J-E02003-16 2017 PA Super 150
CHRISTOPHER GUTTERIDGE AND IN THE SUPERIOR COURT OF APPLIED ENERGY PARTNERS, LLC PENNSYLVANIA
v.
J3 ENERGY GROUP, INC. T/D/B/A J3 ENERGY GROUP AND STEPHEN RUSSIAL
Appellant No. 3397 EDA 2013
Appeal from the Judgment Entered November 25, 2013 In the Court of Common Pleas of Chester County Civil Division at No(s): 2009-09160-CA
BEFORE: GANTMAN, P.J., FORD ELLIOTT, P.J.E., BENDER, P.J.E., BOWES, PANELLA, SHOGAN, LAZARUS, OLSON AND OTT, JJ.
CONCURRING AND DISSENTING OPINION BY BOWES, J.:FILED MAY 17, 2017
While I agree with my distinguished colleagues that Christopher
Gutteridge and Applied Energy Partners, LLC (“AEP”) are entitled to
judgment, we differ as to the amount of that judgment and against whom it
should have been entered. I believe the record fails to factually or legally
support the imposition of personal liability against Stephen Russial. At all
relevant times, Mr. Russial was acting in his capacity as the President of his
corporation, J3 Energy Inc.1 Furthermore, since the amount of the recovery
was based at least in part on the equitable theory of unjust enrichment, the
same equitable considerations militate in favor of deducting from the award ____________________________________________
1 The trial court did not pierce the corporate veil to impose personal liability against Mr. Russial. J-E02003-16
the commissions J3 already paid to Lori Porreca and Herb Keaton. Hence, I
would vacate the judgment and remand the matter to the trial court to enter
judgment against J3 Energy Inc. only, in an amount reflecting a deduction
for the commissions J3 paid to Porreca and Keaton.
The trial court found that Mr. Russial and Mr. Gutteridge were engaged
in a personal business relationship. It based its finding on Mr. Gutteridge’s
testimony that when he first met Mr. Russial, “I was dealing with him
personally.” N.T. 6/13/12, at 10. The personal nature of the relationship
was further supported, according to the trial court, by Mr. Gutteridge’s
testimony that, in March of 2008, the issue arose “should we form a
separate legal entity to run the Energy Buyer’s Group.” Id. at 11. Although
counsel for J3 Energy advised that it was not necessary, Mr. Gutteridge
testified that “the issue of how we should formalize the relationship came up
a number of times over.” Id. The trial court acknowledged that there were
ongoing discussions regarding the formation of a joint venture between AEP
and J3. It concluded, however, that, since there was no written agreement,
it was “perfectly reasonable for Plaintiff Gutteridge to believe that the
formation of the sales and marketing relationship between himself and
Defendant Russial was ongoing and continued despite their inability to
formalize the creation of the Energy Buyers Group.” Trial Court Opinion,
6/11/14, at 4.
-2- J-E02003-16
The majority characterizes the trial court’s finding that Mr. Gutteridge
and Mr. Russial were engaged in a personal business relationship as a
credibility determination and declines to disturb it. I submit that there is no
credibility dispute. The record establishes that Mr. Gutteridge and Mr.
Russial were acting at all relevant times on behalf of AEP and J3 in pursuing
the joint venture and Mr. Gutteridge’s testimony is entirely consistent with
that scenario. The record reveals the following.
Mr. Gutteridge knew Mr. Russial before they broached the subject of a
joint venture between their companies. Mr. Gutteridge also was aware that
J3 Energy was Mr. Russial’s company, and he understood that the
corporation “was a consulting firm, providing those sorts of services, bill
audition, power factor correction, that type of thing.” N.T., 6/12/12 at 34.
It was “during a road trip to Pittsburgh in the fourth quarter of 2007” that
they first discussed the joint venture. Id. at 32. Mr. Gutteridge was quick
to point out that when they created the Energy Buyers Group, it was as a
joint venture between Applied Energy Partners and J3 Energy. Id. at 10.
