Opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

FURHAVEN PET PRODUCTS, INC., _)

Plaintiff, ) C.A. No. 21-342 Erie

Vv. District Judge Susan Paradise Baxter .

CORRY AREA INDUSTRIAL

DEVELOPMENT CORPORATION, )

et al., )

Defendants. )

MEMORANDUM OPINION

I. INTRODUCTION

A. Relevant Pro cedural History

Plaintiff Furhaven Pet Products, Inc. (“Furhaven”) initiated the present action on

December 13, 2021, by filing a complaint against Defendants Corry Area Industrial

Development Corporation (*CAIDC”), City of Corry (“Corry”), and Corry Redevelopment

Authority (“CRA”). Defendant Corry was subsequently dismissed voluntarily on September 22,

2022 [ECF No. 17], and an amended complaint was filed on the same date against Defendants

CAIDC and CRA, only. [ECF No. 18].

The amended complaint contains two counts of breach of contract, one against each of

the two Defendants: Count I claims that Defendant CAIDC breached its Lease Agreement with

Furhaven by failing to construct or pursue the construction of a 30,000 square foot addition to

the leased premises, as required by a Work Letter attached as an exhibit to the Lease Agreement;

Count IT claims that Defendant CRA is liable for CAIDC’s alleged breach of the Lease

Agreement based on a principal-agent theory of liability. Defendants filed an answer to the

complaint on September-30, 2022 [ECF No. 20], and discovery ensued.

After the parties completed discovery, Defendants filed a motion to dismiss for lack of

subject matter jurisdiction and/or motion for summary judgment [ECF No. 57], along with a

supporting brief, a concise. statement of material facts, and an appendix of exhibits [ECF Nos.

58-60, respectively]. In response, Furhaven filed a brief in opposition, an appendix of exhibits,

and a responsive concise statement of material facts [ECF Nos. 61-63]. Notably, in its opposition

brief, Furhaven conceded its claim against Defendant CRA, thus leaving only Count | of its

amended complaint against Defendant CAIDC. Defendants subsequently filed an additional

appendix [ECF No. 64] and a reply to Furhaven’s opposition brief [ECF No. 65]. This matter is

now ripe for consideration. □

Bb. Relevant Factual History!

Furhaven is a for-profit entity engaged in the manufacturing of pet products, which it

sells to large retailers and directly to consumers, (ECF No. 59, at 4 1). Until December 29, 2021,

Furhaven was a privately-held business corporation, with all of its stock being owned by Eric

Heilborn, his wife Amy Heilborn, the Eric Heilborn Family Trust, and the Amy Heilborn Family

Trust (collectively, “the Heilborns”). (id. at { 3). Also, prior to December 29, 2021, Eric

Heilborn (“Heilborn’”) was a director, officer, and full-time employee of Furhaven. (Id. at { 4).

At all times relevant hereto, Defendant CAIDC owned and maintained a multi-unit

industrial building located at 844 Columbus Avenue, Corry, Pennsylvania, commonly referred to

The factual history set forth herein has been gleaned from the parties’ concise statements of material facts [ECF No.

59, 63], but only to the extent such facts are undisputed and/or amply supported by the evidence of record. In

addition, since Furhaven has conceded its claim against Defendant CRA, all facts related to Defendant CRA have

been omitted.

as Enterprise Place. (Id. at 9). On or about January 1, 2021, Furhaven entered into a Lease

Agreement with CAIDC pursuant to which Furhaven was to occupy 106,000 square feet of

manufacturing space in Enterprise Place (“Leased Premises”). (Id. at 4 12). Under Section 3(b)

of the Lease Agreement, Furhaven had the option to expand the Leased Premises by 30,000

square feet, which expansion would be contiguous with the Leased Premises and newly

constructed by CAIDC. (Id. at § 13). Furhaven’s option to expand the Leased Premises was to be

executed by written notice to CAIDC. The parties understood that the written “Work Letter”

attached as Exhibit B to the Lease Agreement constituted such notice and both parties intended

for the expansion to occur. (Id. at 14). None of the Heilborns was a party to the Lease

Agreement and none of them has any rights under either the Lease Agreement or the Work

Letter. (Id. at 4 19).

