IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MICHAEL REIS, SR. and )

LAWRENCE J. KATZ, on Their Own ) Civil Action

Behalf and as Assignees of ) No. 05-CV-01651

Weaver Nut Company, Inc., )

 )

Plaintiffs )

 )

vs. )

 )

BARLEY, SNYDER, SENFT )

& COHEN LLC., )

 )

Defendant )

* * *

APPEARANCES:

LYNANNE B. WESCOTT, ESQUIRE

On behalf of Plaintiffs

ARTHUR W. LEFCO, ESQUIRE

AARON E. MOORE, ESQUIRE

On behalf of Defendant

* * *

A D J U D I C A T I O N

JAMES KNOLL GARDNER,

United States District Judge

The undersigned presided over a 35-day non-jury trial1

in this matter on July 7-9, 11, 16-18, 21-23, 25, 28-29, 

August 6-8, 11-15, September 9-12, 18, 23-26, November 14, 2008,

January 13-15 and 27, 2009. 

There are six claims in plaintiff’s Amended Complaint

for adjudication, brought by plaintiffs Michael Reis, Sr. and

By my Memorandum and Order dated March 27, 2008, I granted the 1

Motion of Defendant, Barley Snyder, LLC to Strike Plaintiffs’ Demand for Jury

Trial, which motion was filed July 13, 2007.

Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 1 of 52
Lawrence J. Katz in either their individual capacity or as

assignees of the rights of Weaver Nut Company, Inc. against

defendant Barley, Snyder, Senft & Cohen, LLC. They are as

follows:

Count I: (1) breach of fiduciary duty brought by

plaintiffs Reis and Katz as assignees of the rights of Weaver Nut

Company, Inc. (“Company”); (2) aiding and abetting breach of a

fiduciary duty brought by Reis and Katz individually; and 

(3) aiding and abetting breach of a fiduciary duty brought by

Reis and Katz as assignees of the Company.

Count II: (4) professional negligence against Barley

Snyder, brought by Reis and Katz as assignees of the Company. 

Count IV: (5) tortious interference with contractual

relations against Barley Snyder, brought by Reis and Katz as

assignees of the Company.

Count VI: (6) breach of contract brought against

defendant Barley Snyder by plaintiffs Reis and Katz in their

capacity as assignees of the rights of the Company. 

For the reasons expressed below, I now find in favor of

defendant Barley, Snyder, Senft & Cohen, LLC and against

plaintiffs Michael Reis, Sr. and Lawrence J. Katz on all six

claims.

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JURISDICTION

This action is before the court on diversity

jurisdiction. Plaintiff Michael Reis, Sr. is a resident of the

State of Illinois and plaintiff Lawrence J. Katz is a resident of

the State of New Jersey. Defendant Barley, Snyder, Senft &

Cohen, LLC is a Pennsylvania limited liability company. The

amount in controversy is in excess of $75,000. See 28 U.S.C. 

§ 1332. 

VENUE

Venue is proper because plaintiffs allege that the

facts and circumstances giving rise to the cause of action

occurred in Lancaster County, Pennsylvania, which is in this

judicial district. 28 U.S.C. §§ 118, 1391.

SUMMARY OF DECISION

 Regarding Count I of plaintiffs’ Amended Complaint , I 2

find in favor of defendant on plaintiffs’ claim for breach of

fiduciary duty brought by plaintiffs Reis and Katz as assignees

of the rights of the Company. Specifically, I conclude that

Barley Snyder did have a fiduciary duty to its client Weaver Nut

Company which demanded undivided loyalty and prohibited Barley

Snyder from engaging in conflicts of interest. A breach of such

duty is actionable. However, I conclude that Barley Snyder 

All Counts discussed are counts in plaintiffs’ Amended Complaint 2

filed April 12, 2006.

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neither breached its duty of loyalty to Weaver Nut Company nor

engaged in any other conflict of interest.

In addition, regarding the two other claims contained

in Count I, aiding and abetting breach of a fiduciary duty

brought by Reis and Katz individually, and aiding and abetting

breach of a fiduciary duty brought by Reis and Katz as assignees

of the Company, I conclude that E. Paul Weaver, III, as President

of Weaver Nut Company owed fiduciary duties to Mr. Reis, Mr. Katz

and the Company, which he breached. 

However, I conclude that plaintiffs failed to prove by

a preponderance of the evidence that Barley Snyder either had

knowledge of the breach by Mr. Weaver, or provided substantial

assistance or encouragement to Mr. Weaver. Rather, I conclude

that based upon the information provided to Barley Snyder, the

firm acted both legally, ethically, and in good faith, concerning

both of its clients (the Weavers and the Company).

Regarding Count II alleging professional negligence

against Barley Snyder, brought by Reis and Katz as assignees of

the Company, I conclude that plaintiffs have failed to establish

by a preponderance of the evidence that Barley Snyder failed to

exercise the ordinary skill and knowledge that attorneys are

required to utilize or that there are any damages owing to the

Company as a result of the actions of Barley Snyder.

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Regarding Count IV alleging tortious interference with

contractual relations against Barley Snyder, brought by Reis and

Katz as assignees of the Company, I conclude that a contract

existed, but defendant did not take purposeful action

specifically intended to harm the existing relation because the

law firm was the agent of the Company. Moreover, I conclude that

there was either privilege, legal justification, or both, for the

actions taken by defendant. Also, I conclude that plaintiffs

have failed to establish damages on count IV by a preponderance

of the evidence.

Finally, Count VI alleges breach of contract for the

professional services rendered to Weaver Nut Company, brought by

plaintiffs Reis and Katz in their capacity as assignees of the

rights of the Company. I conclude that there was a contract

between the Company and Barley Snyder for legal services, but

that the contract was not breached by Barley Snyder. Moreover,

plaintiffs have failed to establish by a preponderance of the

evidence that the Company suffered any damages under the

contract.

PROCEDURAL HISTORY

On April 10, 2005 plaintiffs Reis and Katz, on their

own behalf and as assignees of Weaver Nut Company, Inc., filed

their initial Complaint in this matter. The original Complaint

alleged the five following causes of action: breach of fiduciary

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duty (Count I); professional negligence (Count II); abuse of

process (Count III); interference with a contractual relationship

(Count IV); and conversion (Count V).

On June 23, 2005 defendant filed its initial motion to

dismiss. On July 7, 2005 plaintiffs responded, which included a

request to amend the Complaint. My Order dated March 17, 2006

and filed March 20, 2006 granted plaintiffs’ request.

On April 12, 2006 plaintiffs filed their Amended

Complaint. The Amended Complaint contains the original five

causes of action and an additional cause of action for breach of

contract (Count VI). On May 2, 2006 defendants filed their

second motion to dismiss. On May 19, 2006 plaintiffs responded. 

Oral argument was conducted before me on November 28, 2006. The

matter was taken under advisement at the conclusion of oral

argument on November 28, 2006. 

By my Order and Opinion dated March 30, 2007 I granted

in part and denied in part defendant’s motion to dismiss

plaintiffs’ Amended Complaint. 

Specifically, for reasons articulated in the Opinion, I

granted defendant’s motion to dismiss that portion of Count I of

plaintiffs’ Amended Complaint brought by plaintiffs Reis and

Katz, in their individual capacities, alleging a breach of

fiduciary duty by defendant law firm.

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Also, I granted defendant’s motion to dismiss that

portion of Count II alleging a claim of professional negligence

against defendant Barley Snyder, brought by plaintiffs Reis and

Katz, individually. 

I granted defendant’s motion to dismiss Count III of

plaintiffs’ Amended Complaint alleging a cause of action against

defendant for abuse of process brought by plaintiffs Reis and

Katz in their individual capacities.

Moreover, I granted defendant’s motion and dismissed

from Count IV of the Amended Complaint the claims of Reis and

Katz, individually, alleging tortious interference with

contractual relations by defendant. 

Finally, I granted defendant’s motion to dismiss 

Count V of plaintiffs’ Amended Complaint alleging a cause of

action against Barley Snyder for conversion brought by plaintiffs

Reis and Katz in their individual capacities. 

The claims which remain are those set forth in the

second paragraph of this Adjudication.

By Memorandum and Order dated March 28, 2008, and for

the reasons expressed in the Memorandum, I granted the Motion of

Defendant, Barley Snyder, LLC, to Strike Plaintiffs’ Demand for a

Jury Trial, denied plaintiffs’ Countermotion Pursuant to Federal

Rule of Civil Procedure 39 and struck plaintiffs’ Demand for Jury 

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Trial filed June 29, 2007. Thus, this matter was tried before

the court, not a jury. 

By Order dated July 3, 2008 I denied defendant’s motion

for summary judgment because I found there were numerous genuine

issues of material fact placed on the record by me on that date.

FINDINGS OF FACT3

Based upon the testimony and evidence adduced at

trial, the pleadings, record papers and the parties’ post-trial 4

submissions, I make the following Findings of Fact.

1. Plaintiff Lawrence J. Katz is an individual who

resides at 11 Minuteman Court, Basking Ridge, New

Jersey. Mr. Katz’s background is in merchant banking,

investment banking and commercial finance focused on

special situations or companies that are in distress or

in a restructuring mode.

2. Plaintiff Michael Reis, Sr., is an individual who

resides at 941 Ann Road, Naperville, Illinois. Mr.

