Meso Scale Diagnostics v. Crescendo Biosciences (Cir. Ct. Mont. Cnty.)

Filed: November 29, 2017

Opinion by: Judge Rubin

Holding:

The post-termination materials requirements contract provision was enforceable despite it being removed during negotiations. In resolving a contract dispute, governed by Delaware law, the court may consider extrinsic evidence of the parties’ intentions.

Facts:

William Hagstrom (“Hagstrom”) formed Defendant in 2007 to commercialize Vectra DA, a test for rheumatoid arthritis.  On March 2, 2009, Defendant accepted Plaintiff’s proposal to evaluate the Vectra DA test’s viability.  The parties began to negotiate for a long-term supply agreement in 2010 after the development phase.  Both parties were invested in their relationship for the long-term, and Defendant knew that Plaintiff wanted to share in the long-term success of Vectra DA. Hagstrom understood that Plaintiff would not move forward with signing the agreement without some means of sharing in the upside potential if the product was commercially successful.

Section 10.1 of the Purchase Agreement contained the post-termination provision.  The Court found Plaintiff’s General Manager’s, Jim Wilbur’s (“Wilbur”), testimony more credible than Hagstrom’s testimony regarding Wilbur explaining Section 10.1 to Hagstrom.  Hagstrom denied Wilbur explained it and further argued that he never intended Defendant to be bound to deal with Plaintiff after the contract’s termination.  During the negotiation process, the provision was removed and re-inserted at least once, but the agreement that Hagstrom signed on April 2, 2012, included Section 10.1. 

On April 21, 2016, Defendant notified Plaintiff that it intended to terminate the agreement effective on April 30, 2018.  Plaintiff sued Defendant on May 23, 2016. (see the opinion for litigation details).

Analysis:

In Delaware, the parties’ subjective expressions are considered when a contract is negotiated between parties on an equal footing and the contract/provision is ambiguous.  SIManagement L.P. v. Wininger, 707 A.2d 37 at 43 (1998).  Extrinsic evidence that is considered “must speak to the intent of all of the parties to the contract.”  Id.  In addition, contracts “should be read to give effect to all its provisions and not to render any part of it ineffective.”  Restatement (Second) of Contracts § 203(a) (1981).

The Court acknowledged that Hagstrom was a “seasoned biotech entrepreneur with more than three decades of executive and board-level experience”, having raised $100 million for Defendant from venture capital firms.  In addition, the contract was reviewed by a global law firm.  The Court found Section 10.1 was a “business compromise” and the materials requirement was a “central element of the bargained for exchange”.

The full opinion is available PDF.

Neitzey v. Allen (Cir. Ct. Mont. Cnty)

Filed: August 31, 2017

Opinion by: Judge Michael D. Mason

Holding:  A covenant not to solicit clients that is overbroad on its face will be interpreted based on the wording of the agreement and is not partially enforceable if the employer voluntarily commits to limit its right of enforcement to only those remedies necessary to protect the employer’s legitimate business where such partial enforcement is not achievable based on the wording of the agreement. 

Facts:  A former employee sued his former employer to have certain restrictive covenants stricken from his employment agreement as overbroad.  At issue was a non-solicitation provisions that restricted the former employee from soliciting and accepting business from any customer of the former employer.  The term “customer” was not defined in the employment agreement and was not limited to customers of the former employer during the former employee’s employment by the former employer.  The former employer offered to restrict the meaning of “customer” to those with whom the former employee had personal contact while employed by the former employer. 

Analysis:  The court held that the former employer’s offer to limit enforcement of the non-solicitation provision could not save the provision from being declared unenforceable.  After a lengthy discussion of Holloway v. Faw, Casson & Co., 78 Md. App. 205 (1989) (“Holloway”), Holloway v. Faw, Casson & Co., 319 Md. 324 (1990), and Fowler v. Printers II, Inc., 89 Md. App. 448 (1991), the court agreed with the Court of Appeals in Holloway, that the enforceability of the non-solicitation provision at issue turned on its internal severability.  The non-solicitation provision at issue was not internally severable because, without some measure of damages on a client-by-client basis similar to the liquidated damages clause in Holloway*, there was no way to establish separate damages for clients with whom the former employee had personal contact and the other clients of the former employer.  Therefore, the non-solicitation provision could not be enforced even if the court limited enforcement in the manner proposed by the former employer.

