SodexoMAGIC LLC v. Drexel University

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_______________

Nos. 19-1028 & 19-1107

_______________

SODEXOMAGIC, LLC

v.

DREXEL UNIVERSITY

SodexoMAGIC, LLC,

Appellant in No. 19-1028

Drexel University,

Appellant in No. 19-1107

_______________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 2:16-cv-05144)

District Judge: Honorable Michael M. Baylson

_______________

Argued: March 16, 2020

Before: AMBRO, BIBAS, and PHIPPS, Circuit Judges.

(Filed: January 20, 2022)

_______________

Shay Dvoretzky [ARGUED]

Skadden Arps Slate Meagher & Flom

1440 New York Avenue, N.W.

Washington, DC 20005

Attorney for SodexoMAGIC, LLC

Jared D. Bayer

Stephen A. Cozen [ARGUED]

Robert W. Hayes

Cozen O’Connor

1650 Mark Street

One Liberty Place, Suite 2800

Philadelphia, PA 19103

Attorneys for Drexel University

__________

OPINION OF THE COURT

__________

PHIPPS, Circuit Judge.

TABLE OF CONTENTS

I. Introduction ................................................................... 5

II. Factual Background ...................................................... 6

A. The Competition to Provide Food Services at Drexel

University...................................................................... 6

B. Negotiation of the Management Agreement................. 8

C. The Short Unhappy Life of the Management

Agreement ..................................................................... 9

III. Procedural History and Jurisdictional Analysis .......... 12

2

A. The Parties’ Claims and Counterclaims ..................... 12

B. The District Court’s Jurisdiction over the Dispute ..... 13

C. The District Court’s Resolution of All Claims and

Counterclaims ............................................................. 15

D. Appellate Jurisdiction ................................................. 16

IV. Discussion ................................................................... 17

A. The Parties’ Competing Fraudulent Inducement

Claims Have Different Fates: SodexoMAGIC’s

Claim Survives; Drexel’s Counterclaim Does Not. .... 19

1. Common-Law Fraud Claims in Pennsylvania ..... 20

2. SodexoMAGIC’s Fraudulent Inducement Claim

for Compensatory Damages Survives Summary

Judgment............................................................... 23

a. SodexoMAGIC Presents Sufficient Evidence of

a Misrepresentation as Well as Concealment. ...... 23

b. The District Court Did Not Abuse Its Discretion in

Denying Drexel’s Motion to Strike Declarations

by Three SodexoMAGIC Witnesses. ................... 28

c. Drexel’s Remaining Counterarguments for

Upholding Summary Judgment in Its Favor

Also Fail. .............................................................. 34

3. The Parol Evidence Rule Does Not Bar Sodexo-

MAGIC’s Claim for Fraudulent Inducement. ...... 36

a. Integration Clauses, the Parol Evidence Rule,

and Fraudulent Inducement Claims Under

Pennsylvania Law. ................................................ 37

3

b. The Management Agreement Lacks Fraud-

Insulating Provisions, so the Parol Evidence Rule

Does Not Preclude SodexoMAGIC’s Fraudulent

Inducement Claim. ............................................... 42

4. Pennsylvania’s Gist of the Action Doctrine

Does Not Bar SodexoMAGIC’s Fraud Claim...... 44

5. Drexel’s Fraudulent-Inducement Counterclaim

Fails ...................................................................... 47

B. SodexoMAGIC’s Breach-of-Contract Claim for

Failure to Renegotiate in Good Faith Survives

Summary Judgment. ................................................... 51

1. A Promise to Renegotiate in Good Faith May Be

Enforceable Under Pennsylvania Law, and the

Promise Between These Parties Is Enforceable. .. 51

2. A Genuine Dispute of Material Fact Remains as

to Whether Drexel Renegotiated in Good Faith. .. 59

C. SodexoMAGIC’s Claim for Enhanced Payments for

Fall 2016 Survives Summary Judgment. .................... 65

1. There Was Consideration for a Separate

Contract for the Fall 2016 Semester. .................... 65

2. A Reasonable Jury Could Find that

SodexoMAGIC Accepted Drexel’s Offer. ........... 66

D. Drexel’s Challenge to SodexoMAGIC’s Catering-

Shortfall Claim Fails. .................................................. 68

E. SodexoMAGIC’s Claims for Unjust Enrichment

Fail. ............................................................................. 70

V. Conclusion .................................................................. 73

4

I. INTRODUCTION

After a long-standing business relationship went bad, this,

the ensuing litigation, went big. For years, a vendor provided

food services at a private university, but in 2014 the university

announced that it would competitively bid the contract for on-

campus dining. Although the same vendor ultimately won that

competition, the process of bidding, negotiating, and finalizing

that new contract fractured the relationship beyond repair.

About two years into the contract’s ten-year period of

performance, the vendor sued the university for fraud, multiple

breaches of contract, and alternatively for unjust enrichment.

The university responded with fraud and breach-of-contract

counterclaims.

In resolving cross-motions for summary judgment and

attendant motions to strike, the District Court rejected the bulk

of both parties’ claims. All that survived summary judgment

were relatively small pieces of the vendor’s breach-of-contract

claims and portions of the university’s breach-of-contract

claim. Rather than proceed to trial on the fragments of their

respective cases, the parties referred the remaining claims and

counterclaims to arbitration and jointly moved to dismiss them.

The District Court granted that motion and entered final

judgment, which the parties now appeal, primarily to dispute

the summary judgment ruling.

In reviewing the District Court’s summary judgment

rulings de novo, see Cranbury Brick Yard, LLC v. United

States, 943 F.3d 701, 708 (3d Cir. 2019), and the motion-to-

strike order for an abuse of discretion, see Daubert v. NRA

Grp., LLC, 861 F.3d 382, 389 (3d Cir. 2017), the District Court

5

correctly resolved much of this controversy, but it erred in

rejecting the vendor’s fraud and breach-of-contract claims.

Thus, we will affirm the judgment in part, vacate in part, and

remand this case for further proceedings.

II. FACTUAL BACKGROUND

A. The Competition to Provide Food Services at Drexel

University

For nearly twenty years, either directly or through one of its

predecessor companies, SodexoMAGIC, LLC (‘SDM’)

provided on-campus dining services at Drexel University, a

private university in Philadelphia. But in early 2014 one of

SDM’s rivals, Aramark Corporation, which has its global

headquarters in Philadelphia, made an unsolicited offer to

Drexel to take over campus dining services. SDM responded

with its own unsolicited offer to continue providing food

services. Rather than select one of those offers, Drexel

announced a two-phase competitive bidding process for the on-

campus dining contract.

In the first phase, Drexel sought to identify qualified

bidders. It proposed a scope of work that involved providing

“world class dining and catering services” at its campuses.

Drexel Univ., Request for Proposal for a Campus Dining

Strategic Partnership (SA133). Drexel also expected the food-

service provider to make capital investments of $20 million

over the span of the ten-year contract. While Drexel’s phase-

one solicitation did not contain many details about on-campus

dining, it did represent that Drexel would share “as much detail

about the desired relationship and facts around the current

program as can be reasonably provided.” Id. (SA131). The

6

solicitation also included an estimate that the contract, over its

full term, would have a value between $275 and $300 million.

At the end of the first phase, Drexel determined that SDM and

Aramark, along with two other bidders, qualified to advance to

the second phase.

The second phase took place during the summer of 2014,

and it involved competitive negotiations. In its more detailed

phase-two solicitation, Drexel provided an overview of its on-

campus dining and food-service operations. That overview

pointed out that Drexel’s Strategic Plan called for an increase

of its then-current enrollment of 26,132 students to a student

population of 34,000 by 2021. Drexel noted, however, that not

all students had to have all-inclusive meal plans – that

requirement applied only to first-year undergraduates. And an

appendix to the solicitation informed bidders that Drexel was

projecting an incoming first-year class of 3,100 students for the

2014–15 academic year. But for purposes of its own internal

budget, Drexel estimated that class size at 2,800 students. As

succinctly stated in internal correspondence from one of

Drexel’s senior associate vice presidents, “we gave the bidders

participant numbers based on a freshman class size of 3,100

and the FY15 budget that was loaded by Finance is based on

2,800.” Email from Joe Campbell, Senior Associate Vice

President, Drexel, to Rita LaRue, Senior Associate Vice

President, Drexel (Aug. 4, 2014) (SA182).

Three of the remaining bidders submitted proposals.

Drexel selected two of them – SDM and Aramark – as finalists

and requested that they each submit a best and final offer,

referred to as a ‘BAFO.’ In its BAFO, SDM included an

additional term: an offer to increase its capital contributions by

$4 million beginning in year six of the contract. After

7

considering both BAFOs, Drexel determined that SDM’s

BAFO had more favorable financial terms and was superior in

other respects. On August 15, 2014, Drexel selected SDM for

the dining services contract and broke off negotiations with

Aramark. Having won the competition, SDM continued to

provide on-campus dining services for the 2014–15 academic

year while it worked with Drexel to finalize a new contract.

B. Negotiation of the Management Agreement

Finalizing the new contract was not a smooth process.

Problems started in September 2014 when SDM proposed an

initial draft that omitted the additional $4 million capital

contribution that it had proposed in its BAFO. After several

months of negotiations, the parties agreed to condition that

investment on certain sales levels, evaluated before year six of

the contract.

But that was not the only point of contention. SDM also

proposed that Drexel guarantee annual increases in its first-

year student enrollment. Instead of a guarantee, the parties

agreed that SDM had relied on Drexel’s representations of its

future student enrollment and that they would renegotiate in

good faith if first-year student enrollment did not increase

annually by at least two percent.

Having overcome those and other obstacles, the parties

executed the contract, known as the ‘Management Agreement,’

on May 28, 2015. Although it was signed then, the

Management Agreement specified a commencement date of

August 25, 2014, so that it covered the services SDM provided

after it had won the competitive bidding process. The

Management Agreement also included an integration clause,

8

which stated that it contained all agreements between the

parties on the subject matter.

C. The Short Unhappy Life of the Management

Agreement

The Management Agreement may have been doomed from

the start. The day it was executed, The Philadelphia Inquirer

reported that Drexel’s first-year class had nearly 200 fewer

students than the prior year. See Susan Snyder, That Big

Enrollment Change at Drexel: How Did it Go?, Phila. Inquirer

(May 28, 2015) (SA1553–54). Soon afterward, through a

‘Dear Colleague’ letter, Drexel’s President informed university

stakeholders, including SDM, that the university had “focused

on attracting a smaller pool of exceptionally qualified

applicants,” with the result being that the “enrolled class will

be smaller than in previous years,” causing the university to

operate “with less revenue than [it] historically experienced.”

Letter from John A. Fry, President, Drexel, to Colleagues of

Drexel (June 8, 2015) (SA519–20). According to SDM, that

news of reduced student enrollment came as “a complete

shock.” Email from Nancy C. Arnett, Vice President, Sodexo,

to Greg Klose, Vice President, Sodexo (June 12, 2015)

(SA524). And when SDM asked about that development,

Drexel’s lead negotiator for the Management Agreement

forwarded the inquiry to one of Drexel’s executive directors,

who remarked, “I guess they were going to find out sooner or

later.” Email from Donald Liberati, Executive Director,

Drexel, to Rita LaRue, Senior Associate Vice President, Drexel

(June 9, 2015) (SA526).

Consistent with those revelations, Drexel enrolled 2,720

students in the first-year class for the 2015–16 academic year –

9

a seven percent decrease from the year before. Even with that

diminution, SDM made an initial capital contribution of $9.3

million in July 2015, which funded construction of a new

dining facility, the Urban Eatery at Lancaster Avenue. But the

reduced first-year student enrollment had an immediate effect

on SDM’s revenues.

In November 2015, only six months after executing the

contract, revenue from catering and meal plans fell below the

assumptions referenced in the Management Agreement. And

SDM requested compensation for that shortfall. For several

months, the parties engaged in discussions to restructure

certain aspects of the Management Agreement, including

reducing the additional capital contributions that SDM had

promised.

As the parties’ relationship soured, the termination

provisions of the Management Agreement took on greater

significance. Those terms provided two mechanisms for

termination before full term: for cause and for convenience. To

terminate for cause, a party had to notify the other of a breach,

and that would commence a cure period. If the breach was not

cured or otherwise resolved by the end of the cure period, then

the complaining party could terminate the Management

Agreement. The termination-for-convenience provision

required 60 days’ notice that a party would terminate, and upon

expiration of that period, the Management Agreement would

terminate.

After several months without resolution, on July 25, 2016,

SDM began the process to terminate the Management

Agreement for cause. It notified Drexel that it believed the

shortfalls were material breaches on the theory that sales fell

10

below the amounts listed as assumptions in the Management

Agreement. SDM then tolled the cure period, and the parties

continued discussions through August 2016.

Upon receiving SDM’s notice of breach, Drexel also began

pursuing other options. Two days after SDM’s notice, Drexel

reconnected with other bidders to explore their interest in

taking over the on-campus food-services operations. Using

five-year projections for an incoming first-year class of 2,400

students, Drexel and Aramark discussed the possibility that

Aramark would start providing on-campus food services in

January 2017.

As that possibility became more likely, and without

reconciling completely with SDM, Drexel exercised its option

to terminate the Management Agreement for convenience.

Although the Management Agreement required only 60 days’

notice to terminate for convenience, by letter dated

September 19, 2016, Drexel provided 82 days’ notice: it stated

its intention to terminate the Management Agreement for

convenience on December 10, 2016, the last day of the fall

semester. By that same correspondence, Drexel offered SDM

various financial incentives to remain on campus and provide

food services for the rest of the Fall 2016 Semester. Those

incentives included an increased daily rate for certain meal

plans, a reduced commission due to Drexel, and a release of

SDM’s obligation to make additional capital contributions

under the Management Agreement.

