J-S66002-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

DELIA MCCOY-MCMAHON, IN THE SUPERIOR COURT OF

PENNSYLVANIA

Appellant

v.

J. CARLTON GODLOVE, II, BRIAN R. 

KELLY, PATRICK M. MCCOY, LEWIS J. 

MCCOY, JR., AND SPOTTS, STEVENS 

AND MCCOY, INC.,

Appellees No. 542 MDA 2014

Appeal from the Order Entered February 24, 2014

In the Court of Common Pleas of Berks County

Civil Division at No(s): 08-14641

BEFORE: BENDER, P.J.E., SHOGAN, J., and MUSMANNO, J.

MEMORANDUM BY BENDER, P.J.E.: FILED NOVEMBER 25, 2014

Appellant, Delia McCoy-McMahon (McMahon), appeals from an order 

granting summary judgment in favor of Appellees, J. Carlton Godlove II, 

Brian R. Kelly, Patrick M. McCoy, Lewis J. McCoy, Jr., and Spotts, Stevens 

and McCoy, Inc. (SSM), in a shareholder action initiated by McMahon against 

Appellees. After careful review, we affirm.

The trial court summarized the applicable facts as follows:

[T]his dispute arose out of the financial and organizational 

activities of the closely-held corporation operating under the 

legal name Spotts, Stevens, & McCoy Inc., hereinafter SSM, 

which deals primarily in the business of advanced civil, 

municipal, and environmental engineering services. The primary 

actions aggrieved involve a statutory merger with another 

corporate entity, Wyomissing Holdings, Inc. (hereinafter WHI), 

and the use of corporate assets to fund bonus pools for the 

SSM's executive officers, the expenditure of corporate assets on 
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furnishings. It is important to note that this is not a case where 

the actual actions taken by SSM and its directors are at issue, 

rather it is the legal colorization of [Appellees’] actions and 

intentions which are contested. While the crux of the argument 

may seem that the dispute is purely a business issue, it is 

apparent to the Court that there is a familial dispute as well. 

While both SSM and WHI operate under the corporate 

governance structures, it is abundantly clear that both 

corporations were primarily family operated businesses. Both 

SSM and WHI are closely-held, almost exclusively by members 

of the McCoy family, of which Plaintiff, Delia McCoy-McMahon, 

and [Appellees] are a part. While [] [Appellees] served as the 

officers and directors of [SSM], and as such largely administered 

the day-to-day operations of the company, [McMahon] had 

absolutely no involvement with the operation of the company.

[McMahon] alleges twelve counts of tortious conduct, ten 

of which are clearly stockholder derivative claims. These ten 

[c]ounts, numbered I-III and VI-XII respectively, incorporate a 

myriad of grievances ranging from breach of fiduciary duty to 

fraud. Count V is asserted as a direct claim and is based on a 

theory of breach of fiduciary duty stemming from an unlawful 

freeze-out merger. In regards to the remaining [c]ount, it is 

unclear whether [c]ount IV is assert[ing] a direct or derivative 

claim. Regardless, [c]ount IV is essentially a duplicate of 

[c]ount V, in that the primary grievance stems from the alleged 

organized unlawful minority freeze-out merger. While the lack of 

clarity as to the theory of standing under which [c]ount IV is 

brought certainly serves to further procedurally discompose this 

case, the Court finds that a determination as to whether [c]ount 

IV is a direct or derivative is entirely ancillary, as the Court feels 

it can be aptly disposed [of] under either theory. •

This litigation was initiated October 31, 2008 and, through 

two distinct iterations, has been presented to multiple judges, 

both in the Berks County Court of Common Pleas and the 

Pennsylvania Superior Court[,] as well as in the U.S. District 

Court for the Eastern District of Pennsylvania. The case has 

manifested itself through two separate suits, the October 31, 

2008 [c]omplaint which is now before the Court, and a January 

5, 2009 [a]ppraisal [a]ction. Upon the filing of the 2008 

[c]omplaint, [Appellees] attempted to remove the case to the 

U.S. District Court for the Eastern District of Pennsylvania which, 

after nearly two years of litigation, was ultimately unsuccessful.
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During the pendency of the [f]ederal action, the 

aforementioned [a]ppraisal [a]ction was initiated in the Berks 

County Court of Common Pleas. That case was filed pursuant to 

[McMahon]’s statutory rights as a dissenting shareholder to a 

corporate merger, and solely for the purpose of determining the 

fair value of the corporation's shares at the time of the merger. 