AEP would supply sales and marketing services through its channel partners
to obtain members; J3 Energy would contribute its energy expertise to
manage a pool of energy and a demand response program. Their joint
venture would be called Energy Management Group.
In a February 2008 email to Lori Porreca and other AEP channel
partners, Mr. Gutteridge characterized the venture: “Steve Russial’s
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company, J3 Energy, and Applied Energy Partners will be jointly promoting
and operating the ‘Energy Buyers Group’ throughout the mid-Atlantic states
(PJM electrical region).” Exhibit P-2. Promotional materials and member
agreements described Energy Buyers Group as a “joint venture composed of
Applied Energy Partners and J3 Energy.” The Energy Management Group
membership agreements bore the logos of both Applied Energy and J3
Energy. According to Mr. Gutteridge, they included the logos of both entities
“[b]ecause throughout the whole period we were introducing the Energy
Buyers Group to every single customer as a joint venture between Applied
Energy and J3.” N.T., 6/12/12, at 77. He also explained that either he or
Mr. Russial could sign the agreements on behalf of the joint venture in their
capacities as principals for Applied Energy and J3.
The initial financial arrangement between Applied Energy and J3
Energy provided that commissions on sales would be paid to J3 Energy.
That corporation would pay Applied Energy thirty-five percent of the gross
revenue. Id. at 79. Applied Energy would pay commissions to its channel
partners from its share of the commission.
Although Mr. Gutteridge and Mr. Russial spoke in terms of “I,” “we,”
and “you” when they discussed the joint venture, it is apparent that they
were dealing on behalf of their companies, AEP and J3. As Mr. Gutteridge
explained, “At the point that we started setting up the Energy Buyers Group,
-4- J-E02003-16
it was Applied Energy Partners J3 venture.” Id. at 10. This exchange
during the cross-examination of Mr. Gutteridge illustrates that point.
Q: At your deposition I remember asking you when you met Steve Russial were you aware of his company, J3 Energy Group, Inc., were you aware of that company?
A: Yes.
Q: And were you aware that the company was a corporation?
A: No, not specifically, but I assumed so.
....
Q: Mr. Gutteridge, I’m handing you your deposition on January 6, 2012 of this year. I’m bringing your attention to page 26, lines 14 through 21. Would you read those and let me know when you’re finished?
A: “Let’s talk about that. One of my clients is J3 Energy Group Inc. Were you aware of J3 Energy Group, Inc. when you started dealing with Mr. Russial?”
“Yes.”
“Were you aware that that was a corporation?”
.....
Q: I also asked you if, when you were dealing with Mr. Russial, were you dealing with him in his capacity as president of this corporation - of his corporation. You don’t remember what you answer was?
A: I don’t remember what my answer was, but when I first met Mr. Russial, I was dealing with him personally. At the point that we started setting up the Energy Buyers Group, it was Applied Energy Partners J3 venture.
-5- J-E02003-16
Q: I’m going to approach you one more time.
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J-E02003-16 2017 PA Super 150
CHRISTOPHER GUTTERIDGE AND IN THE SUPERIOR COURT OF APPLIED ENERGY PARTNERS, LLC PENNSYLVANIA
v.
J3 ENERGY GROUP, INC. T/D/B/A J3 ENERGY GROUP AND STEPHEN RUSSIAL
Appellant No. 3397 EDA 2013
Appeal from the Judgment Entered November 25, 2013 In the Court of Common Pleas of Chester County Civil Division at No(s): 2009-09160-CA
BEFORE: GANTMAN, P.J., FORD ELLIOTT, P.J.E., BENDER, P.J.E., BOWES, PANELLA, SHOGAN, LAZARUS, OLSON AND OTT, JJ.