The days following Drexel’s notice of termination were

eventful. On September 23, 2016, senior staff at Drexel met

with Aramark and conditionally agreed to contract with

Aramark for on-campus dining services starting in January

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2017. On September 26, 2016, SDM responded to Drexel’s

notice of termination. In that letter, SDM gave notice that it

was ending the cure period, and it purported to terminate the

Management Agreement for cause effective at the close of

business that day. But through that same communication,

SDM also agreed to remain on campus for the remainder of the

Fall 2016 Semester, explaining that it “does not leave students

in mid-term.” Letter from Timothy J. Fazio, Manion Gaynor

& Manning, LLP, to Stephen A. Cozen, Cozen O’Connor P.C.

(Sept. 26, 2016) (JA158). The next day, SDM filed this lawsuit

in the Eastern District of Pennsylvania.

Despite suing Drexel, SDM remained on campus and

provided services through December 10, 2016. Drexel did not

accept a reduced commission or make enhanced payments for

dining services provided by SDM, and SDM did not make any

further capital contributions.

III. PROCEDURAL HISTORY AND JURISDICTIONAL

ANALYSIS

A. The Parties’ Claims and Counterclaims

In its original complaint, SDM pursued three causes of

action. First, it alleged that Drexel fraudulently induced it to

enter the Management Agreement, and it sought compensatory

and punitive damages. Second, SDM alleged that Drexel

breached its contractual duty to renegotiate in good faith.

Third, as a claim in the alternative, SDM alleged that Drexel

was unjustly enriched when SDM assumed certain liabilities

and provided dining services at reduced rates.

12

Drexel also sought to vindicate its grievances against SDM.

It counterclaimed that SDM breached the Management

Agreement by failing to perform specific obligations,

including filling key management positions, making financial

contributions to certain Drexel initiatives, meeting certain

performance standards, and securing campus appearances from

Earvin “Magic” Johnson.

Both parties later revised their initial pleadings. SDM

amended and supplemented its complaint to add another

breach-of-contract claim. In that count, SDM alleged that

Drexel refused to pay invoices due under the Management

Agreement and that Drexel owed SDM enhanced payments for

dining services provided during the Fall 2016 Semester. After

discovery, on September 12, 2017, Drexel supplemented its

counterclaim to allege that SDM’s offer of additional capital

contributions in its BAFO was insincere and that through that

term SDM fraudulently induced Drexel to award the contract

to SDM instead of Aramark.

B. The District Court’s Jurisdiction over the Dispute

Under the diversity statute, the District Court had subject

matter jurisdiction over this case. That statute requires

complete diversity of citizenship between opposing parties and

an amount in controversy in excess of $75,000. See 28 U.S.C.

§ 1332(a); Exxon Mobil Corp. v. Allapattah Servs., Inc.,

545 U.S. 546, 553 (2005) (explaining that the presence of a

single plaintiff from the same state as a single defendant

deprives a district court of original diversity jurisdiction);

Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267 (1806).

Both of those jurisdictional requirements are satisfied here.

13

There is complete diversity because SDM and Drexel are

not citizens of the same state. As a limited liability

corporation, SDM takes on the citizenship of its members and

submembers. See Zambelli Fireworks Mfg. Co. v. Wood,

592 F.3d 412, 420 (3d Cir. 2010) (explaining that determining

an LLC’s citizenship requires drilling down “through however

many layers of partners or members there may be” to evaluate

the citizenship of each (internal quotation marks omitted)); cf.

Lincoln Benefit Life Co. v. AEI Life, LLC, 800 F.3d 99, 111

(Ambro, J., concurring) (“There is no good reason to treat

LLCs differently from corporations for diversity-of-citizenship

purposes.”). Accounting for those members and submembers,

SDM is a citizen of Delaware, Maryland, and California for

purposes of the diversity statute.1 As a non-profit corporation,

Drexel has citizenship for purposes of the diversity statute in

the state of its incorporation and in the state of its principal

place of business – Pennsylvania in both instances. See

28 U.S.C. § 1332(c)(1); see also Zambelli, 592 F.3d at 419.

Without any overlap in the citizenship of SDM and Drexel, the

complete diversity requirement is satisfied.

1

SDM has two members: Sodexo Operations, LLC and Magic

Food Provision, LLC. Sodexo Operations, LLC has one

member, Sodexo, Inc., which, as a corporation, has citizenship

in Delaware as its state of incorporation and in Maryland

through its principal place of business. See 28 U.S.C.

§ 1332(c)(1); see also Zambelli, 592 F.3d at 419. SDM’s other

member, Magic Food Provision, LLC, is a wholly owned

subsidiary of Magic Johnson Enterprises, Inc., that is both

incorporated and has its principal place of business in

California.

14

The amount in controversy also exceeds the $75,000

threshold in the diversity statute. See 28 U.S.C. § 1332(a).

The multi-million-dollar value of the Management Agreement

coupled with the nature of SDM’s claims for compensatory

damages, expectation damages, and punitive damages

precludes a finding that to “a legal certainty” SDM seeks a

recovery less than the jurisdictional amount. Auto-Owners Ins.

Co. v. Stevens & Ricci Inc., 835 F.3d 388, 395 (3d Cir. 2016)

(quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S.

283, 288–89 (1938)). Accordingly, this case also clears the

$75,000 amount-in-controversy threshold.

C. The District Court’s Resolution of All Claims and

Counterclaims

The District Court resolved much of this dispute by

partially granting and partially denying the parties’ cross-

motions for summary judgment. That ruling decimated SDM’s

case. It lost its fraudulent inducement claim, its breach-of-

contract claims (which were based on Drexel’s alleged failure

to renegotiate in good faith and failure to pay enhanced

compensation for services during the Fall 2016 Semester), and

its alternative claim for unjust enrichment. The District Court

reached those outcomes despite denying Drexel’s motion to

strike three declarations by SDM employees under the sham

affidavit rule. But Drexel lost more than that motion: the

District Court also rejected its fraudulent inducement

counterclaim.

Shortly before the scheduled trial on the remaining counts,

SDM moved for clarification on whether its breach-of-contract

claim for failure to pay a catering-shortfall invoice survived

15

summary judgment. Over Drexel’s objection, the District

Court permitted that claim.

With that issue resolved, both parties agreed to arbitrate the

remaining claims and counterclaims. To that end, they jointly

filed a motion to dismiss and attached exhibits identifying the

remaining claims and counterclaims. The District Court

granted that motion and, through a separate document, entered

final judgment on December 6, 2018. See Fed. R. Civ. P.

58(a). Both parties then appealed.

D. Appellate Jurisdiction

As timely challenges to a final order, both appeals come

within this Court’s appellate jurisdiction. See 28 U.S.C.

§ 1291. The District Court’s judgment on December 6, 2018,

was final and appealable because all outstanding claims and

counterclaims had been resolved through the combination of

the summary judgment ruling and the subsequent order

dismissing the remaining claims. See Aluminum Co. of Am. v.

Beazer E., Inc., 124 F.3d 551, 559–62 (3d Cir. 1997) (holding

that an order dismissing and referring to private arbitration all

unresolved claims achieved finality). SDM’s notice of appeal,

filed on January 2, 2019, was within the time permitted by rule.

See Fed. R. App. P. 4(a)(1)(A) (requiring parties in a civil case

to file a notice of appeal within 30 days after entry of the

judgment). Drexel’s notice of cross-appeal, filed on

January 11, 2019, was also timely. See Fed. R. App. P. 4(a)(3)

(providing that a notice of cross-appeal must be filed within

14 days of another party’s notice of appeal or within the time

otherwise remaining for the other party to appeal, whichever is

longer).

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IV. DISCUSSION

The summary judgment standard has not substantively

changed since a trilogy of Supreme Court cases on the topic in

1986.2 By the text of Rule 56, summary judgment is

appropriate “if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also

Brooks v. Kyler, 204 F.3d 102, 105 n.5 (3d Cir. 2000). As

explained by the Supreme Court, for a factual dispute to be

material, its resolution must have the potential to affect the

outcome of the suit. See Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248 (1986). A dispute is genuine “if the

evidence is such that a reasonable jury could return a verdict

for the nonmoving party,” id., but “the mere existence of a

scintilla of evidence” favoring the non-moving party will not

prevent summary judgment, id. at 252. See also Jutrowski v.

Twp. of Riverdale, 904 F.3d 280, 288–89 (3d Cir. 2018). Still,

in assessing the genuineness of a potential factual dispute,

inferences from the underlying facts should be drawn in favor

2

See Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson

v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); see also

Fed. R. Civ. P. 56 advisory committee’s note to 1987

amendment (explaining that “[n]o substantive change is

intended”); id. advisory committee’s note to 2007 amendment

(explaining that “[t]hese changes are intended to be stylistic

only”); id. advisory committee’s note to 2009 amendment

(consolidating and revising the timing provisions for summary

judgment, but not affecting the standard); id. advisory

committee’s note to 2010 Amendment (“The standard for

granting summary judgment remains unchanged.”).

17

of the nonmoving party. See Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574, 587 (1986); In re IKON

Office Solutions, Inc., 277 F.3d 658, 666 (3d Cir. 2002). But

if the nonmoving party “fails to make a showing sufficient to

establish the existence of an element essential to [its] case, and

on which [it] will bear the burden of proof at trial,” then

summary judgment is appropriate for the moving party.

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

In exercising diversity jurisdiction, a federal court employs

the choice-of-law principles of its forum state to determine

which substantive law governs whether a party is entitled to

judgment as a matter of law. See Klaxon Co. v. Stentor Elec.

Mfg. Co., 313 U.S. 487, 496–97 (1941). Under Pennsylvania

choice-of-law rules, the first step involves assessing whether a

conflict exists between the substantive law of multiple

jurisdictions. See Auto-Owners, 835 F.3d at 404. But here, the

parties have identified no such conflict and have litigated this

case under Pennsylvania substantive law. Thus, substantive

issues should be decided as the Pennsylvania Supreme Court

“would rule if it were deciding this case.” Id. at 403 (quoting

Norfolk S. Ry. Co. v. Basell USA Inc., 512 F.3d 86, 91–92 (3d

Cir. 2008)); see generally Hanna v. Plumer, 380 U.S. 460, 471

(1965) (providing “rough[]” guidance that in diversity cases

“federal courts are to apply state ‘substantive’ law and federal

‘procedural’ law”). In making that prediction, the decisions of

intermediate Pennsylvania appellate courts receive “significant

weight in the absence of an indication that the highest state

court would rule otherwise.” Polselli v. Nationwide Mut. Fire

Ins. Co., 126 F.3d 524, 528 n.3 (3d Cir. 1997) (quoting City of

Phila. v. Lead Indus. Ass’n, 994 F.2d 112, 123 (3d Cir. 1993));

see also Pac. Emps. Ins. Co. v. Glob. Reinsurance Corp. of

Am., 693 F.3d 417, 433 (3d Cir. 2012).

18

A. The Parties’ Competing Fraudulent Inducement

Claims Have Different Fates: SodexoMAGIC’s

Claim Survives; Drexel’s Counterclaim Does Not.

The parties both sued each other for fraudulent inducement.

In its fraud claim against Drexel, SDM alleged that Drexel

misrepresented and concealed its future student-enrollment

projections, which led SDM to bid more favorably on the

Management Agreement. Drexel countersued for fraudulent

inducement on allegations that SDM’s BAFO included capital

contributions that SDM never intended to make and that such

deceit prompted Drexel to negotiate exclusively with SDM, not

Aramark.

Both parties moved for summary judgment against their

opponent’s fraud claims. At the prompting of the District

Court, they each argued that the parol evidence rule did not bar

their fraud claim. They also asserted that the gist of the action

doctrine precluded the other’s fraud claim. SDM additionally

argued that Pennsylvania’s statute of limitations foreclosed

Drexel’s counterclaim.

The District Court rejected the parties’ competing fraud

claims at summary judgment. See SodexoMAGIC, LLC v.

Drexel Univ., 333 F. Supp. 3d 426, 456, 466–67 (E.D. Pa.

2018). In so doing, the District Court found that SDM

produced evidence of a prima facie fraud claim but entered

summary judgment for Drexel due to the parol evidence rule

and the gist of the action doctrine. Id. at 445–57. The District

Court relied on those same affirmative defenses to reject

Drexel’s fraud claim. Id. at 466–67. In ruling for SDM on

19

those grounds, the District Court did not address SDM’s

statute-of-limitations defense.

On appeal, each party challenges the District Court’s fraud

rulings. SDM argues that the District Court misapplied the

parol evidence rule and the gist of the action doctrine to its own

fraud claim. Consistent with that position, SDM does not

defend the District Court’s reliance on those principles to bar

Drexel’s fraud claim. Instead, it offers two alternative bases

for sustaining the judgment against Drexel’s fraud claim: it

renews the statute-of-limitations defense that the District Court

did not consider, and it argues for the first time on appeal that

Drexel has not produced evidence needed for the justifiable-

reliance and causation elements of a prima facie fraud case.

Drexel takes a more nuanced approach. It contends that the

parol evidence rule and the gist of the action doctrine do not

apply to its fraud counterclaim but that they do bar SDM’s

fraud claim. As an alternative, Drexel argues for the first time

on appeal that SDM did not demonstrate a misrepresentation

needed for a prima facie fraud case. For the reasons below,

SDM’s fraud claim survives summary judgment, but Drexel’s

fraud counterclaim does not.

