Court Opinion

ID: 6320223
Source: CourtListenerOpinion
Date Created: 2022-03-04 17:11:16.49059+00
Date Added: 2024-06-11T09:02:36.580584
License: Public Domain

J-A26003-21

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

 ERALDO QATO, INDIVIDUALLY AND         :   IN THE SUPERIOR COURT OF
 DERIVATIVELY ON BEHALF OF             :        PENNSYLVANIA
 AMERICA’S HOME CARE, INC.             :
                                       :
                                       :
              v.                       :
                                       :
                                       :
 PETRAQ XOXE, IMELDA XOXE, AND         :
 ALB CARE, INC.                        :
                                       :
                                       :
 APPEAL OF: PETRAQ XOXE                :   No. 2128 EDA 2020

           Appeal from the Judgment Entered October 28, 2020
   In the Court of Common Pleas of Bucks County Civil Division at No(s):
                             No. 2017-02741

 ERALDO QATO, INDIVIDUALLY AND         :   IN THE SUPERIOR COURT OF
 DERIVATIVELY ON BEHALF OF             :        PENNSYLVANIA
 AMERICA’S HOME CARE, INC.             :
                                       :
                   Appellant           :
                                       :
                                       :
              v.                       :
                                       :
                                       :
 PETRAQ XOXE, IMELDA XOXE, AND         :
 ALB CARE, INC.                        :   No. 2161 EDA 2020

           Appeal from the Judgment Entered October 28, 2020
   In the Court of Common Pleas of Bucks County Civil Division at No(s):
                             No. 2017-02741

BEFORE: BOWES, J., STABILE, J., and McCAFFERY, J.

MEMORANDUM BY BOWES, J.:                           FILED MARCH 4, 2022

     Eraldo Qato (“Qato”), individually and derivatively on behalf of

America’s Home Care, Inc. (“AHC”), and Petraq Xoxe (“Xoxe”), have cross-
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appealed from the judgment entered against Xoxe and in favor of AHC

following a non-jury trial. Upon review, we vacate the judgment, affirm in

part and reverse in part the parties’ motions for post-trial relief, and remand

for further proceedings consistent with this memorandum.

       Qato and Xoxe are entrepreneurs whose families knew each other in

Albania. When Qato moved to Pennsylvania, he obtained employment as a

care manager with Philadelphia Corporation for Aging. Xoxe at the time was

living in New Jersey and working in the medical field as a cardiovascular

technician.     The men from time to time discussed opening a business,

brainstorming ideas ranging from importation of stone from Albania to adult

day care to opening a restaurant. In 2013, when the two men encountered

each other after not having spoken in a while, Qato suggested to Xoxe that

there was a business opportunity in the home care field1 catering to the

Albanian- and Greek-speaking communities. See N.T. Trial, 8/28/19, at 26-

30.

       Qato and Xoxe settled on a plan to incorporate AHC and run it as equal

partners. As Qato did not have funds for the initial capital investment, Xoxe

covered that $50,000 himself, with the understanding that he would be repaid

____________________________________________

1 Home care service companies employ direct care workers to provide services
such as dressing, grooming, bathing, medication management, and food
preparation for seniors and disabled adults, who are the clients. See N.T.
Trial, 8/28/19, at 38-39. Often, the direct care worker is a family member of
the client.   The company pays the direct care worker, then receives
reimbursement for the client through Medicaid. Id.

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once AHC became profitable. While continuing in his other employment, Qato

worked with Xoxe to obtain the necessary license for AHC. Once AHC was

licensed and operating, Xoxe, AHC’s only director and officer, solicited

business and handled administrative work. Qato, still working at his other

full-time job, assisted with the paperwork and did his part to spread word

about AHC in the community. Id. at 31-36.

      As AHC began to grow, Xoxe encouraged Qato to quit his other job and

work full time at AHC, which Qato did in October 2014. Through the efforts

of both men, AHC expanded from approximately forty clients and gross sales

of near $1.6 million in 2015 to $2.7 million with more than double the clients

in 2016. Both Xoxe and Qato earned six-figure salaries, and AHC employed

Qato’s sister Pema to manage the office and answer calls and emails. AHC

had achieved sufficient profitability by mid-2016 that AHC reimbursed Xoxe

his $50,000 investment. Also at that time, the company changed from a non-

stock to a stock corporation, and Xoxe transferred 50% of the shares to Qato,

who took on additional responsibilities such as becoming the administrator of

AHC. The company continued to prosper, with revenue of $3.35 million in

2017, and profits distributed to the shareholders on top of their increased

salaries as employees of AHC. Id. at 37-55; N.T. Trial, 8/29/19, at 46.