CONCURRING AND DISSENTING OPINION BY BOWES, J.:FILED MAY 17, 2017
While I agree with my distinguished colleagues that Christopher
Gutteridge and Applied Energy Partners, LLC (“AEP”) are entitled to
judgment, we differ as to the amount of that judgment and against whom it
should have been entered. I believe the record fails to factually or legally
support the imposition of personal liability against Stephen Russial. At all
relevant times, Mr. Russial was acting in his capacity as the President of his
corporation, J3 Energy Inc.1 Furthermore, since the amount of the recovery
was based at least in part on the equitable theory of unjust enrichment, the
same equitable considerations militate in favor of deducting from the award ____________________________________________
1 The trial court did not pierce the corporate veil to impose personal liability against Mr. Russial. J-E02003-16
the commissions J3 already paid to Lori Porreca and Herb Keaton. Hence, I
would vacate the judgment and remand the matter to the trial court to enter
judgment against J3 Energy Inc. only, in an amount reflecting a deduction
for the commissions J3 paid to Porreca and Keaton.
The trial court found that Mr. Russial and Mr. Gutteridge were engaged
in a personal business relationship. It based its finding on Mr. Gutteridge’s
testimony that when he first met Mr. Russial, “I was dealing with him
personally.” N.T. 6/13/12, at 10. The personal nature of the relationship
was further supported, according to the trial court, by Mr. Gutteridge’s
testimony that, in March of 2008, the issue arose “should we form a
separate legal entity to run the Energy Buyer’s Group.” Id. at 11. Although
counsel for J3 Energy advised that it was not necessary, Mr. Gutteridge
testified that “the issue of how we should formalize the relationship came up
a number of times over.” Id. The trial court acknowledged that there were
ongoing discussions regarding the formation of a joint venture between AEP
and J3. It concluded, however, that, since there was no written agreement,
it was “perfectly reasonable for Plaintiff Gutteridge to believe that the
formation of the sales and marketing relationship between himself and
Defendant Russial was ongoing and continued despite their inability to
formalize the creation of the Energy Buyers Group.” Trial Court Opinion,
6/11/14, at 4.
-2- J-E02003-16
The majority characterizes the trial court’s finding that Mr. Gutteridge
and Mr. Russial were engaged in a personal business relationship as a
credibility determination and declines to disturb it. I submit that there is no
credibility dispute. The record establishes that Mr. Gutteridge and Mr.
Russial were acting at all relevant times on behalf of AEP and J3 in pursuing
the joint venture and Mr. Gutteridge’s testimony is entirely consistent with
that scenario. The record reveals the following.
Mr. Gutteridge knew Mr. Russial before they broached the subject of a
joint venture between their companies. Mr. Gutteridge also was aware that
J3 Energy was Mr. Russial’s company, and he understood that the
corporation “was a consulting firm, providing those sorts of services, bill
audition, power factor correction, that type of thing.” N.T., 6/12/12 at 34.
It was “during a road trip to Pittsburgh in the fourth quarter of 2007” that
they first discussed the joint venture. Id. at 32. Mr. Gutteridge was quick
to point out that when they created the Energy Buyers Group, it was as a
joint venture between Applied Energy Partners and J3 Energy. Id. at 10.
AEP would supply sales and marketing services through its channel partners
to obtain members; J3 Energy would contribute its energy expertise to
manage a pool of energy and a demand response program. Their joint
venture would be called Energy Management Group.
In a February 2008 email to Lori Porreca and other AEP channel
partners, Mr. Gutteridge characterized the venture: “Steve Russial’s
-3- J-E02003-16
company, J3 Energy, and Applied Energy Partners will be jointly promoting
and operating the ‘Energy Buyers Group’ throughout the mid-Atlantic states
(PJM electrical region).” Exhibit P-2. Promotional materials and member
agreements described Energy Buyers Group as a “joint venture composed of
Applied Energy Partners and J3 Energy.” The Energy Management Group
membership agreements bore the logos of both Applied Energy and J3
Energy. According to Mr. Gutteridge, they included the logos of both entities
“[b]ecause throughout the whole period we were introducing the Energy
Buyers Group to every single customer as a joint venture between Applied
Energy and J3.” N.T., 6/12/12, at 77. He also explained that either he or
Mr. Russial could sign the agreements on behalf of the joint venture in their
capacities as principals for Applied Energy and J3.