1. Common-Law Fraud Claims in Pennsylvania

To redress injuries caused by intentional falsehoods – either

false statements or deliberately concealed facts – Pennsylvania

recognizes a civil action for fraud. See Moser v. DeSetta,

589 A.2d 679, 682 (Pa. 1991) (“The concealment of a material

fact can amount to a culpable misrepresentation no less than

does an intentional false statement.”). As developed in

Pennsylvania common law, a fraud claim consists of six

elements:

20

(1) (a) A misrepresentation or

(b) A concealment;

(2) Which is material to the transaction at hand;

(3) (a) Made with knowledge of its falsity or

recklessness as to whether it is true or false

(for a misrepresentation), or

(b) Calculated to deceive (for a conceal-

ment);

(4) With the intent of misleading another into

relying on it;

(5) Justifiable reliance on the misrepresenta-

tion; and

(6) A resulting injury proximately caused by

such reliance.

See Gibbs v. Ernst, 647 A.2d 882, 889 & n.12 (Pa. 1994);

Youndt v. First Nat’l Bank of Port Allegany, 868 A.2d 539, 545

(Pa. Super. Ct. 2005). To prevail, a fraud plaintiff must prove

each of those elements by clear and convincing evidence. See

Moser, 589 A.2d at 682; Gerfin v. Colonial Smelting & Refin.

Co., 97 A.2d 71, 72 (Pa. 1953). Upon such proof, a fraud

plaintiff may recover compensatory damages. See Neuman v.

Corn Exch. Nat’l Bank & Tr. Co., 51 A.2d 759, 766 (Pa. 1947)

(explaining that compensatory damages are recoverable for

fraudulent misrepresentation claims); Smith v. Renault,

564 A.2d 188, 193 (Pa. Super. Ct. 1989) (same); see also

McShea v. City of Phila., 995 A.2d 334, 347 n.5 (Pa. 2010)

(Baer, J., dissenting) (explaining that a “tort plaintiff usually

recovers the actual damages or compensatory damages that she

suffered because of the tort”).

21

A successful fraud plaintiff may also recover punitive

damages. But to do so requires the additional showing “that

the defendant has acted in an outrageous fashion due to either

the defendant’s evil motive or [its] reckless indifference to the

rights of others.” Phillips v. Cricket Lighters, 883 A.2d 439,

445 (Pa. 2005) (internal quotation marks omitted); see also

Feld v. Merriam, 485 A.2d 742, 747–48 (Pa. 1984) (“Punitive

damages must be based on conduct which is malicious,

wanton, reckless, willful, or oppressive.” (internal quotation

marks omitted)). Thus, proof of the six elements of fraud

without additional evidence of outrageous conduct enables a

fraud plaintiff to recover compensatory damages but not

punitive damages. See Pittsburgh Live, Inc. v. Servov,

615 A.2d 438, 442 (Pa. Super. Ct. 1992) (explaining that even

when fraud supports an award of compensatory damages, “the

same fraudulent conduct is not sufficient to [support] an award

of punitive damages without more”).

The six elements of fraud apply to the two subspecies of

fraud claims related to the formation of contracts: fraudulent

inducement and fraud in the execution. A claim for fraudulent

inducement requires proof of the six elements and is available

when a person under no duty to enter a contract was deceived

into doing so. See Coll. Watercolor Grp., Inc. v. William H.

Newbauer, Inc., 360 A.2d 200, 206 (Pa. 1976) (quoting

Restatement (Second) of Contracts § 476 (1932)); see also

Justin Sweet, Promissory Fraud and the Parol Evidence Rule,

49 Calif. L. Rev. 877, 888 (1961) (“Fraud in the inducement

occurs when one party, by means of false statements of fact,

warranties, or promises, misleads another into contracting.”).

A claim for fraud in the execution consists of the same six

elements but with a different focus: proof that a party “was

22

mistaken as to the terms and actual contents of the agreement

[it] executed due to the other’s fraud.” Toy v. Metro. Life Ins.

Co., 928 A.2d 186, 206 (Pa. 2007); see also Sweet, Promissory

Fraud, supra, at 888 (defining “fraud in the execution” as

“deception by one party about the contents of the written

instrument”). Here, both parties’ claims are for fraudulent

inducement, not fraud in the execution.

2. SodexoMAGIC’s Fraudulent Inducement Claim for

Compensatory Damages Survives Summary Judg-

ment.

a. SodexoMAGIC Presents Sufficient Evidence of a

Misrepresentation as Well as Concealment.

In attacking SDM’s fraudulent inducement claim, Drexel

argues that SDM cannot prove the misrepresentation element.

But SDM produces evidence that would allow a jury to find a

misrepresentation or concealment by clear and convincing

evidence.

The theme of SDM’s fraudulent inducement claim is that

Drexel provided it with one set of projections for future student

enrollment but then used another set of projections for its

internal purposes. SDM cites Drexel’s phase-two solicitation

from July 2014 that included an estimate of an incoming first-

year class of 3,137 students for the 2014–15 academic year.

And SDM also produces other evidence that, less than a month

later, in August 2014, Drexel calculated its budget based on an

estimated first-year class of 2,800 students, roughly 300 less

students than the figure it provided SDM. Ultimately, 2,926

first-year students enrolled at Drexel for the 2014–15 academic

year.

23

Those figures show a disconnect between what Drexel told

bidders during the summer of 2014 and its actual student

enrollment projections. But SDM did not execute the

Management Agreement until May 2015 – after it provided on-

campus dining services for the 2014–15 academic year. Thus,

even if Drexel provided a false projection of its first-year

students for the 2014–15 academic year, SDM would struggle

mightily to prove that it justifiably relied on that figure in May

2015, when it finalized the Management Agreement. See Toy,

928 A.2d at 207 (explaining that a person “is not justified in

relying upon the truth of an allegedly fraudulent

misrepresentation if he knows it to be false or if its falsity is

obvious”).

But that is not SDM’s only evidence of Drexel’s deception

regarding its long-term student-enrollment projections. In its

initial solicitation for bids, Drexel represented that it would

share “as much detail about the desired relationship and facts

around the current program as can be reasonably provided.”

Request for Proposal (SA131). And in providing information

to the bidders, Drexel noted that its Strategic Plan called for an

enrollment increase from 26,132 students to 34,000 students

by 2021. Similarly, three SDM employees, who were involved

in various phases of the bidding and negotiation process for the

Management Agreement, signed declarations that Drexel

“repeatedly represented . . . that freshman enrollment would

continue to grow over the ten-year life of the contract, or at the

very least, enrollment would stay flat for the first three years.”

Sherman Decl. ¶ 23 (JA247); Riccio Decl. ¶ 23 (JA254–55);

Arnett Decl. ¶ 9 (JA259). Those same employees also averred

that Drexel never told them during negotiations “that there was

a risk of enrollment decline” or “that enrollment was already

24

declining, and that Drexel was budgeting for that decline.”

Sherman Decl. ¶ 22 (JA247); Riccio Decl. ¶ 22 (JA254);

Arnett Decl. ¶ 9 (JA259). But at their prior depositions those

same employees testified somewhat differently, with one of

them recounting that Drexel represented that student

enrollment “might go up” or “it might go down.” Sherman

Dep. 225:17–226:1 (JA200–01).

Some of SDM’s strongest evidence of deceit comes not

from its own witnesses but from Drexel’s employees. In email

correspondence, Drexel’s Executive Vice President recounted

that “[w]hen [Drexel] contracted with Sodexo two years ago,

we never told them we were dialing back our freshman

enrollment.” Email from Helen Bowman, Executive Vice

President, Drexel, to Robert Francis, Drexel (Apr. 22, 2016)

(SA529). Another internal memorandum prepared in early

May 2015 reveals that Drexel expected that its first-year

enrollment would decline in 2015–16, leading to an even lower

budgetary forecast of a 2,600 student first-year class.

But Drexel was not entirely secretive about its plan to

decrease first-year student enrollment while it negotiated the

Management Agreement. A March 2015 article from a leading

industry news provider reported that Drexel was “making

major changes in admissions.” Ry Rivard, Drexel U. Charts A

New Course For Itself, Inside Higher Ed (Mar. 27, 2015)

(SA1546). The article explained that after it received a report

from a consulting firm in 2013, Drexel decided to shift

approaches away from its enrollment target of 34,000 students

by 2021, and it “was now looking to slow growth.” SA1546–

47.

25

Nonetheless, SDM alleges that it did not gain insight into

the full extent of Drexel’s student enrollment decline until after

it signed the Management Agreement. The same day that the

parties executed the Management Agreement, The

Philadelphia Inquirer published an article in which Drexel’s

Senior Vice President for Enrollment Management reported

that in the Spring, Drexel had “overhauled its admission

process” and now anticipated a decline in freshman enrollment

for Fall 2015. Snyder, Enrollment Change at Drexel, supra

(SA1553–54). Shortly afterwards, in June 2015, Drexel’s

President emailed the Drexel community, including SDM, with

notice not only that it was now expecting a decline in first-year

student enrollment but also that Drexel had “focused on

attracting a smaller pool of exceptionally qualified applicants.”

Email from John A. Fry, President, Drexel, to Drexel Listserv

(June 8, 2015) (SA527). In response to the shock of that news,

SDM emailed a request for an update on the precise enrollment

for the Fall 2015 Semester first-year class, and the Executive

Director of one of Drexel’s student centers remarked, “I guess

they were going to find out sooner or later.” Email from

Donald Liberati, Executive Director, Drexel, to Rita LaRue,

Senior Associate Vice President, Drexel (June 9, 2015)

(SA526). Ultimately, less than a month after executing the

Management Agreement, Drexel informed SDM that its

incoming class size would be lower than the year before –

projecting it to be between 2,600 and 2,700 students.

Considered in aggregate, while not airtight, this evidence

would allow a reasonable jury to conclude that Drexel misled

SDM or concealed its true intention from SDM until after

finalization of the Management Agreement. If a jury resolves

this genuine dispute of material fact in SDM’s favor, then SDM

26

could recover compensatory damages. See Neuman, 51 A.2d

at 766.

But SDM’s evidence does not permit recovery of punitive

damages. Under Pennsylvania law, the same evidence used to

establish fraud cannot be the sole support for an award of

punitive damages. See Smith, 564 A.2d at 193 (“If the rule

were otherwise, punitive damages could be awarded in all

fraud cases. This is not the law.”); see also Pittsburgh Live,

615 A.2d at 442. Something more is required: outrageous

conduct. See Phillips, 883 A.2d at 445. And SDM does not

come forth with sufficient evidence3 that Drexel acted with an

3

The standard of proof required for punitive damages for a

fraud claim is not clear under Pennsylvania law. See, e.g.,

Weston v. Northampton Pers. Care, Inc., 62 A.3d 947, 960–61

(2013) (explaining that fraud claims require clear-and-

convincing proof but not addressing standard of proof for

punitive damages); Pittsburgh Live, 615 A.2d at 441–42

(same). The likely answer is that the standard of proof for

punitive damages mirrors the standard of proof for the

underlying claim. Compare Martin v. Johns-Manville Corp.,

494 A.2d 1088, 1098 (Pa. 1985) (applying a preponderance

standard for punitive damages in a product liability case, which

otherwise requires such proof), abrogated on other grounds by

Kirkbride v. Lisbon Contractors, Inc., 555 A.2d 800 (Pa.

1989), with Hepps v. Phila. Newspapers, Inc., 485 A.2d 374,

389 (1984) (applying a clear-and-convincing standard for

punitive damages for a defamation claim, which otherwise

requires such proof), rev’d on other grounds, 475 U.S. 767

(1986), and Polselli v. Nationwide Mut. Fire Ins. Co., 23 F.3d

747, 750 (3d Cir. 1994) (applying a clear-and-convincing

standard for punitive damages for a claim of bad-faith conduct

27

evil motive or that Drexel’s conduct was malicious, vindictive,

or evidenced a wholly wanton disregard for SDM’s rights. See

id. Without such evidence, SDM’s claim for punitive damages

fails at summary judgment. See Celotex, 477 U.S. at 322.

b. The District Court Did Not Abuse Its Discretion

in Denying Drexel’s Motion to Strike Declara-

tions by Three SodexoMAGIC Witnesses.

By way of counterargument, Drexel invokes the sham

affidavit rule to contend that the District Court abused its

discretion by considering three declarations by SDM

employees. See SodexoMAGIC, 333 F. Supp. 3d at 443

(reasoning that the witnesses’ declarations could be reconciled

with their prior deposition testimony). The sham affidavit rule

allows a court to disregard a later statement by a deponent on

two conditions: the later statement contradicts the witness’s

deposition testimony, and the discrepancy between the two

statements is neither supported by record evidence nor

otherwise satisfactorily explained. See Daubert, 861 F.3d at

391–92; Jiminez v. All Am. Rathskeller, Inc., 503 F.3d 247, 254

(3d Cir. 2007) (explaining that “courts generally have refused

to disregard the affidavit” where there is “independent

evidence in the record to bolster an otherwise questionable

affidavit” (internal quotation marks omitted)); see generally

10A Charles Alan Wright, Arthur R. Miller & Mary K. Kane,

by insurers, which otherwise requires such proof). If so, then

SDM would need to supply clear-and-convincing evidence of

outrageous conduct, and it does not. But due to the paucity of

its evidence of such conduct, SDM’s punitive damages claim

would similarly fail at summary judgment under the

preponderance standard.

28

Federal Practice and Procedure § 2726.1 (4th ed. 2021) (“[A]n

interested witness who has given clear answers to

unambiguous questions cannot create a conflict and resist

summary judgment with an affidavit that is clearly

contradictory, without providing a satisfactory explanation of

why the testimony is changed.”). On abuse-of-discretion

review, the District Court’s decision not to apply the sham

affidavit rule holds up – by a narrow margin.

Three SDM witnesses involved in negotiating the

Management Agreement testified at their depositions about

representations that Drexel made about future student

enrollment. One SDM witness testified that Drexel could not

predict future student enrollment and that Drexel was

noncommittal about future student enrollment:

Q. In every meeting that you had with

[Drexel’s representative], did she not say

that nobody could predict what the

freshman enrollment would be going

forward?

