Court Opinion

ID: 2904522
Source: CourtListenerOpinion
Date Created: 2015-09-09 22:10:45.437727+00
Date Added: 2024-06-11T11:34:50.110696
License: Public Domain

J-A16011-15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

NICHOLAS D. ANDREWS                          IN THE SUPERIOR COURT OF
                                                   PENNSYLVANIA
                         Appellee

                   v.

CROSS ATLANTIC CAPITAL PARTNERS,
INC.,

                   Appellant
_________________________________

NICHOLAS D. ANDREWS

                         Appellant

                    v.

DONALD R. CALDWELL,

                         Appellee
                                                 No. 1694 EDA 2014

              Appeal from the Judgment Entered May 22, 2014
              In the Court of Common Pleas of Chester County
                     Civil Division at No(s): 2011-06164
                                             2011-09776-CT

NICHOLAS D. ANDREWS                          IN THE SUPERIOR COURT OF
                                                   PENNSYLVANIA
                         Appellee

                   v.

CROSS ATLANTIC CAPITAL PARTNERS,
INC.,

                   Appellant
_________________________________
J-A16011-15

NICHOLAS D. ANDREWS

                          Appellee

                v.

DONALD R. CALDWELL,
                                                 No. 1825 EDA 2014
                          Appellant

              Appeal from the Judgment Entered May 22, 2014
              In the Court of Common Pleas of Chester County
                     Civil Division at No(s): 2011-06164

NICHOLAS D. ANDREWS                          IN THE SUPERIOR COURT OF
                                                   PENNSYLVANIA
                          Appellant

                     v.

CROSS ATLANTIC CAPITAL PARTNERS,
INC.,

                   Appellee
_________________________________

NICHOLAS D. ANDREWS

                          Appellant

                     v.

DONALD R. CALDWELL,

                          Appellee               No. 1934 EDA 2014

              Appeal from the Judgment Entered May 22, 2014
              In the Court of Common Pleas of Chester County
                   Civil Division at No(s): 2011-06164-CT

                                      -2-
J-A16011-15

BEFORE: LAZARUS, J., JENKINS, J., and PLATT, J.*

CONCURRING AND DISSENTING MEMORANDUM BY JENKINS, J.:

FILED SEPTEMBER 09, 2015

        I agree with the decision of my distinguished colleagues at 1934 EDA

2014 to quash the appeal of Nicholas Andrews.          I further agree with my

colleagues’ decision at 1694 EDA 2014 to affirm the trial court’s order

denying Andrews’ motion for costs and expert fees.

        I respectfully dissent from the decision of my colleagues in the

majority at 1825 EDA 2014 to affirm the judgment entered in Andrews’ favor

against Cross Atlantic Capital Partners (“CACP”) and Donald Caldwell

(collectively “Appellants”).       In my view, the trial court erred in denying

appellants’ post-verdict motion seeking judgment n.o.v. on the ground that

the statute of limitations expired years before Andrews filed suit. Because I

find this issue dispositive, I will not address any other issues raised by

appellants.

        A motion for judgment n.o.v. is a post-trial motion in which the verdict

loser requests the court to enter judgment in its favor. There are two bases

on which the court can grant judgment n.o.v.:

        [O]ne, the movant is entitled to judgment as a matter of law
        and/or two, the evidence is such that no two reasonable minds
        could disagree that the outcome should have been rendered in
        favor of the movant. With the first, the court reviews the record
____________________________________________

*
    Retired Senior Judge assigned to the Superior Court.

                                           -3-
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     and concludes that even with all factual inferences decided
     adverse to the movant the law nonetheless requires a verdict in
     his favor, whereas with the second, the court reviews the
     evidentiary record and concludes that the evidence was such
     that a verdict for the movant was beyond peradventure.

Polett    v.   Public   Communications,     Inc.,   83   A.3d    205,   212

(Pa.Super.2013).    In an appeal from the trial court’s decision to deny

judgment n.o.v., “[we must consider] the evidence in the light most

favorable to the verdict winner, and he must be given the benefit of every

reasonable inference of fact arising therefrom, and any conflict in the

evidence must be resolved in his favor.” Nelson v. Airco Welders Supply,

107 A.3d 146, 154 (Pa.Super.2014) (en banc).        We will reverse a trial

court’s denial of a judgment n.o.v. only when we find an abuse of discretion

or an error of law that controlled the outcome of the case. Polett, 83 A.3d

at 211.

     Viewed in the light most favorable to Andrews, the verdict winner, the

following evidence was adduced during trial. CACP is a private equity firm

that raises capital from institutional investors and places that capital in

specially created investment funds. Each fund uses its capital to purchase

equity interests in promising companies, known as the fund’s portfolio

companies.

     Each investment fund is a partnership with a general partner and a

number of limited partners. The general partner serves as the investment

manager: it oversees the fund, makes investment decisions, and provides

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strategic advice to the portfolio companies.     CACP is the general partner,

and thus the investment manager, of each fund. The limited partners are

passive investors who put up most of the capital for each fund and bear

most of the risk. In return, they receive an ownership interest in each fund

and are entitled to most of the profits.   The general partner contributes a

smaller portion of capital to each fund and is entitled to some profits, but

with lower priority than the limited partners.