The initial financial arrangement between Applied Energy and J3
Energy provided that commissions on sales would be paid to J3 Energy.
That corporation would pay Applied Energy thirty-five percent of the gross
revenue. Id. at 79. Applied Energy would pay commissions to its channel
partners from its share of the commission.
Although Mr. Gutteridge and Mr. Russial spoke in terms of “I,” “we,”
and “you” when they discussed the joint venture, it is apparent that they
were dealing on behalf of their companies, AEP and J3. As Mr. Gutteridge
explained, “At the point that we started setting up the Energy Buyers Group,
-4- J-E02003-16
it was Applied Energy Partners J3 venture.” Id. at 10. This exchange
during the cross-examination of Mr. Gutteridge illustrates that point.
Q: At your deposition I remember asking you when you met Steve Russial were you aware of his company, J3 Energy Group, Inc., were you aware of that company?
A: Yes.
Q: And were you aware that the company was a corporation?
A: No, not specifically, but I assumed so.
....
Q: Mr. Gutteridge, I’m handing you your deposition on January 6, 2012 of this year. I’m bringing your attention to page 26, lines 14 through 21. Would you read those and let me know when you’re finished?
A: “Let’s talk about that. One of my clients is J3 Energy Group Inc. Were you aware of J3 Energy Group, Inc. when you started dealing with Mr. Russial?”
“Yes.”
“Were you aware that that was a corporation?”
.....
Q: I also asked you if, when you were dealing with Mr. Russial, were you dealing with him in his capacity as president of this corporation - of his corporation. You don’t remember what you answer was?
A: I don’t remember what my answer was, but when I first met Mr. Russial, I was dealing with him personally. At the point that we started setting up the Energy Buyers Group, it was Applied Energy Partners J3 venture.
-5- J-E02003-16
Q: I’m going to approach you one more time. If I show you, again, page 26, the last three lines, and then your answer on the top of your deposition testimony?
A: Yes. You asked me in my dealings with Mr. Russial was he always dealing as president of J3 and I said I assumed so.
Q: Thank you.
N.T., 6/13/12, at 8-10 (emphasis supplied).
I submit that personal communications between corporate principals
regarding their businesses’ participation in a joint venture do not constitute
a business deal between individuals. At all relevant times, Mr. Russial was
acting on behalf of his corporation, J3, and Mr. Gutteridge was acting as
president of AEP, in discussing and forming the joint venture. This is
entirely consistent with the fact that “a corporation must act through
agents.” See Red Vision Sys. v. Nat'l Real Estate Info. Servs., L.P.,
108 A.3d 54, 60 (Pa.Super. 2015); see also Peters Creek United
Presbyterian Church v. Wash. Presbytery, 90 A.3d 95, 113 (Pa.Cmwlth.
2014) (a corporation acts through its officers, shareholders or members).
AEP and J3 Energy, acting through their principals, pursued the joint
venture as they attempted to finalize the terms of their arrangement. The
trial court concluded that when they failed to execute a formal written
contract, it was “perfectly reasonable for . . . Gutteridge to believe that the
formation of the sales and marketing relationship between himself and . . .
-6- J-E02003-16
Russial was ongoing and continued despite their inability to formalize the
creation of the Energy Buyers Group.” Trial Court Opinion, 6/11/14, at 4.