      Meanwhile, Qato and Xoxe’s relationship deteriorated in the summer of

2016, after Xoxe went on a two-month vacation with his family, leaving Qato

and Pema alone to prepare for a state compliance audit. When Xoxe returned,

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he no longer engaged in conversation with Qato, speaking only to Pema. Xoxe

ceased bringing in new clients or otherwise putting effort into the business.

Xoxe then fired Pema without consulting with Qato. Then, a few weeks later,

thirty-three of AHC’s 100 clients abruptly left without warning.    N.T. Trial

8/28/19, at 56-70, 149.    There had been no prior complaints from these

customers. Their caregivers, most of whom were family members, afterwards

expressed confusion, as they were unaware that they were switching agencies

and thought that paperwork which they had signed related only to AHC

opening a new office. Id. at 70, 157.

      It turned out that Xoxe’s wife, Imelda (“Imelda”), who had briefly

worked for AHC, was displeased with her husband’s plan to make Qato a full

partner of the company. Since she did not wish for her family to have to share

profits with Qato, she decided to form her own business and recruit AHC’s

clients. See N.T. Trial 8/29/19, at 68-69. With Xoxe’s full knowledge, Imelda

incorporated her own business, ALB Care, Inc. (“ALB”), in March of 2016, and

began the process of obtaining a license for it to provide home care services.

Imelda initially listed AHC’s address as that for ALB, and Xoxe informed

caregivers that AHC was opening a new office at the location which ultimately

became ALB’s office. N.T. Trial 8/28/19, at 154, 201. Imelda used $175,000

of the assets which she and Xoxe held jointly, with Xoxe’s knowledge and

consent, to capitalize ALB. Id. at 205-06; N.T. Trial 8/29/19, at 51, 88. Xoxe

provided business advice to Imelda, and assisted their daughter, who at the

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time was an employee of AHC, in obtaining the necessary certification for ALB

to operate.    Id. at 218; N.T. Trial, 8/29/19, at 12.     When ALB became

authorized to do business, Imelda and her daughter immediately completed

the paperwork to transfer thirty-three of AHC’s clients and caregivers to ALB.

N.T. Trial, 8/29/19, at 68-69. Xoxe acknowledged that he was aware that

Imelda’s plan for ALB was to target even more of AHC’s customers, and the

only thing that stopped her was Qato’s initiation of this lawsuit and the trial

court’s issuance of a preliminary injunction. See N.T. Trial, 8/28/19, at 209,

216-17.

       Despite this foreknowledge of the threat that ALB posed, and Imelda’s

specific intent to target and transfer AHC clients, Xoxe never told Qato of the

existence of ALB or Imelda’s plans, or himself took any actions as a director

of AHC to retain its clients. Id. at 205-14. Xoxe said nothing to Qato because,

as he saw it, Qato “didn’t pay a penny for that 50 percent of profits.” Id. at

205.

       In April 2017, Qato initiated this action on behalf of AHC against Xoxe,

Imelda, and ALB.         As indicated above, Qato succeeded in obtaining a

preliminary injunction against Imelda’s further solicitation of AHC’s clients.

AHC stated claims of breach of fiduciary duty against Xoxe, aiding and abetting

the breach by Imelda and ALB, and civil conspiracy against Xoxe and Imelda.

Xoxe filed counterclaims for breach of fiduciary duty, unjust enrichment, and

corporate dissolution.

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       In August 2019, the trial court held a bench trial during which it received

evidence of the above facts, as well as evidence that AHC sustained damages

totaling $1,333,505.00 as the result of ALB’s poaching of clients.          After

entertaining further written submissions, on June 22, 2020, the trial court filed

a verdict indicating that: (1) it found in favor of the plaintiffs and against

Xoxe in the amount of $566,752.50, which was half of the damages claimed

by the plaintiffs, to be paid directly to AHC; and (2) Xoxe was to be removed

as a director, but not as an officer, of AHC.2 See Order, 6/22/20.

       Qato and Xoxe each filed timely post-trial motions.      For reasons not

apparent from the certified record, the trial court did not rule upon the motions

within 120 days, although it entertained other filings in the case. Accordingly,

Qato filed a praecipe for entry of judgment pursuant to Pa.R.C.P. 227.4(1)(b).

