",.­

IN THE UNITED STATES DISTRICT COURT 


FOR THE WESTERN DISTRICT OF PENNSYLVANIA 


PACKAGING ENGINEERING, LLC, ) 


) 


Plaintiff, ) 


) 

v. ) C.A. 08-170 Erie 

) 

WERZALIT OF AMERICA, INC., and ) 

WERZALIT GmbH + Co. KG, ) 

) 

Defendants. ) 

OPINION 

Presently before the court is a motion for summary judgment by Defendant Werzalit 

GmbH + Co. KG ("Werzalit-Germany") (Doc. 35) and brief in support thereof. Plaintiff 

Packaging Engineering, LLC ("PE") has filed a brief in opposition, to which Werzalit-Germany 

has responded. For the reasons stated herein, we will grant the motion. 

I. Background 

The general facts are not in dispute unless otherwise noted. PE is in the business of 

providing packaging and shipping solutions to manufacturing businesses, such as those involved 

in the automotive industry. Defendant Werzalit of America, Inc. ("Werzalit-America"), a 

Pennsylvania corporation with its principal place ob business in Bradford, Pennsylvania, is a 

wholly owned subsidiary of defendant/movant Werzalit-Germany, a German business entity. 

Defendants both are in the business of designing and manufacturing wood products, including 

products molded from pressed wood strands. 

This dispute arises out of a contract between PE and Werzalit-America, for the 

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production oftooling for a prototype container or crate that PE was developing for its customer, 

Pilkington pIc. Pilkington is a global manufacturer of glass automobile windshields. 

In early 2004, Russell G. Hall, president ofPE, and John Selz, a business associate, began 

development ofthe pressed wood container. On June 9, 2005 PE entered into a Container 

Development Agreement and Supply Agreement with Pilkington. Under the terms ofthe 

agreement, PE agreed to complete the development of the pressed wood container with 

Pilkington's assistance and to produce and supply the container in specified volumes to 

Pilkington. These containers were intended for storing and/or shipping automotive windshields. 

In September 2005, PE began discussions with Werzalit-America1 to produce the tooling 

to manufacture the container and to supply the containers. PE advised Werzalit-America that PE 

had a contract with Pilkington for the guaranteed sale of a minimum of 150,000 pressed wood 

containers over a four-year period .. 

According to PE, Werzalit-America assured plaintiff that it could produce the tooling and 

manufacture said wood containers to fulfill the requirements of plaintiffs customer. In his 

deposition, Russ Hall described the initial meeting with Alan Ramsey, president of WerzalitAmerica. Hall stated that Ramsey represented that Werzalit-America was in the process of 

acquiring technology that would allow it to produce containers that met Pilkington's objectives. 

Like Inca/Litco, however, Werzalit-America declined to enter into a Container Development 

lpE had presented the concept of the specialized automotive windshield container to a 

company known as Inca/Litco, in an effort to have Inca/Litco complete the prototype crate and 

necessary tooling for the crate. The relationship between Inca/Litco and PE was severed on 

September 13, 2005, after Hall concluded that they could not satisfy the requirements necessary 

for the crate production. 

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Agreement. 

On November 3, 2005, representatives ofPE, Pilkington and Werzalit-America attended 

a meeting at one of Pilkington's plants for the purpose of reviewing a prototype windshield 

container produced by Werzalit-America. William Skill iter, an employee of Pilkington who 

negotiated the Container Development and Supply Agreement with PE, and who was centrally 

involved in the project, stated in the minutes from the November 3, 2005 meeting: 

[The] prototype review went well. .. Werzalit presented their 

perspective and commitment to achieving a quality product that will meet 

Pilkington's objectives but would not concede to compressing the timing to 

completion. They commented that a project ofthe magnitude would typically 

take 9-12 months and they have already compressed their schedules to 5 

months and are still committing to having boxes and production ready by 

march 2006. Further compression is not feasible without jeopardizing the 

quality ofthe engineering or design. They also commented that their owner 

and stockholders are aware of the Pilkington project and are extremely 

committed to working with Pilkington on a worldwide platform. 

This email was sent by Skilliter of Pilkington, not by any representative ofWerzalit-Germany. 