A. Every time –

Q. Well, answer my question.

A. Yes.

***

Q. It could go up, it could go down. They

didn’t know exactly where it would be.

A. What I recollect is a noncommittal, they

didn’t know exactly where it would be.

29

Riccio Dep. 101:10–15; 141:20–23 (JA206–07); see also Hunt

Dep. 90:16–91:3 (JA211–12) (adopting that testimony through

SDM’s designated Rule 30(b)(6) corporate witness as SDM’s

official position). A second witness testified similarly – that

Drexel was noncommittal and stated that future student

enrollment might increase or it might decrease:

Q. [Drexel’s representative] told you she

couldn’t make any commitment as to

what the enrollment would be, correct?

A. Correct.

Q. One way or the other, correct?

A. Correct.

Q. It might go up, it might go down?

A. Correct.

Sherman Dep. 225:17–226:1 (JA200–01). A third witness

testified that she knew in March 2015 that Drexel’s growth

initiatives did not include increasing the first-year class size:

Q. The second sentence you say, “Jim needs

to know that the financial model did not

hurdle at the new understanding of

[Drexel’s] growth initiatives (no new

students – just growing retention, grad

students and online students).” Do you

see that?

A. Yes.

Q. So that’s what Drexel told you, right?

30

A. That was the knowledge that I had on

3/18.

Arnett Dep. 218:12–23 (SA1744).

Later, each of those witnesses signed declarations under

penalty of perjury with statements about the negotiation of the

Management Agreement. See Sherman Decl. (JA244–49);

Riccio Decl. (JA251–56); Arnett Decl. (JA258–61); see also

28 U.S.C. § 1746. Most of those averments do not contradict

the witnesses’ prior deposition testimony. For example, the

declarations state that Drexel never told SDM that, following

recommendations from a consulting firm, it implemented an

initiative that could affect student enrollment and revenues for

the first few years of its implementation. See Sherman

Decl. ¶¶ 6–9, 11 (JA245–46); Riccio Decl. ¶¶ 6–9, 11 (JA252–

53); Arnett Decl. ¶¶ 6–7 (JA259).

The sham affidavit rule does not apply to those

noncontradictory portions of the declarations. Because

summary judgment does not present an occasion to make

credibility assessments, see Jiminez, 503 F.3d at 253, the sham

affidavit rule does not permit striking the entirety of a later-

provided affidavit or declaration since doing so would require

a broader assessment of the witness’s credibility. Thus, the

sham affidavit rule permits striking only contradictory

statements in later-provided affidavits or declarations.

Here, the witnesses’ declarations also contained statements

in tension with their deposition testimony. All three witnesses

averred that Drexel repeatedly represented during the bidding

and negotiation process “that freshman enrollment would

continue to grow over the ten-year life of the contract, or at the

31

very least, enrollment would stay flat for the first three years.”

Riccio Decl. ¶ 23 (JA254–55); Sherman Decl. ¶ 23 (JA247);

Arnett Decl. ¶ 9 (JA259). The declarations also state that the

witnesses first learned that Drexel expected a significant

decline in first-year student enrollment through the ‘Dear

Colleague’ letter sent after SDM had executed the

Management Agreement. See Riccio Decl. ¶ 31 (JA256);

Sherman Decl. ¶ 31 (JA249); Arnett Decl. ¶ 18 (JA261).

For the first two witnesses, it is hard to reconcile their later

statements with their prior deposition testimony. At their

depositions, they testified that Drexel was non-committal

about future student enrollment. See Riccio Dep. 101:10–15;

141:20–23 (JA206–07); Sherman Dep. 225:17–226:1 (JA200–

01). That is different from their later statements that Drexel

consistently predicted increased or steady student enrollment.

See Riccio Decl. ¶ 23 (JA254–55); Sherman Decl. ¶ 23

(JA247). But the sham affidavit rule does not reject later

statements solely because they conflict with prior deposition

testimony. See Baer v. Chase, 392 F.3d 609, 624 (3d Cir.

2004) (“[M]erely because there is a discrepancy between

deposition testimony and the deponent’s later affidavit a

district court is not required in all cases to disregard the

affidavit.”). When a later statement is supported by

independent record evidence, courts generally refuse to strike

those statements. See id. at 625. And record evidence indicates

that in its initial phase-one solicitation Drexel predicted that

student enrollment would increase through 2021.

Permitting consideration of the third witness’s seemingly

contradictory statements also requires a fine line. That witness

testified that she had a “new understanding” of Drexel’s

student enrollment in March 2015. Arnett Dep. 218:12–23

32

(SA1744). But in her later declaration she stated that she first

learned that Drexel expected a “significant decline” in first-

year student enrollment from the ‘Dear Colleague’ letter in

June 2015. Arnett Decl. ¶ 18 (JA261). Most generously, those

statements can be harmonized by reading them as reflecting

emerging knowledge about Drexel’s plans for future

enrollment: the witness had knowledge in March 2015 that

enrollment would not increase and learned later in June 2015

that enrollment would decline significantly. That construction

of these statements, coupled with the lenient standard of

appellate review, leads to the conclusion that the District Court

did not abuse its discretion in refusing to apply the sham

affidavit rule.

For greater repose, SDM’s fraud claim would survive

summary judgment even if the sham affidavit rule did exclude

the challenged statements in these three declarations. The

sham affidavit rule does not permit a court to reject a witness’s

prior deposition testimony. And here, one of SDM’s declarants

testified at his earlier deposition that Drexel held open the

possibility that first-year student enrollment “might go up.”

Sherman Dep. 225:23–226:1 (JA200–01). But if Drexel were

following a plan to dramatically reduce first-year enrollment,

a reasonable jury could find that it was a misrepresentation for

Drexel to state that student enrollment could still increase.

Most significantly, SDM’s evidence of a misrepresentation or

concealment does not come solely from these three witnesses’

testimony or declarations. As explained above, statements by

Drexel employees also suggest that Drexel deceived SDM

about its plans for future student enrollment.4

4

This decision does not preclude a jury from considering these

three witnesses’ declarations in assessing their credibility – if

33

c. Drexel’s Remaining Counterarguments for

Upholding Summary Judgment in Its Favor Also

Fail.

Drexel attacks SDM’s prima facie case of fraudulent

inducement on three additional grounds. None of those have

merit.

Drexel argues that SDM’s fraud claim fails as a matter of

law. According to Drexel, its student-enrollment projections

were forward-looking statements, and an entity cannot be

liable in fraud for incorrectly predicting the future. In general,

that is correct: due to the known unreliability of predicting the

future, forward-looking statements typically cannot constitute

misrepresentations for purposes of a fraud claim. See Coll.

Watercolor, 360 A.2d at 206. But that principle does not apply

when an entity misrepresents its true future projections. And

that is the premise of SDM’s fraud claim. It does not sue

because Drexel’s projections did not come true but rather

because it believes that Drexel provided false projections.

Such conduct qualifies as “a misrepresentation of an existing

fact” that could support a fraud claim. Id. (citing Rose v. Rose,

123 A.2d 693, 697 (Pa. 1956)); see also Nat’l Data Payment

Sys., Inc. v. Meridian Bank, 212 F.3d 849, 858 (3d Cir. 2000)

(citing College Watercolor, 360 A.2d at 206, for the

proposition that, under Pennsylvania law, statements about

plans or projections may be fraudulent if they “knowingly

misstate[]the speaker’s true state of mind when made”).

otherwise permissible under the Federal Rules of Evidence.

See, e.g., Fed. R. Evid. 613, 801(d)(1)(A).

34

Because false future projections qualify as misrepresentations,

SDM’s fraud claim is not barred as a matter of law.

Drexel also submits that it did not commit fraud because it

had no duty to inform SDM that it would miss its future

enrollment targets. That is incorrect. Drexel had a duty not to

misrepresent its student enrollment projections, and even if it

provided accurate initial projections, when those facts

materially changed, it had a duty to not intentionally conceal

that development. See Neuman, 51 A.2d at 764 (“The

deliberate nondisclosure of a material fact amounts to culpable

misrepresentation no less than does an intentional affirmation

of a material falsity.” (citing Restatement (Second) of Torts

§ 551)); see also Restatement (Second) of Torts § 551(2)(c)

cmt. f (explaining that a person who makes a representation

initially believed to have been true but “remains silent after he

has learned that it is untrue and that the person to whom it is

made is relying upon it in a transaction with him is morally and

legally in the same position as if he knew that his statement

was false when made”).

Drexel’s final counterargument has undertones of

concession. Drexel asserts that SDM cannot sue for fraud,

despite any misrepresentations or concealments that Drexel

may have made, because SDM learned the true enrollment

numbers shortly after the Management Agreement was

finalized and SDM should have terminated the contract for

convenience rather than perform. But Pennsylvania law is not

so unkind to the defrauded. Instead, it allows for an election

of remedy: a defrauded party may affirm the contract and sue

for tort damages or pursue contract damages. See Tilghman v.

Dollenberg, 213 A.2d 324, 327 (Pa. 1965) (“The affirmance of

a contract induced by fraud of the seller does not extinguish the

35

right of the purchaser, and it is not a waiver of the fraud, nor

does it bar the right of the purchaser to recover damages for the

fraud.”); see also Allied Erecting & Dismantling, Co. v. USX

Corp., 249 F.3d 191, 199 (3d Cir. 2001) (“[A] party can affirm

a contract over a period of time without waiving a claim to

fraudulent inducement.”). Thus, SDM was not required to

terminate the Management Agreement once it suspected fraud;

it was allowed to perform and seek remedies in tort, which it

now does.

For these reasons, Drexel’s counterarguments lack merit,

and the evidence produced by SDM would allow a reasonable

jury the option of concluding by clear and convincing evidence

that Drexel misrepresented or concealed its own projections for

student enrollment. See Moser, 589 A.2d at 682 (“[A] party

alleging fraud has the burden of proving the same by clear and

convincing evidence.”). But without additional evidence of

outrageous conduct by Drexel, SDM cannot proceed with its

claim for punitive damages. See Phillips, 883 A.2d at 445

(explaining that punitive damages claims require evidence of

outrageous conduct); Pittsburgh Live, 615 A.2d at 442

(explaining that fraud plaintiff cannot rely solely on evidence

supporting underlying fraud claim).

3. The Parol Evidence Rule Does Not Bar

SodexoMAGIC’s Claim for Fraudulent Inducement.

In another effort to defeat SDM’s fraud claim, Drexel

invokes Pennsylvania’s parol evidence rule. Drexel argues that

because the Management Agreement contains an integration

clause, the parol evidence rule prevents the use of extrinsic

evidence to establish the alleged misrepresentations at the heart

of SDM’s fraud claim. For the reasons below, Drexel’s

36

argument overextends Pennsylvania’s parol evidence rule,

which does not preclude SDM’s fraud claim.

a. Integration Clauses, the Parol Evidence Rule,

and Fraudulent Inducement Claims Under Penn-

sylvania Law.

The parol evidence rule attaches legal consequences to an

integrated contract – a contract that is the only agreement

between the parties on a specific topic. See Restatement

(Second) Contracts § 209(1) (“An integrated agreement is a

writing or writings constituting a final expression of one or

more terms of an agreement.”). To demonstrate integration,

parties commonly include an integration clause in a contract.

Such a clause typically states that the contract contains the final

expression of all the terms of the parties’ agreement and that it

supersedes all prior agreements on the subject matter. For

integrated contracts, the parol evidence rule prevents the use of

extrinsic evidence to add to or modify the contract’s terms:

Once 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.

Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 436–

37 (Pa. 2004) (emphasis added).5

5

The parol evidence rule is not absolute; Pennsylvania

recognizes four exceptions. Extrinsic evidence may be used to

37

Under that formulation, the parol evidence rule is a

substantive rule of contract law that prevents the use of

extrinsic evidence to nullify, modify, or augment the terms of

a contract. See id.; see also Rose v. Food Fair Stores, Inc.,

262 A.2d 851, 854 (Pa. 1970) (holding that the parol evidence

rule precludes proof of oral representations that would

“directly contradict the clear meaning of the written contract”);

Nicolella v. Palmer, 248 A.2d 20, 22–23 (Pa. 1968) (holding

that for an integrated contract, the parol evidence rule prevents

extrinsic evidence to establish an additional contract term).

Importantly, the rule does not prevent the use of extrinsic

evidence for other purposes. See, e.g., Berger v. Pittsburgh

Auto Equip. Co., 127 A.2d 334, 335 (Pa. 1956) (allowing

evidence of a misrepresentation “not to alter or vary” the terms

of an integrated contract, but to rescind it). And for fraudulent

inducement claims, the purpose of extrinsic evidence is to

prove a precontractual misrepresentation or concealment – not

to alter or vary the terms of the contract. See Blumenstock v.

Gibson, 811 A.2d 1029, 1036 (Pa. Super. Ct. 2002) (explaining

that, for fraudulent inducement claims, the party seeks to offer

modify contract terms when an integrated contract is

ambiguous or to add contract terms omitted by fraud in the

execution, by accident, or by mistake. See Yocca, 854 A.2d at

437 (stating that parol evidence is admissible to explain or

clarify an ambiguous term in a contract “whether the ambiguity

is created by the language of the instrument or by extrinsic or

collateral circumstances” (quoting In re Est. of Herr, 161 A.2d

32, 34 (Pa. 1960))); Nicolella v. Palmer, 248 A.2d 20, 22 (Pa.

1968) (stating that extrinsic evidence to vary terms of an

integrated agreement is barred “in the absence of fraud,

accident, or mistake”). None of those are at issue in this case.

38

extrinsic evidence to show not “that the representations were

omitted from the written agreement, but, rather, . . . that the

representations were fraudulently made”); 1726 Cherry St.

