Court Opinion

ID: 615672
Source: CourtListenerOpinion
Date Created: 2011-10-20 16:58:25+00
Date Added: 2024-06-11T14:59:26.402262
License: Public Domain

PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
                ____________

                  No. 10-4456
                 ____________
    In re: LEMINGTON HOME FOR THE AGED

OFFICIAL COMMITTEE OF UNSECURED CREDITORS,
ON BEHALF OF THE ESTATE OF LEMINGTON HOME
               FOR THE AGED,
                                 Appellant

                     v.
   ARTHUR BALDWIN; LINDA COBB; JEROME
BULLOCK; ANGELA FORD; JOANNE ANDIORIO; J.W.
 WALLACE; TWYLA JOHNSON; NICOLE GAINES;
  WILLIAM THOMPKINS; ROY PENNER; MELODY
CAUSEY; JAMES SHEALEY; LEONARD R. DUNCAN;
   RENEE FRAZIER; CLAUDIA ALLEN; EUGENE
  DOWNING; GEORGE CALLOWAY; B. J. LEBER;
         REVEREND RONALD PETERS
                ___________

    On Appeal from the United States District Court
       for the Western District of Pennsylvania
        (D.C. Civil Action No. 2-10-cv-00800)
     District Judge: Honorable Arthur J. Schwab
                     ___________

                 Argued July 11, 2011
     Before: SLOVITER, FUENTES and VANASKIE,
                   Circuit Judges.

            (Opinion Filed September 21, 2011)

Robert S. Bernstein, Esq.
Kirk B. Burkley, Esq.
Nicholas D. Krawec, Esq. Argued
Krawec Bernstein Law Firm, PC
707 Grant Street
Suite 2200, Gulf Tower
Pittsburgh, PA 15219-0000
       Counsel for Appellants

Mark R. Hamilton, Esq. Argued
Philip J. Sbrolla, Esq.
Cipriani & Werner
650 Washington Road
Suite 700
Pittsburgh, PA 15228

Todd M. Raskin, Esq.
Mazanec, Raskin & Ryder
100 Franklin’s Row
34305 Solon Road
Cleveland, OH 44139
      Counsel for Appellee Arthur Baldwin

Suzanne B. Merrick

                            2
Thomas, Thomas & Hafer
301 Grant Street
One Oxford Centre, Suite 1150
Pittsburgh, PA 15219-0000
       Counsel for Appellee James Shealey

                       ___________

              ORDER AMENDING OPINION
                    ___________

VANASKIE, Circuit Judge.

     IT IS NOW ORDERED the above captioned case be
amended as follows:

Footnote 5 shall now read:

      The District Court erroneously held that the
      presumption of the business judgment rule is
      overcome only by evidence of gross negligence.
      The District Court cited a Delaware Supreme
      Court case which held that “under the business
      judgment rule director liability is predicated
      upon concepts of gross negligence.” Aronson v.
      Lewis, 473 A.2d 805, 812 (Del. 1984)
      (overruled on other grounds). Pennsylvania,
      however, recognizes directors’ and officers’
      liability for negligent breach of fiduciary duty.
      See, e.g., Wolf v. Fried, 373 A.2d 734, 735 (Pa.
      1977) (“[E]ven in the absence of fraud, self-
      dealing, or proof of personal profit or wanton
      acts of omission or commission, the directors of

                             3
      a corporation may be held personally liable
      where they have been imprudent, wasteful,
      careless and negligent and such actions have
      resulted in corporate losses.”). Of course, a
      non-profit corporation may restrict the
      circumstances under which a director may have
      personal liability for negligent acts by adoption
      of an appropriate by-law, see 15 Pa. C.S. §
      5713(a), in which event a director may be liable
      for a breach of fiduciary duties or a failure to
      perform the duties of the office only if “the
      breach or failure to perform constitutes self-
      dealing, willful misconduct or recklessness.”
       15 Pa. C.S. § 5713(a)(2). While the Home
      adopted an appropriate by-law, there is a
      genuine dispute of fact as to whether alleged
      breaches of fiduciary duties constituted self-
      dealing. Moreover, there is no comparable
      statutory limitation of liability for the officers of
      a non-profit corporation. Thus, a trial is
      required on the claims against Causey and
      Shealey on the question of whether they failed
      to exercise “such care, including reasonable
      inquiry, skill and diligence, as a person of
      ordinary prudence would use under similar
      circumstances.” 15 Pa. C.S. § 5712(c).

                                    s/ Thomas I. Vanaskie
                                    Circuit Judge
DATED: October 20, 2011
PDB/cc: All Counsel of Record

                               4