Reis’ background is in accounting. However, Mr. Reis

is neither a public accountant, nor a certified public

accountant. 

3. Defendant Barley, Snyder, Senft & Cohen LLC

(“Barley Snyder”) is a law firm registered as a

Pennsylvania limited liability company employing 

My Findings of Fact incorporate the relevant facts agreed to by 3

the parties as reflected in the Amended Agreed Statement of Facts and

Conclusions of Law to Add Cites to the Record, which document was filed

January 24, 2009.

The Findings of Fact reflect my credibility determinations

4

regarding the testimony and evidence presented at trial. Credibility

determinations are within the sole province of the finder of fact, in this

case the court. Fed.R.Civ.P. 52; See, e.g. Icicle Seafoods, Inc. v.

Worthington, 475 U.S. 709, 715, 106 S.Ct. 1527, 1530, 89 L.Ed.2d 739, 745

(1986). Implicit in my findings is the conclusion that I found the testimony

of some witnesses credible in whole, some in part, and have rejected portions

of testimony of certain witnesses, as more fully explained in my discussion.

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 8 of 52
licensed professionals with a business address at 126

East King Street, Lancaster, Pennsylvania.

4. Weaver Nut Company, Inc. (“Weaver Nut Company” or

“Company”) is a business corporation organized and

existing under the laws of the Commonwealth of

Pennsylvania with a principal place of business at 1925

West Main Street, Ephrata, Pennsylvania.

5. Weaver Nut Company is a distributor of candies,

nuts and dried fruits in the wholesale and retail

markets.

6. In the year 2000, Weaver Nut Company was owned

exclusively by E. Paul Weaver, III, and Miriam J.

Weaver, his wife. 

7. At all times, E. Paul Weaver, III, was the

President and sole director of Weaver Nut Company.

8. In 2000, Weaver Nut Company was in significant

financial trouble.

9. In 2000, Weaver Nut Company was behind on its

payments of its loan agreements with its lender,

Allfirst Bank.

10. Weaver Nut Company had entered into multiple

forbearance agreements with Allfirst Bank between 2000

and 2001.

11. In early 2001, Robert Riesner was hired by Weaver

Nut Company as Chief Financial Officer to help turn the

company’s financial situation around. 

12. By letter dated July 18, 2001, Allfirst Bank

addressed a letter to Mr. Riesner as Chief Executive

Officer of Weaver Nut Company.

13. Robert Riesner explored numerous options to reduce

the debt of Weaver Nut Company. One option explored

was to locate a firm that would acquire an interest in

Weaver Nut Company, and assist the Company to pay off

the outstanding loans owed to Allfirst Bank.

14. In April 2001, Mr. Reis became aware of the

situation involving Weaver Nut Company through a vendor

of Weaver Nut Company, Eagle Food Snacks, through

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Eagle’s President Akram Choudhry. Mr. Reis made Mr.

Katz aware of the situation regarding Weaver Nut

Company.

15. Mr. Katz operates a company named Summit Private

Capital Group, which is a fictitious name under which

he does business.

16. Mr. Katz was interested in the opportunity

involving Weaver Nut Company and proceeded to obtain

information about the company, met with E. Paul 

Weaver, III and Robert Riesner, and ultimately proposed

an agreement to Mr. Weaver, a Merchant Banking and

Corporate Development Agreement between Summit Private

Capital Group and Weaver Nut Company.

17. Weaver Nut Company, through its President E. Paul

Weaver, III, entered into the Merchant Banking and

Corporate Development Agreement with Summit Private

Capital Group through Lawrence J. Katz as Executive

Managing Director. 

18. The Merchant Banking and Corporate Development

Agreement is dated June 12, 2001. The agreement was

not executed by E. Paul Weaver, III, until July 13,

2001. Michael Reis also signed the agreement as “CFO

Designatee” [sic].5

19. The Company passed a corporate resolution

ratifying the Merchant Banking and Corporate

Development Agreement. 

20. Mr. Reis assumed the position of Chief Financial

Officer of Weaver Nut Company pursuant to the Merchant

Banking and Corporate Development Agreement.

21. Under the Merchant Banking and Corporate

Development Agreement Mr. Reis and Mr. Katz (as Summit)

were entitled to a total aggregate compensation amount

of $200,000 ($105,000 as a “Financial Management

Advisory Fee” to Mr. Reis; $75,000 as a “Financial

Management Advisory Fee” to Summit and $10,000 each to

The parties disagree regarding the timing of the signing of the 5

Merchant Banking and Corporate Development Agreement. The bottom line is that

there was a signed agreement between Weaver Nut Company and Summit Private

Capital Group that set forth the rights, duties and obligations of each of the

participants to the agreement.

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Mr. Reis and Summit for expenses). In addition, Summit

was entitled to a percentage commission on financing

which it arranged and on strategic acquisitions in

which it participated.

22. Mr. Katz and Mr. Reis each received 500 shares of

common stock in Weaver Nut Company equal to a 25% stake

each in the Company.6

23. Under the Merchant Banking and Corporate

Development Agreement Mr. Reis and Mr. Katz had

authority to negotiate on behalf of the Company with

various parties including creditors, customers and

vendors. However, neither Mr. Reis nor Mr. Katz had

the power to legally bind Weaver Nut Company

whatsoever. They had the power to hire and fire

employees only with Company approval. 

24. After execution of the Merchant Banking and

Corporate Development Agreement, a sale-lease back was

negotiated with William Roberts for the building and

real estate occupied by the company.

25. William Roberts is a real estate investor active

in purchasing industrial and commercial properties.

26. On July 27, 2001, Mr. Roberts purchased for

$1,750,000 the building and real estate owned by E.

Paul Weaver, III and Miriam Weaver and occupied by

Weaver Nut Company. In addition, Mr. Roberts loaned

Mr. and Mrs. Weaver an additional $100,000. The

proceeds of the sale of the building and real estate

and additional loan was used to payoff Allfirst Bank.

27. Mr. Riesner’s position at Weaver Nut Company ended

when Allfirst Bank was paid off.

28. In September 2001, Michael Reis began working at

Weaver Nut Company.

The record of this case indicates that there have been numerous 6

dates on which Mr. Reis and Mr. Katz allegedly obtained their respective 25%

stake in Weaver Nut Company. For the purposes of this decision, the exact

date that each exercised the warrants and were actual owners of a 25% interest

in the Company is unimportant. It is clear from the record, including the

corporate tax returns of the Company, that at the end of 2001 both Mr. Reis

and Mr. Katz were 25% shareholders in Weaver Nut Company. Moreover, it is

equally clear that both Mr. Reis and Mr. Katz returned their respective shares

as part of the settlement with the Weavers. 

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29. Mr. Reis would be at the company location

approximately two weeks a month.

30. Mr. Katz would visit Weaver Nut Company every

couple of months, or approximately six to eight times

over the entire time he was involved with the Company.

31. With the assistance of Mr. Reis and Mr. Katz,

Weaver Nut Company was able to negotiate a line of

credit with a company named KBK Financial.

32. The financing obtained from KBK Financial provided

Weaver Nut Company a line of credit in excess of

$1,000,000. KBK bought Weaver Nut Company receivables

on a nonrecourse basis. There was a daily settlement

of receivables and customers were instructed to make

payments to a lock box controlled by KBK Financial.

33. The financing provided to Weaver Nut Company by

KBK Financial was a non-traditional financing

arrangement that was more expensive for the company

than traditional bank financing.

34. The KBK financing required daily work that was

very time consuming and cumbersome for Weaver Nut

Company personnel. 

35. Mr. Reis hired a number of new employees including

Marie Wagner and Dave Fischer. Mr. Reis also hired

additional salesmen to attempt to increase sales

volume.

36. Marie Wagner was hired as an Office Manager with

responsibilities including oversight of the accounts

receivable and payable, general accounting, cash

management and oversight of the staff and customer

service people. Miss Wagner also dealt with the daily

reports to KBK Financial. Miss Wagner reported

directly to Mr. Reis, but had some contact with E. Paul

Weaver, III.

37. In August or September 2002 David Fisher was hired

as an inventory control manager of Weaver Nut Company. 

In January 2003 Mr. Fisher was promoted to general

Manager. Mr. Fisher reported directly to Mr. Reis, but

was also subordinate to the desires of E. Paul Weaver,

III. 

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38. Miss Wagner and Mr. Fisher, among others, were

hired by Mr. Reis to help eliminate or minimize many

unsound business practices that led to Weaver Nut

Company’s financial problems.

39. Weaver Nut Company, through E. Paul Weaver, III,

had for many years engaged in practices including below

cost sales to customers, purchasing without regard to

existing inventory and anticipated demand and sale of

“out of date” product.

40. One of the policies instituted to control

inventory was a two-signature purchase order policy. 

Mr. Weaver initially approved the policy, but later

resisted the policy and refused to follow it, claiming

that he did not approve it.

41. Mr. Reis was responsible for the day-to-day

operations of Weaver Nut Company. He was responsible

for numerous duties, including making sure orders were

filled, receivables were timely addressed, inventory

was properly adjusted, proper internal controls were

established and monitored and generally planning,

organizing, staffing, directing and controlling Weaver

Nut Company.