Furthermore, the recipients on the email (Hall, Ramsey and Graves an employee of WerzalitAmerica in Bradford, Pennsylvania) do not include anyone from Werzalit-Germany. 

On January 31, 2006, Werzalit-America issued a Quotation and Order Confirmation in 

the amount of $300,000 to be paid in four increments. The quotation was for one machine tool 

set, including engineering, to produce the prototype crate designed for windshield transportation. 

Plaintiff verbally accepted this quotation and Werzalit-America issued an Order 

Acknowledgment to plaintiff relating to their agreement. The Order Confirmation issued by 

Werzalit-America on February 24,2006 provided that Werzalit-America was to use its "best 

efforts" to produce tooling for the crate. Wezalit-Germany was not a party to the quotation. 

Hall admitted that all of his negotiations concerning a possible contract were with Alan 

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Ramsey, President ofWerzalit-America. When PE issued the purchase order on the project, it 

was issued to Werzalit-America; likewise, PE's Order Confirmation was received from WerzalitAmerica, not Werzalit-Germany. 

Werzalit-America required that the tool die set remain in its possession so that it could 

manufacture the wood containers. Between February 24, 2006 and December 31, 2006, 

pursuant to the terms ofthe contract, PE apparently paid defendant Werzalit-America $232,000 

toward completion of the tool set. 

According to the plaintiff, it was represented to PE and Pilkington that Werzalit-Germany 

was actively engaged in moving the project forward. PE points to a number of representations 

and instances in support of this contention. For example, Werzalit-Germany was conducting 

structural tests in Germany for the purpose of confirming the strength capabilities ofthe 

windshield container. During the early part of 2006, Werzalet-Germany assigned Martin Dietz, 

its "vice-president of design," to undertake the formulation ofthe adhesive that would be used to 

bind the wood strands for creating the components of the windshield containers. Russ Hall 

testified that a proper adhesive formula was essential to the development ofthe container and 

that Mr. Dietz was the only person working on the formula. 

According to plaintiff, in the summer of 2006, PE and Pilkington discovered that 

Werzalit-America had misrepresented the progress it had made on the tools, and in fact, had 

actually refused or become unable to pay the subcontractor it had hired to cut the tool set. 

In September 2006, Alan Ramsey ofWerzalit-America contacted Russ Hall and informed 

him that Werzalit-America was suspending any further work on the project. Russ Hall and John 

Selz then contacted Jochen Werz, the CEO ofWerzalit-Germany, to confirm Werzalit4 


Case 1:08-cv-00170-SPB Document 43 Filed 07/22/10 Page 4 of 13
Germany's commitment to the project. When asked to clarify his understanding of which 

defendant Werz was speaking for that day, Hall testified that he believed that Jochen Werz 

owned both Werzalit~America and Werzalit-Germany and that, although Hall knew they were 

separate corporations, he did not distinguish between them. 

During the phone call in September 2006, Hall and Selz conveyed that they thought it was 

Werz's obligation (according to PE, Werz, in his role as the leader ofthe "entire" entity, 

Werzalit-Germany and Werzalit-America) to step forward and provide whatever financing that 

Alan Ramsey ofWerzalit-America needed to advance the project. According to Hall, Werz said 

"that he would do everything that he could to maintain the program and advance it."(emphasis 

added). Hall understood that Werz was also committing to providing technical support to his 

American subsidiary. He stated that when "we got off the phone, John and I felt much better. 

We felt that, okay, this guy is going to step up and take more of an interest in this .... Support 

Alan Ramsey's operation and move it forward." However, Hall admits that Werz never said 

"that Werzalit KG is going to support Werzalit ofAmerica" and further, that no one ever 

promised or admitted that Werzalit-Germany would guarantee the performance of WerzalitAmerica or carry out portions ofthe contract performance itself. According to WerzalitGermany, these general statements and communications cannot be construed as an offer for 

Werzalit-Germany to take over the project. 

According to PE, when Werzalit-America announced in September 2006 that it would not 

perform its contractual obligations, Hall wrote to Dietz, inquiring about the support that 

Werzalit-Germany previously promised to provide for the project. This email, dated September 

13,2006, states that "John [Selz] and I [Hall] believe that corporate Werzalit needs to provide 

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Werzalit of America support on this program or the program may be in jeopardy." The email 

does not refer to any promise made by Werzalit-Germany, however. 