P’Ship v. Bell Atl. Props., Inc., 653 A.2d 663, 666 (Pa. Super.

Ct. 1995) (same). Thus, the parol evidence rule acting alone

does not prevent fraudulent inducement claims arising out of

integrated contracts. See generally Sweet, Promissory Fraud,

supra, at 877 (“It is generally agreed that the parol evidence

rule does not prevent admission of evidence of fraud.”).

A contract may, however, contain fraud-insulating clauses.

Those provisions take many forms, but they often have a

common objective: to prevent a party from satisfying the

justifiable-reliance element of a fraudulent inducement claim.

One such fraud-insulating term is a no-reliance clause, through

which a party expressly disclaims reliance on another party’s

precontractual representations.6 Other similar fraud-insulating

provisions are clauses that assume joint responsibility for

6

See Glenn D. West & Kim M. Shah, Debunking the Myth of

the Sandbagging Buyer: When Sellers Ask Buyers to Agree to

Anti-Sandbagging Clauses, Who Is Sandbagging Whom?,

11 The M&A Lawyer, no. 1, Jan. 2007, at 4 (explaining that

no-reliance clauses “relieve the seller of extra-contractual tort

claims” based on precontractual representations because “the

existence of such a clause makes the buyer’s claim of reliance

on such statements to its detriment unjustified and

unreasonable” (citation omitted)); see also Allen Blair, A

Matter of Trust: Should No-Reliance Clauses Bar Claims for

Fraudulent Inducement of Contract?, 92 Marq. L. Rev. 423,

468–75 (2009) (explaining that sophisticated commercial

parties bargain for no-reliance clauses in their agreements for

many reasons).

39

precontractual representations, see, e.g., Bardwell v. Willis Co.,

100 A.2d 102, 103–04 (Pa. 1953), or that state that the

representations in the contract either supersede all prior

representations, see, e.g., Yocca, 854 A.2d at 431, or are the

only representations made, see, e.g., 1726 Cherry St., 653 A.2d

at 670.

When an integrated contract includes a fraud-insulating

term – to form what may be called an ‘integration-plus’

contract – that extends the reach of the parol evidence rule. In

that circumstance, the parol evidence rule prevents the use of

extrinsic evidence to vary the fraud-insulating term. And

without such evidence, it is virtually impossible to establish the

justifiable-reliance element needed for a fraud claim. As the

Pennsylvania Supreme Court has explained for integrated

contracts, “due to the parol evidence rule’s operation, a party

cannot be said to have justifiably relied on prior

representations that he has superseded and disclaimed.” Toy,

928 A.2d at 207 (emphasis added).

For example, consider an integrated contract between

sophisticated parties with a no-reliance clause. There, the parol

evidence rule prevents the use of extrinsic evidence to vary the

terms of the contract, including the no-reliance clause. Left

undisturbed by extrinsic evidence, a no-reliance clause,

through which a party disclaims reliance on any prior

representations, makes it legally impossible for a party to

establish that it justifiably relied on a precontractual

representation. See Glenn D. West & W. Benton Lewis, Jr.,

Contracting to Avoid Extra-Contractual Liability – Can Your

Contractual Deal Ever Really Be the “Entire” Deal?, 64 Bus.

Law. 999, 1018 (2009) (explaining that no-reliance clauses

“purport to preclude proof of the mandatory reliance element

40

of extra-contractual misrepresentation actions” (internal

quotation marks omitted)); Joseph Wylie, Using No-Reliance

Clauses to Prevent Fraud-in-the-Inducement Claims, 92 Ill.

Bar J. 536, 539 (2004) (“[A] party agreeing to [a no-reliance]

clause in essence agrees in advance to waive any causes of

action it may have for fraud.”). Thus, through the operation of

the parol evidence rule, a no-reliance clause in an integrated

contract precludes fraudulent inducement claims that depend

on a precontractual misrepresentation.

Pennsylvania caselaw abounds with similar examples. A

seminal application of this principle occurred in Bardwell v.

Willis Co., when the Pennsylvania Supreme Court rejected a

tort claim for deceit arising out of an integrated contract with

joint diligence and joint representation terms. 100 A.2d at

104–05. There, the Court reasoned that the parol evidence rule

prevented extrinsic evidence from nullifying those terms, and

with those provisions unaltered, the complaining party had no

redress in tort. See id. The Pennsylvania Supreme Court

reached a similar conclusion for an integrated contract that

contained a clause stating that the contract superseded “any

representations or agreements previously made or entered into

by the parties hereto.” Yocca, 854 A.2d at 431 (emphasis

added). Because the parol evidence rule prevented

modification of that term through extrinsic evidence, the

complaining party could not demonstrate justifiable reliance on

prior disclaimed representations. See id. at 439. Pennsylvania

courts treat integrated contracts with no-additional-

representations clauses similarly: the parol evidence rule

prevents fraudulent inducement claims based on precontractual

misrepresentations. See 1726 Cherry St., 653 A.2d at 670

(holding that the parol evidence rule prevented the use of

evidence of a prior representation when the integrated contract

41

stated that there were “no other representations or

understandings” between the parties); see also Blumenstock,

811 A.2d at 1036 (“[T]he case law clearly holds that a party

cannot justifiably rely upon prior oral representations yet sign

a contract denying the existence of those representations.”);

McGuire v. Schneider, Inc., 534 A.2d 115, 119 (Pa. Super. Ct.

1987) (same).

In sum, Pennsylvania’s parol evidence rule does not

prevent fraudulent inducement claims for all integrated

contracts, but the rule may preclude such claims based on

misrepresentations for ‘integration-plus’ contracts – integrated

contracts with fraud-insulating provisions. See Youndt,

868 A.2d at 546 (explaining that “parol evidence is

inadmissible where the contract contains terms that deny the

existence of representations regarding the subject matter of the

alleged fraud,” but “when the contract contains no such term

denying the existence of such representations, parol evidence

is admissible to show fraud in the inducement”).

b. The Management Agreement Lacks Fraud-Insu-

lating Provisions, so the Parol Evidence Rule

Does Not Preclude SodexoMAGIC’s Fraudulent

Inducement Claim.

The parol evidence rule does not apply to SDM’s fraud

claim because, although the Management Agreement contains

an integration clause, it lacks fraud-insulating provisions. The

Management Agreement’s integration clause references prior

agreements; it does not mention, much less disclaim, prior

representations:

42

This Agreement contains all agreements of the

parties with respect to matters covered herein,

superseding any prior agreements, and may not

be changed other than by an agreement in writing

signed by the parties hereto.

Management Agreement § 10.11 (emphasis added) (SA66).

And lest any uncertainty remain, the Management Agreement

also includes an express reliance clause that states explicitly

that the parties relied on certain categories of prior assumptions

and representations:

The financial terms set forth in this Agreement

and other obligations assumed by

SodexoMAGIC hereunder are based on

conditions in existence on the date

SodexoMAGIC commences operations,

including by way of example [Drexel’s] student

population; labor, food and supply costs; and

federal, state and local sales, use and excise tax.

In addition, each party has relied on

representations regarding existing and future

conditions and projections made by the other in

connection with the negotiation and execution of

this Agreement.

Id. § 9.1 (emphases added) (SA57). One category of those

recognized representations – projections about future student

population – is the basis for SDM’s fraud claim.

Under these circumstances, the parol evidence rule does not

preclude SDM’s fraudulent inducement claim. SDM seeks to

introduce extrinsic evidence of Drexel’s precontractual

43

misrepresentations of its student enrollment projections. But it

does not proffer that evidence for the purpose prohibited by the

parol evidence rule: to nullify, vary, or supplement a

contractual term. See Yocca, 854 A.2d at 436–37. Rather,

SDM accepts the terms of the Management Agreement as they

are – in particular, those related to its obligations to make

investments and provide dining services – and it seeks to use

the extrinsic evidence to prove that Drexel fraudulently

induced it to enter into the Management Agreement. Nor does

the Management Agreement contain a fraud-insulating

provision. It does not disclaim reliance on precontractual

representations, and it does not state that representations in the

Management Agreement are exclusive or supersede all prior

representations. Thus, here, the parol evidence rule does not

prevent the use of extrinsic evidence to prove precontractual

misrepresentations. See Youndt, 868 A.2d at 546.7

4. Pennsylvania’s Gist of the Action Doctrine Does

Not Bar SodexoMAGIC’s Fraud Claim.

The District Court also barred SDM’s fraud claim under

Pennsylvania’s gist of the action doctrine. It did so on the

theory that Drexel owed SDM no duty apart from those

imposed by the Management Agreement and thus SDM’s fraud

claim was prohibitively duplicative of its breach-of-contract

claim. See SodexoMAGIC, 333 F. Supp. 3d at 454–56. That is

mistaken.

7

Because the Management Agreement does not contain any

fraud-insulating provisions regarding intentional concealments

of material facts, the parol evidence rule likewise does not bar

SDM from pursuing a fraudulent inducement claim based on

concealment.

44

Under Pennsylvania law, the gist of the action doctrine

prevents a purely contractual duty from serving as the basis for

a tort claim. See Bruno v. Erie Ins. Co., 106 A.3d 48, 65 (Pa.

2014). Tort actions arise from the breach of a duty owed to

another as a matter of social policy, while breach-of-contract

actions arise from the breach of a duty created by contract. See

id. at 68 (explaining that tort claims involve a “violation of a

broader social duty owed to all individuals” and thus exist

“regardless of the contract”); eToll, Inc. v. Elias/Savion

Advert., Inc., 811 A.2d 10, 14 (Pa. Super. Ct. 2002); Bohler-

Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 F.3d 79, 103–

04 (3d Cir. 2001). When a duty is created by contract, the gist

of the action doctrine requires that a claim for a breach of that

duty be brought in contract, not tort. See Bruno, 106 A.3d at

68 (“[If] the duty breached is one created by the parties by the

terms of their contract . . . then the claim is to be viewed as one

for breach of contract.”).

The doctrine has a long lineage in Pennsylvania, having its

roots in precedents from the first half of the nineteenth century.

See generally id. at 60–64 (tracing this principle from its

origins to the present). Examples of its application include the

case of a bailor who was alleged to have negligently misplaced

a bailment, but who under the doctrine could not be sued in

tort. See McCahan v. Hirst, 7 Watts 175, 179 (Pa. 1838). As

the Pennsylvania Supreme Court more recently explained,

without the bailment agreement, the bailor had no duty to

properly handle the property, and the gist of the action doctrine

barred the tort claim. Bruno, 106 A.3d at 63 (citing McCahan,

7 Watts at 179). Similarly, a party who contractually promised

to safely keep and pasture horses was not liable in tort for

negligently keeping and pasturing the horses because, absent

45

the contract, that party had no duty to keep and pasture those

horses. See id. at 64 (citing Cook v. Haggarty, 36 Pa. 67, 69

(Pa. 1859)). In sum, under the gist of the action doctrine, “the

nature of the duty alleged to have been breached . . . [is] the

critical determinative factor,” with the doctrine permitting tort

claims that exist “regardless of the contract.” Id. at 68.

Under the doctrine, it is still possible for the same act to

breach both a duty under tort law and a contractual duty. One

such example occurred when a party contractually promised to

maintain a fence but then removed a portion of the fence near

a quarry and a horse owned by the other party to the contract

tumbled to its death in the unfenced quarry. See id. at 64 (citing

Krum v. Anthony, 8 A. 598 (Pa. 1887)). Because the party who

removed a portion of the fence near the quarry would be liable

for the horse’s death regardless of the contractual duty to

maintain the fence, the gist of the action doctrine did not bar a

tort claim. See id. As another example, a landlord who

promised to repair a defective porch could be subject to tort

claims after the porch had collapsed on the tenant because the

landlord had a duty to invitees even absent the promise to

repair the porch. See id. at 65–66 (citing Reitmeyer v.

Sprecher, 243 A.2d 395 (Pa. 1968)).

The gist of the action doctrine does not apply here because

SDM’s fraudulent inducement claim does not depend on the

breach of a contractual duty. SDM alleges that Drexel

misrepresented and intentionally concealed its internal student

enrollment projections while the parties were negotiating the

Management Agreement. At that time, however, the parties

had not executed the Management Agreement. And without a

binding contract, any duty Drexel owed SDM during

negotiations was grounded only in tort.

46

In reaching a contrary conclusion, the District Court

attributed Drexel’s duty to the terms of the Management

Agreement. See SodexoMAGIC, 333 F. Supp. 3d at 455–56.

But a precontractual duty not to deceive through

misrepresentation or concealment exists independently of a

later-created contract. See Moser, 589 A.2d at 682 (explaining

that parties are under a duty to avoid “intentional false

statement[s]” or “concealment[s] of material fact[s]” (citing

Commonwealth v. Monumental Props., Inc., 329 A.2d 812, 829

(Pa. 1974))). And even if such a duty could be retroactively

incorporated into a contract, that would still not foreclose a tort

action. When a contractual duty duplicates an obligation

generally owed to another in society, the gist of the action

doctrine does not bar a tort claim; it prevents only the

contractual duty from serving as a basis for a tort claim. See

Bruno, 106 A.3d at 62–65; see also, e.g., Reitmeyer, 243 A.2d

at 398; Krum, 8 A. at 600. Because SDM’s tort-based fraud

claim would exist with or without a later-in-time contract, the

gist of the action doctrine does not bar such a claim here.

5. Drexel’s Fraudulent-Inducement Counterclaim

Fails.

In counterclaiming for fraudulent inducement, Drexel

asserts that SDM had no intention of making the $4 million

capital contribution that it promised in its BAFO. According

to Drexel, SDM’s misrepresentation caused Drexel to award

the contract to SDM, not Aramark.