[McMahon] petitioned this Court to delay the [a]ppraisal 

proceedings until the culmination of the initial civil action, which 

this Court denied. On appeal, the Superior Court affirmed this 

Court's decision to deny [McMahon]’s request for the delay of

the [a]ppraisal proceedings. The [a]ppraisal action has since 

culminated. In the [a]ppraisal [a]ction's final determination, this 

Court concluded that the value assessed by [Appellees] was fair 

and adequate compensation for the divested minority shares in 

the corporation.

Upon the [f]ederal [c]ourt[’]s remand of the initial 2008 

[c]omplaint to the Berks County Court of Common Pleas[,] the 

[p]arties proceeded to trade [p]reliminary [o]bjections and 

[a]mended [p]leadings for approximately two years. Finally, in 

late 2012 the [p]arties had filed a complete set of [p]leadings. 

From late 2012 until present[,] the parties have engaged in 

limited discovery, including document requests and the 

deposition of [McMahon]. Although the case has been pending 

for nearly six years, little discovery has actually taken place, 

particularly on [McMahon]’s part, despite the Court[’]s affording 

both parties tremendous leave to do so.

Trial Court Opinion (TCO), 6/4/14, 1 – 3. 

On February 24, 2014, the trial court entered an order granting 

Appellees’ motion for summary judgment. McMahon filed a timely notice of 

appeal and a timely Pa.R.A.P. 1925(b) concise statement of errors 

complained of on appeal. She now presents the following questions for our 

review:

I. Do counts IV and V of the amended complaint succeed as 

a matter of law because all “reasons” purported by 

Appellees for the freeze-out merger are mere pretext 

contrived by the Appellees to hide their/its only reason –

to eliminate Appellant from the corporation so the 
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Appellees could continue the business for themselves/itself 

and to circumvent liability for the numerous actions taken 

and decisions made by these self-interested Appellees?

II. Should the Superior Court reverse the trial court’s granting 

Appellees’ motion for summary judgment related to counts 

I, II, III, IV, V, VI, VII, VIII, IX, X and XII because 

Appellant has maintained standing to assert these claims?

McMahon’s brief at 4.

Our standard of review with regard to the granting of a motion for 

summary judgment is well-settled:

“Our scope of review of a trial court's order granting or denying 

summary judgment is plenary, and our standard of review is 

clear: the trial court's order will be reversed only where it is 

established that the court committed an error of law or abused 

its discretion.” Universal Health Services, Inc. v. 

Pennsylvania Property and Casualty Insurance Guaranty 

Assoc., 884 A.2d 889, 892 (Pa. Super. 2005) (citation omitted).

The entry of summary judgment is proper whenever no 

genuine issue of any material fact exists as to a necessary 

element of the cause of action. The moving party's right 

to summary judgment must be clear and free from doubt. 

We examine the record, which consists of all pleadings, as 

well as any depositions, answers to interrogatories, 

admissions, affidavits, and expert reports, in a light most 

favorable to the non-moving party, and we resolve all 

doubts as to the existence of a genuine issue of material 

fact against the moving party. 

LJL Transp., Inc. v. Pilot Air Freight Corp., 599 Pa. 546, 962 

A.2d 639, 647 (Pa. 2009) (citations omitted). 

Krapf v. St. Luke’s Hospital, 4 A.3d 642, 649 (Pa. Super. 2010), appeal 

denied, 34 A.3d 831 (Pa. 2011).