* In Holloway, the non-solicitation provision was accompanied by a liquidated damages provision equal to 100% of the prior year’s fee for any clients solicited in violation of the non-solicitation provision.

Full text of opinion available here.

Comptroller of the Treasury v. Jalali (Ct. of Special Appeals)

Filed: January 31, 2018

Opinion by: Judge James A. Kenney III

Holding: The Court of Special Appeals held that: (1) the question of whether advances of money to a business are considered debt or equity (the “debt-equity” question) is a mixed question of law and fact; (2) in deciding the debt-equity question, the Maryland Tax Court applied correct legal principles and properly evaluated the relevant facts and circumstances when it found that a taxpayer’s advances of money to business entities were advances of debt; and (3) the Court of Special Appeals would not consider an issue not raised by the Comptroller before the Tax Court because, on judicial review of administrative agency decisions, the Court of Special Appeals is restricted to the record before the agency and generally does not consider issues not encompassed in the agency’s final decision (although the Court went on to find that a taxpayer’s advances constituted bad business debt because the record supported a finding that the taxpayer’s dominant motivation for making the advances was to protect his employment).

Facts: Taxpayer made several advances to businesses he owned or in which he had an ownership interest. Each advance was documented by a written promissory note containing a loan amount, loan period, interest rate, and other repayment terms. The interest and repayment terms of the notes were not strictly complied with or enforced. None of the advances were secured. Ultimately, the businesses failed and the advances were not repaid. Taxpayer filed amended tax returns with the Maryland Revenue Administration division and the Internal Revenue Service for the relevant tax year. The amended returns reported the unpaid advances as unreimbursed business expenses and sought a resulting carried-back net operating loss and tax refund. The Comptroller rejected the returns. Taxpayer requested a final determination, and the Comptroller issued a Notice of Final Determination denying the requested refunds, in part, because (i) proof of acceptance of one applicable return by the IRS had not been provided; and (ii) the advances were not bona fide loans. Taxpayer appealed to the Maryland Tax Court, which reversed the Comptroller’s determination and granted the requested refunds. The Comptroller filed a petition for judicial review, and the Circuit Court for Anne Arundel County affirmed the Tax Court. On appeal by the Comptroller, the Court of Special Appeals affirmed the Tax Court’s decision.

Analysis:  The Court of Special Appeals first held (in contrast to Fourth Circuit precedent) that the debt-equity question is a mixed question of fact and law. Therefore, the Court limited its review of the Tax Court decision to determining whether “a reasoning mind reasonably could have reached the factual conclusion that the Tax Court reached”. Applying this standard, the Court found that, in addressing the debt-equity question, the Tax Court properly evaluated the facts of the case in light of many of the factors deemed relevant by applicable case law, including the adequacy of capitalization of the businesses, availability of outside financing, the presence of written promissory notes, the presence of stated loan terms, the unsecured position of the advances, the failure of the businesses to comply with interest and repayment terms, the taxpayer’s subjective intent, and the source of repayments. The Court then addressed the Comptroller’s claim that, even if the advances at issue were debt, the advances were non-business bad debt and therefore not deductible. The Court held that it would not consider the argument because it had not been raised before the Tax Court, noting that “[o]n judicial review of administrative agency decisions, we do not ordinarily ‘pass upon issues presented to us for the first time on judicial review.’” Nevertheless, the Court went on to find that there was sufficient evidence in the record that the taxpayer’s “dominant motivation” in making the advances at issue was to protect his employment, and, as such, the advances constituted deductible bad business debt.

The full opinion is available in PDF.

Jesse Small v. Monty J. Bennett (Cir. Ct. Balto. City)

Filed:  February 5, 2018

Opinion by:  Pamela J. White

Holding:  Demand for attorney's fees and costs incurred prior to the mooting of a shareholder derivative suit (1) failed to satisfy the requirements of the "corporate benefit rule" because the suit was frivolous and causally unrelated to the corporate benefit in question, and (2) failed to meet the requirements for a discretionary award under Maryland Rule 2-703.

Facts:  Defendants are a Texas-based publicly traded real estate investment trust ("Company"), the management group that conducts Company's day-to-day business affairs ("Advisor"), and Company's managing board ("Directors").

