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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

TELETRACKING TECHNOLOGIES, INC.,               IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA
                          Appellant

                     v.

FRANK J. GORI, MARK JULIANO, GENE
NACEY, LORRAINE NACEY, STEPHEN P.
NASH, BRIAN E. SCHULIGER, INSIGHT
VENTURE MANAGEMENT, L.L.C. AND
INSIGHT TTT, LLC,

                          Appellees                 No. 940 WDA 2014


                Appeal from the Order Entered June 6, 2014
            In the Court of Common Pleas of Allegheny County
                   Civil Division at No(s): GD 11-006531


BEFORE: BENDER, P.J.E., LAZARUS, J., and MUNDY, J.

DISSENTING MEMORANDUM BY BENDER, P.J.E.:                FILED MAY 28, 2015

     Respectfully, I dissent. Teletracking Technologies, Inc. (the Company)

asserts the trial court erred in its interpretation of a corporate shareholder

agreement and improperly imbued a question of law with equitable

considerations.   The learned Majority deftly sidesteps these assertions,

offering no legal counterpoint to the Company’s arguments and citing in

support of its affirmance precedent of dubious value.

     The interpretation of a contract presents a question of law, and our

review is de novo.     Lesko v. Frankford Hosp. – Bucks Cnty., 15 A.3d

337, 342 (Pa. 2011).
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      [W]hen a written contract is clear and unequivocal, its meaning
      must be determined by its contents alone. It speaks for itself
      and a meaning cannot be given to it other than that expressed.
      Where the intention of the parties is clear, there is no need to
      resort to extrinsic aids or evidence. Hence, where language is
      clear and unambiguous, the focus of interpretation is upon the
      terms of the agreement as manifestly expressed, rather than as,
      perhaps, silently intended.

Id. (quoting Steuart v. McChesney, 444 A.2d 659, 661 (Pa. 1982))

(emphasis in original).

      According to the Company, the Shareholder Agreement provisions are

clear and unambiguous. Its argument is simple: Pursuant to Section 1(c) of

the agreement, a selling shareholder must complete the sale of stock,

pursuant to a bona fide offer, within 120 days of its presentation to the

Company.    Thereafter, if closing is not completed, the offer must be re-

presented to the Company and re-subjected to the first refusal process. This

Court previously determined that the Insight offer was bona fide and

presented to the Company on March 31, 2011. Therefore, according to the

Company, the Minority Shareholders were required to complete the sale by

July 29, 2011 (120 days later).   The Company acknowledges that, at that

time, litigation was ongoing, but asserts that litigation did not necessarily

impede closing on the sale.     Moreover, according to the Company, the

Minority Shareholders should have sought to preserve the status quo

pending appeal. As they did not, the Company concludes, the plain meaning

of the Shareholder Agreement controls, and the Minority Shareholders must

re-submit the Insight offer.

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       I agree with the Company’s arguments regarding the clear and

unambiguous provisions of the Shareholder Agreement and that the Minority

Shareholders did nothing to preserve the status quo during this litigation.

Indeed, the Minority Shareholders argued against preserving the status quo

in the context of the Company’s prayer for injunctive relief.1 Thus, pursuant

to the Shareholder Agreement, the Minority Shareholders were required to

complete the sale of their stock to Insight by July 29, 2011. They did not.

In my view, therefore, they must re-submit the Insight offer and initiate the

first refusal process anew.

       The Minority Shareholders are sophisticated investors, represented by

counsel, who presumably determined to pursue a strategy that would best

meet their objectives.       Nevertheless, if they had preserved the status quo

pending the Company’s initial appeal, it is likely that this case would not now

be before the Court. See Pa.R.A.P. 1701(b)(1); see also Pa.R.A.P. 1732.

To be blunt, the Minority Shareholders had their day in court; they won the

day but failed to protect their victory.

       The   Majority does not dispute           the   legal interpretation of the

Shareholder Agreement, echoing instead the equitable considerations voiced
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1
  On June 5, 2013, long after the closing deadline had passed, the Minority
Shareholders filed a motion to preserve the status quo pursuant to Pa.R.A.P.
1701. However, the intent of this motion was to secure the disclosure of
certain financial statements and to prevent the disposition of Company
assets. See Minority Shareholder’s Motion, 06/05/2013, at 6.




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by the trial court.2          However, “it has long been the rule in this

Commonwealth that in dealing with legal rights, a court of equity follows and

is bound by rules of law, and does not use equitable considerations to

deprive a party of his rights at law.” Bauer v. P. A. Cutri Co. of Bradford,

253 A.2d 252, 255 (Pa. 1969) (citing Albright v. Albright, 228 Pa. 552,

560-561, 77 A. 896, 898-899 (1910)). In my view, we should not engage in

equitable considerations absent a material breach of the underlying contract

or some egregious behavior, such as fraud.

       The Majority simply ignores this fundamental rule, implicitly adopting

and extending the analysis of the trial court.      For example, the trial court

specifically determined to equitably toll the 120-day closing period, based

upon its determination that the Company’s “obstinate behavior” had

frustrated the purpose of the Shareholder Agreement, citing in support LJL

Transp., Inc. v. Pilot Air Freight Corp., 962 A.2d 639 (Pa. 2009). See

Trial Court Opinion at 5-7.            Although not addressed in detail in its

Memorandum, the Majority seemingly endorses this view.            See Majority

Memorandum at 8 (suggesting that the Company used the 120-day closing

period “as a sword, rather than a shield.”).

       In LJL Transp., a franchisee engaged in repeated, fraudulent conduct,

thus breaching its franchise agreement. See LJL Transp., 962 A.2d at 642-
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2
  Notably, the Minority Shareholders do not dispute this legal interpretation
either.



