Saturday, September 26, 2009

Strudwick v. Whitney (Cir. Ct. Balto. City)

Filed August 28, 2009.
Opinion by Judge Evelyn Omega Cannon.

Held: Defendants whose contacts with Maryland were primarily limited to sending correspondence into the state and maintaining a passive website lacked sufficient contacts for the court to exercise personal jurisdiction over them.

Facts: In a lawsuit concerning the ownership of business interests in Costa Rica, the plaintiffs alleged claims against two foreign defendants who moved to dismiss for lack of personal jurisdiction.

The plaintiffs alleged general jurisdiction on grounds that the defendants had clients in Maryland and had earlier entered their appearance as counsel in the case. The court held that the defendants' limited client roster in the State was not sufficient. The court further held that appearing in the case could not be considered a factor because a defendant's contacts are to be measured as of the time the claim arose.

The plaintiffs alleged specific jurisdiction based on 1) an e-mail and a letter sent to the plaintiff in Maryland, 2) an allegedly defamatory website, and 3) allegedly defamatory e-mails sent to third parties, including Maryland residents. The court held that a passive website and e-mails that allegedly caused harm to business interests outside the jurisdiction were not sufficient grounds upon which to exercise personal jurisdiction.

The full opinion is available in PDF.

Tuesday, September 22, 2009

Federal Trade Commission v. Innovative Marketing, Inc. (Maryland U.S.D.C.)

Filed September 16, 2009
Opinion by Judge Richard D. Bennett

Held: Under the recently articulated Iqbal "plausibility" standard, the FTC sufficiently pleaded a cause of action against a corporate officer for personal liability for deceptive marketing practices.

Facts: The FTC sued multiple companies and their officers for marketing software using misleading "scareware" tactics. One officer moved to dismiss for failure to state a claim against him in his individual capacity. Under the FTC Act, upon establishment of corporate liability for deceptive marketing, individual defendants may be held personally liable upon proof that they "participated directly" in the acts or "had authority to control them." In addition, the FTC must prove the individual had some knowledge of the conduct.

Regarding the individual, the FTC alleged that 1) he was a corporate officer, 2) he handled the company's finances and merchant accounts, 3) this was important because of the difficulty maintaining payment processors due to a high rate of chargebacks and complaints, and 4) his credit card was used by another defendant to buy advertising. The court held that these allegations were sufficient to support a claim for personal liability under the Act.

*Concerning the knowledge requirement, the court relied on the defendant's degree of participation in business affairs, the small size of the enterprise, and the breadth of the scheme to infer that he had knowledge.

The full opinion is available in PDF.

Wednesday, September 16, 2009

Belkin, LLC v. HTPA Holding Co. (Cir. Ct. Mont. Co.)

Filed August 28, 2009
Opinion by Judge Durke G. Thompson

Held: Where written purchase-and-sale agreement was silent on outcome where both parties timely objected to first party's chosen appraiser, and where pre-formation extrinsic evidence showed no meeting of the minds on this material term, the contract is unenforceable, and the court will not supply missing terms.

Facts: Several investors formed an LLC to own two professional sports franchises. After a dispute arose between several members and another member over a player trade, all of them negotiated a written agreement to govern the majority group's buy-out of the dissenting members' interest in the company. Among other things, the agreement provided a mechanism for selecting supposedly neutral appraisers to determine the fair market value of the franchises. The agreement granted the dissenting member the right to select the first appraiser, subject to the filing of an objection within five days. The objecting party would then have the right to select the second appraiser. If that selection was timely objected to, the agreement allowed for the league to choose a third appraiser. Critically, the agreement did not expressly prohibit any party from objecting to appraisel produced by its own selection, and it made no provision for the outcome in the event two parties objected to the appraisal. This is exactly the situation that resulted when both the dissenting member and the majority group objected to the appraisal made by the appraiser originally selected by the dissenter.

Analysis: On a prior appeal, the Court of Special Appeals found the provision of the agreement governing appraiser selection and objection to be silent, and therefore, ambiguous in the event that both parties objected to a selection. On remand, and applying Delaware law, the Circuit Court for Montgomery County looked to pre-formation extrinsic evidence to determine whether there was any agreement on what would happen in the event of a bilateral objection. The court found no extrinsic evidence of such an agreement, express or implied, and that "no one contemplated the legal entanglement that resulted when both sides objected." There being no meeting of the minds, the court declared that "the contract becomes unenforceable by the courts," and it left the parties to negotiate a resolution on their own, without judicial assistance. The court declared that neither party was in breach.

Drafters are encouraged to consider the potential consequences where a contractual objection provision does not expressly foreclose a party from objecting to its own action. As this case demonstrates, if the provision is silent on the issue, there is both a risk for bad-faith manipulation of the ambiguity as well as a risk that the manipulator himself will be left with an unenforceable agreement.

The full opinion is available in PDF.

Tuesday, September 1, 2009

Onconome, Inc. v. University of Pittsburgh (Cir. Ct. Balto. City)

Filed July 21, 2009.
Opinion by Judge Evelyn Omega Cannon.

Held: An arbitration clause in a licensing agreement but not in a related agreement between the same parties will cover claims based on the related agreement so long as the claims "touch matters" covered by the clause. Further, an arbitration clause binds a non-signatory of an agreement if he or she is a transaction participant that is closely related to the dispute.

Facts: The parties entered into a series of three agreements concerning the development and marketing of a medical treatment. Two agreements did not contain an arbitration clause. The plaintiff filed suit for breach of one of those agreements, and the defendants moved to dismiss, invoking the right to arbitrate. The Court referred to the substance of the complaint and determined that the allegations "touched matters" covered by the agreement containing the arbitration clause. Accordingly, the plaintiff was required to arbitrate.

The full opinion is available in PDF.