42. Mr. Reis was on-site at Weaver Nut Company

approximately two weeks per month. Mr. Reis delegated

many of his responsibilities to others to perform in

his absence.

43. From late 2001 through early 2003 Mr. Katz worked

behind the scenes attempting to find new business

acquisitions and possible business partners for Weaver

Nut Company. 

44. One potential transaction pursued by Mr. Katz

involved a possible merger with a company named

National Bulk Foods. No deal was ever consummated with

National Bulk Foods.

45. By the end of calendar year 2002 Weaver Nut

Company had returned to profitability with its profit

margin rising from approximately 19% to 24.5%. 

However, the expenses of the company had risen sharply

because of the increased costs of Mr. Reis and Mr.

Katz, the additional employees who had been hired and

the cost of the KBK Financial financing.

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46. Harold Hershey was the long-time accountant

utilized by Weaver Nut Company for its corporate

accounting needs, including preparation of financial

statements, tax returns and other accounting matters.

47. Early in the tenure of Mr. Reis and Mr. Katz at

Weaver Nut Company, Mr. Hershey expressed to Mr. Weaver

Mr. Hershey’s opinion that the Merchant Banking and

Corporate Development Agreement and the KBK financing

were not good for Weaver Nut Company.

48. Beginning in November 2002 and continuing through

April 11, 2003, significant tensions developed within

the management of Weaver Nut Company.

49. In that period, the management of Weaver Nut

Company split between those individuals loyal to 

E. Paul Weaver, III, and those loyal to Mr. Reis and

Mr. Katz.

50. A serious dispute arose between Mr. Reis and Mr.

Katz on one side and Mr. Weaver on the other regarding

the two-signature purchasing policy.

51. Mr. Weaver originally agreed to the two-signature

policy, then later insisted that he never agreed to it

and that his signature approving the policy was either

forged or was placed on the document by using his

signature stamp without his authorization.

52. Mr. Reis and Mr. Weaver sent contradictory letters

to vendors on the subject of the two-signature policy. 

Mr. Weaver sent letters advising vendors that he still

had full authority to make purchases with his signature

alone. Mr. Reis sent letters indicating that if a

purchase Order did not have two signatures, the

purchase order would not be honored, and the goods

would be returned or not paid for.

53. The dispute over the two-signature policy resulted

in Mr. Weaver seeking legal advice from attorneys at

defendant Barley Snyder.

54. On March 26, 2003 Mr. Weaver had an initial

telephone contact with Paul Mattaini, Esquire, a

partner at Barley Snyder. Barley Snyder did not

represent either E. Paul Weaver, III or Weaver Nut

Company before that date.

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55. During the telephone call with Attorney Mattaini,

Mr. Weaver discussed the situation at the Company, the

problems as he perceived them, and he gave Attorney

Mattaini a brief description of the Merchant Banking

and Corporate Development Agreement.

56. At the time Mr. Weaver retained Barley Snyder, he

was the President and sole director of Weaver Nut

Company.

57. On April 1, 2003 Mr. and Mrs. Weaver, together

with John Maksel, met with Attorneys Mattaini and 

Shawn M. Long, of Barley Snyder at the offices of the

firm.

58. During the April 1, 2003 meeting, Mr. Weaver gave

Attorney Mattaini a brief description of the history of

the company, how Mr. Weaver became involved with Mr.

Reis and Mr. Katz, the situation regarding the

development agreement and what was happening under the

agreement, differences that had developed between

Messrs. Reis and Katz and Mr. Weaver on how the Company

was being run, and how all those issues fit with the

relationship that was ongoing under the development

agreement.

59. Mr. Weaver expressed a serious concern to Attorney

Mattaini that the mixed messages that were being sent

to customers and vendors were hurting both the shortand long-term viability of the Company.

60. Mr. Weaver falsely advised Mr. Mattaini that Mr.

Reis and Mr. Katz were not shareholders in the Company

and that the stock warrants mentioned in the

development agreement had not been exercised by them.

61. In determining whether to undertake the

representation of Weaver Nut Company and E. Paul

Weaver, III, Attorney Mattaini considered the

applicable provisions of the Pennsylvania Rules of

Professional Conduct including Rule 1.13 and its

comments. Attorney Mattaini correctly concluded that

the firm was not precluded from representing either or

both parties.

62. Barley Snyder inquired regarding the corporate

records of Weaver Nut Company with its corporate

counsel Robert Sisko, Esquire, but was advised that

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counsel did not have the corporate records being

sought.

63. Angela Weaver Nolt, Mr. and Mrs. Weaver’s

daughter, who was an employee of Weaver Nut Company,

advised Barley Snyder that the box where the corporate

records were stored at Weaver Nut Company had been

moved, and when located, did not contain the corporate

records that had previously been in the box. Weaver

Nut Company advised Barley Snyder that it did not have

the corporate records requested by Barley Snyder or

copies of them.

64. Weaver Nut Company employees were unable to find,

and Barley Snyder was unable to review, the corporate

records of Weaver Nut Company because Michael Reis had

removed the corporate records from the premises of

Weaver Nut Company and had placed them in a safe

deposit box at Blue Ball National Bank without the

knowledge or consent of E. Paul Weaver, III.

65. The corporate records that were removed from

Weaver Nut Company included all the original share

certificates for the Company.

66. Barley Snyder advised Mr. Weaver that termination

of the Merchant Banking and Corporate Development

Agreement and termination of the employment of Mr. Reis

and Mr. Katz and other employees was an aggressive

strategy which might lead to litigation. After

consultation with counsel, Mr. Weaver decided that it

was in the best interests of Weaver Nut Company to end

its relationship with Messrs. Reis and Katz and to

terminate the employment of certain employees.

67. Barley Snyder took direction from Mr. Weaver based

upon his role as President and sole director of Weaver

Nut Company and his assertion that Messrs. Reis and

Katz were not shareholders in the company.

68. Attorney Mattaini reasonably believed that Barley

Snyder was able to provide competent and diligent

representation to Weaver Nut Company and to Mr. and

Mrs. Weaver at the same time because their interests

were not adverse to one another, based upon Mr.

Weaver’s false representations that Messrs. Reis and

Katz were not shareholders.

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69. Barley Snyder did an internal conflict of interest

check prior to meeting with the Weavers.

70. On April 11, 2003, Barley Snyder attorney Shawn M.

Long sent a letter to Mr. Reis and Mr. Katz.

71. The April 11, 2003 letter was copied to Barley

Snyder attorneys Paul G. Mattaini, a partner, and

Matthew H. Haverstick, an associate.

72. The April 11, 2003 letter advised Mr. Reis and Mr.

Katz that Weaver Nut Company was terminating the

Merchant Banking and Corporate Development Agreement

together with their employment with Weaver Nut Company.

73. On April 11, 2003, other Company personnel hired

by Mr. Reis, including the office manager (Marie

Wagner), the warehouse manager (George Haynes) and the

general manager (David Fisher), were fired by E. Paul

Weaver, III.

74. Barley Snyder and its attorneys took action on

behalf of the Weavers and Weaver Nut Company without

consulting Mr. Reis and Mr. Katz.

75. Barley Snyder received instructions from Weaver

Nut Company through E. Paul Weaver, III, its President

and sole director who had legal authority to speak for,

and bind, Weaver Nut Company.

76. On or about April 15, 2003 Messrs. Reis and Katz

advised Barley Snyder that together they held 50% of

the shares in Weaver Nut Company. Mr. Weaver disputed

this assertion when questioned by Barley Snyder

attorneys. Because the corporate books and records

were missing. Barley Snyder had no means of verifying

either position. Barley Snyder correctly determined

that the issue of who owned shares in Weaver Nut

Company was in dispute. 

77. On April 15, 2003 a meeting was held between the

parties and their counsel to discuss the firing of Mr.

Reis, Mr. Katz and the other members of the senior

management team.

78. Mr. Reis and Mr. Katz were both present and were

represented at the April 15, 2003 meeting by David C.

Schattenstein, Esquire.

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79. During the meeting it was recommended by Attorney

Schattenstein that an independent accountant be brought

in to take a look at the financial condition of the

Company and to make recommendations.

80. Attorney Schattenstein recommended a number of

possible candidates including Frank C. Musso from the

Lancaster, Pennsylvania area; the firm of Perini

Randolph from Wilmington, Delaware; the firm of

Cancannon, Gallagher & Miller from Allentown,

Pennsylvania; and the firm of Miller Tate from

Philadelphia, Pennsylvania.

81. The parties agreed to utilize Frank C. Musso

because he was closer in proximity to Weaver Nut

Company and the costs to the Company for his services

would likely be less than from firms that were

geographically farther away.

82. Attorney Schattenstein contacted Mr. Musso who

indicated he was available to meet with the parties.

83. On April 16, 2003 a meeting was conducted at

Weaver Nut Company with Mr. Musso, Mr. and Mrs. Weaver,

Attorney Schattenstein, Shawn M. Long, Esquire and some

other attorneys from Barley Snyder. Mr. Reis and Mr.

Katz were not present at this meeting, but they were

represented by Attorney Schattenstein who was.

84. The beginning of the meeting on April 16, 2003 was

very chaotic and Mr. Musso indicated to all those

present that he saw no reason for him to be there. 

After that statement, the others at the meeting seemed

to calm down, and the participants began compiling a

list of items to be addressed.

