Whelan v. Abell

953 F.2d 663, 293 U.S. App. D.C. 267
CourtCourt of Appeals for the D.C. Circuit
DecidedJanuary 17, 1992
DocketNos. 90-7016 to 90-7018
StatusPublished
Cited by132 cases

This text of 953 F.2d 663 (Whelan v. Abell) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Whelan v. Abell, 953 F.2d 663, 293 U.S. App. D.C. 267 (D.C. Cir. 1992).

Opinion

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

These consolidated cases arise out of the failure of Animated Playhouses Corporation (Corporation), a restaurant chain founded by appellants Andrew Whelan and Edward Whelan. Appellees Tyler Abell, Anthony Chase,1 and John Toomey purchased one of the Corporation’s restaurants and brought legal actions against the Whelans and the Corporation regarding misrepresentations allegedly made during the purchase negotiations. These actions concluded without determination of liability. The Whelans then sued Abell, Chase, and Toomey, charging them with a number of common law torts, including malicious prosecution and abuse of process. The district court ruled against the Whelans on all counts. The Whelans raise numerous challenges to the district court’s decisions.2 We affirm three of the challenged rulings, reverse the others, and remand for further proceedings.

I.

A.

The Whelans, who were major investors in and senior officers of the Corporation,3 planned to develop a nationwide chain of family entertainment restaurants featuring three-dimensional animated characters. In 1982, they sold to Abell and Chase the Corporation’s first restaurant located in Putty Hill, Maryland. Shortly thereafter, Abell and Chase sold a one-third interest in their investment to Toomey, referring to their partnership as ACT Associates (ACT).4

The Putty Hill restaurant as well as the chain as a whole proved unsuccessful. The parties hotly contest the cause of the business’ failure, but it is undisputed that once the business’ problems became apparent, ACT attempted to force the Whelans and the Corporation to make large payments to the partners. ACT threatened the Whelans with legal action over alleged illegalities committed during the 1982 negotiations for the Putty Hill restaurant if the Whelans did not agree to take certain actions. ACT demanded that the Corporation buy back the restaurant and assume the debt the partners incurred to finance the purchase. ACT further demanded that the Whelans transfer to ACT most of their personal shares in the Corporation. When pressing these demands, ACT pointed out that a lawsuit would seriously impede the Corporation’s efforts to raise additional capital and that the Whelans could not afford to litigate. And to make the point more dramatically, ACT also apprised the Corporation’s major investors of the potential litigation by sending them copies of a letter threatening legal action and a draft complaint.

[271]*271Eventually the partners carried out their threats. In March 1984 ACT filed a lawsuit against the Corporation and the Whelans (Putty Hill lawsuit), alleging mail and wire fraud, securities fraud, franchise law violations, and racketeering. All of the charges rested on alleged misrepresentations made in the course of the 1982 negotiations. ACT also sent a letter to the Maryland Attorney General’s Office in February 1984 claiming that the Corporation and Andrew Whelan violated the Maryland Franchise Disclosure Act, Md.Code Ann., Art. 56, § 345-365D. The Maryland Securities Commission issued a show cause order and in November 1984 Andrew Whelan entered into an “undertaking” with the Commission in which he neither admitted nor denied wrongdoing. The agreement provided that satisfaction of its terms would result in a rescission of the show cause order one year later.

The Corporation and other of the Whelans’ business ventures subsequently suffered a string of setbacks. A venture capital firm on the verge of injecting large amounts of capital into the Corporation withdrew, and the Corporation filed for bankruptcy in July 1984; a separate venture involving a network of walk-in medical clinics failed; the Whelans were forced to relinquish most of their holdings in a pharmacy venture; and Andrew Whelan was unable to secure franchise rights in an unrelated restaurant business when his net worth declined below the franchisor’s minimum requirements.

The Putty Hill lawsuit never went to trial. At a status conference, Judge Gesell expressed his belief that ACT had not brought the action in good faith, and he told the partners to “fish or cut bait.” Abell and Toomey subsequently moved to dismiss the Whelans from the case in October 1984. Judge Gesell dismissed the suit against the Whelans in February 1985, and he dismissed the rest of the case in 1986.