      In 1999, at the height of the dot-com boom, CACP formed an

investment fund called the Technology Fund, L.P. (the “Technology Fund”) to

invest in tech companies. The Technology Fund’s general partner was XATF

Management, L.P. (“XATF”).         CACP was XATF’s general partner and

investment manager of the Technology Fund. About 100 investors acted as

the Technology Fund’s limited partners and invested about $114 million.

XATF invested an additional $6 million.

      Andrews graduated from the Wharton School of the University of

Pennsylvania in 1993. His first job was with Firemark Investments, a private

equity firm, which terminated him in 1998. On September 1, 1999, Andrews

accepted an offer to join CACP as a principal on an at-will basis. Principals

at CACP have no ownership interest in CACP or in the funds for which CACP

serves as investment manager. Andrews’ responsibilities at CACP included

researching prospective portfolio companies, conducting market research,

and meeting with entrepreneurs.      He received a salary of $125,000.00, the

                                     -5-
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opportunity to earn a bonus of $75,000.00 at the end of his first year of

employment, and health and dental benefits.           He also received the

opportunity to earn up to one point of “carried interest” in the Technology

Fund, i.e., one percent of the Technology Fund’s excess profits.        Under

CACP’s standard practice, an employee’s carried interest did not begin to

vest until the first anniversary of employment.      Andrews was never an

investor in the Technology Fund.

      Much of Andrews’ work at CACP involved researching GAIN Capital

(“GAIN”) as a potential investment for the Technology Fund.        At CACP’s

request, Andrews negotiated the terms of CACP’s investment in GAIN and

recommended that CACP invest $2.5 million in GAIN in return for a 22.75%

ownership interest. GAIN’s CEO testified that Andrews did a good job in this

endeavor.

      According to CACP, the Technology Fund did not do as well as

everyone had hoped. CACP admitted that the Fund was able to return to the

limited partners and to the general partner their aggregate capital

contributions ($120 million) and was able to pay some of the preferred

return (interest) to the limited partners. CACP claimed, however, that the

Technology Fund fell far short of generating excess profits.     Accordingly,

CACP has never distributed excess profits to any of the Technology Fund’s

limited partners, to its general partner, to any of CACP’s partners, or to any

of CACP’s employees or former employees.

                                    -6-
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        About nine months after Andrews joined CACP, CACP informed him

that he was not going to be promoted to partner. Consequently, Andrews

resigned on June 1, 2000. At the time of his departure, CACP and Andrews

negotiated a separation agreement in which CACP agreed, among other

things, to pay Andrews an amount equal to three months of additional salary

plus a $75,000 bonus for which Andrews would have become eligible had he

remained at CACP for an entire year instead of nine months.           CACP also

agreed to continue Andrews’ medical and dental benefits for another three

months.

        Most importantly, CACP agreed in Paragraph 5 of the separation

agreement that Andrews would share in the Technology Fund’s “carried

interest” if the Fund ever become successful enough to generate excess

profits, thus waiving CACP’s standard requirement that the right to carried

interest does not vest until the first anniversary of employment. Paragraph

5 states in full:

        By the end of this Severance Period, you will have vested one
        year of service towards 1.0% of carried interest in CACP
        Technology Fund, L.P. and 0.5% carried interest in The Co-
        Investment 2000 Fund, L.P.[1] Therefore, you will receive 0.2%
        and 0.1 % carried interest as your earned and vested carry in
        CACP Technology Fund, L.P. and The Co-Investment 2000 Fund,
        L.P., respectively. In addition, as special consideration for your
        effort put forth on GAIN Capital, we will offer you a full 1.0% and
        0.5% carried interest on that particular transaction to be earned,
        paid and distributed at such time that the distribution is made to
____________________________________________

1
    The Co-Investment 2000 Fund’s carried interest is not at issue in this case.

                                           -7-
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      all other Limited Partners of the funds. Distributions of your
      participation in these carried interests will be in all cases
      identical to what you would have received if still employed by
      the funds.

      The separation agreement does not define “carried interest”, and CACP

and Andrews disagreed as to its meaning. CACP argued at trial that carried

interest is a distribution of the Technology Fund’s excess profits which

cannot take place until after CACP returns capital and interest to the limited

partners.   In CACP’s view, for Andrews to receive carried interest, the

Technology Fund as a whole must make a profit.         Andrews maintained at

trial that he must receive carried interest anytime CACP distributed any

money, including capital, from sales of GAIN shares. In other words, it was

not necessary for the entire Technology Fund to make a profit before

Andrews received carried interest; the only requisite was that CACP sell

shares of GAIN stock. Andrews labeled his interpretation of carried interest

as his right to “deal-specific” carried interest.

      On September 3, 2003, three years after leaving the company,

Andrews learned from a press release that a number of GAIN shareholders

had sold a significant portion of their shares. N.T., 8/27/13, at 75-77. On

September 4, 2003, Andrews sent Brian Adamsky, CACP’s CFO, an email

inquiring whether the Technology Fund was among those shareholders.