Typically, a fraudulent inducement claim involves

deception that leads a person to enter a contract. See Maguire

v. Wheeler, 150 A. 882, 884 (Pa. 1930) (“Where the person

47

making the promise under such circumstances intended at the

time not to perform it, thus fraudulently making use of the

promise as a device to procure the contract or deed, equity will

grant relief . . . .”). Yet Drexel makes no such allegation here.

Instead, it claims that SDM’s misrepresentation induced it to

forgo contracting with Aramark. While a nontraditional

application, the Pennsylvania Supreme Court would likely

recognize such a fraudulent inducement cause of action

because a promise without an intention to perform may form

the basis of a fraud claim. See Rose, 123 A.2d at 697

(explaining that promises made without the intention to carry

out the promise support an action for fraud); Sweet,

Promissory Fraud, supra, at 888 (“The general rule is that a

promise made without the intent to perform it is fraud.”).

But this is an unusual context to advance such a theory. The

evidence here suggests that Drexel misrepresented its

predictions for future student enrollment not just to SDM but

to all bidders, including Aramark. From that perspective,

Drexel is claiming that it lost the opportunity to contract with

Aramark on the basis of misrepresentations that it made to

Aramark. Under these circumstances, it is doubtful that

Pennsylvania would permit a fraudulent-inducement claim.

But it is unnecessary to reach that novel question of state law

here.

That is so because Drexel’s fraud claim is untimely. Under

the relevant statute of limitations, a party has two years to sue

for fraud. See 42 Pa. Stat. and Cons. Stat. § 5524(7). That

period commences when a cause of action accrues. See Rice v.

Diocese of Altoona-Johnstown, 255 A.3d 237, 246 (Pa. 2021).

Working backwards, Drexel first filed its fraud counterclaim

on July 13, 2017. Thus, to be timely, its claim must have

48

accrued on or after July 13, 2015 – a little less than two months

after the parties finalized the Management Agreement.

Yet Drexel’s fraud claim accrued well before that date. See

Gleason v. Borough of Moosic, 15 A.3d 479, 484 (Pa. 2011)

(explaining that a cause of action accrues “when an injury is

inflicted and the corresponding right to institute a suit for

damages arises”). SDM proposed its BAFO on August 8,

2014, and Drexel awarded the contract to SDM a week later,

on August 15, 2014. As of that date, Drexel relied on SDM’s

alleged false promise and discontinued competitive

negotiations with Aramark and could have sued SDM for

fraud. And because Drexel did not initiate its counterclaim for

over two years – not until July 13, 2017 – Pennsylvania’s

statute of limitations, through its normal operation, would bar

Drexel’s fraud claim.

Drexel contends that the statute of limitations should not

operate normally in this case. Instead, according to Drexel, the

statute of limitations should be tolled by either the discovery

rule or the fraudulent-concealment exception.

Drexel argues first that the discovery rule should toll the

statute of limitations until April 28, 2017. That is the date on

which Drexel received discovery materials from SDM

suggesting that SDM never intended to fulfill the commitments

it made in its final offer. See In re Risperdall Litig., 223 A.3d

633, 640 (Pa. 2019) (explaining that the discovery rule tolls the

statute of limitations for the period that “an injury or its cause

[are] not reasonably knowable”). It is undisputed that Drexel

had constructive knowledge of SDM’s allegedly false

intentions by that date. And such knowledge stops tolling

under the discovery rule. See Gleason, 15 A.3d at 484.

49

But discovery-rule tolling ceases once a party has “actual

or constructive knowledge of at least some form of significant

harm and of a factual cause linked to another’s conduct,

without the necessity of notice of the full extent of the

injury . . . or precise cause.” Id. (quoting Wilson v. El-Daief,

964 A.2d 354, 364 (Pa. 2009)); see also Fine v. Checcio,

870 A.2d 850, 858 (Pa. 2005) (explaining that the discovery

rule still requires reasonable diligence, measured under an

objective standard of whether a plaintiff used “the means of

information within [its] reach, with the vigilance the law

requires” (citation omitted)). And here, Drexel had

constructive knowledge of a potential material

misrepresentation at an earlier point in time, when SDM

circulated an initial draft of the Management Agreement on

September 12, 2014, without the $4 million capital

contribution. As alleged by Drexel, that term was “one of the

principal financial advantages distinguishing Sodexo’s BAFO

from Aramark’s,” Am. Countercl. ¶ 54 (SA13), and Drexel’s

lead negotiator suspected that SDM was pulling a bait and

switch. Thus, as of September 12, 2014, the discovery rule no

longer tolled the statute of limitations. Drexel still had two

years to investigate and sue, but it did not file its counterclaim

within that period.

The related but distinct doctrine of fraudulent-concealment

tolling does not salvage Drexel’s counterclaim. That doctrine

allows tolling of the statute of limitations for the period in

which the opposing party, through fraud or concealment,

causes another party to “relax [its] vigilance or deviate from

[its] right of inquiry into the facts.” Fine, 870 A.2d at 860. But

here, although Drexel alleges that SDM’s BAFO

misrepresented its intention to make an additional $4 million

50

capital contribution, that alleged misrepresentation was not

concealed after SDM circulated its first draft of the

Management Agreement. At that point, because the draft did

not include that previously promised term, SDM was no longer

concealing its intention to not make that additional investment.

Thus, fraudulent-concealment tolling ceased on September 12,

2014, as well. And because Drexel did not file its fraud

counterclaim until over two years after that date, the statute of

limitations bars it.

B. SodexoMAGIC’s Breach-of-Contract Claim for

Failure to Renegotiate in Good Faith Survives

Summary Judgment.

SDM also sued Drexel for breaching the Management

Agreement for failing to renegotiate in good faith after annual

first-year student enrollment did not increase by two percent.

The District Court granted summary judgment to Drexel on

this count, reasoning primarily that promises to renegotiate in

good faith are too indefinite to be enforced. See

SodexoMAGIC, 333 F. Supp. 3d at 457–59. As an alternative

ground, the District Court found that Drexel did renegotiate in

good faith. See id. at 459 n.6. Both conclusions are incorrect:

the first as a matter of law; the second due to a genuine dispute

of material fact.

1. A Promise to Renegotiate in Good Faith May Be

Enforceable Under Pennsylvania Law, and the

Promise Between These Parties Is Enforceable.

Pennsylvania affords parties broad latitude in fashioning

their agreements. See Cent. Dauphin Sch. Dist. v. Am. Cas.

Co., 426 A.2d 94, 96 (Pa. 1981); see also Restatement

51

(Second) of Contracts, ch. 8, intro. note (“In general, parties

may contract as they wish, and courts will enforce their

agreements without passing on their substance.”). As part of

that flexibility, a voluntarily-agreed-to contract term is

enforceable unless a statute or the common law specifically

prevents enforcement of that term. See Greene v. Oliver

Realty, Inc., 526 A.2d 1192, 1194 (Pa. Super. Ct. 1987)

(“Contemporary contract law generally provides that a contract

is enforceable when the parties reach mutual agreement,

exchange consideration and have outlined the terms of their

bargain with sufficient clarity.”); Stephan v. Waldron Elec.

Heating & Cooling LLC, 100 A.3d 660, 665 (Pa. Super. Ct.

2014) (same). Statutorily prohibited contracts include oral

contracts subject to the statute of frauds8 and contracts for

wages below the minimum wage.9 The common law prevents

enforcement of other types of promises, including promises

8

See 13 Pa. Stat. and Cons. Stat. § 2201(a); 33 Pa. Stat. and

Cons. Stat. § 1.

9

See 43 Pa. Stat. and Cons. Stat. § 333.104; Chevalier v. Gen.

Nutrition Ctrs., Inc., 220 A.3d 1038, 1055 (Pa. 2019)

(recognizing the Pennsylvania General Assembly’s declaration

of policy that, in the fair wage context, “‘freedom of contract’

as applied to [employees’] relations with their employers is

illusory” (quoting 43 Pa. Stat. and Cons. Stat. § 333.101)

(alteration in original)).

52

that are illegal;10 that otherwise violate public policy;11 or that

are indeterminate, indefinite, or vague.12

10

Dippel v. Brunozzi, 74 A.2d 112, 114 (Pa. 1950) (“[A]n

agreement which violates a provision of a statute, or which

cannot be performed without violation of such a provision, is

illegal and void.”); see Am. Ass’n of Meat Processors v. Cas.

Reciprocal Exch., 588 A.2d 491, 495 (Pa. 1991) (“What we

consider controlling, however, . . . is that the alleged contract

is illegal under a statute enacted in aid of significant public

policies identified by the Pennsylvania legislature.”); Rounick

v. Neducsin, 231 A.3d 994, 1000 n.6 (Pa. Super. Ct. 2020)

(explaining that “the courts of this Commonwealth will not be

used to enforce contracts that are illegal pursuant to a statute”).

11

Pittsburgh Logistics Sys., Inc. v. Beemac Trucking, LLC,

249 A.3d 918, 930 (Pa. 2021) (“Generally, a clear and

unambiguous contract provision must be given its plain

meaning unless to do so would be contrary to a clearly

expressed public policy.” (quoting Eichelman v. Nationwide

Ins. Co., 711 A.2d 1006, 1008 (Pa. 1998))); Tayar v.

Camelback Ski Corp., 47 A.3d 1190, 1199 (Pa. 2012);

Ferguson v. McKiernan, 940 A.2d 1236, 1244 (Pa. 2007).

12

See Devlin v. City of Phila., 862 A.2d 1234, 1244 n.9 (Pa.

2004) (“[T]o create an enforceable contract, parties must

delineate the terms of their bargain with sufficient clarity.”

(citation and internal quotation marks omitted)); id. (“[A]n

agreement cannot be enforced if its terms are indefinite.”

(citation and internal quotation marks omitted)); Seiss v.

McClintic-Marshall Corp., 188 A. 109, 110 (Pa. 1936) (“The

contract here set up is so lacking in precision, so indefinite and

vague, that nothing certain about it can be formulated.”);

Edgcomb v. Clough, 118 A. 610, 614 (Pa. 1922) (“In order that

53

Those categories do not specifically include promises to

renegotiate in good faith. Nonetheless, such a promise could

still be unenforceable if it shares attributes with a prohibited

category.

The only prohibited category potentially implicated by a

promise to renegotiate in good faith is the rule against

indeterminate promises. But as a general matter, promises to

renegotiate are not too indefinite to be enforceable. Indeed, the

Pennsylvania Supreme Court long ago relied on a right-to-

renegotiate-in-good-faith clause as a basis for its decision. See

Cosgrove v. Kappel, 168 A.2d 319, 320 (Pa. 1961). More

recently, three Justices of the Pennsylvania Supreme Court

favored resolving a dispute through the enforceability of a

similar agreement to negotiate in good faith. See Dep’t of Gen.

Servs. v. On-Point Tech. Sys., 870 A.2d 873, 874 (Pa. 2005)

(Saylor, J., joined by Nigro and Baer, JJ., concurring in part

and dissenting in part) (“I would also specifically confirm the

Third Circuit’s prediction that this Court would cognize a

contract-based cause of action for breach of an agreement to

negotiate in good faith.”). And several intermediate

Pennsylvania courts, along with this Court, have concluded

a contract may be enforceable, its terms must be certain and

explicit and not vague or indefinite.”); Ingrassia Constr. Co. v.

Walsh, 486 A.2d 478, 484 (Pa. Super. Ct. 1984) (“A court

cannot enforce a contract unless it can determine what it is.”

(quoting 1 A. Corbin, Corbin on Contracts § 95 (1963))); Reed

v. Pittsburgh Bd. of Pub. Educ., 862 A.2d 131, 135 (Pa.

Commw. Ct. 2004) (“If a court, due to indefiniteness or

incompleteness, is unable to determine if a contract was

performed, the court must find no contract existed in the first

place.”).

54

that the Pennsylvania Supreme Court would recognize a

contract-based cause of action for breach of a promise to

negotiate in good faith. See GMH Assocs. Inc. v. Prudential

Realty Grp., 752 A.2d 889, 903–04 (Pa. Super. Ct. 2000);

Jenkins v. Cnty. of Schuylkill, 658 A.2d 380, 385 (Pa. Super.

Ct. 1995); see also Flight Sys., Inc. v. Elec. Data Sys. Corp.,

112 F.3d 124, 130 (3d Cir. 1997); Channel Home Ctrs. v.

Grossman, 795 F.2d 291, 299 (3d Cir. 1986). Thus, under

Pennsylvania law, a promise to renegotiate in good faith is

likely not – as a category – too indeterminate to be enforceable.

See Flight Sys., 112 F.3d at 130; Channel Home Ctrs.,

795 F.2d at 299.

Still, an individual promise to renegotiate may be too vague

or indefinite to be enforceable. Courts decline to enforce

promises to renegotiate that lack a framework for evaluating

the parties’ good-faith obligations. See, e.g., Jenkins, 658 A.2d

at 385 (rejecting a claim for breach of a duty to negotiate in

good faith where the language of the letter did “not reveal that

the parties intended to be bound by any terms of the original

specifications” and “no specific terms were even agreed

upon”).13 But here, two attributes of the Management

13

See also A/S Apothekernes Laboratorium for

Specialpraeparater v. I.M.C. Chem. Grp., Inc., 873 F.2d 155,

158–59 (7th Cir. 1989); (rejecting a similar claim where “the

letter [of intent] did not set forth any previously agreed upon

terms much less provide a general framework within which the

parties intended to conduct their negotiations”); Tchrs. Ins. &

Annuity Ass’n of Am. v. Tribune Co., 670 F. Supp. 491, 498

(S.D.N.Y. 1987) (explaining that agreements to negotiate open

terms in good faith commit parties “to the obligation to

55

Agreement’s promise to renegotiate in good faith give it the

structure needed to be enforceable: the trigger for the

obligation to renegotiate and the parameters for the proposed

renegotiation.