The trial court mistakenly concluded that because AEP and J3 did not
execute a formal written agreement, the business relationship defaulted to
one between Mr. Gutteridge and Mr. Russial personally. I submit there was
a business relationship between AEP and J3, as evidenced by their common
pursuit of members in Energy Management Group. Admittedly, the
relationship stumbled, but technically, the absence of a formal written
agreement was not legally required. A joint venture is a
"special combination of two or more persons where, in some specific venture, a profit is jointly sought without any actual partnership or corporate designation": 30 Am. Jur., Joint Adventures, § 3. The existence or non-existence of a joint venture depends upon what the parties intended in associating together. It must arise from a contractual basis, although the contract need not be express but may be implied from the acts and conduct of the parties. To constitute a joint venture certain factors are essential: (1) each party to the venture must make a contribution, not necessarily of capital, but by way of services, skill, knowledge, materials or money; (2) profits must be shared among the parties; (3) there must be a "joint proprietary interest and right of mutual control over the subject matter" of the enterprise; (4) usually, there is a single business transaction rather than a general and continuous transaction.
McRoberts v. Phelps, 138 A.2d 439, 443-444 (Pa. 1958). Whether a joint
venture exists depends on the specific case, “and no fixed nor fast rule can
be promulgated to apply generally to all situations.” Id. The association
can be one of corporations, which “by contract, express, or implied, agreed
-7- J-E02003-16
to engage in a common enterprise for their mutual profit.” Gold & Co. v.
Northeast Theater Corp., 421 A.2d 1151, 1155 n.1 (Pa.Super. 1980).
The trial court concluded that AEP and J3 failed to reach a meeting of
the minds on the specific terms of the joint venture and neither party
challenges that finding on appeal. Nonetheless, the court imposed liability
upon J3 Energy Inc. based on its breach of promises to AEP and unjust
enrichment. I believe that characterizing the business relationship herein as
a personal one between Mr. Gutteridge and Mr. Russial, and imposing
personal liability on Mr. Russial, is legally irreconcilable with the court’s
concomitant finding of liability against J3 Energy Inc. based on its
relationship with Applied Energy.2 It does not follow that when those two
entities failed to reach a formal joint venture agreement, the relationship
devolved into a personal one between the principals.
The evidence, viewed in the light most favorable to Mr. Gutteridge and
AEP, the prevailing parties below, establishes that Mr. Gutteridge and Mr.
Russial were acting at all times on behalf of their respective companies in
seeking to forge a joint venture. This was a failed business deal between J3
____________________________________________
2 I am aware that a corporate officer is subject to liability for breaching a promise extended not in his corporate capacity, but in his individual capacity. See Loeffler v. McShane, 539 A.2d 876, 879 n.3 (Pa.Super. 1988). There is no evidence in the record that Mr. Russial’s promises or representations about revenue sharing were made in anything other than his corporate capacity.
-8- J-E02003-16
Energy and AEP, rather than Mr. Russial and Mr. Gutteridge. There is no
factual or legal basis to impose personal liability against Mr. Russial, and
thus, I would vacate the judgment and remand with directions to the trial
court consistent with that finding.
The trial court invoked equitable remedies to ensure that the
Defendants were not unjustly enriched and ordered them to make restitution
in the amount of thirty-five percent of the revenue. The majority sanctions
the trial court’s refusal to credit against that amount the commission
payments J3 made to Lori Porreca and Herb Keaton since the latter had not
released Mr. Gutteridge and AEP from its obligation to pay such
commissions. I believe equitable principles favor an offset for the payments
J3 made to Porreca and Keaton even in the absence of a release. By not
crediting the payments, the trial court has unjustly enriched Mr. Gutteridge
and AEP as there is no viable legal means for Lori Porreca and Herb Keaton
to recover again against those parties. Judge Technical Servs., Inc. v.
Clancy, 813 A.2d 879, 887 (Pa.Super. 2002) ("An injured party cannot
recover twice for the same injury, based on the theory that double recovery
results in unjust enrichment.").
For all of the foregoing reasons, I would vacate the judgment and
remand for proceedings consistent herewith.
Judge Shogan and Judge Olson join this Concurring and Dissenting
Opinion.
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