85. By the end of the April 16, 2003 meeting the

parties, through their respective counsel, had agreed

to retain Mr. Musso.

86. An engagement letter was sent to counsel for both

sides of the dispute. Both sides approved the

engagement letter. Mr. Weaver specifically signed the

letter as President of Weaver Nut Company. Frank C.

Musso, CPA was retained on April 16, 2003 and

thereafter undertook an evaluation of Weaver Nut

Company.

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87. Mr. Musso was engaged in the business of aiding

companies that were having either organizational or

financial difficulties and providing these companies

with advice on how best to correct their particular

situation.

88. Mr. Musso began a review of the operations of the

Company. On April 23, 2003 Mr. Musso prepared an

interim report that made some preliminary

recommendations, including replacing the KBK Financial

financing and completing the computer system

installation, together with identifying a number of

inadequacies in administrative discipline and review,

internal controls, lack of financial controls and

numerous problems with inventory.

89. On April 24, 2003 Messrs. Reis and Katz called Mr.

Musso and expressed their displeasure with not having

received a report from him and his not recommending

that they and all the other fired employees be brought

back. Messrs. Reis and Katz were very hostile and

threatening to Mr. Musso on the telephone call.

90. Later in the day on April 24, 2003 Attorney

Schattenstein faxed a letter to Mr. Musso indicating

that Mr. Reis and Mr. Katz were expecting an initial

report and answered a question concerning a previous

request by Mr. Musso for information.

91. Between April 25 and April 29, 2009 Attorney

Schattenstein stopped representing Mr. Reis and Mr.

Katz.

92. On April 28, 2003 Weaver Nut Company, through E.

Paul Weaver, III acting as the sole director of the

Company, issued a document entitled Written Consent of

Sole Director to Corporate Actions. The document

ratified the actions taken by Mr. Weaver, including

termination of the Merchant Banking and Corporate

Development Agreement; termination of the employment of

Mr. Reis, Mr. Katz and the other fired employees;

granting Mr. Weaver additional duties and powers; and

ratifying all of his acts for, and on behalf of, the

Company.

93. On April 29, 2003 Mr. Musso advised Mr. Reis and

Mr. Katz that, in his view, neither they, nor the other

terminated employees should be rehired.

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94. Mr. Musso concluded that Weaver Nut Company was

better off without the Merchant Banking and Corporate

Development Agreement or the employment of Mr. Reis,

Mr. Katz or the fired employees. Mr. Musso found

numerous deficiencies in the operation of Weaver Nut

Company in areas that were under Mr. Reis’ direct

supervision.

95. On April 29, 2003 Mr. Musso resigned from the

formal written engagement of his services with Weaver

Nut Company dated April 16, 2003. On that same date,

Mr. Musso initiated a new engagement with the Weavers

and the Company to provide accounting and management

services to them.

96. On April 30, 2003 an action was commenced in the

Court of Common Pleas of Lancaster County, Pennsylvania

entitled Weaver Nut Company, Inc. et al.v. Summit

Private Capital Group, et al., No. CI-03-03473 seeking

damages for the alleged torts of defamation, tortious

interference with contractual relations and conversion. 

On May 1, 2003 the case was removed to the United

States District Court for the Eastern District of

Pennsylvania and was assigned to Senior District Judge 

James McGirr Kelly as case number 2003-cv-2815.

97. On April 30, 2009 Weaver Nut Company and E. Paul

Weaver, III also filed a Petition for Special

Injunction in Lancaster County case number CI-03-03473

seeking, among other things, to enjoin Messrs. Reis and

Katz from communicating with vendors of Weaver Nut

Company, interfering with the operation of the Company

and for the return of all Company books, records and

other property.

98. On April 30, 2003 a shareholder derivative action

was commenced in the United States District Court for

the Eastern District of Pennsylvania entitled Reis et

al. v. Weaver Nut Company et al, and was assigned to

Judge James McGirr Kelly as case number 2003-cv-2621.

99. The filing of the shareholder derivative action

created a potential conflict of interest for Barley

Snyder in their joint representation of both Weaver Nut

Company and Mr. and Mrs. Weaver. Barley Snyder advised

Weaver Nut Company that it would need to secure other

counsel. Barley Snyder continued to represent Mr. and

Mr. Weaver, individually.

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100. Weaver Nut Company attempted to retain the

services of their former corporate counsel Robert

Sisko, to no avail.

101. On May 20, 2003 an attorney not affiliated with

Barley Snyder, Christopher S. Underhill, Esquire, met

with Mr. Weaver at the offices of Barley Snyder to

discuss his possible retention on behalf of Weaver Nut

Company.

102. On May 22, 2003 Attorney Underhill sent an

engagement letter to Weaver Nut Company accepting the

Company as a client, addressing the scope and purpose

of the representation, explaining his purpose as

counsel for the Company and attaching his Statement of

Fees and Costs and explaining that his law firm would

bill the Company on a monthly basis for his services.

103. On May 23, 2003 Mr. Weaver, as President of

Weaver Nut Company, signed the engagement letter

indicating his receipt of the letter from Attorney

Underhill and agreement to its terms. 

104. Barley Snyder did not represent or provide any

legal services or advice to Weaver Nut Company after

the company retained Attorney Underhill.

105. Any transmittal letters from Barley Snyder to

Weaver Nut Company containing legal bills for services

rendered by Barley Snyder to the Company after May 2003

were an oversight and not indicative that any legal

services were actually performed by Barley Snyder on

behalf of Weaver Nut Company after that date.

106. The firm of Barley Snyder and Attorney

Underhill’s firm, Hartman, Underhill & Brubaker, LLP,

are direct competitors in the legal marketplace.

107. In May 2003 Weaver Nut Company hired John Maksel

as the new Chief Financial Officer for the Company,

filling the vacancy created when Michael Reis was

fired.

108. John Maksel was the person at Weaver Nut Company

with whom Attorney Underhill primarily dealt.

109. E. Paul Weaver, III misunderstood Attorney

Underhill’s role as counsel for the Company, and Mr.

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Weaver erroneously believed that Attorney Underhill was

in the dispute to aid him in Mr. Weaver’s individual

capacity. 

110. After being retained by Weaver Nut Company,

Attorney Underhill and John Maksel went to the

Company’s accountant to review the financial records of

the Company for the periods both before and after

Messrs. Reis and Katz became involved with the Company. 

Attorney Underhill also reviewed, among other things,

the Merchant Banking and Corporate Development

Agreement and the lawsuit instituted by Mr. Reis and

Mr. Katz.

111. Attorney Underhill indicated that he was willing

to meet with Messrs. Reis and Katz to discuss the

pending litigation and the situation with Weaver Nut

Company after Messrs. Reis and Katz responded to the

discovery requests that Attorney Underhill had

propounded upon them.

112. From just after their employment was terminated

on April 11, 2003 until early July 2003, Mr. Reis and

Mr. Katz communicated by e-mail, letter and telephone,

derogatory information about E. Paul Weaver, III and

Weaver Nut Company to KBK Financial and to some of the

Company’s customers and vendors with the intent to

cripple or destroy the Company’s ability to remain in

business without their reinstatement. 

113. Attorney Underhill determined that the

shareholder derivative lawsuit brought by Messrs. Reis

and Katz was not helpful to the Company and would

probably be harmful to the Company. Attorney Underhill

concluded that Weaver Nut Company should defend the

lawsuit rather than acting on the plaintiff’s side.

114. Attorney Underhill made all of his legal

determinations independently and free of any influence

or coercion from either John Maksel, E. Paul Weaver,

III or Barley Snyder.

115. After the departure of Messrs. Reis and Katz from

Weaver Nut Company, the Company obtained new financing

from KBK Financial that was more favorable and less

expensive to the Company then the previous KBK

financing had been.

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116. Eventually, Weaver Nut Company obtained more

traditional bank financing that was less expensive than

the KBK financing.

117. Overall, the financial program instituted after

the departure of Messrs. Reis and Katz, together with

the cost savings from the firing of all the employees

including Messrs. Reis and Katz, resulted in

significant savings to the Company.

118. The increases in operating costs implemented by

Messrs. Reis and Katz offset the increase in gross

profit margin that the Company enjoyed during their

tenure.

119. Weaver Nut Company had a gross profit margin of

24.5% in 2002.

120. Weaver Nut Company maintained a gross profit

margin average of 23.08% for the years 2003-2006 after

the departure of Messrs’ Reis and Katz.

121. Weaver Nut Company significantly decreased its

operating costs after the departure of Messrs. Reis and

Katz.

122. Weaver Nut Company had a net income loss in

calendar year 2001 of $101,529.7

123. Weaver Nut Company had a net income loss of

$9,103 in calendar year 2002.8

124. Weaver Nut Company had a net income loss of

$283,004 in 2003.9

125. Weaver Nut Company had a net income gain of

$142,129 in calendar year 2004.

Messrs. Reis and Katz started actively working for the Company in 7

September 2001.

Messrs. Reis and Katz worked for the Company for the entire year 8

in 2002.

Messrs. Reis and Katz worked for Weaver Nut Company from 9

January 1, 2003 until they were fired on April 11, 2003.

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 23 of 52
126. Weaver Nut Company had a net income gain of

$92,111 for a nine month period in 2005.10

127. Weaver Nut Company had a net income gain of 

$170,348 in fiscal year 2006.