Plaintiff’s Exhibit 6. Andrews wrote:

      I saw the press release for Gain’s [deal] with Tudor on
      VentureWire, and noticed in Mark’s quote a reference to ‘liquidity
      to existing shareholders’. Did XATF sell some or all of its position

                                        -8-
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       into the round? If so, the sale would trigger an obligation under
       my separation agreement, so please advise as to the amount
       and timing of payment to me.

Id. (italics added). In other words, Andrews claimed that if XATF sold GAIN

stock, then CACP owed Andrews one percent of the proceeds from the sale

of the shares, based on Andrews’ construction of the third sentence of

paragraph 5 of the separation agreement.

       Later on September 4th, Glenn Rieger, CACP’s president, responded to

Andrews via email:

       Nick - It has been a while, I hope all is well! GAIN has made a
       lot of progress since your resignation from CACP, and continues
       to be one of our better performing companies. As we were
       putting this transaction together with Tudor I had in the back of
       my mind our contractual obligations to you. Believe me if l felt
       there was an obligation to payout to you, I would be the first to
       contact you because that would mean a payout to me as well.

       The $10MM deal with Tudor was a series C round with all but
       $1MM being used to redeem common A & B stock. Mark is the
       largest recipient in the group clearing over $6 MM personally.
       XATF is receiving $1.1 MM to be distributed to its [limited
       partners] while retaining between 18.8-19.4% ownership based
       on an EBITDA[2] ratchet that will not be finalized until 12/31/04.

       The operative sentence of your agreement is the last sentence of
       paragraph #5 -”Distributions of your participation in these
       carried interests will be in all cases identical to what you would
       have received if still employed by the funds.” Since XATF is
       not into its carry at this time, there is no distribution to
       the GP under the carry provision of the Partnership
       Agreement       and     hence,      no    distribution    to  any
____________________________________________

2
  EBITDA is an acronym for “earnings before interest, taxes, depreciation
and amoritization.” Andrews does not claim that the reference to EBITDA
helps his case, so I need not address it further.

                                           -9-
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      employees/partners/others from the GP as a result of this
      transaction. I will keep you posted on the outcome of the fund
      as it may relate to any carry as those events occur.

Plaintiff’s Exhibit 6 (italics and bolding added).

      A few days later, on September 9th, Andrews sent Rieger the following

email:

      I went over to my storage place and dug out the separation
      agreement and my attendant materials, and in reading the file
      confirmed that we have a genuine disagreement about the
      nature of the agreement. While this is not a big deal when the
      immediate amount involved is $11,000 I think we can agree that
      we are better off reconciling our views before the number goes
      up.

      Paragraph 5 of the agreement is language you proposed. While I
      think I can understand how you read the ‘if still employed clause
      to create some ambiguity as regards the fund-level carry, as
      regards the gain-specific ‘carry’ there can be no doubt about
      the intent and meaning of ‘...special recognition...to be earned,
      paid, and distributed at such time as the distribution is made
      to—Limited    Partners.’   Obviously    this  language     is  all
      contextualized by the fact that I was not an LP myself, by the
      lack of a predecessor agreement or other basis for an ‘if still
      employed’ comparison, and most of all by the performance gap
      between Gain and XATF.

      I think we all expected at the time of the agreement, and still
      hope today, that XATF would and will make payouts. (I’m
      actually quite encouraged by your email in this regard - if you
      were thinking about me on this deal but expecting to pay all
      early simultaneously, XATF must be pretty close to paying out.)
      Nonetheless, I think we should prepare for the possibility
      that Gain winds up positive and XATF negative by
      clarifying the language of paragraph 5 as soon as
      possible.

Plaintiff’s Exhibit 6 (italics and bolding added).

                                      - 10 -
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     For the next seven years, Andrews did nothing further. He admitted at

trial that he failed to “follow up with” anyone at CACP about the fundamental

disagreement to which he had devoted his September 9, 2003 email. He said

that although he was supposed to receive $11,000.00 in September 2003 at

the time of distribution to the limited partners, it made no sense on a cost-

benefit basis to hire an attorney to recover $11,000.00. N.T., 8/26/13, at

129-30. He conceded that he made no effort to clarify the language of the

separation agreement. N.T., 8/27/13, at 84. He even admitted that he had

visited CACP’s offices a few times between 2003 and 2010 but did not raise

the carried interest issue with anyone during his visits.     Id. at 84-85.

During the same seven-year period, however, Andrew followed GAIN’s

progress by reading press releases and by searching the internet. Id. at 85-

86. Information readily accessible in the public domain showed that GAIN

was increasing in value and was making significant purchases of shares from

its existing shareholders.   Id. at 86-87.   One press release specifically

named CACP as being among these shareholders. Id. at 91.