In November 2006, Werz participated in a conference call with Hall, Selz and Ramsey. 

According to the plaintiffs, during the call Mr. Werz again expressed his commitment to the 

container project and indicated that Werzalit-Germany was considering pulling the equipment 

used to manufacture the containers to Germany for further development. Notes of this 

conversation were prepared and circulated among participants, and state in part: "Mr. Werz plans 

to move the ... project to Germany where his engineering resources are. He plans to put Martin 

Dietz in charge ofthe project." Martin Dietz was a vice president at Werzalit-Germany and was 

the same individual who had been involved in formulating the adhesives to be used in 

manufacturing the containers. Representatives of both PE and Pilkington would regularly turn 

to Martin Dietz to seek information, support or direction regarding the project. 

When Werzalit-America announced in September 2006 that it would not perform its 

contractual obligations, Mr. Hall wrote to Mr. Dietz, inquiring about the support that WerzalitGermany had previously promised to provide for the project. Mr. Deitz had similar discussions 

with representatives of Pilkington, such that Skilliter was lead to believe that Werzalit-Germany 

would provide engineering resources, financial resources, and labor to come in and install the 

equipment. According to Skilliter, during a conference call with Dietz, he made it clear that he 

expected "to step in and give either the financial resources to hire the contractors or pull people 

from different areas in their organization to make things happen, because it was being stalled." 

Skilliter also testified that in September 2006, Mr. Dietz commented that Werzalit-Germany 

needed to take the project over and move it to Germany and "develop it our way." 

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Bruce Miller, a mechanical engineer - at Pilkington testified that he attended a meeting 

on November 17,2006, in which Martin Dietz participated, during which the progress of the 

project was discussed. According to Miller, Dietz stated that "he had the technical people in 

Germany to progress the project and he would take that back to Germany." Miller understood 

that Werzalit-Germany would provide production assistance such as equipment to be used to 

fabricate boxes. Werzalit-Germany aptly notes that it is not even mentioned by name in any of 

the statements, and that none ofthe statements includes a promise by Werzalit-Germany to 

undertake any specific course of action. The minutes ofthis meeting state, "Process design and 

prototyping ofprocess to be done in Germany due to limited resources in Bradford." 

In January 2007, plaintiffwas advised by defendant, Werzalit-America, that it was 

abandoning its efforts to complete the project. Jochen Werz had instructed Alan Ramsey to 

terminate the project. PE's subsequent efforts to produce a production version ofthe crate using 

other suppliers failed. To date, PE has never produced a practical production version ofthe crate. 

PE alleges that Werzalit-Germany's repudiation of its obligations was a material breach 

ofthe contract and that plaintiff has suffered a loss of its tooling payments in the amount of 

$232,000 plus lost profits relating to the sale ofthe wood containers in an amount in excess of 

$1,000,000. 

On August 27,2008, Werzalit-Germany filed a motion to dismiss on the grounds that its 

alleged promise to guarantee the performance ofWerzalit-America 1) was not in writing and 

therefore violated the statute offrauds; and 2) was not supported by adequate consideration. We 

denied the motion to dismiss in an Opinion and Order dated November 1,2008, and the case 

proceeded to discovery. 

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Werzalit-Germany has filed a motion for summary judgment, arguing that plaintiffPE 

failed to produce any evidence that Werzalit-Germany promised to guarantee the contractual 

obligations ofWerzalit-America. Plaintiff argues that based on the consistent testimony of the 

individuals involved in the project, Werzalit-Germany promised that "it would stand behind and 

guarantee" the performance of defendant, Werzalit-America, and if necessary carry out portions 

ofthe contract performance itself. 