Paragraph 2 of the Work Letter required Furhaven and CAIDC to each “Use reasonable

diligence at all times in performing their respective obligations and duties under thfe] Work

Letter.” (1d. at { 15), Neither the Lease Agreement nor the Work Letter states a deadline for

completion of the 30,000 square foot expansion of the Leased Premises, nor does either contain

language stating that “time is of the essence.” (Id. at {| 16, 17). To complete the expansion of the

Leased Premises, CAIDC engaged the services of Porter Consulting Engineering, whose services

includes design of the expansion site, advertising and evaluating bids, and administration of the

project through construction. (Id. at ¥ 20). The representatives and Board of Director members of

CAIDC projected that the cost of constructing the expansion would and should be approximately

$100 per square foot, for a total cost of $3,000,000.00. (Id. at 421).

On or about April 23, 2021, with the assistance of Ashley Porter (“Porter”) of Porter

Consulting Engineering, CAIDC solicited bids for construction of the 30,000 square foot

expansion, with the option to complete the project in October or November 2021. (id. at § 23).

During a May 12, 2021 pre-bid conference of potential contractors, the contractors expressed

concern about the feasibility of a 2021 completion given the unavailability of materials and

labor, the pricing of labor and materials, and supply chain disruptions caused by the COVID

pandemic. (Id. at { 24). As a result, on May 17, 2021, an Addendum to the request for bids was

issued which stated the option to complete the project in October 2021, November 2021, or May

2022. (Id. at § 25).

At the June 9, 2021 bid opening, only one bid was received for the construction of the

expansion. The bid was from Dynasty Construction in the amount of $3,800,000.00 and called

for completion in May 2022, five months beyond Furhaven’s preferred date and five months

after the Heilborns’ sale of the company. (Id. at § 26). In his July 14, 2021 correspondence,

Porter outlined his observations and conclusions regarding the single bid received for the

expansion project, noting that the bid exceeded the anticipated budget; that labor was at high

demand and short supply; that material pricing was extremely high; and that material availability

was extremely limited. (Id. at § 27). Based upon Porter's correspondence and subsequent

discussions with him, CAIDC’s Board of Directors elected not to accept the single bid received

and to re-bid the expansion project in the future. (Id. at {| 28).

On November 18, 2021, A&M Capital Partners (“A&M”) issued to Eric Heilborn a letter

of intent for the purchase of Furhaven by A&M’s subsidiary, Worldwise. (Id. at 34). The |

Heilborns’ sale of Furhaven involved the transfer of all of their common stock of the company to

Worldwise, which was closed on December 29, 2021. (Id. at § 36). Defendants did not learn

about the Heilborns’ sale of all of their ownership interest in Furhaven until sometime in 2022.

(id. at 37, 38).

On March 11, 2022, CAIDC advertised a second request for bids with a projected

completion date of December 2022; however, CAIDC was again informed that this timing was

not feasible, so an addendum was subsequently issued with a projected completion date of June

2023. (Id. at § 29). At the April 7, 2022 bid opening, eight (8) bids were received, and a bid of

$3,465,000.00 was accepted with a completion date of June 2023. (Id. at { 39). Construction of

the expansion was timely completed, and the finished premises was turned over to Furhaven on

June 30, 2023. (Id. at § 31). Furhaven has continued to occupy the original Leased Premises, as

well as the 30,000 square foot expansion space, since then.

i. DISCUSSION

Furhaven asserts that the delay in completing the 30,000 square foot expansion amounted

to a breach of the Lease Agreement. CAIDC moves to dismiss this claim for lack of Article Hi

standing, arguing that Furhaven has not suffered an injury in fact because the damages sought are

personal to the Heilborns who lack standing to bring a claim under the Lease Agreement.

Alternatively, CAIDC moves for summary judgment in its favor, arguing that Furhaven cannot

establish that CAIDC failed to act with “reasonable diligence” to complete the 30,000 square

foot expansion, and that the purported assignment of Furhaven’s claim to Eric Heilborn is

champertous and invalid, thus divesting him of any standing to prosecute this claim. These

arguments will be addressed in turn.