     In December 2010, seven years after Andrews believed CACP had

breached the separation agreement and had caused him damages, Andrews

made further inquiries to CACP about the Technology Fund. N.T., 8/26/13,

at 129-31. As a result of those inquiries, CACP CFO Adamsky sent Andrews

the most recent available financial data about the fund, including data about

the fund’s GAIN-related distributions.   Id. at 132-33, 138-39.     Adamsky

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wrote to Andrews in 2011: “We will let you know if there are any dramatic

changes in the XATF fund which would make a carry allocation a possibility

…”

      Sales of the Technology Fund’s shares in GAIN resulted in six

distributions of the following amounts on the following dates:

      September 10, 2003:           $ 1,090,381.00
      April 4, 2006:                $ 10,000,004.00
      January 14, 2008:             $ 42,433,651.00
      December 21, 2010:            $ 14,993,616.00
      March 15, 2012:               $ 3,666,451.00
      February 13, 2013:            $ 3,128,423.00

      Aggregate distributions:      $ 75,311,526.00

N.T., 8/28/13, at 36-38.    All distributions repaid capital contributions and

preferred return to the Fund’s investors.      Id. at 44.        None of these

distributions were distributions of excess profits, because the Technology

Fund never generated excess profits.

      In 2011, Andrews filed an action alleging breach of contract against

CACP and breach of the Wage Payment Collection Law (“WPCL”) against

CACP and CACP’s CEO, Caldwell. The breach of contract claim asserted that

CACP breached its duty to make payments due under the separation

agreement.    The WPCL claim contended that the payments due under the

separation agreement constituted unpaid “wages”. Andrews claimed that he

was entitled to damages of one percent of the total distributions, or more

than $750,000.00.     Both before and during trial, Appellants requested

dismissal of Andrews’ action under the applicable statutes of limitations. At

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the close of Andrews’ case in chief, the trial court granted a nonsuit to

Appellants as to the September 2003 distribution. But at both the nonsuit

stage (N.T., 8/28/13, at 72-78) and directed verdict stage (N.T., 8/30/13, at

3-5), the trial court rejected the statute of limitations argument as to all

distributions other than September 2003.

      The jury completed a special verdict slip with 19 questions relating to

liability, damages and the statute of limitations.   The jury found that the

discovery rule tolled the statute of limitations, and that Appellants failed to

act in good faith under the separation agreement.        The jury returned a

verdict in the amount of $742,221.45 against Appellants. Subsequently, the

trial court denied Appellants’ timely post-verdict motions seeking judgment

n.o.v. and/or a new trial. The court granted Andrews’ post-verdict motions

in part and added prejudgment interest and attorney fees to the verdict,

resulting in a judgment of $1,216,617.70 in Andrews’ favor.

      Based on this evidence, Appellants argue that the trial court erred in

denying their post-trial motion for judgment n.o.v. because, as a matter of

law, the statute of limitations bars all of Andrews’ breach of contract and

WPCL claims. I agree.

      Preliminarily, I find no merit in Andrews’ claim that Appellants waived

their statute of limitations argument.   Appellants preserved the statute of

limitations argument at every step by raising the statute in their answer to

Andrews’ complaint, their motion for compulsory nonsuit (N.T., 8/28/13, at

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74), their motion for directed verdict (N.T., 8/30/13, at 3-4), their post-

verdict motions seeking judgment n.o.v. and their Pa.R.A.P. 1925(b)

statement. I now turn to the substance of Appellants’ argument.

      Statutes of limitations begin to run

      as soon as the right to institute and maintain a suit arises; lack
      of knowledge, mistake or misunderstanding do not toll the
      running of the statute of limitations. A person asserting a claim
      is under a duty to use all reasonable diligence to be properly
      informed of the facts and circumstances upon which a potential
      right of recovery is based and to institute suit within the
      prescribed statutory period.

      The statute of limitations requires aggrieved individuals to bring
      their claims within a certain time of the injury, so that the
      passage of time does not damage the defendant’s ability to
      adequately defend against claims made the statute of limitations
      supplies the place of evidence lost or impaired by lapse of time,
      by raising a presumption which renders proof unnecessary.
      Statutes of limitations are designed to effectuate three
      purposes: (1) preservation of evidence; (2) the right of potential
      defendants to repose; and (3) administrative efficiency and
      convenience.

Aquilino v. Philadelphia Catholic Archdiocese, 884 A.2d 1269, 1275

(Pa.Super.2005) (internal citations omitted). Statutes of limitations promote

the state’s interest in finality by preventing a plaintiff from sleeping on his

rights “until evidence has been lost, memories have faded, and witnesses

have disappeared.” Order of R.R. Telegraphers v. Ry. Express Agency,

321 U.S. 342, 348–349 (1944).

      The statute of limitations for WPCL actions is three years, 43 Pa.C.S. §

260.9a(g), and the statute of limitations for breach of contract actions is

four years, 42 Pa.C.S. § 5525(8).