Xoxe filed a timely notice of appeal from the judgment, and Qato filed a timely

cross-appeal. Qato sua sponte filed a Pa.R.A.P. 1925(b) statement of errors

complained of on appeal, and Xoxe timely complied with a subsequent order

to file his statement.      Thereafter, the trial court filed a Pa.R.A.P. 1925(a)

opinion addressing the parties’ claims of error.3

____________________________________________

2  The trial court held that the claims for civil conspiracy and aiding and
abetting failed. As Qato and AHC do not argue any claims of error regarding
these rulings, Imelda and ALB have declined to participate in these appeals.

3  As is discussed infra, the trial court acknowledged in its opinion that several
of the parties’ claims are valid and asks this Court to correct them. See Trial
Court Opinion, 2/19/21, at 15-16, 18. While we appreciate the candid
(Footnote Continued Next Page)

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       The parties filed their briefs and presented oral argument to this Court.

Accordingly, the appeal is ripe for disposition.

       Qato presents the following questions for our consideration:

              1.    Did the trial court err in failing to direct that the
       damages assessed against Petraq Xoxe be awarded directly to
       plaintiff Eraldo Qato, the 50% shareholder who brought the
       derivative action, or alternatively, whether the [c]ourt erred in
       failing to assess damages against Petraq Xoxe in the total amount
       of the harm he caused to the corporation?

             2.    Did the trial court abuse its discretion by failing to
       provide for the payment of prejudgment interest on the damages
       award from July 21, 2017 until the date of entry of the final
       judgment?

             3.     Did the trial court err in failing to remove Petraq Xoxe
       as an officer of [AHC]?

Qato’s brief at 3-4.

       Xoxe submits the following questions:

              1.    Did the trial court err by finding that [Xoxe] breached
       his fiduciary duty by: (a) “permitting” his wife to open a business;
       (b) not stopping clients from leaving to go to his wife’s business;
       and (c) not disclosing the wife’s business to a 50% shareholder of
       the corporation?

              2.   Did the trial court err by finding that [Xoxe] was liable
       for damages for the alleged breach of fiduciary duty where: (a)
       there was no record evidence that the corporation could have
       prevented the customers from leaving; (b) the 50% shareholder
       knew about the competitor despite the non-disclosure; and (c)
       Pennsylvania’s health-care law prohibited the corporation from
       “influencing” its clients’ choice of which healthcare provider to
       use?

____________________________________________

admission of error, we observe that the point of post-trial motions practice is
to allow the trial court to correct such errors prior to appeal.

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            3.    Did   the   trial   court   err   by   removing   [Xoxe’s]
      directorship?

              4.   Did the trial court err in calculating damages because
      it relied on an expert report that: (a) stated that 36 customers
      left the corporation when in fact 33 did so; and (b) failed to
      consider the corporation’s obligation to pay the employer’s share
      of payroll taxes in calculating the corporation’s profit margin?

Xoxe’s brief at 5-6.

      We consider the parties’ issues mindful of the following overriding legal

principles:

             Our standard of review of a non-jury verdict is limited to
      determining whether the findings of the trial court are supported
      by competent evidence and whether the trial court committed an
      error in any application of the law. We consider the evidence in a
      light most favorable to the verdict winner and will reverse only if
      the trial court’s findings of fact are not supported by competent
      evidence in the record or if its findings are premised on an error
      of law.

Hornberger v. Dave Gutelius Excavating, Inc., 176 A.3d 939, 943–44

(Pa.Super. 2017) (cleaned up).

      Rather than addressing each cross-appellant’s claims of error seriatim,

we group them by subject matter, first considering Xoxe’s challenges to the

finding of liability for breach of a duty owed to AHC.               Pursuant to

Pennsylvania’s Associations Code:

      A director of a business corporation shall stand in a fiduciary
      relation to the corporation and shall perform his duties as a
      director . . . in good faith, in a manner he reasonably believes to
      be in the best interests of the corporation and with such care,
      including reasonable inquiry, skill and diligence, as a person of
      ordinary prudence would use under similar circumstances

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15 Pa.C.S. § 1712(a). Xoxe acknowledges that he was a director, and thus,

a fiduciary, of AHC. See Xoxe’s brief at 36.