Company became a publicly traded corporation in late 2013 and soon entered into an advisory agreement engaging Advisor to perform management functions.  In mid 2015, concerned about a hostile takeover, Directors adopted a poison pill in the form of an amended advisory agreement; one which would impose an onerous termination fee payable by Company to Advisor upon a change in control or termination of the agreement by either side.

Displeasure over the termination fee's size and triggering mechanism was swiftly communicated by a minority shareholder ("Minority") who commenced derivative suits in early 2016.   Minority sued first in Maryland and weeks later in Texas, alleging breach of fiduciary duty for failing to approve candidates for a proxy battle and adopting a termination fee that threatened to reduce the firm's current equity by 50% in the event of a change in control.  Minority was ultimately unable to overcome the business judgment rule presumption and suffered the dismissal of all claims in February 2016.

Though they prevailed in their suit against Minority, Directors were not deaf to the rising noise of discontent.  Between February and April 2016, Directors established a committee to explore negotiation of a termination fee reduction.  Insufficiently placated by the measure, Plaintiff, a separately situated shareholder ("Shareholder") entered the scene and served a demand letter on Directors in April mirroring the claims made by Minority and requesting an investigation and recommendation on the merits of litigation.  

By that time, the record confirmed much of Advisor's and Directors' energies to be centered on the termination fee provision.  Independent directors of Company and Advisor began negotiations and  drafted revisions to the advisory agreement.  An unsolicited takeover offer received Directors' favorable attention and protracted discussions regarding the import and impact of the termination fee.  Directors retained outside counsel to conduct Shareholder's demanded investigation and to report findings at the upcoming December 2016 board meeting.

Directors described these events in several letters to Shareholder between April and October, but Shareholder considered his demand as having been refused.  In October 2016, Shareholder filed a derivative complaint in the Circuit Court for Baltimore City largely regurgitating the content and form of Minority's prior suits: naming the same defendants (Company, Advisor, and Directors) and alleging breach of fiduciary duty with focus on the "unconscionable" fee provision.

Meanwhile, negotiations over the fee provision continued into 2017.  In January, Company's independent directors approved and recommended the amended advisory agreement.  In June 2017 at Company's annual shareholder meeting, shareholders approved the amended advisory agreement which softened its termination fee calculation and trigger mechanism.

That approval served to moot Shareholder's derivative suit; however, arguing that his litigation had led directly to substantial and valuable benefit for Company's shareholders, Shareholder moved for an award in the amount of attorneys' fees and expenses.

Analysis:  The court began by outlining the standard for an award of discretionary fees according to the corporate benefit doctrine, which required Shareholder to demonstrate three elements: (a) that his suit was meritorious when filed, (b) that Directors' action to benefit the corporation was taken prior to judicial resolution, and (c) that the corporate benefit was causally related to the suit.

To the first, the court examined whether Shareholder's suit would have survived the motion to dismiss - and were left wanting.  Shareholder neglected to allege sufficient facts in his complaint to show that Directors had failed to act in accordance with the Business Judgment Rule or made anything other than good faith, informed business decisions.

To the third, the court's examination of the chronology of events led to a finding that neither the termination fee negotiations nor subsequent approval had been causally related to Shareholder's demand letter or threat of litigation.  Instead, the train of activity as to challenging and rectifying the termination fee and trigger mechanisms had already left the station following Minority's suit - and months prior to Shareholder's involvement by demanding an investigation or filing the instant litigation.  Finding insufficient support for the required elements, the court determined Shareholder's litigation to have yielded no corporate benefit.

The court finally turned to Maryland Rule 2-703 which might have permitted a discretionary award in consideration of factors such as (a) time and labor required, (b) novelty and difficulty of questions raised, (c) legal skills required,... (e) customary fees for such services, (f) contingent or fixed fee agreement, (g) time-limiting circumstances,... or (i) experience and ability of counsel, among other factors.  Even had Shareholder been able to meet his burden to show a corporate benefit, his neglect to support the 2-703 showing with sufficient evidence about any of the recited factors and inability to explain or justify the difference between an initial demand for $565,000 and an amended demand for $272,347 were fatal to a request for a discretionary award.

Accordingly, the court denied Shareholder's motion for award of attorneys' fees and expenses.

The full opinion is available in PDF.