Moreover, our Supreme Court has stated:

Rule 1035 also provides that “[w]hen a motion for summary 

judgment is made and supported as provided in this rule, an 
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adverse party may not rest upon the mere allegations or denials 

of his pleading, but his response, by affidavits or as otherwise 

provided in this rule, must set forth specific facts showing that 

there is a genuine issue for trial. If he does not respond, 

summary judgment, if appropriate, shall be entered against 

him.” Pa.R.C.P. 1035(d). Therefore, where a motion for 

summary judgment has been made and properly supported, 

parties seeking to avoid the imposition of summary judgment 

must show by specific facts in their depositions, answers to 

interrogatories, admissions or affidavits that there is a genuine 

issue for trial. See Overly v. Kass, 382 Pa. Super. 108, 554 

A.2d 970 (1989), and Tom Morello Construction Co., Inc. v. 

Bridgeport Federal Savings and Loan Assn., 280 Pa. Super. 

329, 421 A.2d 747 (1980).

Marks v. Tasman, 589 A.2d 205, 206 (Pa. 1991).

We begin by addressing McMahon’s second argument, regarding her 

standing to pursue derivative shareholder claims against Appellees. 

Notwithstanding McMahon’s claim that the trial court dismissed the eleven 

claims she enumerates in her brief for lack of standing, it appears that the 

trial court instead dismissed ten claims on this basis. These were numbered 

in McMahon’s complaint as counts I, II, III, VI, VII, VIII, IX, X, XI, and XII. 

In its opinion, the trial court stated it found that these claims were derivative 

stockholder claims, and that counts IV and V were construable as direct 

stockholder claims.

A derivative claim is brought on behalf of a corporation; in such an 

action, “the gravamen of the complaint is injury to the corporation, or ... to 

recover assets for the corporation or to prevent dissipation of its assets.” 

Hill v. Ofalt, 85 A.3d 540, 549 (Pa. Super. 2014). Thus, a derivative claim 

must be brought by a shareholder of a corporation. Pa.R.C.P. § 1506 states:
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(a) In an action to enforce a secondary right brought by one or 

more stockholders or members of a corporation or similar entity 

because the corporation or entity refuses or fails to enforce 

rights which could be asserted by it, the complaint shall set 

forth:

(1) that each plaintiff is a stockholder or owner of an 

interest in the corporation or other entity. 

McMahon concedes that the merger became effective on October 27, 

2008. The terms of that merger divested McMahon of her shares of stock in 

SSM. McMahon filed a writ of summons on October 31, 2008, and a 

complaint on November 25, 2008. Accordingly, we are constrained to 

conclude that the trial court did not commit an error of law when it granted 

Appellees summary judgment with regard to these claims, as McMahon was 

without standing to bring a derivative shareholder action.

In support of her argument that she had standing to pursue this 

action, McMahon relies on Mitchell Partners, L.P., v. Irex Corp., 53 A.2d 

39 (Pa. 2012). However, the Mitchell court did not address the issue of 

standing. Rather, that case involved the interpretation of a particular 

statute, 15 Pa.C.S. § 1105, which dictates what types of equitable relief are 

available to shareholders, and Mitchell is not controlling with regard to the 

instant case.

Likewise, McMahon argues that in Drain v. Covenant Life Ins. Co., 

685 A.2d 119 (Pa. Super. 1996), this Court rejected “a strict construction of 

Rule 1506 of the Pennsylvania Rules of Civil Procedure.” McMahon’s brief at 

51 – 52. We do not agree with this analysis. As noted supra, derivative 
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stockholder suits must be brought by stockholders. The Drain Court held 

that if a stockholder is divested of their shares during the pendency of 

litigation, that shareholder nonetheless retains standing to pursue their 

derivative claim. Id. at 126 – 127. Thus, Drain does not apply to the 

circumstances of the instant case, where McMahon was divested of her 

shares prior to the time she filed her complaint. Accordingly, we conclude 

the trial court did not err when it granted Appellees’ motion for summary 

judgment with regard to McMahon’s derivative claims, as there was no 

genuine issue of material fact with regard to her lack of standing to raise 

them.