      The trial court offered the following basis for its determination that Xoxe

breached his fiduciary duties:

             Here, at the very minimum, Xoxe did not act as a person of
      ordinary prudence would have in warding off competition from
      ALB. When ALB was draining AHC’s client base, Xoxe did nothing
      to battle AHC’s corporate foe. Instead, Xoxe concealed the
      existence of this new competitor from his corporation. Xoxe also
      permitted his wife, Imelda, to use their joint marital funds to
      establish ALB as a corporation and to fund ALB corporate offices.
      Finally, in response to the new threat, Xoxe stopped working with
      his business partner and provided no more assistance to the
      faltering AHC. This amounts to a breach of the fiduciary duty of
      care.

             The precise circumstances further cast aspersions on
      whether Xoxe displayed the necessary loyalty to AHC that
      Pennsylvania law prescribes to officers and directors. For one,
      Xoxe’s close relationship with his competitor leads to an inference
      that his loyalty was not wholly with AHC and Qato. With Xoxe and
      Imelda sharing a joint bank account, Xoxe’s personal wealth would
      be increased by Imelda’s operations, suggesting he placed his own
      wealth over the best interests of AHC. Xoxe’s implied assertion—
      that he exercised [the required skill and diligence] in his dealings
      with AHC and Qato—failed to persuade this court. To remark that
      Xoxe used his personal position—sharing a financial unity with his
      company’s competitor—to the detriment of his differently-suited
      AHC co-owner is a fair characterization. This court declined to find
      that Xoxe affirmatively sabotaged AHC, but Xoxe’s sundered
      allegiances and his subsequent suspect conduct constituted a
      breach of fiduciary duty.

Trial Court Opinion, 2/19/21, at 9-10 (footnotes omitted; party designations

altered).

      Xoxe argues that the trial court erred in relying upon Xoxe’s failure to

act as a basis for finding a breach because it improperly raised that theory of

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liability sua sponte, and because imposition of such a duty is contrary to

regulations governing home-healthcare providers. See Xoxe’s brief at 30-32.

Xoxe further maintains that the trial court erred in basing its finding of a

breach of duty upon a notion that Xoxe was required to control his wife or

order her not to compete with AHC. Id. at 34-36. Finally, Xoxe contends that

his failure to disclose the existence of ALB could not serve as a breach of duty

because he had no obligation to do so.        We find merit in none of these

arguments.

      First, Xoxe did not raise in his post-trial motion or his Pa.R.A.P. 1925(b)

statement any claim of error regarding the alleged sua sponte injection of a

new theory of liability by the trial court, or a complaint that Qato did not plead

inaction as a basis for his claim.     Accordingly, the issue is waived.     See

Pa.R.C.P. 227.1(b)(2) (stating grounds for post-trial relief not specified in the

motion are waived); Pa.R.A.P. 1925(b)(4)(vii) (providing issues not raised in

a Rule 1925(b) statement are waived). In any event, Xoxe’s contention that

he was “not on notice that Qato was challenging [Xoxe’s] alleged failure to do

more to prevent clients from leaving” lacks merit.        See Xoxe’s amended

fourth-step brief at 3.   As Qato details in his brief, inaction as a basis for

breach of fiduciary duty appeared as early as at the preliminary injunction

stage of the case, was addressed in Qato’s pretrial memorandum, and was

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litigated at trial. See Qato’s third-step brief at 3-8.4 Hence, this issue does

not undermine the trial court’s finding that Xoxe breached his fiduciary duty

to AHC.

       Second,     the   then-applicable       provisions   of   Chapter   51   of   the

Pennsylvania Code did not prohibit Xoxe from taking any actions to retain

clients. Xoxe bases his contention on 55 Pa. Code § 55.11(i), which provided

among the prerequisites for becoming a provider enrolled with the Department

of Human Services, that a provider “may not influence a participant’s freedom

of choice in selecting a new provider.”            55 Pa. Code § 55.11(i) (effective

June 9, 2012 to February 2, 2020).

       The trial court agreed that Xoxe could not have forced AHC clients to

stay, but it indicated that AHC was permitted to attempt to persuade them to

remain. See Trial Court Opinion, 2/19/21, at 12. However, Xoxe contends

that persuasion “is comparable to ‘influence,’ or perhaps represents even

stronger efforts to alter a decision.” Xoxe’s brief at 50. He maintains that

§ 55.11(i) thus mandated his nonfeasance and, therefore, the trial court erred

in finding him at fault for his failure to act. Id. at 49-51.

       We disagree. The plain intent of the then-operable regulation was to

prohibit providers from interfering in a client’s freedom to choose a new

____________________________________________

4  Although the terminology “third-step brief” and “fourth-step brief” are not
utilized in Pa.R.A.P. 2136 in prescribing the briefing in cross-appeals, we
designate them as such herein as the parties have so titled their filings.