Willow Grove Citizens Assoc. v. County Council of Prince George's County, Maryland (Ct. of Special Appeals)

Filed:  December 20, 2017

Opinion by:  Stuart R. Berger

Holding:  A Maryland LLC’s participation in an administrative proceeding by filing for a zoning special exception was valid even though the LLC had forfeited its right to do business in Maryland.  A foreign unregistered corporation's participation in the proceedings as agent or co-applicant did not invalidate the application because the isolated action did not constitute doing business in Maryland.

Facts:  Appellee (“LLC”) in 2001 purchased a parcel in Bowie, Maryland with the intent to construct an assisted living facility.  The parcel being zoned "Rural Residential," prior owner had obtained a special exception for this same purpose but had never developed the land.

In 2012, LLC neglected its State Department of Assessments and Taxation ("SDAT") obligations and forfeited its right to use its name and do business in Maryland.  LLC's sole member was a corporation organized in the District of Columbia not registered to do business in Maryland.  LLC's rights remained forfeited in February 2014 when it applied for a special exception to operate an assisted living facility on the parcel.

The application was accepted, heard, and granted in October 2014 by the local planning commission ("Examiner").  People's Zoning Counsel, appointed by the County Council to protect the public interest and create a full and complete record, was the same attorney who had conducted the settlement and subsequent contract work around the sale of the parcel to LLC.  The record showed no objections made after his disclosure of prior involvement and no objection to his participation in the proceedings.  Examiner's decision was appealed to the County Council who remanded the matter for a determination of LLC's standing with SDAT.

In May 2015, LLC's rights were reinstated, and a month later the sole member became a qualified corporation in Maryland.  LLC provided certificates of good standing at the subsequent rehearing where the Examiner recommended approval.   Appellant, a civic association ("Citizens"), appealed to the County Council, who found LLC legally authorized to file an application for a special exception concerning real or personal property, that forfeiture had not impaired the validity of such a filing, and that the act of applying for a special exception did not constitute doing business.  The Circuit Court for Prince George's County affirmed.

Analysis:  Because Citizens accepted the factual record and objected only to the decision of the County Council on legal grounds, the only question before the court was whether the approval for special exception had been premised on legally erroneous conclusions of law.

Evaluating Citizens' claim that LLC's actions in pursuit of a special exception were a legal nullity, the court pointed to § 4A-911 of the Corporations & Associations Article (emphasis added):

The forfeiture of the right to do business in Maryland and the right to the use of the name of the limited liability company under this title does not impair the validity of a contract or act of the limited liability company entered into or done either before or after the forfeiture, or prevent the limited liability company from defending any action, suit or proceeding in a court of this State.

Irrespective of its forfeiture, LLC remained a legal entity with the power to enter binding contracts at any time.  What of the statute's proscription against bringing lawsuits?  Continuing on, the court found that because LLC had not filed its application "in a court of this State," the implicit prohibition against initiating suits was irrelevant.

"What about the sole member's initial status as an unregistered corporation?," pressed Citizens.  Applying a similar analysis, the court cited § 7-103 of the Corporations & Associations Article to find unregistered corporations to be entitled to engage in many in-state activities such as maintaining, defending, or settling actions, suits, claims, disputes, administrative or arbitration proceedings.  Citizens failed to meet their burden to prove the sufficiency of sole member's contacts or actions within the state to constitute "doing business,"  therefore, the sole member's status as co-applicant or agent in pursuing the special exception was also irrelevant. 

Finally, the court found that Citizens had not preserved for judicial review the question of People's Zoning Counsel's alleged conflict of interest because it failed to raise the issue at any stage of the administrative proceedings.

Accordingly, the court found the County Council's decision to approve the application for special exception to be correct as a matter of law.

The full opinion is available in PDF.

Farm Fresh Direct by a Cut Above, LLC v. Downey (Maryland U.S.D.C.)

Filed: October 26, 2017

Opinion by: Judge Ellen Lipton Hollander

Holding:

Under Maryland law, the liability protections afforded to limited liability company (“LLC”) members with respect to obligations of an LLC did not support dismissal of claims that an individual engaged in unfair competition and deceptive trade practices by forming and participating in an LLC, where the plaintiff alleged conduct supporting direct claims against the individual.

