PHILADELPHIA – The U.S. Court of Appeals for the Third Circuit affirmed a decision from the U.S. District Court for the Western District of Pennsylvania on Friday in a breach of contract case involving a manufacturing business and their former consultant.
Judges D. Michael Fisher, Michael A. Chagares and Maryanne Trump Barry considered the matter between Harry D. Martin and Snap-Tite, Inc., John S. Clark, George P. Clark and Gary L. Clark. Barry spoke for the federal appeals court in their opinion.
From 1940 until its sale in 2012, Snap-Tite operated as a manufacturing business in Erie and was majority-owned by one or more members of the Clark family. Martin, a friend of the Clarks, assisted Snap-Tite in different capacities for over forty years, serving as a management consultant, outside counsel and an outside member of the Board of Directors (Board) and the Long Range Planning Committee (LRPC).
Martin’s work with Snap-Tite can be categorized in three eras: 1965 to 2004, 2005 to 2008, and 2009 to 2012. Initially, he was compensated two-fold by Snap-Tite: $500 per meeting for his role on the Board, plus payment for legal services he provided to Snap-Tite as a member of Elderkin, Martin, Kelly & Messina (The Elderkin Firm).
Martin retired from law in late 2004, but continued to serve on the Snap-Tite Board. During 2005 to 2008, Martin was still paid on a per meeting basis, but also received additional compensation for management consulting services he allegedly provided the company—$104,999.92 in 2005, $122,666.64 in 2006, $93,333.35 in 2007, and $75,000.00 in 2008.
Although Martin’s role essentially remained the same through 2012, his compensation structure changed significantly in 2009. At that time, the company increased Martin’s Board pay to $32,000 annually and ceased any additional payment for his consulting services.
Where the legal dispute occurred was the differing beliefs between Martin and the Clarks as to whether his consulting work from 2009 to 2012 was done under the auspices of the Board and the LRPC, and whether it constituted lost income on the part of Martin.
“The amended complaint contained four counts: one for breach of express contract, one for breach of an implied-in-fact contract, and two for unjust enrichment,” Barry said. “The District Court granted the Clarks’ motion for summary judgment and dismissed Martin’s claims in their entirety, in an order dated Feb. 27, 2015.”
The District Court held Martin’s express contract for his Board and LRPC service “foreclosed the possibility of an implied contract” and denied him $1,640,000 he was seeking for consulting services provided between December 2008 and April 2012.
The Court dismissed his unjust enrichment claims on similar grounds, saying “the services Martin provided to Snap-Tite were in his capacity as a Board member for which he was paid, or in his capacity as an attorney with the Elderkin firm for which he was paid through the law firm.”
Martin appealed the trial court’s ruling, believing they erred in finding his consulting services included in his role with the Board and LRPC and claiming his unjust enrichment claims should proceed because “the work on which those claims are based was different from the work for which he previously was compensated, either in his capacity as outside counsel or member of the Board.”
The Third Circuit found Martin’s arguments not to be “persuasive.”
“Martin claims that Snap-Tite owes him $1,640,000 in consulting fees pursuant to an implied-in-fact contract covering the approximate period of December 2008 to April 2012,” Barry said, later referring to this consulting work as “entirely indistinct” from the work Martin performed on the Board and the LRPC, according to his own testimony.
“Martin establishes only that he worked more than others on the [LRPC] toward the Committee’s undisputed purpose. This is insufficient to establish that his work as a ‘consultant’ was ‘entirely unrelated’ to his work on the Board and the [LRPC], and, as such, his claim was rightly dismissed,” Barry stated.
Likewise, Barry felt both of Martin’s claims for unjust enrichment, both for the consulting services in preparation for the sale of the company in 2012 and the near-$4 million bonus he felt was due him as a result of the sale, failed because “he was already compensated for the work performed.”
“As the District Court aptly found, ‘All the services Martin provided to Snap-Tite were in his capacity as a Board member for which he was paid, or in his capacity as an attorney with the Elderkin Firm for which he was paid through the law firm,” Barry said. “Martin’s claims for unjust enrichment cannot stand because an express contract governs that same relationship.”
The plaintiff is represented by W. Patrick Delaney and Craig Murphey of MacDonald Illig Jones & Britton, in Erie.
The defendant is represented by Neal R. Devlin and Michael J. Musone of Knox McLaughlin Gornall & Sennett, also in Erie.
U.S. Court of Appeals for the Third Circuit case 15-1756
U.S. District Court for the Western District of Pennsylvania case 1:12-cv-00162
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com