II. Standard of Review 

Summary judgment is appropriate when "the pleadings, depositions, answers to 

interrogatories, and admissions on file, together with affidavits, if any, show that there is no 

genuine issue as to any material fact that the moving party is entitled to a judgment as a matter of 

law." Fed. R. Civ. P. 56(c), Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Summary 

judgment may be granted only ifthe moving party establishes that there exists no genuine issue 

ofmaterial fact and that it is entitled to judgment as a matter oflaw. Id. Summary judgment is 

appropriate only when the record evidence could not lead a reasonable jury to find for the 

non-moving party. Anderson v. Liberty Lobby Inc" 477 U.S. 242,248-249 (1986). In evaluating 

a motion for summary judgment the court does not weigh the evidence or make credibility 

determinations. Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000). Rather 

than evaluating the evidence and determining the truth ofthe matter, the court determines 

whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. In reviewing the evidence, 

the court draws all reasonable inferences in favor ofthe non-moving party. Reeves, 530 U.S. at 

150; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). 

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III. Discussion 

Defendant Werzalit-Gennany has filed a motion for summary judgment on the grounds 

that the action is barred by the statute of frauds and that any alleged promises by WerzalitGermany to guarantee the perfonnance of Werzalit-America are not supported by consideration. 

The Pennsylvania Statute ofFrauds states as follows: 

§ 3. Promise to answer for debt of another 

No action shall be brought ... whereby to charge the defendant, upon any special 

promise, to answer for the debt or default of another, unless the agreement upon 

which such action shall be brought, or some memorandum or note thereof, shall 

be in writing, and signed by the party to be charged therewith, or some other 

person by him authorized. 

33 P .S. § 3. ). A written memorandum is required in order to enforce a promise to pay the debt 

of another under Pennsylvania law. 33 Pa. Cons. Stat. Ann. § 3; Leonard v. Martling, 106 A.2d 

585 (Pa.1954). However, the statute of frauds rule that a promise to answer for the debt of 

another must be in writing does not apply where the main object ofthe promisor is to serve his 

o\VTI pecuniary or business purpose. See, Biller v. Ziegler, 593 A.2d 436,440 (1991) and cases 

cited therein. 

Werzalit-Gennany therefore argues that any alleged promises by Werzalit-Gennany to 

guarantee the perfonnance of Werzalit-America were verbal expressions (allegedly made well 

after the parties entered their agreement) and fails to satisfY the requirements of the statute of 

frauds. Werzalit-Gennany argues that because PE admits that no writing exits to support its 

claim against Werzalit-Gennany, and further, because Werzalit-Gennany never offered or agreed 

to guarantee the perfonnance ofWerzalit-America the statute of frauds does not come into our 

analysis because no parol evidence exists in this case. Even so, according to Werzalit-Gennany, 

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PE has produced no evidence to support any exception to the statute of frauds. 

In response, PE argues, as more fully explained below, that Section 88 ofthe Restatement 

(Second) of contracts clearly contemplates the creation of an oral guarantee under principles of 

estoppel and that there is a genuine issue of material fact in this regard. PE argues that, 

consistent with our holding on the motion to dismiss earlier in this case, PE's claim is not barred 

by the suretyship provision of the Statute of Frauds because the leading object or main purpose of 

Werzalit-Germany's promise to continue with the container project and stand behind the 

performance of Werzalit-America was to serve its own pecuniary or business purpose. 

In further support ofits motion for summary judgment, Werzalit-Germany argues that 

these alleged promises to guarantee the obligations of Werzalit-America are not supported by 

consideration, and under the case law, a third party's alleged guarantee of the debt or obligation 

of another is unenforceable unless supported by consideration, citing Paul Revere Protective Life 

Ins. Co. v. Weis, 535 F. Supp. 379,385 (E.D. Pa. 1981). Sufficient consideration to support a 

guaranty can exist where the guaranty is a condition precedent to a contracting party's agreement 

to enter into the underlying contract. Id. Werzalit-Germany argues that its alleged guaranty 

could not have induced PE to enter into the contract with Werzalit-America because the 

agreement pre-dated the alleged promise to "stand-behind" Werzalit-America's performance. 

The "leading object" or the "main purpose rule:" 

'Whenever the main purpose and object of the promisor is, not to answer for 

another, but to subserve some pecuniary or business purpose of his own, involving 

either a benefit to himself, or damages to the other contracting party, his promise 

is not within the statute, although it may be in form a provision to pay the debt of 

another, although the result ofit may incidentally have the effect of extinguishing 

that liability, is the rule laid down in many cases, and has been consistently 

followed by this court. ' 

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Eastern Wood Products Co. v. Metz, 89 A.2d 327, 330 (Pa. 1952), quoting Goodling v. Simon, 

54 Pa. Super. 125, 127 (1913). One court has explained that the difficulty in creating a brightline test for this rule "is that the question to be answered relates to the purpose, motive, object or 

desire ofthe promisor, and, therefor, it can only be answered by analyzing the complex objective 

manifestations surrounding the making ofthe promises." Thomas A Armbruster. Inc. v. Barron. 