Facts:

A Maryland LLC, Farm Fresh Direct by a Cut Above LLC (“Plaintiff”), brought suit against multiple defendants, including another Maryland LLC, Farm Fresh Direct Home Food Services, LLC (“Defendant LLC”), and an individual who allegedly filed Defendant LLC’s Articles of Organization with the Maryland State Department of Assessments and Taxation (“Defendant Individual” and together with Defendant LLC, the “Defendants”), alleging that the Defendants engaged in unfair competition in violation of both Section 43(a) of the Lanham Act, codified at 15 U.S.C. § 1125(a), and Maryland common law, by establishing and engaging in a competing business under a name which was confusingly similar to the name of the Plaintiff.  The Defendant Individual moved, pro se, to dismiss the action.  Despite construing the motion liberally in favor of the Defendant Individual, the district court denied the motion, holding that the Plaintiff had alleged sufficient facts to satisfy the pleading requirements of Fed. R. Civ. P. 8(a).    

Analysis: 

The district court analyzed as a threshold issue whether the Defendant Individual was subject to suit in light of the Defendant LLC’s status as a Maryland LLC.  The district court’s analysis begins with a review of Maryland and Fourth Circuit law regarding the corporate shield and the corresponding LLC shield.  The court then notes that, notwithstanding the LLC shield, which generally protects LLC members from personal liability for obligations of the LLC, the LLC shield does not protect LLC members from direct liability for that member’s own actions.  Because Plaintiff alleged that the Defendant Individual formed the Defendant LLC and acted as its resident agent, the district court held that Plaintiff had alleged sufficient facts to plead direct claims against the Defendant Individual.  Further, because Plaintiff alleged that the name of the Defendant LLC was confusingly similar to the name of the Plaintiff and that the Defendant LLC engaged in substantially the same business as the Plaintiff, the district court held that Plaintiff alleged sufficient facts to plead claims of unfair competition and deceptive trade practices under Maryland and Federal law.  Accordingly, the district court denied Defendant Individual’s motion to dismiss.

The full opinion is available in PDF.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

White Oak Power Constructors v. Alstom Power, Inc. (Maryland U.S.D.C.)

Filed: November 7, 2017

Opinion by: Catherine C. Blake, United States District Judge

Holding: Tort claims based on conduct prior to the execution of a contract are not outside the scope of the agreed to forum selection clauses and that enforcing said clauses, which refer to “any legal action” related to the agreement.

Facts: In 2013, Defendant, Old Dominion Electric Cooperative (“Old Dominion”) entered into an Equipment Purchase Agreement (“Alstom Agreement”) with Defendant Alstrom Power, Inc. (“Alstrom”) for three generators for use in the Wildcat Point Generation Facility under development in Rising Sun, Maryland (“the Plant”). In 2014, Old Dominion entered into an Engineer, Procure and Construct Contract (“White Oak Agreement”) with Plaintiff, White Oak Power Constructors (“White Oak”) to construct the Plant and prepare it for operation. All three parties also signed an Assignment, Assumption, and Consent Agreement (“Assignment Agreement”) assigning certain of Old Dominion’s rights and responsibilities from the Alstrom Agreement to White Oak.

The Alstrom Agreement forum selection clause states:

 “Any legal action with respect to this Agreement shall exclusively be brought in the state courts of Virginia located in Henrico County, Virginia or in the United States District Court for the Easter District of Virginia located in Richmond, Virginia…each of the parties irrevocably waives any objection…further irrevocably waives and agrees not to plead or claim in any such court that any action or proceeding brought in any such court has been brought in an inconvenient forum.”       

The Assignment Agreement contains a substantively identical forum-selection provision. In addition, the White Oak Agreement forum selection clause states:

“Both parties hereto agree…to submit to the exclusive jurisdiction of the United States District Court for the Eastern District of Virginia located in Richmond, Virginia, in any litigation between the parties or, if the federal court lacks jurisdiction, the state courts of the Commonwealth of Virginia located in Henrico County, Virginia…contractor hereby waives any objection that it may now or hereafter to the venue of any such suit or any such court or that such suit is brought in an inconvenient forum.”

Plaintiff argued that its tort claims were outside the scope of the forum selection clauses and, even if the tort claims are within the scope of the forum selection clauses, enforcing the clauses would be unreasonable. The court denied all of Plaintiff’s arguments.