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provider. It does not preclude a provider from making efforts to retain clients

so long as the efforts do not cause the clients to believe that they lacked the

freedom to go elsewhere. As Qato observes, § 55.11(i) was “not intended to

permit one provider access to the client while denying another provider, the

existing provider, from the same access.”          Qato’s third-step brief at 25.

Rather, the intent is to forbid a provider “from misrepresenting to the client

the fact [that] his or her freedom of choice” is what ultimately controls. Id.

The trial court did not err in concluding that Xoxe could have, but utterly failed

to, make lawful efforts to keep AHC’s clients.5

       Third, we reject Xoxe’s suggestion that the trial court’s finding was

based upon the abolished doctrine of coverture and its tenet that a wife’s

identity merges into that of her husband. See Xoxe’s brief at 34-36. Xoxe’s

argument is that the trial court’s reference to Xoxe’s willingness for Imelda to

use funds from a joint account to fund her competing business necessarily

implies “that Imelda had no right to open her own business.” Id. at 34. In

actuality, the trial court merely cited Xoxe’s personal financial interest in his

____________________________________________

5  Xoxe alternatively asks that we remand for the trial court to consider the
business judgment rule as a basis to preclude his liability. See Xoxe’s brief
at 33. However, that rule “insulates an officer or director of a corporation
from liability for a business decision made in good faith” if certain conditions
are met. Linde v. Linde, 220 A.3d 1119, 1143 (Pa.Super. 2019) (cleaned
up). The trial court’s implicit finding that Xoxe did not act in good faith, having
actively concealed his knowledge and preventing AHC and Qato from taking
efforts to thwart Imelda’s plans, renders the business judgment rule
unavailing under these circumstances.

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competitor’s success as one of the circumstances evincing his lack of loyalty

to AHC and its financial best interests.   See Trial Court Opinion, 2/19/21, at

9-10.

        Finally, we are not persuaded by Xoxe’s argument that he violated no

fiduciary duty because he had no obligation to disclose the existence of ALB.

Xoxe highlights that ALB was actually formed when Xoxe was the only

shareholder of AHC, thus giving him no one else to whom to disclose the

information. However, this straw-man argument is meritless. We reiterate

that the trial court did not find Xoxe liable for a mere failure to disclose the

fact that ALB existed.      Rather, the trial court found that Xoxe actively

concealed his wife’s scheme to lure away AHC’s clients, made no effort in his

role as an officer and director of AHC to retain its clients, and indeed stopped

performing the normal work he had done for AHC before ALB’s recruitment

campaign began. See Trial Court Opinion, 2/19/21, at 9. Moreover, since

Xoxe and Imelda did not maintain separate finances, Xoxe personally

benefitted from his decision to ensure that AHC took no steps to compete with

ALB. Xoxe’s attempt to set up an overly-narrow basis for the trial court’s

decision merely to knock it down does not persuade us that relief is due.

        Accordingly, we conclude that none of Xoxe’s claims of error concerning

the trial court’s finding that he breached his fiduciary merits relief.

        In his next cluster of issues, Xoxe asserts that the trial court erred in

finding that his breach of duty caused damages. Specifically, Xoxe contends

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that his inaction was not the proven cause of any losses sustained by AHC

since there was no evidence showing: (1) why any of the clients left AHC, (2)

that Xoxe or AHC could have prevented any clients from leaving for ALB, and

(3) what Qato would have done differently if Xoxe had disclosed Imelda’s

efforts.6 See Xoxe’s brief at 44-48.

       We find our decision in CST, Inc. v. Mark, 520 A.2d 469 (Pa.Super.

1987), to be instructive.       CST was an advertising firm, and Mark its vice

president of media operations. Mark had been involved in CST’s publication

of a 1981 trip planning guide for a client. Although Mark had attempted to

convince CST to take the necessary steps to seek the job of publishing the

1982 guide, CST was reluctant, citing a cash-flow problem. Mark personally

obtained the job in the name of his own company and fronted $5,000 to the

client. CST later met with the client, which requested that Mark release his

rights to the job. However, by the time this came about, CST was not able to

post the required performance bond and did not publish the 1982 guide. CST

terminated Mark and sued him for breach of fiduciary duty.

       The trial court found Mark liable for breaching his fiduciary duty of

undivided loyalty and awarded $40,000 in damages.          Specially, the court

found that Mark had not been unjustly enriched by usurping the opportunity,

____________________________________________

6 Xoxe also relies upon the regulations against influencing the clients’ freedom
to choose another provider in challenging the damages awarded by the trial
court. See Xoxe’s brief at 49-51. This claim fails for the reasons explained
supra in connection with Xoxe’s breach of his fiduciary duty.