A. Article TT Standing

in order to establish the “irreducible constitutional minimum” of Article III standing, a

plaintiff must have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged

conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.”

Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016 (internal citations omitted). “To establish injury

in fact, a plaintiff must show that [it] suffered ‘an invasion of a legally protected interest’ that is

‘concrete and particularized’ ad ‘actual or imminent, not conjectural or hypothetical.’” Id. at 339

(internal citations omitted). “For an injury to be ‘particularized,’ it ‘must affect the plaintiff in a

personal and individual way.’” Id. To be concrete, an injury “must actually exist” or be “real.”

Id. at 340.

Here, CAIDC argues that Furhaven “did not sustain lost profits... because of a delay in

the completion of the building expansion” because “[t]he sales that generated such profits were,

to the extent they were delayed, simply realized by Furhaven in 2022 rather than 2021.” This,

however, is not in dispute. Instead, Furhaven’s claim is based on consequential damages in the

nature of increased costs [it incurred] for temporary labor and overtime during the 4" financial

quarter of 2021 amounting to $ 270,428.00. (ECF No. 61, at p. 7; ECF No. 63, at | 71).

According to Eric Heilborn, these damages specifically relate to additional costs allegedly

sustained by Furhaven prior to the sale/transfer of the Heilborns’ stock on December 29, 2021.

(ECF No. 60-1, at pp. 13-18 (internal pp. 41-46)). Thus, such claimed damages are “personal” to

Furhaven. And, according to Furhaven, these costs would not have been incurred if the building

expansion had been completed by October 2021, as expected.” Whether this expectation was

reasonable or even enforceable is another matter to be addressed below. However, for purposes

of CAIDC’s motion to dismiss based on lack of Article III standing, the Court finds that

—_

In this regard, CAIDC argues that “to the extent that Furhaven hired additional labor or paid overtime to workers in

2021, such costs also increased output, i-e., fulfilled booked orders either in 2021 or 2022.” By this, CAIDC appears

to be asserting that these costs were ultimately recovered when the orders were fulfilled and, thus, Furhaven did not

actually suffer loss; however, the only evidence of record cited by CAIDC in support of this assertion is the

deposition testimony of Furhaven’s CFO, Michael Carr, who, at one point, testified, “Will — 1 don’t believe the — the

Furhaven Pet Products, Inc. will benefit anything from this lawsuit.” (ECF No. 60-2, at p. 16 (internal p. 52)). This

statement alone is insufficient to refute Furhaven’s damage claim.

Furhaven has sufficiently set forth an injury in fact.

B. Reasonable Diligence

Furhaven’s breach of Lease Agreement is premised on its allegation that CAIDC failed to

act with “reasonable diligence” to complete the 30,000 square foot expansion in accordance with

the Work Letter attached as an exhibit to the Lease Agreement, which provides that “Lessor and

Lessee each shall use reasonable diligence at all times in performing their respective obligations

and duties under this Work Letter.” (ECF No. 1-2, at p. 23, 42). It is beyond dispute that the

Work Letter does not contain any terms specifying a deadline for completion of the expansion or

stating that time was of the essence. (ECF No. 59, at {] 16-17). Nonetheless, Furhaven argues

that “representations were made by CAIDC’s Executive Director that the expansion would be

completed by the 4™ financial quarter of 2021” (ECF No. 61, at p. 8), and it is beyond dispute

that Furhaven’s claimed damages atise solely from CALDC’s failure to complete the expansion

by October 2021. However, as CAIDC correctly points out, Plaintiff's reliance upon alleged.

representations made outside the Lease Agreement is improper due to the Lease Agreement’s

integration clause, which provides, ,

This Lease Agreement, together with its Exhibits, constitutes the entire

contract between the parties hereto and there are no other understandings,

promises, representations or warranties, oral or written, relating to the

subject matter of this Lease, which shall be deemed to exist or to bind any

of the parties hereto, their respective heirs, executors, administrators,

successors or assigns, except as set forth herein. No amendment, change or

addition to the Lease shall be binding upon Lessor or Lessee unless

reduced in writing and signed by both parties.