We now address McMahon’s argument concerning her direct 

shareholder claims; namely, that the merger at issue was unlawful. 

McMahon raises a number of specific objections to the merger, which we will 

address in turn.

First, McMahon argues that she is due equitable relief as the merger 

was a prohibited “freeze out” merger, and that Appellees’ motivation for the 

merger was to remove her as a shareholder. Our courts have recognized 

that “it is a violation of the majority shareholders’ fiduciary duty to minority 

shareholders to freeze out the minority for the sole purpose of continuing 

the business for the benefit of the majority.” In re Jones & Laughlin 

Steel Corp., 412 A.2d 1099, 1102 (Pa. 1980). 
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McMahon states that the “‘reasons’ purported by Appellees for the 

freeze-out merger are mere pretext contrived by the individual Appellees....” 

McMahon’s brief at 24. We note that in construing Appellees’ motivation for 

the merger as “pretext,” McMahon has conceded that Appellees offered 

some independent rationale for the merger. Moreover, as noted by the trial 

court:

Despite [] [McMahon’s] contention that the sole purpose of the 

merger was to remove her as a shareholder, [Appellees] have 

come forth with four legitimate reasons for the merger: (1) to 

remove a shareholder working as a consultant for one of SSM's 

major competitors; (2) to remove as shareholders former 

employees who were working or might eventually go to work for 

competitors while continuing to receive SSM's confidential 

information; (3) to eliminate the disparity between the limited 

number of employees with shares and the overwhelming number 

of employees without; and (4) to position the [c]ompany for 

potential future tax savings. Godlove Affidavit ¶30. Further, 

during her deposition [McMahon] admitted that at least three of 

the proffered business reasons were valid business reasons.

Pl.Dep. at 211-212, 313. Finally, [McMahon’s] evidence consists 

entirely of an unauthenticated handwritten note, purportedly 

created at an SSM board meeting regarding the merger, which 

read only "DeDe ([McMahon’s] nickname)—freeze out?". 

However, even if the note was assumed to be trustworthy and 

admissible, it is apparent to the Court that in light of the dearth 

of other substantive facts and [Appellees] additional 

justifications for executing the merger, that [McMahon’s] facts in 

support of an unlawful freeze-out merger are insufficient to 

deprive [Appellees] from summary judgment in their favor.

TCO at 7. Given the reasons provided by Appellees for the merger, 

McMahon’s concessions that these reasons were legitimate business reasons, 

and the absence of evidence offered to the contrary by McMahon, the record 

does not support the contention that there was a genuine issue of material 
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fact with regard to McMahon’s claim that the sole purpose for the merger 

was to remove her as a shareholder. Therefore, we conclude that the trial 

court did not err in granting summary judgment for Appellees.

Next, McMahon argues that Appellees’ actions constituted oppressive 

conduct, as they defeated her reasonable expectation that she would not be 

“arbitrarily excluded from gaining a return from the potential future sale of 

[SSM],” and the “loss of any future gains that could have been experienced 

when [SSM] sold its stock for 40 to 50 dollars a share.” McMahon’s brief at 

27. 

15 Pa.C.S. § 1767(a)(2) permits the appointment of a custodian in a 

closely held corporation where “the directors or those in control of the 

corporation have acted illegally, oppressively or fraudulently to one or more 

[shareholders].” In addition, 15 Pa.C.S. § 5981(2) provides for the 

involuntary winding up and dissolution of a non-profit corporation where the 

acts of the directors are “illegal, oppressive or fraudulent.” In the instant 

case, however, McMahon seeks neither the appointment of a custodian, nor 

the dissolution of a non-profit. Moreover, while McMahon alleges that her 

expectation of receiving nearly five to ten times the amount she was paid for 

her shares is reasonable, at her deposition, McMahon conceded that when 

the merger occurred there was not a buyer willing to pay such an amount for 

SSM’s shares. Consequently, we cannot conclude a genuine issue of 

material fact existed with regard to this issue.
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McMahon also argues that the merger was procedurally improper 

because the Appellees “failed to submit the decision to organize” the merger 

“to SSM’s shareholders for approval.” McMahon’s brief at 29. However, as 

noted by the trial court, “pursuant to 15 Pa.C.S. § 1924(b)(1)(ii) and 15 

Pa.C.S. § 2538(b)(3), where a corporate entity acquires 80% or more of the 

shares of another corporation, as is the uncontroverted case here, the 

approval of the non-interested shareholders is not required.” TCO at 6. 