                                    - 14 -
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      In my view, CACP’s September 4, 2003 email to Andrews constitutes

an anticipatory repudiation of Andrews’ conception of carried interest under

paragraph 5 of the separation agreement.       Consequently, the statute of

limitations began running on September 4, 2003 for Andrews’ entire contract

and WPCL claims.     Contrary to Andrews’ argument, each distribution by

CACP did not give rise to a separate action with a separate limitations

period. When the WPCL and contract statutes of limitations expired in 2006

and 2007, respectively, Andrews’ actions became time-barred in their

entirety.

      CACP’s anticipatory repudiation. A repudiation is an “absolute and

unequivocal refusal to perform …” 2401 Pennsylvania Avenue Corp. v.

Federation of Jewish Agencies of Greater Philadelphia, 489 A.2d 733,

736 (Pa.1985).   An “anticipatory repudiation” occurs in advance of (or in

anticipation of) actual failure to perform the agreement.     The burden of

proving an anticipatory repudiation rests on the party asserting it. Shafer

v. A.I.T.S., 428 A.2d 152, 155 (Pa.Super.1981).

      An anticipatory repudiation gives the plaintiff the immediate right to

sue for breach of contract.     Weinglass v. Gibson, 155 A. 439, 440

(Pa.1931). “The rationale behind the rule of anticipatory repudiation is the

prevention of economic waste.      An [obligee] should not be required to

perform a useless act as a condition of his right to recover for a breach when

the obligor has demonstrated an absolute and unequivocal refusal to

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perform.” 2401 Pennsylvania Avenue Corp., 489 A.2d at 737. Thus, in

Weinglas, when a theatre owner booked an entertainer to give a

performance in his theatre on a given date and time, and then booked

another entertainer for that same date and time and advertised the latter's

performance to the public, our Supreme Court held that the first entertainer

(the plaintiff) could sue for breach of contract even though he had not

actually gone to the theatre to tender performance. Id., 155 A. at 440.

     It is also illuminating to identify what does        not constitute a

repudiation.   A mere missed payment in the course of an installment

contract does not constitute repudiation, because the failure to pay an

installment does not necessarily reflect the payor’s unequivocal refusal to

perform. R.C. Beeson, Inc. v. Coca Cola Co., 337 Fed.Appx. 241, 244 (3d

Cir.2009) (citing Corbin on Contracts § 954) (“a single infraction of

contractual obligations, such as a missed payment, is insufficient to

constitute a ‘total breach’ of the agreement unless accompanied by an

anticipatory repudiation of future performance”).

     Viewing Rieger’s September 4, 2003 email and Andrews’ September 9,

2003 email in the light most favorable to Andrews, giving Andrews the

benefit of every reasonable inference, I conclude that Rieger communicated

three points in his September 4, 2003 email: (1) the Technology Fund was

receiving $1.1 million from the sale of GAIN stock and was distributing over

80% of this sum to its limited partners while retaining 18-19% as EBITDA;

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(2) these distributions did not generate carried interest (“XATF is not into its

carry at this time”), so Andrews was not eligible for payment of carried

interest under paragraph 5 of the separation agreement; (3) Rieger himself

was ineligible for payment because the sale of GAIN stock was not carried

interest (“believe me if l felt there was an obligation to payout to you, I

would be the first to contact you because that would mean a payout to me

as well”). Through these points, Rieger repudiated Andrews’ interpretation

of   “carried   interest”   in   the   separation   agreement,   for   he   clearly

communicated that sales of GAIN stock and distributions to the limited

partners and the general partner from these sales did not, by themselves,

trigger Andrews’ right to payment of carried interest.

         In his September 9, 2003 response to Rieger, Andrews recognized that

Rieger had repudiated his interpretation of “carried interest”, stating that

“we have a genuine disagreement about the nature of the [separation]

agreement,” and that “there can be no doubt” that his interpretation of

“carried interest” was correct.        Andrews urged that “we are better off

reconciling our views before the number goes up” beyond $11,000.00, the

amount that Andrews claimed CACP owed him from the 2003 sale of GAIN

stock.

         Even when construed in the light most favorable to Andrews, this

evidence compels one, and only one, conclusion: in September 2003, CACP,

through Rieger, unequivocally repudiated Andrews’ position that CACP owed

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him carried interest each time CACP sold GAIN stock.       Moreover, Andrews

understood that CACP rejected his interpretation of carried interest. 2401

Pennsylvania Avenue Corp., 489 A.2d at 736 (defining repudiation).

      Andrews insists that the final sentence of Rieger’s September 4, 2003

email -- “I will keep you posted on the outcome of the fund as it may relate

to any carry as those events occur” – shows that the email is not a

repudiation, because it suggests that CACP would someday pay Andrews

carried interest on sales of GAIN stock. The majority appears to rely on the

final sentence as well by asserting on page 20 of their memorandum: “At

most, the email exchange demonstrated that the parties were trying to work

out differences in interpretation of paragraph 5, there would be no payment

made in September 2003, but [CACP] would keep Andrews informed about

the possibility of future payments.” It is essential, however, to read the final

sentence in context with the rest of Rieger’s email; isolating a statement out

of context can easily cause a court to derive unreasonable inferences from

the statement, thus running afoul of the proper standard of review. Nelson,

107 A.3d at 154 (in appeal from denial of judgment n.o.v., verdict winner

must be given the benefit of every “reasonable” inference of fact arising

from the evidence). Read in context, the final sentence can have only one

meaning, even giving Andrews the benefit of all reasonable inferences:

