2011 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-20-2011

In Re: Lemington Home

Precedential or Non-Precedential: Precedential

Docket No. 10-4456

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Recommended Citation

"In Re: Lemington Home " (2011). 2011 Decisions. Paper 288.

http://digitalcommons.law.villanova.edu/thirdcircuit_2011/288
PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 10-4456

____________ 

In re: LEMINGTON HOME FOR THE AGED 

OFFICIAL COMMITTEE OF UNSECURED CREDITORS, 

ON BEHALF OF THE ESTATE OF LEMINGTON HOME 

FOR THE AGED, 

 Appellant 

v. 

ARTHUR BALDWIN; LINDA COBB; JEROME 

BULLOCK; ANGELA FORD; JOANNE ANDIORIO; J.W. 

WALLACE; TWYLA JOHNSON; NICOLE GAINES; 

WILLIAM THOMPKINS; ROY PENNER; MELODY 

CAUSEY; JAMES SHEALEY; LEONARD R. DUNCAN; 

RENEE FRAZIER; CLAUDIA ALLEN; EUGENE 

DOWNING; GEORGE CALLOWAY; B. J. LEBER; 

REVEREND RONALD PETERS

___________ 

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civil Action No. 2-10-cv-00800)

District Judge: Honorable Arthur J. Schwab

___________ 

Argued July 11, 2011
2

Before: SLOVITER, FUENTES and VANASKIE, 

Circuit Judges.

(Opinion Filed September 21, 2011)

Robert S. Bernstein, Esq.

Kirk B. Burkley, Esq.

Nicholas D. Krawec, Esq. Argued

Krawec Bernstein Law Firm, PC

707 Grant Street

Suite 2200, Gulf Tower

Pittsburgh, PA 15219-0000

 Counsel for Appellants

Mark R. Hamilton, Esq. Argued

Philip J. Sbrolla, Esq.

Cipriani & Werner

650 Washington Road

Suite 700

Pittsburgh, PA 15228

Todd M. Raskin, Esq.

Mazanec, Raskin & Ryder

100 Franklin’s Row

34305 Solon Road

Cleveland, OH 44139

 Counsel for Appellee Arthur Baldwin

Suzanne B. Merrick
3

Thomas, Thomas & Hafer

301 Grant Street

One Oxford Centre, Suite 1150

Pittsburgh, PA 15219-0000

Counsel for Appellee James Shealey

___________

ORDER AMENDING OPINION

___________

VANASKIE, Circuit Judge.

IT IS NOW ORDERED the above captioned case be 

amended as follows: 

Footnote 5 shall now read:

The District Court erroneously held that the 

presumption of the business judgment rule is 

overcome only by evidence of gross negligence. 

The District Court cited a Delaware Supreme 

Court case which held that “under the business 

judgment rule director liability is predicated 

upon concepts of gross negligence.” Aronson v. 

Lewis, 473 A.2d 805, 812 (Del. 1984) 

(overruled on other grounds). Pennsylvania, 

however, recognizes directors’ and officers’ 

liability for negligent breach of fiduciary duty. 

See, e.g., Wolf v. Fried, 373 A.2d 734, 735 (Pa. 

1977) (“[E]ven in the absence of fraud, selfdealing, or proof of personal profit or wanton 

acts of omission or commission, the directors of 
4

a corporation may be held personally liable 

where they have been imprudent, wasteful, 

careless and negligent and such actions have 

resulted in corporate losses.”). Of course, a 

non-profit corporation may restrict the 

circumstances under which a director may have 

personal liability for negligent acts by adoption 

of an appropriate by-law, see 15 Pa. C.S. § 

5713(a), in which event a director may be liable 

for a breach of fiduciary duties or a failure to 

perform the duties of the office only if “the 

breach or failure to perform constitutes selfdealing, willful misconduct or recklessness.” 

15 Pa. C.S. § 5713(a)(2). While the Home 

adopted an appropriate by-law, there is a 

genuine dispute of fact as to whether alleged 

breaches of fiduciary duties constituted selfdealing. Moreover, there is no comparable 

statutory limitation of liability for the officers of 

a non-profit corporation. Thus, a trial is 

required on the claims against Causey and 

Shealey on the question of whether they failed 

to exercise “such care, including reasonable 

inquiry, skill and diligence, as a person of 

ordinary prudence would use under similar 

circumstances.” 15 Pa. C.S. § 5712(c).

s/ Thomas I. Vanaskie

Circuit Judge

DATED: October 20, 2011

PDB/cc: All Counsel of Record