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as he lost the $5,000 of his personal money and released his interest in the

contract. However, the court found that Mark’s breach of fiduciary duty “had

been a substantial factor in bringing about, and, therefore, a legal cause of

the corporation’s failure to get the contract.” Id. at 472. It therefore awarded

damages “measured by the court’s estimate of the profits which the

corporation had lost by not getting the job.” Id.

      On appeal, Mark contended, inter alia, (1) that the evidence was

insufficient to establish that his actions were the cause of CST’s failure to

obtain the contract or (2) that the profits would have been $40,000. Id. at

473. This Court disposed of the claims as follows:

      These are close questions.        However, when a Pennsylvania
      appellate court reviews determinations of questions of fact, its
      only function is to examine and ascertain whether there is
      competent evidence in the record from which the facts necessary
      to sustain the judgment might properly be found. The test is not
      what conclusion the appellate court would have reached if it had
      been its province to find the facts, but whether there was evidence
      from which the facts could reasonably be found.

            Because our scope of review is thus limited, we are
      constrained to accept the findings of the trial court. Although the
      evidence would have supported contrary findings, we cannot say
      that the trial court arbitrarily rejected evidence or abused its
      discretion when it concluded that except for appellant’s breach of
      the duty of undivided loyalty to the corporation, CST would have
      been hired to produce the [1982] guide and would have realized
      therefrom a profit of $40,000.00.

Id. (cleaned up).

      Applying this rationale to the case sub judice, we reach the same result.

Qato did not produce witnesses to indicate that each of the thirty-three clients

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who left within the two-week period in 2017 would have stayed with AHC if

Qato had foreknowledge of Imelda’s plans or Xoxe had taken steps to retain

their business. However, as detailed above, the court did hear that AHC had

no complaints from clients prior to that time, that many expressed confusion

afterwards about the fact that they were now with a different company, and

that the mass exodus of clients ceased once Imelda was precluded from

soliciting from AHC’s client base. Therefore, we cannot say that the trial court

abused its discretion in inferring from the evidence presented that the clients

would have stayed but for Xoxe’s malfeasance. No relief is due.

      Having concluded that the trial court acted within its discretion in finding

a breach of duty and causation, we next consider the parties’ challenges to

the amount of damages assessed by the trial court. The trial court awarded

half of the amount of damages calculated by Qato’s expert to be paid by Xoxe

to AHC. Plaintiffs contend that the trial court, finding for the corporation on

the derivative action, should have awarded 100% of the damages to be paid

to the corporation, rather than the 50% loss suffered by Qato individually.

See Qato’s brief at 12-15. Xoxe argues that the trial court’s calculation was

incorrect because it was based upon an expert report that (1) included more

customers leaving than was supported by the evidence, and (2) did not factor

taxes into the calculation. See Xoxe’s brief at 54-56.

      The trial court acknowledged that it committed two of the three errors

alleged.   Regarding Xoxe’s claim about the number of customers, the trial

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court suggests that this Court “account for the discrepancy by reducing the

damages found in Qato’s expert report by 8.33% or three divided by thirty-

six.”   Trial Court Opinion, 2/19/21, at 16.        As for Qato’s claim about the

erroneous halving of damages, which Xoxe agrees requires correction, the

trial   court   indicates   that   the   correct   damages   amount    should   be

$1,039,046.25, which is the full, adjusted amount of lost profits sustained by

AHC. See Xoxe’s brief at 28; Trial Court Opinion, 2/19/21, at 18.

        However, the trial court denies any miscalculation involving the FICA

and unemployment compensation taxes.               It expressed the understanding

“that these taxes would be assessed on [the] damage award after the

distribution to the shareholders.” Trial Court Opinion, 2/19/21, at 16. The

court explained: “If this is true, accounting for the unemployment and FICA

taxes in [the] damage award to AHC would lead to what is essentially double

taxation.” Id. The trial court thus declined to deduct these taxes, believing

that “AHC’s damage award will presumably be taxed by FICA and

unemployment after distribution.” Id.

        We conclude that the trial court erred in all three respects in formulating

its damages award. As Xoxe explained, FICA and unemployment payroll taxes

are paid in part by an employee on their wages and are generally withheld by

the employer. See Xoxe’s brief at 55. However, the employer has its own,

separate obligation to pay payroll taxes. Id. While Xoxe’s expert factored

this business expense into the calculation of AHC’s net profits, Qato’s did not.

