Prudential Real Estate Affiliates, Inc v. PPR REALTY, INC.; RONALD CROUSHORE; HELEN SOSSO; KATHY MCKENNA Kathy McKenna

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-2584
PRUDENTIAL REAL ESTATE
AFFILIATES, INC.
v.
PPR REALTY, INC.; RONALD CROUSHORE;
HELEN SOSSO; KATHY MCKENNA
Kathy McKenna,
Appellant
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 99-cv-00873)
District Judge: Honorable William L. Standish
Submitted Under Third Circuit LAR 34.1(a)
February 8, 2002
Before: SLOVITER, and AMBRO, Circuit Judges
SHADUR*, District Judge
(Opinion filed March 1, 2002)
*Honorable Milton I. Shadur, United States District Judge for the Northern District
of Illinois, sitting by designation.
OPINION
AMBRO, Circuit Judge:
In this appeal we decide whether the District Court properly denied Appellant
Kathy McKenna’s motion to dissolve the preliminary injunction. We affirm.
I.
Because the facts of this case are well known to the parties, we will not recite them
in detail. The procedural history of this case is convoluted. While appeals of the
Pennsylvania arbitration by Helen Sosso and Ronald Croushore were pending, Prudential
Real Estate Affiliates, Inc. ("PREA") filed suit in the United States District Court for the
Central District of California (the "Central District") to obtain a preliminary injunction
against transfer to McKenna of the shares in PPR Realty, Inc. ("PPR") held by Sosso and
Croushore. Over McKenna’s opposition, the motion was granted. McKenna appealed to
the Ninth Circuit, and then moved that the Central District dissolve the preliminary
injunction. The Central District held that it lacked jurisdiction to consider the motion

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given the pendency of McKenna’s appeal before the Ninth Circuit.
The Ninth Circuit upheld the preliminary injunction and the Central District’s
holding that it lacked jurisdiction to consider the motion to dissolve. While the appeals
were pending, the underlying case was transferred to the United States District Court for
the Western District of Pennsylvania (the "District Court"). Eighteen months later,
McKenna filed a motion with the District Court to dissolve the injunction. That Court
denied her motion, and McKenna appealed.
II.
This Court has jurisdiction under 28 U.S.C. 1332 because the parties are citizens
of different states and the amount in controversy exceeds $75,000. McKenna argues that
this Court lacks subject matter jurisdiction because "the plaintiff and defendants Sosso,
Croushore, and PPR have been aligned in all motions in this case," Appellant’s Br. at 1,
thus destroying diversity jurisdiction. The Ninth Circuit considered this question at
length and determined that "[r]especting the ultimate right to purchase the stock that is the
primary matter in dispute in this case, Sosso, Croushore, and PPR are either disinterested,
or have interests antagonistic to PREA, depending on the outcome of the Pennsylvania
appeal." Prudential Real Estate Affiliates v. PPR Realty, 204 F.3d 867, 874 (9th Cir.
2000). It reasoned that, by virtue of the Pennsylvania arbitration, Sosso and Croushore
have no claim in the ownership of the stock, and are mere "constructive trustees with no
stake in the outcome except to be released of their charge." Id. at 873.
McKenna claims that PREA’s "exit strategy" is to sell the stock back to Sosso and
Croushore, but the evidence she offers fails to establish that PREA’s interests are aligned
with Sosso’s and Croushore’s. On the contrary, the memorandum she cites indicates
PREA’s desire to obtain benefits from the acquisition, and then pursue "exit options" once
the acquisition is no longer profitable. Because McKenna fails to provide evidence of
Sosso and Croushore’s alignment with PPR, we agree with the Ninth Circuit that diversity
exists. We therefore possess subject matter jurisdiction.
III.
We review the denial of a motion to dissolve an injunction for abuse of discretion.
Favia v. Indiana Univ. of Pa., 7 F.3d 332, 340 (3d Cir. 1993); Township of Franklin
Sewerage Auth. v. Middlesex Co. Util. Auth., 787 F.2d 117, 120 (3d Cir. 1986). In order
to modify an injunction there must be "a change of circumstances between entry of the
injunction and the filing of the motion that would render the continuance of the injunction
in its original form inequitable." Favia, 7 F.3d at 337. Similarly, to dissolve an
injunction a district court must consider "whether the movant has made a showing that
changed circumstances warrant the discontinuation of the order." Franklin Sewerage
Auth., 787 F.2d at 121.
McKenna advances many arguments for dissolving the injunction, nearly all of
which fail to allege the changed circumstances required to dissolve an injunction. Each
of her arguments was made or could have been made before the Central District.
The principal changed circumstance she alleges involves the declaration of Bryan
Shreckengost, the attorney for Sosso and Croushore, who claimed that Judge Eugene
Strassburger, III, of the Court of Common Pleas for Allegheny County, Pennsylvania,
"suggested that if the arbitration award was confirmed, it might be appropriate to allow
the Federal Court in California some reasonable amount of time to be advised of and to
consider the issues presented to it by PREA." McKenna argued before the Central
District that this declaration was false, but that Court issued the injunction anyway, and
McKenna appealed. Judge Strassburger subsequently called the Shreckengost declaration
"absolutely incorrect." McKenna then petitioned the Central District to dissolve its
injunction, but the Court declined to consider the motion given the pendency of
McKenna’s appeal of the preliminary injunction. Because the Ninth Circuit simply
affirmed the Central District’s ruling that it lacked jurisdiction to consider a motion to
vacate a preliminary injunction during the pendency of an appeal, Prudential Real Estate,
204 F.3d at 880, McKenna argues that no court has considered Judge Strassburger’s
statement. Appellant’s Br. at 61.
In identifying Judge Strassburger’s statement, McKenna presents this Court with a
"changed circumstance" to support her motion to dissolve the preliminary injunction.
The District Court held that Judge Strassburger’s statement, although a "changed
circumstance," did not render the continued imposition of the preliminary injunction
inequitable, and so did not warrant dissolving the injunction. It was correct. McKenna