First, the Management Agreement has a sufficiently

definite trigger for renegotiation obligations. Drexel and SDM

agreed to “renegotiate[] on a mutually agreeable basis” upon

certain changes to “representations regarding existing and

future conditions” that they made to each other in negotiating

the Management Agreement:

[E]ach party has relied on representations

regarding existing and future conditions and

projections made by the other in connection with

the negotiation and execution of this Agreement.

In the event of a change in the conditions or the

inaccuracy or breach of, or the failure to fulfill,

any such representation by a party, the financial

terms and other obligations assumed by the other

party shall be renegotiated on a mutually

agreeable basis to reflect such change,

inaccuracy or breach.

Management Agreement § 9.1 (SA57) (emphases added).

Those representations include the statement that Drexel’s

growth was a critical factor in determining certain

contractually defined “Investments” that SDM promised.14

negotiate the open issues in good faith in an attempt to reach

the alternate objective within the agreed framework”).

14

The Investments consist of specific classes of capital

contributions. See id. § 8.5 (SA49–52). Most of those

56

Management Agreement § 8.5 (SA49). They also include

SDM’s projection that future first-year student enrollment

would increase annually by two percent:

Parties agree that the University’s growth is a

critical factor in calculating the Investments

afforded under this Agreement and it has been

projected by SodexoMAGIC that this growth

will realize an increase of 2% per year in the

freshman class year over year.

Id. § 9.2 (SA58) (emphasis added). And recognizing that

changes to the assumed future student population could have

an adverse economic effect on SDM, the parties agreed to work

“in good faith to mutually agree upon solutions in an effort to

counter such impact”:

contributions occurred in the past, such as when SDM or one

of its affiliates made improvements to Drexel’s dining

facilities. See id. § 8.5(A)–(B) (SA49–50). For those past

contributions, the Management Agreement provided for a

straight-line amortization schedule for Drexel to reimburse

SDM over time, typically a ten-year period. See id. One class

of Investments related to construction of an urban eatery. See

id. § 8.5(C) (SA50). Another class of Investments was for

promised enhancements related to a food truck, a dining center,

and the urban eatery. See id. § 8.5(D) (SA51–52). The parties

budgeted those future Investments at $10.7 million, an amount

that Drexel would repay through a straight-line amortization

schedule beginning on the date the funds are paid out and

continuing through June 30, 2025. See id.

57

[Drexel] recognizes that Sodexo MAGIC [sic]

made certain assumptions in preparing the

financial package offered in this Agreement and

understands that changes to the financial

assumptions below may have an adverse

economic impact on SodexoMAGIC; in such

cases [Drexel] shall work with SodexoMAGIC

in good faith to mutually agree upon solutions in

an effort to counter such impact.

SodexoMAGIC acknowledges its responsibility

to respond quickly and expertly to factors under

their control that may affect these outcomes.

Id. § 9.2 (emphasis added). Together, these terms identify a

trigger to renegotiate as an annual future first-year student

enrollment increase of less than two percent. In light of these

terms, no one disputes that the duty to renegotiate in good faith

was in fact triggered.

Second, the Management Agreement defines the scope of

renegotiations. Future student enrollment was expressly linked

to the Investments that SDM promised. See id. (stating that

student “growth is a critical factor in calculating the

Investments afforded under this Agreement”). Through

renegotiation of the promises related to the Investments, the

parties could agree to reduce future capital contributions for

those Investments, see id. § 8.5(C)–(D), accelerate the

amortization schedule for those Investments, see id. § 8.5(A)–

(B), or provide some other setoff. By limiting the topics

subject to renegotiation, the Management Agreement enables

evaluation of whether good-faith renegotiations occurred.

That, along with the definite trigger for renegotiation, removes

58

the promise to renegotiate in good faith from the realm of

indeterminacy.

2. A Genuine Dispute of Material Fact Remains as to

Whether Drexel Renegotiated in Good Faith.

The District Court alternatively concluded that Drexel did

renegotiate in good faith. See SodexoMAGIC, 333 F. Supp. 3d

at 459 n.6. Evaluating that issue requires an understanding of

the concept of good faith, which varies by context. See

Stamerro v. Stamerro, 889 A.2d 1251, 1259 (Pa. Super. Ct.

2005) (explaining that “[t]he obligation to act in good faith in

the performance of contractual duties varies somewhat with the

context” (quoting Somers v. Somers, 613 A.2d 1211, 1213 (Pa.

Super. Ct. 1992))). The Management Agreement did not

specifically define the term, and the Pennsylvania Supreme

Court has not given meaning to good faith in the context of a

promise to renegotiate. In the abstract, however, the duty of

good faith is ambiguous: it could require nothing more than

that the parties avoid acting in bad faith, or it could impose an

affirmative obligation on the parties.

The first view is more prevalent in the context of an implied

duty of good faith. The Restatement (Second) of Contracts, in

discussing an implied duty of good faith, explains that good

faith “excludes a variety of types of conduct characterized as

involving ‘bad faith’ because they violate community

standards of decency, fairness or reasonableness.”

Restatement (Second) of Contracts § 205 cmt. a; see also

Robert S. Summers, “Good Faith” in General Contract Law

and the Sales Provisions of the Uniform Commercial Code,

54 Va. L. Rev. 195, 196 (1968) (arguing that “good faith, as

used in the case law, is best understood as an ‘excluder’ – it is

59

a phrase which has no general meaning or meanings of its own,

but which serves to exclude many heterogeneous forms of bad

faith”). And some Pennsylvania cases have picked up on the

notion that good faith means only the absence of bad-faith

conduct. See, e.g., Stamerro, 889 A.2d at 1259 (describing

good faith through express reference to recognized forms of

bad-faith conduct); Herzog v. Herzog, 887 A.2d 313, 317 (Pa.

Super. Ct. 2005) (finding a violation of an implied duty of good

faith in part because one party’s “conduct [wa]s unfair and

unreasonable”); Somers, 613 A.2d at 1213 (explaining that an

implied duty of good faith excludes various types of bad faith,

including, among other things, “evasion of the spirit of the

bargain, lack of diligence and slacking off, [and] willful

rendering of imperfect performance”).

Alternatively, a duty of good faith could impose an

affirmative obligation. In the commentary, the Restatement

leaves room for that view by referencing two definitions of

good faith from the Uniform Commercial Code in which the

duty is affirmative. See Restatement (Second) of Contracts

§ 205 cmt. a (explaining that good faith is defined as “honesty

in fact in the conduct or transaction concerned” in U.C.C. § 1-

201(19) and as “honesty in fact and the observance of

reasonable commercial standards of fair dealing in the trade”

in U.C.C. § 2-103(1)(b)). Consistent with an interpretation that

good faith imposes an affirmative duty in the renegotiation

context, Pennsylvania courts have examined the sincerity of

the parties’ intention to reach an agreement pursuant to an

obligation to negotiate in good faith in the labor contexts and

for contracts governed by the U.C.C. See, e.g., Markham v.

Wolf, 190 A.3d 1175, 1188 (Pa. 2018) (explaining that, in the

labor context, good-faith bargaining entails “evincing an intent

to bargain in an attempt to reach an agreement if possible”);

60

Eighth North-Val, Inc. v. William L. Parkinson, D.D.S., P.C.,

Pension Tr., 773 A.2d 1248, 1254 (Pa. Super. Ct. 2001)

(requiring for good faith in contract modifications under

U.C.C. § 2-209 “an honest desire to compensate for

commercial exigencies”). In those cases, in evaluating good-

faith negotiations, Pennsylvania courts have examined the

reasonableness of the negotiation process. See, e.g., Markham,

190 A.3d at 1188 (explaining, in the labor context, that

bargaining in good faith “includes a wide range of legally

enforceable responsibilities, including meeting at certain

times, places, with certain frequency”); Eighth North-Val,

773 A.2d at 1254 (“In analyzing [the good-faith requirement

for contract modification under U.C.C. § 2-209], the trier of

fact must determine whether the means used to obtain the

modification constitute extortion or overreaching.”). Thus, an

affirmative duty to renegotiate in good faith could be viewed

as requiring a sincere intention to reach an agreement and the

use of reasonable negotiation tactics.

Both formulations – good faith as an excluder and good

faith as an affirmative duty – have a core commonality: they

each relate to the renegotiation process, not the outcome. For

that reason, a promise to renegotiate in good faith does not

compel the parties to agree. See Burbach Broad. Co. v. Elkins

Radio Corp., 278 F.3d 401, 407 n.2 (4th Cir. 2002) (“Th[e]

obligation [to negotiate in good faith] does not guarantee that

the final contract will be concluded if both parties comport with

their obligation, because good faith differences in the

negotiation of the open issues may prevent the parties from

reaching a final contract.”). Moreover, such a promise does

not prevent one party from out-negotiating the other – that may

be done as long as a party avoids bad faith (under the excluder

formulation) or acts with a sincere intention to reach an

61

agreement and employs reasonable bargaining tactics (under

an affirmative duty formulation). See Creeger Brick & Bldg.

Supply, Inc. v. Mid-State Bank & Tr. Co., 560 A.2d 151, 154

(Pa. Super. Ct. 1989) (“[I]t cannot be said that a lender has

violated a duty of good faith merely because it has negotiated

terms of a loan which are favorable to itself.”).

Those general principles alone do not resolve which

understanding of the term ‘good faith’ should apply here. On

the one hand, the Management Agreement makes express the

duty to renegotiate in good faith, and that strains the

applicability of the good-faith-as-an-excluder approach, which

has been applied most commonly when the duty of good faith

is implied. On the other hand, the Management Agreement

falls outside the contexts in which Pennsylvania courts have

imposed an affirmative duty of good faith: labor disputes and

contracts governed by the U.C.C. Ultimately, it is not

necessary to select one meaning of good faith over the other

because either definition generates the same outcome here.

As a baseline, without considering the evidence of fraud,

the record evidence indicates that Drexel did renegotiate in

good faith with SDM. Under the view that good faith functions

only to exclude bad-faith conduct, Drexel met its obligation

because the record lacks evidence of bad faith during the

renegotiation correspondence. Alternatively, if good faith

imposes an affirmative duty, both components of that duty

appear to have been satisfied. Drexel negotiated with a sincere

intention to reach an agreement: SDM’s own internal

documents characterized Drexel as “forthcoming” and

recognized that, although the numbers did not match up, the

“meeting went extremely well,” with both parties showing

determination to reach a deal. See Email from Nancy C.

62

Arnett, Vice President, Sodexo, to Leonard Riccio, Senior Vice

President, Sodexo (May 20, 2016) (SA1572–73). Similarly,

evidence suggests that Drexel employed reasonable

negotiation tactics. At first, SDM proposed reducing its future

capital contributions by $12.7 million, for a total future

contribution of $2 million. In response, Drexel also proposed

reducing SDM’s obligation for future capital contributions, but

by less, $9 million. That counterproposal represented a 60%

discount off the original promise to invest $14.7 million. The

parties went back and forth several times on key terms, and

Drexel provided specific reasons for its counteroffer. See

Email from Helen Bowman, Executive Vice President, Drexel,

to John A. Fry, President, Drexel (July 13, 2016) (SA533–36).

The outstanding $3.7 million separating the parties from

agreement, while an obstacle, amounted to about 14% of the

initially promised future capital contribution. Although the

parties could not close that gap, that alone does not prevent a

finding of good faith, and here Drexel appears to have used

reasonable tactics in negotiating with SDM. In short, looking

only at the renegotiation correspondence, Drexel appears to

have acted in good faith.

But due to SDM’s fraudulent-inducement evidence, the

context for evaluating good faith is broader. Under either

formulation of a good-faith duty, a party cannot fraudulently

induce a promise and also in good faith renegotiate that

obligation as if the fraud never occurred. Knowingly gaining

the benefit of one’s own prior uncured fraud would likely

qualify as bad faith under Pennsylvania law. And

renegotiating without correcting and offsetting prior deceit

undermines sincerity and is not a reasonable negotiation tactic.

Thus, the question of whether Drexel renegotiated in good faith

hinges on whether Drexel fraudulently induced SDM to enter

63

the Management Agreement. Because that underlying issue is

subject to genuine dispute, so is the question of whether Drexel

renegotiated in good faith.

In sum, it is inconsequential which formulation of good

faith the Pennsylvania Supreme Court would apply to a

contractual duty to renegotiate because, under either, SDM’s

prima facie evidence of fraudulent inducement carries its

good-faith renegotiation claim past summary judgment.15

15

Although both SDM’s fraud claim and SDM’s breach-of-

contract claim for failure to renegotiate in good faith survive

summary judgment, that does not mean that SDM is entitled as

a matter of law to recover on both claims. It may be that SDM

will have to elect one of those claims over the other. See

Gamesa Energy USA, LLC v. Ten Penn Ctr. Assocs., L.P.,

217 A.3d 1227, 1239 (Pa. 2019) (explaining that although

“inconsistent remedies may be pleaded and pursued in

litigation, damages calculated pursuant to only one theory may

be recovered”); see also Schwartz v. Rockey, 932 A.2d 885,

893 n.10 (Pa. 2007) (citing Olympia Hotels Corp. v. Johnson

Wax Dev. Corp., 908 F.2d 1363, 1371 (7th Cir. 1990), for its

discussion of the timing of the choice between inconsistent

claims for fraud and breach of contract). But assessing and

applying Pennsylvania election-of-remedies law is left for the

District Court in the first instance on remand. See generally

Dan B. Dobbs & Caprice L. Roberts, Law of Remedies § 9.3,

at 740 (3d ed. 2018) (recognizing that some courts “suggest

that the election of remedies doctrine is based on a policy to

avoid duplication of relief,” while others justify the doctrine on

the ground that a party cannot seek recovery for remedies that

are “logically inconsistent”).