Rieger stated, in so many words, that while sales of GAIN stock alone do not

trigger CACP’s obligation to pay carried interest, separate events other than

                                     - 18 -
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sales of GAIN stock may trigger this obligation, and CACP would contact

Andrews upon the occurrence of those events. Rieger’s email did not merely

reject Andrews’ right to payment for the 2003 sale of GAIN stock, as the trial

court and the majority suggest; it rejected Andrews’ right to payment for all

future sales of GAIN stock. To construe Rieger’s final sentence as leaving

open the possibility of payments of carried interest from future sales of GAIN

stock is unreasonable, because this construction lifts the final sentence out

of context from the detailed repudiation of this concept in the remainder of

Rieger’s email.

      The first decision cited by the majority in support of their contention

that Rieger’s email was not an anticipatory repudiation, 2401 Pennsylvania

Avenue Corp., is factually distinguishable. There, a building owner entered

into a commercial lease with the defendant (“putative tenant”), but the

putative tenant was unable to take possession because a prior tenant still

occupied some of the leasehold space. The owner granted the prior tenant

an extension of time to vacate the building and asked the putative tenant to

grant this extension. The putative tenant reacted by purchasing a different

building and declining to honor the lease.     The owner claimed that the

putative tenant committed an anticipatory breach on the basis of the

following facts: (a) the putative tenant stated on July 24, 1974 that “he was

advised that the lease would have no effect because of the inability of [the

owner] to give possession in May as called for in the lease”; (b) the owner’s

                                    - 19 -
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inconclusive meeting with the putative tenant on July 30, 1974, (c) the

owner met with the putative tenant on August 1, 1974, and the putative

tenant declined to grant an extension to the prior tenant based on counsel’s

advice that the granting of an extension “would in essence, acknowledge the

validity of the lease,” and (d) on this same date, the putative tenant

informed the owner that it “did not want to occupy the four floors, had no

use for it, and would not consider any type of extension without a release, of

liability from the lease.” Our Supreme Court held:

     Whether viewed individually or collectively these statements are
     insufficient to [constitute] an absolute and unequivocal refusal.
     The July 24th statement that [the putative tenant] had been
     advised that the lease would have no effect because of [the
     owner]’s failure to deliver the space in May is insufficient
     because it does not provide a definitive indication that [the
     putative tenant] intends to act on this advice or treat the
     contract as void. [The putative tenant]’s August 1st statement
     that it did not wish to approve an extension for [the existing
     tenant] because it would lend validity to the lease does not
     indicate that it will in fact not perform. Moreover, [the putative
     tenant]’s statement that it had no use for the space and would
     not consider approving the extension without a release from its
     obligations under the lease indicates that [the putative tenant]
     did recognize at the very least a possible obligation under the
     contract. The fact that a party seeks to preserve what it deems
     to be a legal defense to the required performance does not
     reflect an intention to deliberately breach the agreement. To the
     contrary, it reflects an intention to avoid performance only if
     there is a legal basis for the refusal of performance.

Id., 489 A.2d at 737.

     The present case differs from 2401 Pennsylvania Avenue Corp.

because, in the words of that decision, Rieger’s email provided a “definitive

indication” that CACP “[would] in fact not perform” the separation

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agreement in the manner requested by Andrews. Id. Whereas the putative

tenant in 2401 Pennsylvania Avenue Corp. “recognize[d] … a possible

obligation under the contract,” id., Rieger unequivocally rejected Andrews’

demand that CACP pay carried interest on sales of GAIN stock.

      The second decision relied upon by the majority, Harrison v. Cabot

Oil & Gas Corp., 110 A.3d 178 (Pa.2015), is also distinguishable. Harrison

held that the filing of a declaratory judgment action contesting the validity or

scope of an agreement is not an anticipatory breach, because it “does not

entail ... an unequivocal refusal to perform.”    Id. at 184.    The Harrison

court cited with approval decisions from other jurisdictions that “an action

for declaratory judgment does not indicate an unconditional refusal to

comply with contractual obligations” but is merely a request for the court to

“guide [the] parties in their future conduct in relation to each other.” Id. at

185 & n. 4 (citing Principal Life Ins. Co. v. Lawrence Rucker 2007 Ins.

Trust, 674 F.Supp.2d 562, 568 (D.Del.2009); Seneca Ins. Co. v. Shipping

Boxes I, LLC, 30 F.Supp.3d 506, 511–12 (E.D.Va.2014)).               The Court

continued:

      Generally, a party acts at his peril if, insisting on what he
      mistakenly believes to be his rights, he refuses to perform his
      [contractual duties]. His statement is a repudiation if the
      threatened breach would, without more, have given the injured
      party a claim for damages for total breach. Modern procedural
      devices, such as the declaratory judgment, may be used to
      mitigate the harsh results that might otherwise result from this
      rule.