128. Weaver Nut Company’s sales revenue dropped every

year from 2001 until 2005. 

129. Weaver Nut Company’s sales increased in 2006.

130. Despite falling sales, Weaver Nut Company was

more profitable in 2004, 2005 and 2006 than it had been

in 2001-2003.

131. Legal bills paid for by Weaver Nut Company to

Barley Snyder for services rendered to Mr. and Mrs.

Weaver in their individual capacities, were deducted

from outstanding loans made by the Weavers to the

Company.

132. E. Paul Weaver, III in his role as President and

sole director of Weaver Nut Company owed fiduciary

duties to Mr. Reis, Mr. Katz and to Weaver Nut Company.

133. Mr. Weaver breached his fiduciary duties to Mr.

Reis, Mr. Katz and Weaver Nut Company.

134. Barley Snyder knew that Mr. Weaver owed fiduciary

duties to the Company.

135. Barley Snyder had no knowledge that Mr. Weaver

was breaching fiduciary duties to either the Company or

to Messrs. Reis and Katz.

136. On December 15, 2003 all litigation involving Mr.

Reis, Mr. Katz, the Weavers and the Company was settled

pursuant to a consolidated Settlement Agreement.

137. As part of the settlement, Messrs. Reis and Katz

received a combined $415,000 of which $100,000 was for

attorneys’ fees. In addition, under the Settlement

Agreement Weaver Nut Company was required to provide 

In 2005 Weaver Nut Company converted from a calendar year to a 10

fiscal year for income tax reporting purposes. Accordingly, a full year net

income gain/loss is not available. 

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 24 of 52
health insurance coverage for Messrs. Reis and Katz for

a period of one year.

138. As part of the terms of the Settlement Agreement,

Messrs. Reis and Katz were required to return to the

Weavers any shares in Weaver Nut Company they may have

had.

139. As part of the settlement, Weaver Nut Company

assigned to Mr. Reis and Mr. Katz any claims the

Company might have against Weaver Nut Company.

CONCLUSIONS OF LAW 

1. Defendant Barley Snyder did not breach its

fiduciary duties to Weaver Nut Company.

2. Defendant Barley Snyder did not aid or abet the

breach of any fiduciary duty owed by E. Paul Weaver,

III, to plaintiffs Michael Reis, Sr. or Lawrence J.

Katz.

3. Defendant Barley Snyder did not aid or abet the

breach of any fiduciary owed by E. Paul Weaver, III, to

Weaver Nut Company.

4. Defendant Barley Snyder was not negligent in the

performance of its professional services to Weaver Nut

Company.

5. Defendant Barley Snyder did not tortiously

interfere with Weaver Nut Company’s contractual

relations with Michael Reis, Sr., Lawrence J. Katz or

Summit Private Capital Group.

6. Defendant Barley Snyder was privileged and legally

justified in assisting the termination of the Merchant

Banking and Corporate Development Agreement.

7. Defendant Barley Snyder did not breach its contract

for professional services with Weaver Nut Company.

8. The Merchant Banking and Corporate Development

Agreement did not create a joint venture between Weaver

Nut Company and Summit Private Capital Group. 

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 25 of 52
9. Plaintiffs Michael Reis, Sr. and Lawrence J. Katz

have not proven by a preponderance of the evidence that

they suffered any damages in their individual

capacities.

10. Plaintiffs Michael Reis, Sr. and Lawrence J. Katz

have not proven by a preponderance of the evidence that

Weaver Nut Company suffered any damages as a result of

any actions of defendant Barley Snyder.

11. Plaintiffs’ proposed damages are all speculative

and conjectural.

DISCUSSION

Plaintiffs’ Claims

As noted above, plaintiffs Michael Reis, Sr. and

Lawrence J. Katz seek damages on six separate theories of

liability against defendant law firm Barley, Snyder, Senft &

Cohen, LLC. 

Count I of plaintiffs’ Amended Complaint contains three

causes of action against defendant Barley Snyder. They are

breach of a fiduciary duty owed to plaintiffs Reis and Katz, as

assignees of the rights of Weaver Nut Company; aiding and

abetting breach of a fiduciary duty brought by plaintiffs Reis

and Katz, individually; and aiding and abetting breach of a

fiduciary duty brought by plaintiffs as assignees of the rights

of the Company.

Count II asserts a cause of action for professional

negligence brought by plaintiffs Reis and Katz as assignees of

the rights of the Company. 

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 26 of 52
Count IV alleges a cause of action for tortious

interference with contractual relations brought by plaintiffs

Reis and Katz as assignees of the rights of the Company

Finally, Count VI avers a cause of action for breach of

contract brought by plaintiffs Reis and Katz as assignees of the

rights of the Company. Below, I address each count separately.

Breach of Fiduciary Duty

Count I of plaintiffs’ Amended Complaint asserts a

cause of action for breach of fiduciary duty. Specifically,

plaintiffs assert that defendant Barley Snyder breached a

fiduciary duty to Weaver Nut Company by representing both the

Company and the Weavers. More specifically, plaintiffs assert

that the Merchant Banking and Corporate Development Agreement was

for the benefit of the Company and that by aiding the Weavers in

terminating the contract, defendant harmed the Company. In

addition, plaintiffs assert that defendant was operating under a

conflict of interest in representing both the Company and the

Weavers at the same time.

Defendant Barley Snyder contends that it acted pursuant

to the direction of E. Paul Weaver, III. Defendant contends that

it believed Mr. Weaver was the President, sole shareholder and

founder of Weaver Nut Company. Defendant contends that Mr.

Weaver directed defendant to take action on behalf of the Company

against plaintiffs in the interests of saving the Company from

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 27 of 52
the harm being caused to the Company by plaintiffs. Furthermore,

defendant contends that it acted in good faith, acted in the

interests of Weaver Nut Company, and conducted a reasonable

investigation into the facts asserted by Mr. Weaver. 

Furthermore, defendant contends that there was no

potential conflict of interest between the Weavers and the

Company until plaintiffs filed their shareholder derivative

action on April 30, 2003. Defendant contends that until 

April 30, 2003 there was no indication that their representation

of both the Weavers and the Company created any possibility of a

conflict of interest because until that date both of its clients

interests appeared to be aligned with each other. For the

following reasons, I agree with defendant. 

The elements which plaintiffs must prove in a claim for

breach of a fiduciary duty are: 

(1) that the defendant negligently or

intentionally failed to act in good faith and

solely for the benefit of plaintiff in all matters

for which he or she was employed; (2) that the

plaintiff suffered injury; and (3) that the

agent’s failure to act solely for the plaintiff’s

benefit...was a real factor in bringing about

plaintiff’s injuries.

Meyers v. Sudfeld, 2007 U.S.Dist. LEXIS 7634 at *32 (E.D.Pa. 

Feb. 2, 2007)(Padova, J.) citing McDermott v. Party City Corp.,

11 F.Supp.2d 612, 626 n. 18 (E.D.Pa. 1998)(Robreno, J.).

An attorney owes a fiduciary duty to his client which

“demands undivided loyalty and prohibits the attorney from

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 28 of 52
engaging in conflicts of interest, and breach of such duty is

actionable.” Maritrans GP Inc. v. Pepper, Hamilton & Scheetz,

529 Pa. 241, 253, 602 A.2d 1277, 1283 (Pa. 1992). 

Here, defendant relied on the statements of Mr. Weaver

who was the President and sole director of the Company. The

information provided by Mr. Weaver included that Mr. Reis and Mr.

Katz were acting in ways that were harming to Company; that Mr.

Reis had hired numerous employees without Mr. Weaver’s consent;

that Mr. Reis was contacting vendors and customers regarding the

two-signature policy and giving conflicting information regarding

who was empowered to make purchasing decisions; that the new

employees, the financing with KBK Financial, and the new

inventory computer programs were very expensive and unnecessary;

and that the Merchant Banking and Corporate Development Agreement

together with the actions of Mr. Reis and Mr. Katz were not good

for the financial health of the Company. Mr. Weaver also falsely

advised defendant that Messrs. Reis and Katz were not

shareholders in the Company.

“An attorney is entitled to rely in good faith upon the

statement of facts made to him by his client, and is not under a

duty to institute an inquiry for the purpose of verifying his

statement before giving advice thereon.” Meiksin v. Howard Hanna

Company, Inc., 404 Pa.Super. 417, 424, 590 A.2d 1303, 1306

(1991). In this case, defendant did attempt to verify the

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 29 of 52
information provided by Mr. Weaver. Defendant reviewed the

Merchant Banking and Corporate Development Agreement and it

sought the corporate books and records from both Mr. Weaver and

from corporate counsel, Robert Sisko, Esquire.

However, because Mr. Reis and Mr. Katz removed the

corporate records from the premises of Weaver Nut Company, it was

not possible for Barley Snyder to verify whether the Weavers were

the sole shareholders or if Mr. Reis and Mr. Katz had exercise

the warrants mentioned in the Merchant Banking and Corporate

Development Agreement and were now actually shareholders.

Because it appeared from the information provided to

Barley Snyder by Mr. Weaver that he was acting in the interest of

the Company by seeking to terminate the employment of Mr. Reis,

Mr. Katz, the other employees that were hired by them, and to

terminate the Merchant Banking and Corporate Development

Agreement, there was no negligent or intentional conduct

performed by Barley Snyder in bad faith. 