In December 1984, however, ACT had filed a second lawsuit on essentially the same claims against the lawyers who had represented the Whelans and the Corporation during ACT’s acquisition of the Putty Hill restaurant. After a bench trial, Judge Gesell dismissed that case with prejudice. He found that

plaintiffs [Abell, Chase, and Toomey] have failed to prove their claims. Neither defendant individually nor in association with others engaged in any fraudulent act or misrepresentation, intentionally or otherwise. In their dealings with plaintiffs, each defendant made full disclosure of facts known to them and did not omit to state any material fact.

Abell v. Elmer, 1990 Fed.Sec.L.Rep. (CCH) ¶ 92,448, at 92,731, 1985 WL 5836 (D.D.C.1985). He also described the suit as “nothing more than a desperate attempt by disappointed investors to create a cause of action where none exists.” Id. Relying in part on Judge Gesell’s decision, Andrew Whelan sought rescission of his undertaking with the Maryland Securities Commission. The Commission vacated the undertaking in November 1985 “in accordance with [its] terms.”

B.

By 1987 the legal actions initiated by ACT were concluded. The Whelans then turned round and sued ACT,5 charging the partners with tortious interference with prospective business advantage, breach of fiduciary duty, wrongful involvement in litigation, abuse of process, and malicious prosecution. Chase defaulted soon after the suit was filed, and default orders were entered against him. Abell and Toomey, however, persevered in their defense.

Before the case went to trial, the district court denied the Whelans’ partial summary judgment motion, which, relying on Judge Gesell’s findings in Abell v. Elmer that no fraud or misrepresentation occurred during the 1982 negotiations, sought to preclude Abell and Toomey from defending in this action on the ground that their original lawsuit was warranted. The court, on the [272]*272other hand, granted Abell and Toomey’s partial summary judgment motions dismissing the malicious prosecution, abuse of process, and wrongful involvement in litigation claims. Only the tortious interference with prospective business advantage and breach of fiduciary duty claims thus remained.

On the first day of the jury trial, Abell and Toomey moved to bar any testimony concerning the lost value of the Whelans’ investments in the Corporation on the ground that only the Corporation itself could recover for such loss. The district court agreed and granted the motion. At the close of the Whelans’ case, the court also directed a verdict for Abell and Toomey on the breach of fiduciary duty claim on the ground that only the Corporation could assert claims arising out of that alleged misconduct. These rulings left only the Whelans’ tortious interference claim, limited, of course, to the damage inflicted on business opportunities unrelated to the Corporation.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Rumi LLC. v. Irtanki
District of Columbia, 2025
Legal Technology Group, Inc. v. Mukerji
District of Columbia, 2019
Wagdy v. Kerry
District of Columbia, 2018
Carlos Loumiet v. United States
828 F.3d 935 (D.C. Circuit, 2016)
Cranpark, Inc. v. Rogers Group, Inc.
821 F.3d 723 (Sixth Circuit, 2016)
Patrick v. District of Columbia
179 F. Supp. 3d 82 (District of Columbia, 2016)
United States v. All Assets Held in Account Number XXXXXXXX
314 F.R.D. 12 (District of Columbia, 2015)
Loumiet v. United States of America
968 F. Supp. 2d 142 (District of Columbia, 2013)
Siemens USA Holdings, Inc. v. United States
960 F. Supp. 2d 221 (District of Columbia, 2013)
American National Insurance v. JPMmorgan Chase & Co.
893 F. Supp. 2d 218 (District of Columbia, 2012)
Lamont v. Proskauer Rose, LLP
881 F. Supp. 2d 105 (District of Columbia, 2012)
Dormu v. District of Columbia
District of Columbia, 2011
Cherry v. Federal Communications Commission
641 F.3d 494 (D.C. Circuit, 2011)
Trenwick America Reinsurance Corp. v. Irc, Inc.
764 F. Supp. 2d 274 (D. Massachusetts, 2011)
STONEY v. McAleer
11 A.3d 376 (New Jersey Superior Court App Division, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
953 F.2d 663, 293 U.S. App. D.C. 267, Counsel Stack Legal Research, https://law.counselstack.com/opinion/whelan-v-abell-cadc-1992.