McMahon argues that section 8.04 of SSM’s bylaws nonetheless required a 

shareholder vote. According to this section, no shareholder vote is required 

if a “contract or transaction is fair as to the corporation as of the time it is 

authorized, approved or ratified by the board of directors or shareholders.” 

Bylaws of SSM § 8.04(a)(3) (appended to SSM’s motion for summary 

judgment of 10/11/13 as exhibit G). McMahon does not suggest how the 

merger was unfair to the corporation; as noted supra, during the pendency 

of this litigation, she conceded that the reasons for the merger articulated by 

SSM were legitimate business reasons. We conclude that the trial court did 

not err in finding there was no genuine issue of material fact regarding the 

procedural propriety of the merger.

Finally, McMahon claims that the “totality of the circumstances” 

demonstrate that “fraud or fundamental unfairness” was involved in the 

merger transaction. McMahon’s brief at 35, 36. McMahon claims that 

Appellees acted, through means such as expediting the completion of SSM’s 
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business valuation, to preclude her from exercising her rights as a 

shareholder. As stated by the trial court, 

While [McMahon] seeks broad equitable relief[,] the Pa. B.C.L. 

places stringent statutory limitations on the Court's ability to 

grant equitable relief. Pursuant to 15 Pa.C.S. § 1105, "in the 

absence of fraud or fundamental unfairness, an injunction 

against any proposed plan or amendment of articles authorized 

under any provision of this subpart, nor any right to claim the 

right to valuation and payment of the fair value of his shares 

because of the plan or amendment, except that he may dissent 

and claim such payment if and to the extent provided in 

Subchapter D of Chapter 15 (relating to dissenters rights)." 15 

Pa.C.S. § 1105. The rule goes on further to provide that "Absent 

fraud or fundamental unfairness, the rights and remedies so 

provided shall be exclusive." Id. Indeed, in Mitchell Partners, 

LLC v. Irex Corp. the Pennsylvania Supreme Court reiterated 

the principles proscribed by 15 Pa C.S. § 1105 and emphasized 

that "the fraud or fundamental unfairness exception may not be 

invoked lightly." Mitchell Partners, LLC v. Irex Corp., 53 

A.3d 39, 47 (Pa. 2012). ... Barter v. Diodoardo defined 

unfairness as "something more than an unfairness in the price to 

be paid the dissenting shareholders for their shares in order for 

the court to enjoin the merger.... The unfairness must result 

from nondisclosure or misrepresentation concerning some 

essential [sic] of the merger itself. The minority shareholders 

are entitled to disclosure of all material facts in an atmosphere of 

complete candor." Barter v. Diodoardo[,] 771 A.2d 835, 840 

(Pa. Super. 2001). Despite boilerplate allegations of 

impropriety and fraud, [McMahon] does not assert specific facts 

to indicate to the Court unfairness of any kind, only a 

dissatisfaction of the buy-back price. While [McMahon] alleges 

that some kind of misrepresentation or fraud occurred, she can 

provide nothing in the way of specific substantive proof [of] any 

such malfeasance. Under the Mitchell and Barter standards, 

[McMahon’s] argument is insufficient to justify precluding 

[Appellees] from [s]ummary [j]udgment, let alone awarding 

[McMahon] her requested equitable remedy.

TCO at 6. We agree with the trial court’s analysis. Accordingly, we conclude 

that summary judgment on this claim was not error. 
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Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 11/25/2014