To the contrary, Barley Snyder was permitted to rely on

Mr. Weaver’s representations. The firm conducted a reasonable

investigation based on the materials available to it, and advised

Mr. Weaver that the course of action he was taking, although

lawful, was an aggressive approach which may have a significant

risk of legal action being instituted by the affected parties. 

Barley Snyder reasonably relied on the decisionmaking of the

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Case 2:05-cv-01651-JKG Document 205 Filed 09/30/09 Page 30 of 52
President and sole director of the Company that this aggressive

approach was necessary to make sure the Company remained a viable

on-going business.

Furthermore, after firing Mr. Reis and Mr. Katz, Barley

Snyder participated in having the Company assessed by Mr. Musso

and worked closely with Mr. Weaver and the employees of Weaver

Nut Company to make the transition as smooth as possible.

After they were fired, Messrs. Reis and Katz informed

Barley Snyder that they were both shareholders in the Company. 

However, Mr. Weaver continued to dispute this contention and

Barley Snyder had no means of verification because Mr. Reis and

Katz had removed the corporate records.

The contention by Mr. Weaver that Messrs. Reis and Katz

were causing harm to the Company was further supported by the

independent evaluation performed by Francis C. Musso, CPA, who

was retained by the Company at the recommendation of counsel for

Messrs. Reis and Katz, David C. Schattenstein, Esquire. 

Mr. Musso concluded after investigation, among other

things, that the Company was suffering from cash flow and

budgeting problems, inventory control problems, lack of internal

controls and lack of administrative discipline. Mr. Musso

attributed most of the failures to the failures of Mr. Reis in

his role as Chief Financial Officer. These determinations

corroborated the information given to Barley Snyder by Mr. Weaver

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regarding the state of affairs at Weaver Nut Company under the

direction of Mr. Reis and Mr. Katz. 

I find Mr. Musso’s testimony on these subjects credible

and persuasive in light of the testimony of other witnesses

including Mr. Glusman and Attorney Underhill, more fully

discussed below. 

Finally, I conclude that Barley Snyder took its ethical

obligations seriously as evidenced by the fact that when Mr. Reis

and Mr. Katz filed their shareholder derivative action, Barley

Snyder correctly determined that a possible conflict of interest

had arisen which required Weaver Nut Company to seek independent

counsel. Barley Snyder first approached former corporate

counsel, Robert Sisko, Esquire, who declined to represent the

Company. Then, in an effort to help its client Weaver Nut

Company, Barley Snyder solicited the help of Christopher S.

Underhill, Esquire, who eventually accepted Weaver Nut Company as

a client.

As noted in my Findings of Fact, Attorney Underhill

engaged in an independent investigation of the facts and

circumstances surrounding the situation at Weaver Nut Company and

determined that Weaver Nut Company was better off without Mr.

Reis, Mr. Katz and the Merchant Banking and Corporate Development

Agreement. I find Attorney Underhill’s testimony both credible 

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and persuasive. Moreover, his conclusions are supported by the

similar assessments of Mr. Musso and Mr. Glusman.

Plaintiffs assert that their firing harmed the Company. 

Rather, I find that their firing helped the Company. 

Accordingly, based upon the foregoing, I conclude that

plaintiffs have not proven by a preponderance of the evidence

that defendant negligently or intentionally failed to act in good

faith solely for the benefit of Weaver Nut Company in all matters

for with they were employed. To the contrary, I find the actions

of Barley Snyder actually benefitted the Company.

Moreover, I conclude that Barley Snyder was not acting

under a conflict of interest during the brief period that they

represented both the Company and the Weavers. Furthermore,

Barley Snyder acted in a prudent manner to withdraw from its

representation of the Company upon the filing by Mr. Reis and Mr.

Katz of a shareholder derivative action.

Regarding the second and third elements, I conclude

that there was no failure to act by Barley Snyder that was a

factor in bringing about any damage to Weaver Nut Company and

that the Company suffered no actual damages.

Regarding damages, plaintiff Katz testified for a

number of days regarding his theory of the amount of damages

incurred by the Company as a result of the Company’s removal of

Mr. Reis and Mr. Katz. To the contrary, defendant’s expert 

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David H. Glusman, CPA testified that Weaver Nut Company suffered

no damages as a result of the firing of Mr. Reis and Mr. Katz. 

The parties in this case agree that Pennsylvania does not permit

an award of damages that are merely speculative. Burtch v. Ganz,

366 B.R. 414, 443 (Bankr. E.D.Pa. 2007) citing Werther v. Rosen,

2003 WL 1861579 at *3 (Phila.Ct.Com.Pl. Apr. 2, 2002)

(Sheppard, J.). For the following reasons, I conclude that the

testimony of Mr. Katz was purely speculative and that the expert

opinion of Mr. Glusman was credible and persuasive.

Mr. Katz testified regarding his lay opinion regarding

the economic prospects of Weaver Nut Company and its expected

performance with Mr. Reis and Mr. Katz involved in its

management. I found Mr. Katz’s lay opinion unpersuasive. It was

based upon speculation, such as his projections of (1) a 15%

increase in Company sales each year; (2) a renegotiation of the 11

Merchant Banking and Corporate Development Agreement to provide

an increase in the contractual income paid by the Company to both

Messrs. Reis and Katz; (3) funds sufficient to buy back the real

estate sold to Mr. Roberts; and (4) the increase in value of that

real estate.

Moreover, I found unpersuasive Mr. Katz’s method of

calculating lost profits because it was based upon his

I note that the testimony of Michael Reis Sr. on this same point 11

was in conflict with that of Mr. Katz. Mr. Reis testified that he expected a

sales growth of approximately 3% per year.

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speculative projections of what the Company’s earnings would have

been in the years 2003-2008 if plaintiffs had been involved; and

because of his failure to deduct from the figures the normal

operating expenses of the Company. I found the testimony of Mr.

Katz on the issue of damages to be self-serving and unconvincing.

To the contrary, I found persuasive the testimony of

defendant’s expert Certified Public Accountant David H. Glusman. 

In particular, I concluded that the Company had significant

expenses related to the employment of Mr. Reis and Mr. Katz, the

employment of the additional employees hired by them and the cost

of the KBK financing. Moreover, the actual financial statements

of the Company indicate that the Company lost money while under

the stewardship of Messrs. Reis and Katz and made money after

they were fired. Specifically, while the Company’s sales were

not as great in 2004-2006, the Company showed an increased profit

in each of those years. 

Thus, based in part on the testimony of Mr. Glusman,

the financial statements of Weaver Nut Company, and my assessment

of the testimony of Mr. Katz, I conclude that plaintiffs failed

to establish by a preponderance of the evidence that Weaver Nut

Company suffered any damage at all. I fact, I conclude that

Weaver Nut Company financially prospered after the firing of Mr.

Reis and Mr. Katz.

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Accordingly, I conclude that plaintiffs, as assignees

of the rights of Weaver Nut Company, have not proven by a

preponderance of the evidence that defendant Barley Snyder

breached a fiduciary duty owed to Weaver Nut Company. Hence, I

enter judgment on this aspect of Count I of plaintiffs’ Amended

Complaint in favor of defendant Barley Snyder and against

plaintiffs Reis and Katz, as assignees of the rights of Weaver

Nut Company. 

Aiding and Abetting

 Count I of plaintiffs’ Amended Complaint contains a

claim of aiding and abetting the breach of a fiduciary duty 

brought by plaintiffs Katz and Reis, both individually and as

assignees of the claims of the Company. Specifically, plaintiffs

assert that defendant Barley Snyder aided and abetted the breach

of fiduciary duties owed by E. Paul Weaver, III to plaintiffs

Michael Reis, Sr. and Lawrence J. Katz, individually as

shareholders of Weaver Nut Company. In addition, plaintiffs

claim that defendant aided and abetted Mr. Weaver in breaching

fiduciary duties owed to the Company. I note that plaintiffs

have not asserted exactly what fiduciary duties Mr. Weaver

allegedly violated. However, based upon the evidence presented

at trial, I am able to divine plaintiffs’ intent. 

Defendant contends that there is no evidence that Mr.

Weaver breached any fiduciary duty to Mr. Reis and Mr. Katz or to

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the Company. In addition, defendant contends that there is no

evidence that Barley Snyder had knowledge of any breach of 

fiduciary duties by Mr. Weaver or that it substantially assisted

or encouraged him to do so. 

For the following reasons, I conclude that E. Paul

Weaver, III did breach his fiduciary duties to both Mr. Reis and

Mr. Katz, as well as his fiduciary duties to the Company. 

However, I conclude that plaintiffs have not proven by a

preponderance of the evidence that Barley Snyder either had

knowledge of the breach or provided substantial assistance or

encouragement to Mr. Weaver. 

The elements that must be proved in order to maintain a

claim for aiding and abetting a breach of fiduciary duty are: 

(1) a breach of a fiduciary duty owed to another; (2) knowledge

of the breach by the aider and abettor; and (3) substantial

assistance or encouragement by the aider and abettor in effecting

that breach. Pierce v. Rossetta Corporation, 1992 U.S.Dist.

LEXIS 9065 (E.D.Pa. June 15, 1992)(Dubois, J.); Koken v.