64

C. SodexoMAGIC’s Claim for Enhanced Payments for

Fall 2016 Survives Summary Judgment.

Through an amended and supplemental count, SDM sought

to recover for additional alleged breaches of contract. Beyond

requesting compensation allegedly due under the Management

Agreement, SDM also claimed that Drexel owed enhanced

payments under a separate contract governing the Fall 2016

Semester. Finding a lack of consideration and acceptance, the

District Court concluded that the parties did not enter a separate

contract and rejected SDM’s claim for enhanced payments for

food services that semester. See SodexoMAGIC, 333 F. Supp.

3d at 461–64. That was incorrect, and SDM’s breach-of-

contract claim for Fall Semester 2016 survives summary

judgment.

1. There Was Consideration for a Separate Contract for

the Fall 2016 Semester.

SDM provided consideration for a separate contract for the

Fall 2016 Semester through forbearance. In its notice

terminating the Management Agreement for convenience,

Drexel specified a termination date 82 days later. But the

Management Agreement required only 60 days’ notice to

terminate for convenience. So once it received Drexel’s notice,

SDM could have responded with its own notice of termination

for convenience with an accelerated termination date. For

example, SDM could have immediately given a 60-day notice

of termination for convenience, which would have terminated

the Management Agreement 22 days before Drexel’s proposed

date. Thus, to accept Drexel’s offer, SDM would have to

refrain from issuing its own accelerated notice to terminate for

convenience and leaving campus as a result. And under deeply

65

entrenched Pennsylvania law, a party may provide

consideration by agreeing to “refrain[] from doing anything

which [it] has a right to do.” York Metal & Alloys Co. v.

Cyclops Steel Co., 124 A. 752, 754 (Pa. 1924) (citation

omitted); see generally Stelmack v. Glen Alden Coal Co.,

14 A.2d 127, 128 (Pa. 1940) (explaining that, under

Pennsylvania law, consideration must be “bargained for as the

exchange for the promise,” and it must confer some “benefit to

the party promising, or a loss or detriment to the party to whom

the promise is made” (internal quotation marks omitted)); but

cf. Chatham Commc’ns, Inc. v. Gen. Press. Corp., 344 A.2d

837, 840 (Pa. 1975) (“[T]he performance of an act which one

party is legally bound to render to the other party is not legal

consideration.”). By remaining on campus despite its ability

to leave early, SDM provided the requisite consideration for a

separate contract governing food services for the Fall Semester

2016.16

2. A Reasonable Jury Could Find that SodexoMAGIC

Accepted Drexel’s Offer.

The District Court separately rejected SDM’s claim for

breach of contract for the Fall 2016 Semester due to a lack of

a meeting of the minds. See SodexoMAGIC, 333 F. Supp. 3d

at 463 (“There was no meeting of the minds as to the terms

which Drexel proposed in its September 19 letter for Sodexo’s

rates and commissions. Sodexo may not accept some terms,

reject others, and then assert that an agreement conclusively

existed.”). But under Pennsylvania law a party may accept a

16

Similarly, if SDM’s termination for cause were valid, then

SDM’s continued provision of food services would also

constitute consideration.

66

contract offer by promise or performance. See Herman v.

Stern, 213 A.2d 594, 600 (Pa. 1965) (acceptance through

promise); Ross v. Leberman, 148 A. 858, 859 (Pa. 1930)

(acceptance through performance); Hartman v. Baker,

766 A.2d 347, 351 (Pa. Super. Ct. 2000) (same); see also

Restatement (Second) of Contracts § 50 cmt. a (1981) (“In case

of doubt, the offeree may choose to accept either by promising

or by rendering the requested performance.”). And here, a

reasonable jury could conclude that SDM accepted Drexel’s

offer either by promise or, if it finds that SDM did not reject

Drexel’s offer, through performance.

The key evidence that SDM accepted through promise is

SDM’s letter in response to Drexel’s offer. In that

correspondence, SDM stated that it “agree[d] to remain on

campus through December 10, 2016.” Letter from Timothy J.

Fazio, Manion Gaynor & Manning, LLP, to Stephen A. Cozen,

Cozen O’Connor P.C. (Sept. 26, 2016) (JA158). Even though

the same letter also purports to terminate the Management

Agreement for cause, a reasonable jury could still conclude

that SDM separately promised to remain on campus through

the specified date.

Drexel disputes that SDM’s letter could qualify as an

acceptance. It argues that SDM’s letter was not an acceptance

because it did not reference Drexel’s offer and because it

provided a different reason for staying – a commitment not to

leave students mid-term. But Pennsylvania law does not

require that an acceptance letter specifically reference the offer

being accepted. See Ingrassia, 486 A.2d at 483 (“Offer and

acceptance need not be identifiable and the moment of

formation need not be pinpointed.”). Nor does an accepting

party need to share the same motive as the offering party to

67

enter a contract. See generally 1 Corbin on Contracts § 3.4

(2021) (“[I]t is not necessary that the sole motive of the offeree

must be the desire for the offered reward. It need not even be

the offeree’s principal or prevailing motive.”). Drexel next

contends that because the parties disagreed about whether

SDM terminated the Management Agreement for cause, they

could not have the meeting of the minds needed to form a

contract for the Fall 2016 Semester. But a reasonable jury

could find that, regardless of a broader disagreement between

the parties, they still agreed to the “the material and necessary”

terms on which SDM would remain on campus and provide

dining services through December 10, 2016. Lombardo v.

Gasparini Excavating Co., 123 A.2d 663, 666 (Pa. 1956).

For these same reasons, a jury could reasonably conclude

that SDM did not reject Drexel’s offer. With that finding, a

jury could also conclude that SDM accepted Drexel’s offer

through performance. It is undisputed that SDM remained on

campus and provided the requested dining services – all with

Drexel’s knowledge. And under Pennsylvania law, post-offer

performance provides strong evidence of acceptance. See Selig

v. Phila. Title Ins. Co., 111 A.2d 147, 151 (Pa. 1955);

Hartman, 766 A.2d at 351; Accu-Weather, Inc. v. Thomas

Broad. Co., 625 A.2d 75, 78–80 (Pa. Super. Ct. 1993). Thus,

even if SDM’s written response to Drexel’s offer was

ambiguous, a reasonable jury could still find that SDM

accepted Drexel’s offer through performance.

D. Drexel’s Challenge to SodexoMAGIC’s Catering-

Shortfall Claim Fails.

After the District Court’s summary judgment order, a

dispute arose between the parties over which claims survived

68

summary judgment. They disagreed about whether SDM’s

claim for catering shortfalls remained. SDM calculated those

shortfalls based on a $3.4 million benchmark referenced in

Section 9.2 of the Management Agreement.17 But through a

later clarifying order, the District Court specified that “[c]laims

based on Section 9.2 that are not related to any breach of a duty

to renegotiate in good faith are still in the case.” Order re: Trial

on Count V Issues (Nov. 1, 2018) (JA85).

Following that order, the parties referred all remaining

claims and counterclaims to arbitration and jointly moved to

dismiss them. The granting of the parties’ joint motion

achieved finality, which permitted the parties to appeal the

District Court’s summary judgment ruling. See 28 U.S.C.

§ 1291.

Now, after the joint motion dismissing all remaining

claims, Drexel challenges the District Court’s clarifying order.

It argues that the catering-shortfall claim did not survive

summary judgment.

That argument is meritless, nearing frivolous. In jointly

moving to dismiss all remaining claims, Drexel represented to

the District Court that the catering-shortfall claim remained.

The arbitration agreement, which was an exhibit to the joint

17

The legal premise for any catering shortfall is vulnerable to

the extent that the Management Agreement does not guarantee

minimum catering net sales of $3.4 million the first year but

provides only an assumption in that respect. Thus, if SDM had

only an expectation but not a right to recover, its claim would

be improperly premised on false billing – the submission of

invoices for which there was no obligation to pay.

69

motion, stated that the only remaining claims were those in the

parties’ mediation statements. And SDM’s mediation

statement, which was an exhibit to the arbitration agreement,

specifically identified the catering-shortfall claim. By those

representations to the District Court, Drexel waived the right

to argue the already-tenuous proposition that the District

Court’s clarifying order impermissibly conflicted with its prior

summary judgment ruling.18

E. SodexoMAGIC’s Claims for Unjust Enrichment

Fail.

On appeal, SDM also pursues unjust enrichment as an

alternative remedy for two of its breach-of-contract claims.

First, it seeks unjust enrichment if the duty to renegotiate in

good faith in the Management Agreement is unenforceable.

Second, SDM resorts to unjust enrichment to recover enhanced

payments if the parties did not form a separate contract

governing dining services for the Fall 2016 Semester. The

District Court rejected SDM’s unjust enrichment claim due to

pleading deficiencies, but it also concluded that the claim

would fail as a matter of law. See SodexoMAGIC, 333 F. Supp.

3d at 473–74. For the reasons below, unjust enrichment is

unavailable as a matter of law.

18

See In re Fine Paper Antitrust Litig., 685 F.2d 810, 817 (3d

Cir. 1982) (“We will not interfere with a trial court’s control of

its docket except upon the clearest showing that the procedures

have resulted in actual and substantial prejudice to the

complaining litigant.” (internal quotation marks omitted)); see

also In re Asbestos Prods. Liab. Litig. (No. VI), 921 F.3d 98,

109 (3d Cir. 2019); United States v. Wecht, 484 F.3d 194, 217

(3d Cir. 2007).

70

SDM’s first argument for unjust enrichment rests on a

novel legal theory. It argues that if the promise to renegotiate

cannot be enforced, then despite the remainder of the

Management Agreement, SDM should be able to seek

compensation for the benefits Drexel received as a result of the

unenforceability of that promise. Although it has not

addressed that specific question, the Pennsylvania Supreme

Court has left no doubt that “unjust enrichment is inapplicable

when the relationship between parties is founded upon a

written agreement or express contract, regardless of how ‘harsh

the provisions of such contracts may seem in the light of

subsequent happenings.’” Wilson Area Sch. Dist. v. Skepton,

895 A.2d 1250, 1254 (Pa. 2006) (quoting Third Nat’l Bank &

Tr. Co. of Scranton v. Lehigh Valley Coal Co., 44 A.2d 571,

574 (Pa. 1945)).19 From the breadth and force of that

expression, it may well be that the Pennsylvania Supreme

Court would disallow an unjust enrichment claim even when a

contract governing the parties’ relationship contains an

unenforceable promise. But it is unnecessary to reach that

issue. As explained above, the promise in the Management

19

See also Hershey Foods Corp. v. Ralph Chapek, Inc.,

828 F.2d 989, 999 (3d Cir. 1987) (“Quantum meruit will not

be awarded when there is an express agreement.” (citing

Murphy v. Haws & Burke, 344 A.2d 543, 546 (Pa. Super. Ct.

1975))); Dan B. Dobbs & Caprice L. Roberts, Law of

Remedies § 4.1(2), at 379 & n.64 (3d ed. 2018) (“A valid

contract defines the obligations of the parties as to matters

within its scope, displacing to that extent any inquiry into

unjust enrichment.” (quoting Restatement (Third) of

Restitution and Unjust Enrichment § 2(2) (2011) (emphasis

omitted))).

71

Agreement to renegotiate in good faith is enforceable, and with

a fully enforceable contract governing the parties’ relationship,

the quasi-contractual remedy of unjust enrichment is

unavailable.

SDM also invokes unjust enrichment to recover enhanced

compensation for providing on-campus dining services during

the Fall 2016 Semester. At the outset, SDM’s claim for unjust

enrichment is actionable only to the extent that no contract

governs the parties’ relationship for that time period. See

Wilson Area Sch. Dist., 895 A.2d at 1254. But here, if a jury

finds that no contract governs the provision of Fall 2016 dining

services, that would have to be because SDM did not accept

Drexel’s offer. In that circumstance – the only one in which

an unjust enrichment claim could proceed – the obstacle to

SDM’s receiving enhanced compensation would be its own

failure to accept Drexel’s offer. Yet an unjust-enrichment

claim requires the “acceptance and retention of . . . benefits

under such circumstances that it would be inequitable.” Meyer,

Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of

Malone Middleman, P.C., 179 A.3d 1093, 1102 (Pa. 2018)

(internal quotation marks omitted); see also Shafer Elec. &

Constr. v. Mantia, 96 A.3d 989, 993 (Pa. 2014). And it is

neither unjust nor inequitable to deny compensation to an

entity that conferred a benefit but did not accept an offer for

such compensation.

Similarly, the Pennsylvania Supreme Court has rejected a

claim of unjust enrichment when a benefit that a party confers

upon another also protects its own interest. See Am. & Foreign

Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d 526, 546 (Pa. 2010).

Here, by continuing to provide dining services, SDM served its

own interest by maintaining its professed commitment to not

72

leave students without dining services mid-term.

Accordingly, it would not be unjust or inequitable if SDM does

not receive enhanced compensation for the dining services it

provided for the Fall 2016 Semester.

V. CONCLUSION

For the foregoing reasons, we will affirm in part and vacate

in part the District Court’s judgment and remand the remaining

claims.

We will affirm summary judgment in Drexel’s favor on

SDM’s unjust enrichment and punitive damages claims as well

as summary judgment in SDM’s favor on Drexel’s fraudulent

inducement claim. Likewise, we will affirm the District

Court’s clarifying order and its decision to deny Drexel’s

motion to strike declarations by SDM witnesses under the

sham affidavit rule.

We will vacate the District Court’s order granting summary

judgment to Drexel on SDM’s claims for fraudulent

inducement, breach of contract for failure to renegotiate in

good faith, and breach of a supplemental agreement for the Fall

2016 Semester. Those surviving claims will be remanded to

the District Court.

73