(ECF No. 1-2, at p. 20, § 30).

Under Pennsylvania law, “[o]nce a writing is determined to be the parties’ entire contract,

the parol evidence rule applies, and evidence of any previous oral or written negotiations or

agreements involving the same subject matter as the contract is almost always inadmissible to

explain or vary the terms of the contract.” Yocea v. Pittsburgh Steelers Sports, Inc., 854 A.2d

425, 436 (Pa. 2003) (citations omitted). “An integration clause which states that a writing is

meant to represent the parties’ entire agreement is ... a clear sign that the writing is meant to be

just that and thereby expresses all of the parties’ negotiations, conversations, and agreements

made prior to its execution.” Id. Thus, to the extent the alleged representations relied upon by

Furhaven were made prior to execution of the Lease Agreement, evidence of the same violates

ihe parol evidence rule and is inadmissible. Furthermore, to the extent the representations are

alleged to have occurred after the Lease Agreement was executed, they are not binding upon the

parties under the terms of the integration clause because they were not reduced to a writing

signed by both parties. Thus, Furhaven’s reliance on CAIDC’s alleged representations to support

its claim is without merit.

As noted earlier, despite not being bound by its alleged representations, CAIDC began

soliciting bids on or about April 23, 2021, for the construction of the building expansion, with

the option to complete the project in either October or November 2021. (ECF No. 59, at § 23);

however, during a May 12, 2021 pre-bid conference, potential contractors expressed concern

about the feasibility of a 2021 completion given the unavailability of materials, unavailability of

labor caused by demand in the area, pricing of labor and materials, and supply chain disruptions

caused by the COVID pandemic. (Id. at { 24). As a result, the request for bids was amended to

provide an alternative date for completion of May 2022, in addition to the October and

November 2021 options provided in the original bid request. (Id. at □□ 25). This change resulted in

a single bid to complete the expansion by May 2022, seven months beyond Furhaven’s preferred

date of October 2021, (Id. at § 26). Based on this record evidence, Furhaven is unable to

establish that the delay in completing the expansion beyond its preferred or expected date of

October 2021 resulted from CAIDC’s lack of reasonable diligence. Indeed, the record evidence

establishes that the circumstances contributing to the delay in construction were largely beyond

CAIDC’s control, as they were primarily attributable to adverse market conditions caused by the

COVID-19 pandemic.’

Based on the foregoing, the Court finds that Furhaven’s breach of contract is unsupported

by the record evidence and summary judgment will be entered: in favor of CAIDC and against

Furhaven, accordingly.*

An appropriate Order follows.

oo

Furhaven argument that the primary cause for the delay was attributable to CAIDC’s unilateral decision to fund a

portion of the project with a grant from the Redevelopment Assistance Capital Program (“RACP”) is unavailing.

Specifically, Furhaven argues that the RACP’s requirement that all structural steel be milled, melted and

manufactured in the United States significantly restricted the number of bids received and “made the scheduled

completion date pursuant to the bidding documents unfeasible for potential contractors.” (ECF No. 61, at pp. 8-9;

ECF No. 63, at § 68). In support of this argument, Furhaven points to Porter’s letter dated September 1, 2021, in

which he notes “Further complicating the matter is the need for compliance with the Pennsylvania Steel Products

Procurement Act” as required by the RACP grant (ECF No. 62-4, at p.2); however, this was merely noted as a

“further complication” of other adverse market conditions that continued to exist, which Porter cites earlier in his

letter. In particular, Porter notes in the same letter, “We are regularly communicating with several pre-engineered

building suppliers and manufacturers as well as steel fabricators and erectors, and we are not yet hearing of any

relief or improvement in either pricing or delivery time frames.” (1d.) (emphasis added). And this was as of

September 1, 2021, rendering an October 2021 completion date unfeasible.

As aresult, there is no need to address the validity of Furhaven’s purported assignment of its claim to Eric Heilborn.