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Id. at 185 (citing Restatement (Second) of Contracts, § 250 cmt. d (1981))

(emphasis in original).

      In this case, CACP did more than file a declaratory judgment action

seeking the court’s guidance on the separation agreement. Rieger’s email

definitively rejected Andrews’ demand for payment of carried interest from

sales of GAIN stock.       To paraphrase Harrison, Rieger’s email was a

repudiation because, “without more, [it gave Andrews,] the injured party[,]

a claim for damages for total breach.”      Id., 110 A.3d at 185.   Indeed,

Andrews’ statements in his response to Rieger’s email – “we have a genuine

disagreement about the nature of the agreement,” “there can be no doubt

about [the separation agreement’s] intent and meaning”, and “we are better

off reconciling our views before the number goes up” – implicitly admit that

Rieger’s email gave him a claim for total breach. He elected to refrain from

suing in 2003 not because he harbored any doubt about whether Rieger

repudiated his interpretation of carried interest, but only because he felt

there was little economic benefit in suing for $11,000.00, the amount he

claimed was due at that time.    Andrews’ business decision to refrain from

suing did not transform Rieger’s email into something other than an

unequivocal repudiation.

      There is only one limitation period, and it commenced on the

date of repudiation. Andrews argues that each payment owed to him by

CACP gave rise to a separate cause of action with a separate limitation

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period. Andrews equates his case with installment contract cases where a

separate statute begins running each time the defendant misses an

installment.   See Ritter v. Theodore Pendergrass Teddy Bear Prod.,

Inc., 514 A.2d 930, 938 (Pa.Super.1986) (“where installment or periodic

payments are owed, a separate and distinct cause of action accrues for each

payment as it becomes due”).

      CACP responds by arguing that the installment contract principle does

not apply when the defendant repudiates the contract.          In the event of

repudiation, CACP argues, there is only one statute of limitations period for

all payments which begins to run on the date of repudiation.

      Relying on Total Control v. Danaher Corp., 359 F.Supp.2d 387

(E.D.Pa. 2005), the trial court held that a separate statute of limitations ran

for each installment that CACP failed to pay. The court held that Andrews

knew or should have known about the 2003 sale of GAIN shares, and

therefore the statute of limitations for this particular payment began running

in 2003 and expired before Andrews’ lawsuit.       As to the other sales, the

court held that Andrews neither knew nor should have known that CACP

made additional sales of GAIN stock, and therefore the statute on each

subsequent claim did not expire before Andrews filed suit.

      I conclude that the installment contract principle does not apply when

the defendant repudiates the contract. In such circumstances, there is only

one limitations period which begins to run on the date of repudiation. I base

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my opinion on a decision from our Supreme Court, Barr v. Luckenbill, 41

A.2d 627 (Pa.1945), and on persuasive authorities from other courts.        In

Barr, the plaintiff loaned the defendant $7,500.00 which the defendant

agreed to invest for plaintiff in securities.    Pending this investment, the

defendant was to have the use of the money for his own purposes and to

pay 3% interest thereon. Instead of investing the money for the plaintiff’s

benefit, the defendant loaned $4,500.00 to a third person, one Zuber. The

defendant never repaid the $4,500.00 to the plaintiff and only paid interest

on the remaining $3,000.00. Ten years after the defendant’s loan to Zuber,

the plaintiff sued the defendant for failure to repay the $4,500.00 principal

and annual installments of 3% interest.       Our Supreme Court held that by

making the loan to Zuber, the defendant “repudiated any further obligation

on his part for the $4,500, and plaintiff’s right of action to recover that sum

thereupon arose. As this occurred more than ten years before the present

suit was begun, the claim would clearly seem to be barred by the statute of

limitations.”   Id. at 629.   There was no separate right of action for each

interest payment that became due after the defendant's repudiation of the

loan agreement. A single right of action, with a single statute of limitations,

arose for the entire loan agreement on the date of repudiation.

      A number of federal decisions are consistent with Barr.       In Welch

Foods v. Borough of N. E., 46 F. App’x 678 (3d Cir.2002), a case decided

under Pennsylvania law, a manufacturer contracted with the borough to use

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the borough’s waste-disposal facilities at special rates.    A few years later,

the borough passed an ordinance raising these rates and began billing the

manufacturer at those higher rates.          About twenty years later, the

manufacturer sued the borough for breach of contract, demanding the

monies it had been overbilled in the preceding decades.       The Third Circuit

held that the statute of limitations barred the manufacturer’s claims in their

entirety -- even as to damages allegedly incurred within the limitations

period (i.e., within four years of the manufacturer’s lawsuit).      The court

recited the rule that “[i]n analyzing when the statute of limitations begins to

run on a continuing contract, we must focus on the type of breach. Where

there was an outright repudiation [of the contract], ... the statute of

limitations [begins] to run at that point.” Id. at 682.     The court reasoned

that the borough’s ordinance amounted to an outright repudiation of its pre-

existing contract with the manufacturer. Accordingly, “any cause of action

arising out of this repudiation accrued on the date of passage of this

Ordinance.”   Id.   The court relied on its decision in Henglein v. Colt

Indus., 260 F.3d 201 (3d Cir. 2001), an ERISA case, wherein a group of

terminated employees sued their former employer -- the operator of a steel

plant that had shut down -- for breaching a pension plan agreement to pay

them lifetime shutdown benefits. At the time of termination, the employer

informed the employees that they would not receive lifetime shutdown

benefits.   The Third Circuit held that on the date of termination, the

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employer had committed an “outright repudiation,” so the employees’ entire

cause of action for lifetime shutdown benefits accrued at that time. Id. at

214. Due to this repudiation, a separate cause of action did not arise each

time the employer withheld an installment of shutdown benefit payments.