Steinberg, 825 A.2d 723 (Pa.Commw. 2003).

A director of a corporation stands in a fiduciary

relation to the corporation and has a legal obligation to the

corporation to perform his duties as a director in good faith and

in a manner he reasonably believes to be in the best interest of

the corporation. The director must use such care, including

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reasonable inquiry, skill, and diligence, as a person of ordinary 

prudence would use under similar circumstances. See 15 Pa.C.S.A.

§ 1712(a).

In addition, “[a] director shall not be considered to

be acting in good faith if he has knowledge concerning the matter

in question that would cause his reliance to be unwarranted. 

15 Pa.C.S.A. § 1712(b). Inherent in the fiduciary duties owed by

a director are a duty of loyalty, of good faith and to avoid

self-dealing.

E. Paul Weaver, III, was the sole director of Weaver

Nut Company. As such, he owed fiduciary duties to the

corporation. In my Findings of Fact above, I conclude that Mr.

Weaver falsely stated to Barley Snyder that Mr. Reis and Mr. Katz

were not shareholders of the Company. Mr. Weaver, as President

and sole director would have actual knowledge of the corporate

tax returns filed for tax years 2001 and 2002 that clearly show

that both Mr. Reis and Mr. Katz were shareholders for the

purposes of the federal income tax laws in both of those calendar

years. Thus, it was a false statement by Mr. Weaver to tell

Barley Snyder that plaintiffs Reis and Katz were not

shareholders. This false statement violates the duty of good

faith as well as the intent of 15 Pa.C.S.A. § 1712(b). Moreover,

I find that Mr. Weaver signed both plaintiffs’ share

certificates, and that his statements to the contrary were false.

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I also conclude that, in addition to his stated purpose

of protecting Weaver Nut Company from Messrs. Reis and Katz, Mr.

Weaver was also acting in his own self-interest and violating his

duty of loyalty to both the corporation and its shareholders. 

Thus, I conclude that E. Paul Weaver, III, did breach a fiduciary

duty owed to Mr. Reis and Mr. Katz, individually and to Weaver

Nut Company.

Regarding the second element of a claim for aiding and

abetting a breach of fiduciary duty, I conclude that Barley

Snyder had no knowledge of the breach of fiduciary duties by Mr.

Weaver. Specifically, plaintiffs have failed to establish by a

preponderance of the evidence that Barley Snyder had any such

knowledge. Mr. Weaver falsely stated to Barley Snyder that

Messrs. Reis and Katz were not shareholders. Barley Snyder

attempted to investigate this assertion but was unable to confirm

or deny the assertion. Even when presented with the assertion of

stock ownership by Messrs. Reis and Katz, Barley Snyder was still

not able to confirm this because plaintiffs had secreted the

corporate books and records away from the Company.

However, Mr. Weaver was not acting solely in his own

interest. His actions reveal that the termination of Mr. Reis,

Mr. Katz and the Merchant Banking and Corporate Development

Agreement was in the Company’s best interest. This conclusion is

supported by the testimony of Mr. Musso, Mr. Underhill and 

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Mr. Glusman which I found persuasive and credible. More

specifically, Weaver Nut Company performed better after the

termination of Messrs. Reis and Katz than while they were

involved with the Company. Accordingly, I conclude that Barley

Snyder had no knowledge of the breach of fiduciary duties by 

E. Paul Weaver, III.

Next, whether the actions of Barley Snyder can be

viewed as giving substantial assistance or encouragement to Mr.

Weaver in effecting the breach is a more difficult question. The

firm’s actions in aid of Mr. Weaver and the Company did result in

the termination of the employment of Mr. Reis and Mr. Katz. 

However, it did not terminate any rights they each had as

shareholders. Those rights remained in effect until they both

returned any shares they possessed to the Weavers and the Company

as a result of their Settlement Agreement. Under that agreement,

plaintiffs were compensated for all their rights as shareholders

and their contract rights pursuant to the Merchant Banking and

Corporate Development Agreement. 

Because Barley Snyder was not aware of any breach of

fiduciary duties on the part of Mr. Weaver, and because its

conduct did not fall outside the normal provision of legal

services to either the Weavers or the Company, I conclude that

Barley Snyder did not provide substantial assistance or

encouragement in effecting the breach by Mr. Weaver. Stated

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differently, Barley Snyder did nothing to encourage Mr. Weaver to

falsely state the status of shareholders in Weaver Nut Company,

or to assist him in doing so.

Accordingly, I conclude that plaintiffs have failed to

prove by a preponderance of the evidence their claims of aiding

and abetting the breach of a fiduciary duty, either individually,

or as assignees of the claim of the Company. Thus, I grant

judgment in favor of defendant Barley Snyder and against

plaintiffs on that count.

Professional Negligence

In Count II, plaintiffs’ Amended Complaint alleges a

cause of action for professional negligence against defendant

Barley Snyder in its representation of the Company, brought by

plaintiffs Reis and Katz as assignees of the rights of the

Company. Specifically, plaintiffs allege that Barley Snyder had

a conflict of interest in representing both Mr. Weaver and the

Company and that this conflict caused harm to the Company. 

More specifically, the Company asserts that Barley

Snyder did not exercise adequate due diligence in determining

whether a conflict of interest would occur and alleges that

attorneys of ordinary skill and knowledge would have done so. 

Furthermore, plaintiffs contend that because of defendant’s 

negligence, the Company was damaged and that defendant’s 

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negligence was the proximate cause of the Company’s damages.

Defendant denies these allegations. 

There are three elements of a cause of action for

professional negligence: “(1) the employment of the attorney or

other basis for his duty to act as an attorney; (2) the failure

of the attorney to exercise ordinary skill and knowledge; and 

(3) that such negligence was the proximate cause of damage to the

plaintiff.” Ibn-Sadiika v. Reister, 380 Pa.Super. 397, 403, 

551 A.2d 1112, 1115 (Pa.Super. 1988)(citations omitted). Expert

testimony is required to establish the relevant standard and

whether defendant complied with that standard. Lentino v. Fringe

Employee Plans, Inc., 611 F.2d 474, 480 (3d Cir. 1979) citing

Chandler v. Cook, 438 Pa. 447, 265 A.2d 794 (1970); Lambert v.

Soltis, 422 Pa. 304, 221 A.2d 173 (1966).

Here both plaintiffs and defendant proffered the

testimony of expert witnesses on the issue of whether Barley

Snyder committed professional negligence in its representation of

Weaver Nut Company. Plaintiffs offered the testimony of 

Professor Geoffrey C. Hazard, Jr., who was qualified as an expert

in the field of standards of professional legal conduct. 

Defendant offered the testimony of Thomas G. Wilkinson, Jr., who

was qualified as an expert in the field of lawyer professional

standards. Both experts come to the court with very impressive 

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credentials and both were very knowledgeable and helpful in their

presentations to the court.

Professor Hazard opined that the relationship between

the Weavers and Weaver Nut Company on one hand, and Messrs. Reis

and Katz, together with Summit Private Capital Group, on the

other was one of a joint venture. I disagree.

Because Weaver Nut Company was an existing Company and

because Mr. Reis and Mr. Katz did not share control of the

Company with Mr. Weaver, the parties cannot be deemed to have

been involved in a joint venture.

To constitute a joint venture, certain factors are

essential:

1) each party to the venture must make a

contribution, not necessarily of capital, but by

way of services, skill knowledge, materials or

money;

2) profits must be shared among the parties;

3) There must be a joint proprietary interest and

a right of mutual control over the subject matter

of the enterprise; [and]

4) Usually, there is a single business transaction

rather than a general and continuous transaction.

Keeler v. International Harvester Used Truck Center, 

317 Pa.Super. 244, 246-247, 463 A.2d 1176, 1178 (Pa.Super. 1983)

citing McRoberts v. Phelps, 391 Pa. 591, 138 A.2d 439 (1958).

Here, the Merchant Banking and Corporate Development 

Agreement specifically provided that Mr. Reis and Mr. Katz did

not have the mutual right of control the subject matter of the

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enterprise (the Company). Moreover, the venture was limited to

single endeavor or transaction but would continue for an

unspecified and indefinite time period. Thus, I conclude that

the relationship between the Weavers, Weaver Nut Company, Mr.

Reis, Mr. Katz and Summit Private Capital Group was not a joint

venture.

The professional standards of due care which Professor

Hazard opined were breached by defendant lawyers, were the

standards applicable to commercial lawyers representing clients

involved in a joint venture. Because the factual basis for

Professor Hazard’s opinions was that the relationship of the

parties was a joint venture, and because I have rejected that

factual premise, I do not credit Professor Hazard’s opinions. As

a result, I conclude that plaintiffs have not sustained their

burden of proof on this claim.

On the other hand, I conclude that there is a

sufficient factual basis to support the opinions of Attorney

Wilkinson that Barley Snyder did not breach the applicable

standard of professional care under the circumstances of this

case. I found his opinions to be both credible and persuasive. 

As a result I find that defendant did not fail to exercise

reasonable professional skill and knowledge in its representation

of Weaver Nut Company.