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Id.   Xoxe maintains that, applying the expense of payroll taxes to the

calculations of Qato’s expert, AHC’s profit margin is 28.06%, not 34.1. Id.

Notably, Qato does not offer any argument in support of the trial court as to

this issue. Hence, we agree with Xoxe that the trial court’s calculation was

further in error based upon its misapprehension of the nature of payroll taxes

as a business expense of AHC which AHC would not have retained as profit.

       Accordingly, we vacate the judgment and that portion of the verdict

ordering Xoxe to pay $566,752.50 to AHC. We further reverse the denial of

Qato’s post-trial motion as to issue (A)(1) and Xoxe’s post-trial motion as to

issue (III). Upon remand, the trial court shall enter a new verdict reflecting

the damages of lost net profits from the thirty-three lost customers, and it

shall order that either 100% of the damages be paid by Xoxe to AHC, or 50%

of the damages paid directly to Qato.7

       Next, Xoxe argues that the trial court erred in removing him as a director

of AHC, while Qato asserts that it erred in not also removing him as an officer.

Our legislature has provided that directors of a corporation may be removed

____________________________________________

7  Qato suggests that the trial court could have, and should have, instead
awarded 50% of AHC’s damages directly to Qato. See Qato’s brief at 16-17.
Xoxe, noting that the parties are in new litigation concerning control over AHC,
agrees that ordering Xoxe to pay half of the corrected damages amount
directly to Qato would be the most practicable solution. See Xoxe’s brief at
57-58. We leave the question to the trial court to decide when entering its
amended verdict.

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by shareholders, the board, or the court. Specifically, the following applies to

court removal of a director:

      Upon application of any shareholder or director, the court may
      remove from office any director in case of fraudulent or dishonest
      acts, or gross abuse of authority or discretion with reference to
      the corporation, or for any other proper cause, and may bar from
      office any director so removed for a period prescribed by the court.
      The corporation shall be made a party to the action and as a
      prerequisite to the maintenance of an action under this subsection
      a shareholder shall comply with Subchapter F (relating to
      derivative actions).

15 Pa.C.S. § 1726(c). This decision is within the sound discretion of the trial

court. See Linde v. Linde, 220 A.3d 1119, 1145 (Pa.Super. 2019).

      As for officers, the Associations Code merely provides that “[a]ny officer

or agent of a business corporation may be removed by the board of directors

with or without cause.” 15 Pa.C.S. § 1733.

      The trial court addressed Xoxe’s claim of error as follows:

             Here, th[e trial] court found that Xoxe actively concealed
      Imelda’s business scheme from AHC, failed to notify Qato of this
      approaching business adversary, and spent increasingly less time
      working for AHC when his wife Imelda began targeting AHC
      customers. Th[e c]ourt finds this behavior exhibited a lack of trust
      and honesty. Similarly, Xoxe’s concealment of Imelda’s plot
      suggested a lack of integrity. Further, Xoxe’s failure to notify his
      corporation of a potential business threat that could potentially
      usurp all of ANC’s clients constituted a gross abuse of discretion.
      All in all, Xoxe committed the necessary acts to reach the
      offending level of conduct required for director removal.

Trial Court Opinion, 2/19/21, at 13-14 (party designations altered).

      Xoxe’s argument for reversal is primarily a regurgitation of his belief

that it was a mere failure to tell Qato that ALB existed that formed the basis

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of the trial court’s ruling, and that it was in error because he had no duty to

do so.   See Xoxe’s brief at 51-52.           We have already rejected Xoxe’s

mischaracterization of the trial court’s holding, finding ample evidence that he

breached his duty to AHC by both assisting Imelda in forming ALB with the

full knowledge that she did so for the specific purpose of decimating AHC’s

business and by ensuring that AHC would offer no resistance to her efforts.

The trial court did not err in finding this proper cause to remove Xoxe as a

director of AHC pursuant to § 1726(c).

      As for Qato’s claim, the trial court opined that it lacked the authority to

remove corporate officers. Id. at 19. Qato offers no support for a trial court’s

power to remove an officer other than § 1726(c). Qato contends that the

statute’s reference to a court’s power to remove a director “from office” is a

reference “to the fact that many corporate directors serve as officers as well.”