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did not support her assertion that this false evidence "tainted" her case before the Central
District. The Central District’s findings of fact make no mention of Shreckengost’s
declaration at all. She was able to argue the declaration’s falsity before the California
federal courts, albeit without the benefit of Judge Strassburger’s statement. In the absence
of any evidence of the Central District’s reliance upon Shreckengost’s declaration, the
District Court did not abuse its discretion in holding it equitable to continue the
injunction.
McKenna next argues that "even PREA’s main affiant from the preliminary
injunction proceedings now admits that Kathy McKenna did not breach the franchise
agreement." Appellant’s Br. at 46. It is true that Elliot S. Rose, Vice President of
Network Services for PREA, testified at a deposition that occurred after the Central
District issued the preliminary injunction that he "knew of no instance where McKenna
was in breach or didn’t comply" with her obligations under the franchise agreement.
Appellant’s Br. at 46. McKenna claims that this testimony amounts to an abandonment of
Rose’s prior affidavit, where he stated "Kathy McKenna has objected to the transfer of
the Disputed Stock to PREA, and is now refusing to allow PREA to exercise its right of
first refusal." The District Court, far from abusing its discretion, stated the matter clearl
This is the only statement in the affidavit that could possibly be interpreted
as a statement regarding conduct of McKenna that amounts to an alleged
breach of contract, and regardless of the purported disclaimer of Mr. Rose,
the statement is true in that McKenna does dispute PREA’s right of first
refusal and does object to the transfer of the disputed shares to PREA. If
the statement were not true . . . the parties would not presently be before the
court.
One final changed circumstance does exist. The Ninth Circuit explained that the
reason for imposing the preliminary injunction was because Sosso, Croushore, and PPR
wished to "[prohibit] transfer of the stock while their appeal is resolved in Pennsylvania
state court." Prudential Real Estate, 204 F.3d at 873. The resolution of the state court
appeal means that this purpose no longer exists. Nonetheless, maintaining the
preliminary injunction remains necessary to prevent McKenna from transferring the stock
while the underlying merits of the parties’ respective rights are decided. Hence, we will
not dissolve the injunction.
VI.
For the foregoing reasons, we affirm the District Court’s denial of McKenna’s
motion to dissolve the preliminary injunction.
TO THE CLERK:
Please file the foregoing Opinion.
By the Court,
/s/ Thomas L. Ambro
Circuit Judg

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