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As noted above, I have already concluded regarding

plaintiffs’ claim for breach of fiduciary duty that defendant

Barley Snyder did not operate under a conflict of interest in its

representation of Weaver Nut Company. Moreover, I concluded that

there were no damages. Thus, notwithstanding the expert

testimony provided by the parties, I conclude that plaintiffs

have not established by a preponderance of the evidence that

defendant Barley Snyder committed professional negligence in its

representation of Weaver Nut Company.

Accordingly, I grant judgment in favor of defendant and

against plaintiffs on Count II of plaintiff’s Amended Complaint.

Tortious Interference With Contractual Relations

Count IV of plaintiffs’ Amended Complaint avers a cause

of action for tortious interference with contractual relations

brought by plaintiffs Reis and Katz as assignees of the Company. 

Plaintiffs aver that defendant acted outside the normal scope of

the attorney/client relationship based upon a conflict of

interest in representing both the Weavers and the Company and

because of Barley Snyder’s own self-interest in obtaining large

attorneys’ fees in representing the Company.

Defendant denies plaintiff’s contentions. 

To state a claim for tortious interference with

contractual relations a plaintiff must allege: (1) the existence

of a contract; (2) purposeful action by the defendant

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specifically intended to harm the existing relation; (3) absence

of privilege or justification on the part of the defendant; and

(4) actual legal damage as a result of defendant’s conduct. 

CAT Internet Services, Inc. v. Magazines.com, Inc., 

2001 U.S.Dist. LEXIS 8 at *14 (E.D.Pa. Jan. 4, 2001)(Padova, J.)

citing Shiner v. Moriarty, 706 A.2d 1228, 1238 (Pa.Super. 1998). 

Pennsylvania law recognizes a tortious interference claim only

where defendant has interfered with a plaintiff’s contract with a

third party. Center for Concept Development, LTD., v. Godfrey,

1999 U.S.Dist.LEXIS 3337 at *6 (E.D.Pa. Mar. 23, 1999) 

(Hutton, J.). 

Defendant contends that plaintiffs cannot prevail

because the actions of an attorney who is acting to protect the

legal interests of his client are privileged for purposes of a

claim for tortious interference with contractual relations. 

Plaintiffs aver that defendant’s actions were not

privileged with respect to the Company. Specifically, plaintiffs

as assignees of the Company, allege that because Barley Snyder

represented both Mr. Weaver and the Company, it was required to

ensure that it did not harm the contractual relations of either

of its clients. Plaintiffs allege that what Mr. Weaver believed

to be in his interest was not in the interest of the Company.

Regarding the elements of this tort, it is clear that

there was a contract (the Merchant Banking and Corporate

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Development Agreement). Thus, plaintiffs have satisfied the

first element of their claim.

Next, plaintiffs must prove that there was purposeful

action by the defendant specifically intended to harm the

existing relation. As noted above, plaintiffs Reis and Katz sit

in the shoes of the Company based upon the assignment of the

Company’s rights. “It is hornbook law that a party...to a

contract cannot interfere with its own contracts.” Godfrey, 

1999 U.S.Dist.LEXIS 3337 at *6-*7. It is as equally well-settled

that a corporate entity and its agents are not distinct parties

for contracting purposes because a corporation is a creature of

legal fiction which may only act through its officers, directors

and agents. Godfrey, 1999 U.S.Dist. LEXIS 3337 at *7. 

Therefore, a corporation’s agents cannot tortiously

interfere with the corporation’s contracts when the agents’

conduct occurs within the scope of employment. Labalokie v.

Capital Area Intermediate Unit, 926 F.Supp. 503, 509 (M.D.Pa.

1996)(Rambo, J.)(Citations omitted). In addition, attorneys are

normally recognized as agents for their clients and are deemed to

be the same party as their clients when performing their duties

as lawyers within the course and scope of that representation. 

See e.g. Heffernan v. Hunter, 189 F.3d 405, 413 (3d Cir. 1999).

Here, I have already concluded that defendant Barley

Snyder did not act under a conflict of interest and that the

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representation of both the Weavers and Weaver Nut Company was

proper. Thus, Barley Snyder was an agent of Weaver Nut Company

when it, pursuant to its clients directive, sought to terminate

the Merchant Banking and Corporate Development Agreement. 

Because plaintiffs sit in the shoes of Weaver Nut Company as

assignees and Barley Snyder sits in the shoes of Weaver Nut

Company as its agent, Weaver Nut Company cannot tortiously

interfere with its own contract. 

Defendant did not take any purposeful action

specifically intended to harm the existing relation. Rather, it

was the Company that took the action. Because the Company is the

equivalent of the plaintiffs for this purpose, plaintiffs have

failed to prove the second element by a preponderance of the

evidence.

Regarding the third element of privilege or

justification, “[c]ourts have recognized a broad privilege which

protects attorneys from being sued by third parties as a

consequence of the advice they give their clients in good faith.” 

Trustees of the International Brotherhood of Electrical Workers

Local 98 Pension Plan v. Aetna Casualty & Surety Company, 

1998 U.S. Dist. LEXIS 14605 at *9 (E.D.Pa. Sept. 14, 1998)

(Waldman, J)(Citations omitted.) However, there are limits to

the privilege when “the attorney’s conduct consisted of ‘self-

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interested activity’ beyond the proper scope of the practice of

law.” 1998 U.S. Dist. LEXIS 14605 at *10.

In this case, I have already concluded that defendant

did not operate under a conflict of interest. Moreover, if it is

true that an attorney acts in self-interest if he accepts a

client who has the ability to pay for the attorney’s services,

then every attorney/client relationship would be marred by the

attorney’s self-interest, except in those cases taken by on a pro

bono basis. Here, plaintiffs have provided no evidence that

defendant Barley Snyder acted inappropriately in any way during

its representation of Weaver Nut Company.

Moreover, I conclude that Barley Snyder was justified

and privileged to give Weaver Nut Company advice regarding the

Merchant Banking and Corporate Development Agreement, including

opinions regarding the negative consequences of terminating the

agreement. 

Accordingly, I conclude that defendant was both

justified and privileged in the actions and advice it provided

during the representation of Weaver Nut Company.

Finally, on the issue of damages, as noted above, I

conclude that plaintiffs have not proven any damages by a

preponderance of the evidence. Specifically, with regard to this

claim for tortious interference with contractual relations I

again conclude that Weaver Nut Company was better off without the

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Merchant Banking and Corporate Development Agreement. Thus, the

Company was in no way damaged.

Accordingly, I grant judgment in favor of Barley Snyder

and against plaintiffs Reis and Katz as assignees of the Company

on Count IV of plaintiffs’ Amended Complaint.

Breach of Contract

Count VI of plaintiffs’ Amended Complaint alleges

breach of contract for the professional services rendered by

Barley Snyder to Weaver Nut Company, brought by plaintiffs Reis

and Katz in their capacity as assignees of the rights of the

Company. Specifically, plaintiffs assert that defendant breached

the contract by operating under a conflict of interest in the

dual representation of the Weavers and the Company.

The elements of a breach of contract claim include: 

(1) the existence of a contract, including its essential terms;

(2) a breach of a duty imposed by the contract; and (3) resultant

damages. Gorski v. Smith, 812 A.2d 683 (Pa.Super. 2002). 

Although defendant did not produce a written representation

agreement, nevertheless tha parties’ course of dealing clearly

establish that they had an attorney-client relationship. See

Meyers v. Sudfeld, 2007 WL 419182 (E.D.Pa. Feb. 2, 2007) 

(Padova, J.).

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A claim for breach of the attorney-client agreement

is a contract claim and the attorney’s liability

in this regard will be based on the terms of that

contract. Thus, if an attorney agrees to provide

his or her best efforts and fails to do so an

action will accrue. Of course an attorney is by

implication agreeing to provide that client with

professional services consistent with those

expected of the profession at large.

Bailey v. Tucker, 533 Pa. 237, 251-252, 621 A.2d 108, 115 

(Pa. 1993).

Here, plaintiffs have established the existence of a

contract. Defendant does not dispute that it was hired to

perform services for Weaver Nut Company. However, plaintiffs’

sole contention is that the services provided by Barley Snyder to

the Company were provided while defendant was operating under a

conflict of interest. I have previously determined above that no

conflict of interest was present during the representation of

Weaver Nut Company. Thus, I conclude that there was no breach of

any duty owed to the Company.

Moreover, I also determined that the Company has not

suffered any damages in this case. Hence, the final element is

not satisfied. 

Thus, because plaintiffs have failed to prove by a

preponderance of the evidence that there was either a breach of a

duty imposed by the contract at issue or any damages resulted

therefrom, I conclude that plaintiffs fail to prove a cause of

action of breach of contract.

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Accordingly, I grant judgment in favor of defendant

Barley Snyder and against plaintiffs Reis and Katz in their

capacity as assignees of the rights of Weaver Nut Company on

Count VI of plaintiffs’ Amended Complaint.

CONCLUSION

 For the reasons expressed above, I find in favor of

defendant Barley, Snyder, Senft & Cohen and against plaintiffs

Michael Reis, Sr. and Lawrence J. Katz, individually, and as

assignees of the rights of Weaver Nut Company on Counts I, II, IV

and VI of plaintiffs’ Amended Complaint. 

12

 

 

 

 

 

 

All other counts of plaintiff’s Amended Complaint were dismissed 12

by my Order and Opinion dated March 30, 2007 and amended April 2, 2007

granting defendant’s motion to dismiss.

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