491 A.2d 882,884 (Pa. Super. 1985), citing 1. Murray, Murray on Contracts § 316 (2d ed. 1974). 

We agree with the defendant and will grant the motion for summary judgment. We find 

that no reasonable jury could conclude that Werzalit-Germany promised to perform the 

contractual obligations ofWerzalit-America. There is no evidence that either PE threatened to 

pull out ofthe project with Werzalit-America or that Werzalit-Germany attempted to convince 

PE to continue with the project. Likewise, there is no evidence to support the assertion that 

Werzalit-America's main purpose was to serve its own pecuiniary or business purpose. 

Although Werzalit-Germany owned 100% ofthe co-defendant subsidiary, Eastern Wood 

Products Co. v. Metz, 89 a.2d 327,329-30 (Pa. 1952) (statute of frauds does not apply where 

promisor owned 100% of the corporation whose obligation he personally guaranteed), there is 

insufficient evidence to support the argument that this alleged promisor's main purpose for 

making an alleged guaranty was to serve its own pecuniary or business ends. Webb 

Manufacturing Co. v. Sinoff, 674 A.2d 723, 726 (Pa. Super. 1996). At most, through discovery 

plaintiff has found evidence that certain individuals had the impression that Werz himself wanted 

to help out; this is far different from whether there is a genuine issue ofmaterial fact that any 

specific contractual promises was ever stated by representatives of Werzalit-Germany and what, 

if any, its motive would have been in doing so. 

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In response to Werzalit-Germany's argument with respect to consideration, PE argues 

that because Werzalit-Germany reasonably should have expected that its guarantee would induce 

plaintiff to continue with the project and to forbear seeking damages against Werzalit-America 

under a theory of breach by repudiation, its agreement to do so is contractually binding. Section 

88 ofthe Restatement (Second) ofContracts provides: 

A promise to be surety for the performance of a contractual obligation, made to 

the obligee, is binding if 

(a) the promise is in writing and signed by the promisor and recites a purported 

consideration; or 

(b) the promise is made binding by statute; or 

(c) the promisor should reasonably expect the promise to induce action or 

forbearance ofa substantial character on the part ofthe promisee or a third 

person, and the promise does induce such action or forbearance. 

Restatement (Second) of Contracts § 88 (1981) (emphasis added); see Midlantic Foods, Inc. v. 

Michael Rosenzweig and Feasterville Thriftway, Inc., 1987 WL 582749 (Pa. Com. PI. Oct 02, 

1987). Again, we find that PE has not shown that there is evidence that Werzalit promised to 

stand behind and guantee the performance ofWerzalit-America. Moreover, ajury could not 

reasonably infer that Werzalit-Germany was attempting to induce plaintiff to continue with the 

project and to forbear pursuing a cause of action for abandonment and/or repudiation of its 

contractual obligations. 

It may be undisputed that key actors such as Hall and Skilliter hoped and believed 

Werzalit-Germany would save the project, but the record evidences does not meet the 

requirement of "clear and precise evidence" of a guarantee of sorts. Berquist Co. v. Sunroc Co., 

777 F. Supp. 1236, 1250 (E.D. Pa. 1991). There are general statements and communications that 

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Werz wanted to "do everything that he could to maintain the program and advance it" but there is 

no evidence that an agreement - offer, acceptance and consideration demonstrating an objective 

meeting ofthe minds as to definite contractual terms- was in fact ever reached. We therefore 

find that PE's allegations against Werzalit-Germany should not proceed to trial. Its motion for 

summary jUdgment shall be granted. 

Date: --~~9r--a-~~~\~------- \4. j..t }-.DdJ l4uu...)A;. 6. Co-wL~ Maurice B. Cohill, Jr. 

Senior United States District Court Judge 

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