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43.   On appeal, the Pennsylvania Supreme Court considered “whether a

party's   conduct   in   breaching   a   contract   may   justify   its   immediate

termination, even if the contract includes an express provision granting the

breaching party the right to cure before the contract is terminated.” Id. at

641 (emphasis added).        The Supreme Court concluded that a material

breach causes the “contractual relationship to essentially evaporate.” Id. at

652. Under such circumstances, the non-breaching party need not adhere

to the contract’s terms. Id.

      Clearly, LJL Transp. is inapposite.       Mere obstinacy, or the zealous

pursuit of contractual rights, does not equate to fraud, nor will it constitute a

breach. Here, the Minority Shareholders have made no allegation of breach

or fraud, nor has any court found evidence thereof. Thus, there is no basis

on which to conclude that the Company has frustrated the purpose of the

shareholder agreement, and therefore, has no authority to delve into

equitable considerations depriving the Company of its rights at law. In my

view, the Majority’s tacit acceptance of the trial court’s analysis is

inappropriate.

      The Majority also suggests that the Company prevented the Minority

Shareholders from performing under the contract, thus excusing their

nonperformance, citing in support Iron Trade Prods. Co. v. Wilkoff Co.,

116 A. 150 (Pa. 1922). See also Minority Shareholders’ Brief at 18-20




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(asserting the prevention doctrine).             I disagree.3   Application of the

prevention doctrine requires “wrongful acts” that “prevent performance

required by the other party.” In re Scott, 82 B.R. 760, 762 (Bankr. E.D.

Pa. 1988) (applying Pennsylvania law). “Mere difficulty of performance will

not excuse a breach of contract.” Iron Trade Prods. Co., 116 A. at 151

(emphasis added).

       None of the acts mentioned by the Majority persuades me that the

prevention doctrine is applicable here.          For example, the Majority quotes

favorably from the trial court’s personal attacks directed to the majority

shareholder of the Company, who also serves as CEO and chairman, for his

alleged efforts to prevent the Minority Shareholders from selling their

shares. See Majority Memorandum at 7. In my view, such personal attacks

are unwarranted.        See College Watercolor Grp., Inc. v. William H.

Newbauer, Inc., 360 A.2d 200, 207 (Pa. 1976) (“The accepted rule in

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3
  The Majority’s reliance upon Iron Trade Prods. Co. is curious. In that
case, our Supreme Court actually rejected the defendant’s argument that
the plaintiff had prevented its performance. Id. at 151 (“Here plaintiff's
conduct did not prevent performance by defendant, although it may have
added to the difficulty and expense thereof.”). The other precedent cited by
the Majority is similarly curious. See Goodwin v. Rodriguez, 554 A.2d 6
(Pa. 1989) (reversing a trial court’s equitable decision to permit a delinquent
tenant to remain in a residence where eviction proceedings were based upon
violation of a valid lease agreement); Valora v. Pa. Emp. Benefit Trust
Fund, 939 A.2d 312, 319-320 (Pa. 2007) (recognizing that “the doctrine of
subrogation has its origins in equity, not in contract law”) (emphasis added).




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Pennsylvania is that a corporation is an entity distinct from its shareholders

even if the stock is held entirely by one person.”). Here, we are faced with a

dispute between a corporate entity and certain of its minority shareholders –

nothing more.4

       The Majority references corporate decisions to reject previous offers to

purchase Company shares.             In my view, the Company’s opposition to

previous offers presented by the Minority Shareholders cannot be considered

on this record because there has been no finding, by any court, that the

previous offers were bona fide. Absent such a finding, we simply have no

basis upon which to malign the Company’s prior actions.

       The Majority also concludes that the Company’s pursuit of its legal

rights stymied closing on the Insight offer. See Majority Memorandum at 8-

9.   However, the basis of the Majority’s conclusion - a provision in the

purchase agreement between Insight and the Minority Shareholders that

precluded closing while litigation was ongoing or threatened – is irrelevant.

The Company was not party to the purchase agreement and is not

responsible for its terms. Moreover, I am aware of no reason why Insight


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4
  I note further that the trial court’s lengthy comparison of this person to
Napoleon Bonaparte is rather grandiose. See Trial Court Opinion at 1-4;
see also http://en.wikipedia.org/wiki/Napoleonic_Wars_casualties#cite_ref-
3 (last visited May 7, 2015) (citing various estimates of the hundreds of
thousands of dead and missing casualties of the Napoleonic Wars).




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and the Majority Shareholders could not have modified any terms that

rendered closing overly burdensome.

      Finally, it is, of course, well settled that “no order can be made by a

court in the enforcement of a judgment which would, in violation of ‘due

process,’ take from a litigant substantive property rights[.]”     Comm’rs of

Sinking Fund of City of Phila. v. City of Phila., 188 A. 314, 317 (Pa.

1936). However, the trial court stands this precedent on its head, citing it in

support of the court’s decision to toll the closing deadline. See Trial Court

Opinion at 7-9 (suggesting such was necessary to enforce the previous

judgment). The underlying trial court order of May 26, 2011, declared the

following substantive property rights: (1) the Insight offer was bona fide and

(2) notification of the offer triggered the Company’s matching rights and

obligations as of March 31, 2011.      These matching rights and obligations

include the Company’s right of first refusal and its right to have any bona

fide offer settled within 120 days. See Shareholder Agreement at §§ 1(a)-

(c). Thus, contrary to the trial court’s analysis, the retroactive tolling of the

closing deadline did not enforce a previous order but rather fundamentally

modified substantive rights previously determined.

      For these reasons, I would reverse the order of the trial court.




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