Cunney v. Patrick Communications, LLC (U.S.D.C.)

Filed June 13, 2016

Opinion by James K. Bredar

Holding: Where certain words or terms take on a specific trade usage in a particular industry, it is competent for the parties to a contract in which such words and terms are used to show the peculiar meaning of them in the business or trade to which the contract relates, not for the purpose of modifying the contract but rather for the purpose of elucidating the language of the parties.

Facts:  The Plaintiff was employed at a brokerage firm, which specialized in “broadcast, media, telecom and wireless transactions,” under the provisions of an “Employment Memorandum” that provided Plaintiff would receive a percentage of fee’s the brokerage firm collected as a result of business Plaintiff originated within the broadcast media realm.  Plaintiff’s commissions were to be derived from collected fee’s paid to the firm as a result of his work.  

After the Plaintiff had been employed at the firm for a period of time, one of the principals at the firm (“Principal”) started an investment company with two partners.  This investment company was formed to engage in spectrum arbitrage geared to capitalize on the FCC’s initiative to expand broadband services across the country. Plaintiff supplied the investment company with spectrum valuation reports, viewed as a marketing tool that would lead to engagements of the brokerage firm and corresponding fees to the firm. These reports were used by the investment company in its business operations. Plaintiff provided this information only after he was authorized to do so by Principal.

Principal owned shares in the investment company through an LLC, which was co-owned with his wife (the “LLC”).  Plaintiff received no equity in the investment company.  Plaintiff inquired about getting an equity interest in LLC, a profit share in the investment company and proceeds from an auction sale of the brokerage firm, as opposed to collecting commission in cash from the work he done up until that point. No agreement was finalized.  Later, the Plaintiff brought up the commissions and profit share he felt that he was entitled to during his exit interview.  

Plaintiff sought to recover commissions he allegedly earned through a breach of contract and quantum meruit claim.  Plaintiff also alleged certain violations of the Maryland Wage Payment and Collection Law that are not included in this summary.

Analysis:

To prevail in a breach of contract action the Plaintiff must prove that the Defendant owed the Plaintiff a contractual obligation that was breached.  The language of the contract determines the intent of the parties. Where there are words used in a specific trade or industry, parties may explain the “peculiar meaning” of the words to enable the court to interpret the contract language and the intent of the parties.

The Plaintiff argued that the work he performed while employed at brokerage firm, fit within the confines of what could be considered “a broadcast media transaction” under his Employment Memorandum and therefore entitle him to 40% of the profits the brokerage firm would receive upon liquidation of the investment company. The Court disagreed for three independent reasons.  First, after hearing testimony from expert witnesses who provided definitions for a “broadcast media transaction,” the Court decided that the formation of the investment company did not constitute a broadcast media transaction as that term is understood in the media brokerage industry.

Second, the Court decided that the Plaintiff did not originate the investment company, and that the origination of the investment company was not a transaction that generated fee’s for the brokerage firm. There was no language in the operating agreement of the investment company which referenced services to be provided by the brokerage firm at any point in time. Principal entered into this separate business on his own accord, without the involvement of the brokerage firm. Anything Principal was due to earn from the investment company, was based on its’ future earnings. Through testimony it was said that “there was no agreement that [the brokerage firm] would receive equity interest in commissions for doing work for [the investment company].”

Third, the Court also found the record to contradict Plaintiff’s notion that he was the “originator and procuring cause” of the venture of the investment company.  The Court recognized that he did make contributions to the venture as a going concern but he had no role in the “crucial formative stages of the venture.” A key witness involved in the formation of the investment company testified that he “did not believe he ever spoke with Plaintiff regarding the [investment company] concept before he decided to implement it.” Going on to state that “this transaction would have happened with or without [Plaintiff]”. Another key participant in the formation of the investment company stated that he was not even sure who the Plaintiff was and that he did not use “advice” from the Plaintiff when deciding whether to fund the investment company.  The Plaintiff testified that he “never really saw the actual [investment company] formation documents.”

The Court noted the defense expert witness’s testimony regarding the meaning of “originate” in the media brokerage industry, including that the “originator must identify the potential client and may also be responsible for negotiating the terms of an acceptable representation agreement between the client and the brokerage firm.”  The Court found that Plaintiff provided no such role. 

In the end, the Motion for Summary Judgment submitted by the defense was granted, and judgment for the defendants was entered on two counts of the Plaintiff’s amended complaint. Another count alleged in the Plaintiff’s Amended Complaint was dismissed with prejudice.

The opinion is available in PDF.