Analysis: The court first acknowledged the Supreme Court’s holding that: “When the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause. Only under extraordinary circumstances unrelated to the convenience of the parties should a §1404(a) motion be denied.” Plaintiff made the following arguments against enforcement of the forum selection clauses, and for the following reasons, the court denied each argument in turn:

(1)  Plaintiff’s tort claims were outside the scope of the forum selection clauses.

The court relied on the language of the Agreements to dismiss this claim, citing, “the Alstrom Agreement referred to ‘any legal action or proceeding with respect to this agreement’ and ‘actions of proceedings arising out of or in connection with this agreement.’ Both of these clauses therefore encompass pre-execution conduct of the parties related to the bidding on and negotiation of the agreements, including the alleged fraud in the inducement.”

(2)  Enforcing the clauses would be unreasonable.

The court cited the fourth circuit, explaining, “a forum selection clause may be found unreasonable if: (i) its formation was induced by fraud or overreaching; (ii) the complaining party will for all practical purposes be deprived of his day in court because of the grave inconvenience or unfairness of the selected forum; (iii) the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (iv) its enforcement would contravene a strong public policy of the forum state.”

The court found none of the above circumstances present, explaining, “[Plaintiff] has not advanced any facts to show that the forum selection clause specifically was obtained by fraud or overreaching…[and Plaintiff] offered no evidence that it will be gravely inconvenient or that it would be unfair to litigate this case in the forum state to which it agreed.” Similarly, there was no discussion of contravening a strong public policy by enforcing the clause. The court concluded, “allowing [Plaintiff] to escape its obligations under the forum selection clause…would be permitting forum shopping.”

(3)  Plaintiff did not bargain for the forum selection clause in the Alstrom Application.

The court quickly dismissed this final argument, explaining, “[Plaintiff] knew it would be subject to assignment of the Alstrom Agreement when it entered in the White Oak Agreement and the Assignment Agreement…[Plaintiff] could have bargained for a different forum selection clause. Instead, it agreed to inclusion of an identical clause in the Assignment Agreement. Further, the forum selection clause in the White Oak Agreement is even broader than that in the Alstrom Agreement.”

The opinion is available in PDF.

Schuster v. SLM Corporation (Maryland U.S.D.C.)

Opinion by Judge Catherine C. Blake

Filed:  October 23, 2017

Holding:  A company does not owe a duty to a non-customer, who it has no direct relationship with, absent special circumstances.

Facts: Plaintiff brought suit against SLM Corporation (hereinafter referred to as company) alleging that the company negligently allowed his daughter to use him as a co-signer on several student loan agreements without his consent. Previously, plaintiff had willingly co-signed for loans for daughter through the same company using a different email address and phone number.  The plaintiff contended that the company should’ve been aware of the fact that he did not consent to being a co-signer on a separate set of loans because there was a new phone number and email address listed on the applications for the new loan. Plaintiff also asserted that the company owed a duty to protect him from the possibility of being fraudulently listed as co-signer. Defendant company submitted a Motion to Dismiss on the basis that it did not owe Plaintiff a duty to protect him from fraud.

Analysis:

Under Maryland law a negligence claim must demonstrate that there is a relationship between the parties, that one require one party to owe a duty to the other. Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 451 Md. 600, 610 (2017). There must be an “intimate nexus.” Id. at 614. The “intimate nexus” only exists where there is contractual privity or its equivalent. Id. at 620.  “[B]anks do not typically owe a duty to their customers beyond whatever contractual relationship might bind them.” 

The court considered plaintiff to be a “non-customer” of the company as it pertained to the claims regarding the separate set of loans. For “non-customers”, a bank owes no duty with whom it has no direct relationship, absent special circumstances.  The court disregarded plaintiffs’ argument that the use of new contact information created a special circumstance because plaintiff failed to raise the argument in his complaint. The court instead considered that argument to demonstrate the scope of its’ analysis detailing the duty a company owes a non-customer.  It stated that the company owes a duty to a customer “limited to the terms of the agreement it arises”. Spaulding v. Wells Fargo Bank, N.A., 714 F. 3d 769, 778-79 (4^th Cir. 2013). The court went on to state that the new contact information was not indicative of fraud as “new contact information is not facially suspect”. And, there is no indication that plaintiff relied on the company or that the company knew or should have known of such reliance. Since plaintiff failed to demonstrate an intimate nexus between himself and the company in this new contract, the court granted the Motion to Dismiss submitted by company.

The opinion is available in PDF.