or
abused its discretion by finding the doctrine of collateral
estoppel precluded Karen Brown from arguing Franklin
Brown’s convictions neither involved his “personal
dishonesty” nor were “materially injurious” to Rite Aid within
the meaning of “good cause” under Paragraph 5(a) of the
contract.
7. Whether the trial court committed an error of law or
abused its discretion by finding “as a matter of law, the [Rite
Aid] board did not violate the contract” when it stopped
making payments under the ARD contract in June 2002. July
11, 2019 Opinion and Order at Pg. 6.
Brown’s Br. at 8-10.
We first will address Brown’s claims that the court erred in granting
summary judgment because it erred in finding that (1) Rite Aid repudiated the
contract in 2002, and therefore the statute of limitations barred the claims,
and (2) the Savings Clause did not apply. Resolution of these claims disposes
of the case.
“[S]ummary judgment is only appropriate in cases where there are no
genuine issues of material fact and the moving party is entitled to judgment
as a matter of law.” Nicolaou v. Martin, 195 A.3d 880, 891 (Pa. 2018) (citing
Pa.R.C.P. 1035.2(1)). “When considering a motion for summary judgment,
the trial court must take all facts of record and reasonable inferences
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therefrom in a light most favorable to the non-moving party and must resolve
all doubts as to the existence of a genuine issue of material fact against the
moving party.” Id. We reverse a grant of summary judgment if there has been
an error of law or an abuse of discretion. Id. at 892. Because the question of
whether there is a genuine issue of material fact is a question of law, our
standard of review is de novo and our scope of review is plenary. Id.The statute of limitations for a claim of breach of contract is four years.
See 42 Pa.C.S.A. § 5525(a). The limitation period is “computed from the time
the cause of action accrued.” Fine v. Checcio, 870 A.2d 850, 857 (Pa. 2005).
“[A] cause of action accrues when the plaintiff could have first maintained the
action to a successful conclusion.” Id. Where a claim accrues due to
“anticipatory repudiation or breach,” the breaching party must have expressed
“an absolute and unequivocal refusal to perform or a distinct and positive
statement of an inability to do so.” Andrews v. Cross Atlantic Capital
Partners, Inc., 158 A.3d 123, 130 (Pa.Super. 2017) (en banc) (quoting
Harrison v. Cabot Oil & Gas Corp., 110 A.3d 178, 184 (Pa. 2015)).
Pennsylvania’s Savings Clause provides that, where an action was
dismissed without prejudice, a party may commence an action within one year
of the dismissal:
(a) Termination of prior matter.--
(1) If a civil action or proceeding is timely commenced and
is terminated, a party, or his successor in interest, may,
notwithstanding any other provision of this subchapter,
commence a new action or proceeding upon the same cause
of action within one year after the termination and any other
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party may interpose any defense or claim which might have
been interposed in the original action or proceeding.
42 Pa.C.S.A. § 5535(a)(1).
Brown maintains that she, not Franklin, is the sole beneficiary of the
contract payments and the court therefore erred in relying on correspondence
between Rite Aid and Franklin and on the lawsuit filed by Rite Aid naming
Franklin as a defendant to find Rite Aid repudiated the contract. Brown’s Br.
at 35-36. She notes that “[n]one of the correspondence relied upon by the
trial court to find repudiation was directed to . . . Brown.” Id. at 36. She
argues that anticipatory repudiation or breach requires “an absolute and
unequivocal refusal to perform or a distinct and positive statement of an
inability to do so.” Id. (quoting Andrews, 158 A.3d at 130). She concludes
that Rite Aid never repudiated the contract because it never made a statement
to her that it would not make payments. Brown asserts that because Rite Aid
never repudiated, and because the contract was an installment contract, her
breach of contract action is timely because with each missed payment, a
separate cause of action accrued.
Brown further argues that if Rite Aid did repudiate the contact in 2002,
the Savings Clause applies because she is Franklin’s successor in interest, and
in the prior action Franklin denied a paragraph in Rite Aid’s complaint by
asserting he was entitled to the benefits of the deferred compensation
agreement and he filed a counterclaim seeking costs.
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The trial court found that Rite Aid successfully and unequivocally
repudiated the deferred compensation agreement in 2002. 1925(a) Op. at 6.
We agree.
In 2002, Rite Aid sent a letter to Franklin stating that it would cease
payments under the contract, payments that were to be made to Brown. Rite
Aid also filed a lawsuit, naming Franklin as a defendant. Although it did not
correspond with Brown, Brown continued to be married to Franklin, and makes
no claim that she did not know about the letter and lawsuit. Further, Brown
stopped receiving the payments pursuant to the contract in 2002, and had not
received such payments for 15 years when she initiated the breach of contract
lawsuit. Brown knew that she stopped receiving payments under the contract
and that Rite Aid had no intention of making any future payments. Under the
facts of this case, Brown’s lawsuit, filed 15 years after the payments ceased,
is untimely.
Further, Brown’s claim that the Savings Clause applies to her causes of
action lacks merit. She was not a named defendant in the prior action. In fact,
the declaratory judgment claim was dismissed because she had not been
joined and the court found her to be an indispensable party. Therefore, Brown
did not allege any claim against Rite Aid. Further, Franklin’s counterclaim in
the prior action asserted Rite Aid breached a separate contract. It did not claim
a breach of the deferred compensation agreement. Therefore, even if Brown
could use Franklin’s counterclaim in support of her Savings Clause claim, it
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would not apply, as Franklin’s counterclaim did not assert Rite Aid breached
the deferred compensation agreement.
Order affirmed.
Judge Dubow joins the Memorandum
Judge Olson concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 07/01/2020
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