Id. at 214; see also Algayer v. Metro. Life Ins. Co., 2004 WL 1588232,

*2 (E.D.Pa., July 12, 2004) (“the general rule governing installment

contracts does not apply when an employer or insurer has completely

repudiated an obligation to make periodic payments to an employee or plan

participant, and the period of limitation instead begins at the time of

repudiation”).

      These decisions make considerable sense. Because the plaintiff’s right

to   entire    recovery     ripens   immediately    upon    repudiation,    2401

Pennsylvania Avenue Corp., 489 A.2d at 737, logic dictates that the

statute of limitations begins running for the entire action at the time of

repudiation.     In an installment contract setting, it is illogical for an entire

right of recovery to mature at the time of repudiation but for separate and

distinct statutes of limitation to apply to each installment payment. Yet that

is what Andrews would have us hold.          In his view, even though he knew

perfectly well in September 2003 that CACP had repudiated the separation

agreement, he enjoys a new right of action for each sale of GAIN stock --

even sales that take place decades later.

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       Based on these precedents, I conclude that the statute of limitations

began to run on Andrews’ entire contract and WPCL claims on September 4,

2003, when Rieger repudiated Andrews’ construction of the separation

agreement.      Due to Rieger’s repudiation, the installment contract principle

under which a separate statute of limitations runs for each missed

installment does not govern this case. The three-year statute of limitations

on Andrews’ WPCL claim expired on Tuesday, September 5, 2006,3 and the

four-year statute for Andrews’ contract action expired on September 4,

2007. Andrews’ 2011 lawsuit is time-barred in its entirety.

       Total Control, the federal decision relied upon by the trial court, is

unpersuasive.       The promisor in Total Control never repudiated the

installment contract; it simply stopped making installment payments.       Id.,

359 F.Supp.2d at 391.           Because it merely missed payments instead of

repudiating the contract, a separate statute of limitations ran for each non-

payment. Rieger’s repudiation distinguishes this case from Total Control.

____________________________________________

3
  Monday, September 4, 2006, was Labor Day, so the statute expired on the
next business day, September 5, 2006. See 1 Pa.C.S. § 1908 (“when any
period of time is referred to in any statute, such period in all cases, except
as otherwise provided in section 1909 of this title (relating to publication for
successive weeks) and section 1910 of this title (relating to computation of
months) shall be so computed as to exclude the first and include the last day
of such period. Whenever the last day of any such period shall fall on
Saturday or Sunday, or on any day made a legal holiday by the laws of this
Commonwealth or of the United States, such day shall be omitted from the
computation”).

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     The decisions cited in Andrews’ brief are distinguishable for the same

reason. For example, in Pennsylvania Turnpike Comm’n v. ARCO, 375

A.2d 890 (Pa.Cmwlth.1977), an oil company entered into a long-term lease

with the Turnpike Commission to operate a gas station along the

Pennsylvania Turnpike.   The lease prescribed that rent was payable on a

monthly basis.   The parties disputed the gas station’s computation of rent

from time to time over their twenty-year relationship, but neither party

repudiated the lease. After twenty years, the Turnpike Commission brought

an action to recover damages for alleged underpayment of rent by the oil

company during the preceding six years of installment payments, the

applicable limitations period for contract claims at that time.         The

Commonwealth Court declined to apply the statute of limitations, explaining

that “the Commission could have no cause of action until each allegedly

improperly computed payment was made and, as to each such payment, a

separate and distinct cause of action would accrue.” Id. at 892. That

conclusion was logical because the oil company, unlike CACP, never

repudiated the contract. See also Van Seiver v. Van Seiver, 12 A.2d 108,

110 (Pa.1940) (separate statute ran for each deficient alimony payment,

where deficiencies appeared to be unintentional, and there was no

suggestion in Supreme Court’s opinion that husband had repudiated his

alimony obligations); Ritter, 514 A.2d at 935 (separate statute ran for each

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missed installment; no suggestion in this Court’s opinion that defendant

repudiated contract).

     For these reasons, I respectfully dissent from the majority’s decision at

1825 EDA 2014 to affirm the judgment entered in Andrews’ favor. I would

reverse and remand for entry of judgment n.o.v. in favor of appellants. I

concur with the majority’s decisions at 1694 EDA 2014 and 1934 EDA 2014.

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