Qato’s brief at 22. Therefore, Qato posits, § 1726(c) provides the “statutory

authority to remove Petraq Xoxe as an officer of [AHC] for the very same

reasons that his removal from the board of directors was warranted.” Id.

      We find Qato’s attempt to stretch the reach of § 1726(c) unavailing.

The legislature plainly established separate rules for the removal of directors

and officers, declining to allow court intervention regarding the latter.

Compare 15 Pa.C.S. § 1726(c) (“Removal of directors”) with 15 Pa.C.S.

§ 1733 (“Removal of officers and agents”). The fact that a directorship is an

“office” within the company does not make a director an “officer.” AHC is free

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to itself, through its new board of directors, which does not include Xoxe, to

remove him as an officer with or without cause pursuant to § 1733.

      Finally, Qato contends that the trial court erred in failing to award pre-

judgment interest.    Whether to award prejudgment interest is within the

sound discretion of the trial court. See, e.g., Kaiser v. Old Republic Ins.

Co., 741 A.2d 748, 755 (Pa.Super. 1999).

      When a court comes to a conclusion through the exercise of its
      discretion, there is a heavy burden to show that this discretion has
      been abused. It is not sufficient to persuade the appellate court
      that it might have reached a different conclusion, it is necessary
      to show an actual abuse of the discretionary power. An abuse of
      discretion will not be found based on a mere error of judgment,
      but rather exists where the court has reached a conclusion which
      overrides or misapplies the law, or where the judgment exercised
      is manifestly unreasonable, or the result of partiality, prejudice,
      bias or ill-will. Absent an abuse of that discretion, we will not
      disturb the ruling of the trial court.

Linde, supra at 1150 (cleaned up).

      The general rule is that the prevailing litigant is entitled only to interest

as of the date of the verdict. Id. However, “pre-judgment interest may be

awarded when a defendant holds money or property which belongs in good

conscience to the plaintiff, and the objective of the court is to force

disgorgement of his unjust enrichment. Pre-judgment interest in such cases

is a part of the restitution necessary to avoid injustice.” Id. (quoting Kaiser,

supra at 755) (cleaned up). In sum, the trial court should apply equitable

principles and decide whether to award interest “according to a plain and

simple consideration of justice and fair dealing.” Id. (cleaned up).

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      The trial court, in addressing Qato’s claim of error regarding its failure

to award pre-judgment interest, acknowledged the legal principles noted

above, then explained its decision as follows:

      Here, this [c]ourt used this broad discretion to [deciding whether
      to] award pre-judgment interest, and this [c]ourt declined to
      deviate from the general rule that the successful litigant is entitled
      to interest beginning only on the date of the verdict.

           Therefore, this Court did not err in declining to award pre-
      judgment interest to AHC.

Trial Court Opinion, 2/19/22, at 18.

      Qato maintains that an award of prejudgment interest is necessary to

fully compensate AHC for Xoxe’s breach of fiduciary duty, and urges that

“[t]his Court should not countenance” the trial court’s non-explanation for its

decision to the contrary. Qato’s brief at 19.

      We agree that the trial court’s opinion does not shed much light on its

balancing of the equities.    However, this Court has in a similar situation

affirmed the trial court’s ruling where the certified record otherwise indicated

that the trial court’s decision was based upon the proper considerations. See

Kaiser, supra at 755 (affirming trial court’s award of prejudgment interest

upon an examination of the evidence of record although “the trial court did

not specify its reasons for the award of pre-judgment interest”).

      As Xoxe observed, the trial court did not find that Xoxe took property

belonging to AHC, “but rather failed to do more to stop others from taking it.”

Xoxe’s brief at 58. Further, since the clients went to ALB, of which Imelda

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was the only owner, and Qato points to no evidence of how much benefit Xoxe

himself has realized, the traditional basis for the award of such interest,

namely to disgorge wrongfully-obtained property from one who has been

unjustly enriched, is not evident. Hence, we agree with Xoxe that the trial

court’s decision to award AHC damages for the expected future profits lost

from the transfer of all thirty-three clients, but to deny pre-judgment interest,

was a reasonable compromise under the circumstances of this case and not a

manifest abuse of discretion. See Kaiser, supra at 755. Consequently, we

hold that Qato’s final issue merits no relief.

      Nonetheless, for the reasons detailed above, we vacate the October 28,

2020 judgment, affirm in part and reverse in part the denial by operation of

law of the parties’ motions for post-trial relief, and remand for further

proceedings consistent with this memorandum.

      Judgment vacated.       Case remanded with instructions.       Jurisdiction

relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 3/4/2022

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