Moore v. Donegal (Ct. of Special Appeals)

Filed: September 30, 2020

Opinion by: J. Graeff

Holding: Whether a settlement offer was accepted within a reasonable period of time is a question of fact rather than law. 

Facts: In the course of litigating a negligence claim, the Appellee’s insurance adjuster offered to pay the Appellant a sum of $18,000. This offer was made prior to trial. During trial, Appellant made a $21,000 counter offer, which was declined and the original offer was reiterated. The trial continued and Appellant communicated acceptance of the $18,000 to opposing counsel during a recess. The Appellee’s insurance adjuster stated that the offer was no longer available. The jury trial ended and returned a verdict for the defendant. 

Appellant filed a suit for breach of a settlement agreement and a motion for summary judgement that it was undisputed that a contract had been formed. Appellee filed a motion for summary judgment that it was undisputed that a breach of contract did not occur. The circuit court denied Appellant’s motion and granted Appellee’s motion. The question before the Court was whether the circuit court had erred in doing so. 

Analysis:

The Court held that the circuit erred in granting Appellee’s motion based on its finding, as a matter of law, that the offer had lapsed. The circuit court had found that the offer lapsed after a reasonable amount of time, which not only considers the passing minutes or hours, but also the broader context. Here, the trial had advanced to a different procedural posture from the time of offer to the attempted acceptance. Thus, the offer had lapsed.

The Court held that this was a matter for the trier of fact to decide, as it is an issue of fact rather than an issue of law. The sole issue was whether the offer lapsed or whether Appellant accepted it within a reasonable amount of time. The Court relied on Barnes v. Euster, 240 Md. 603 (1965), which held that generally the reasonableness of delays in acceptance is a question of fact unless those facts and inferences are undisputed. In Barnes, two years after an offer for the purchase of real estate subject to an unfulfilled condition to obtain rezoning was terminated by the seller, the buyer stated it was willing to waive such condition. The Barnes court held that the delay in acceptance was unreasonable as a matter of law, given the seller’s notice of termination and the rapidly rising prices of real estate. 

Here, the delay was a matter of hours not years, and there is no case in Maryland standing for the proposition that settlement offers lapse, as a matter of law, when the procedural posture of a case changes. An offer made during trial would certainly end at the time of final judgement, but not necessarily when trial merely resumes. When an offer that does not specify a time for acceptance is pending while trial proceeds, the issue of whether the offer was accepted in a reasonable amount of time is generally an issue of fact. The Court cited persuasive authority from a Pennsylvania case regarding settlement of a negligence case that circumstances such as the nature of the contract, the relationship of the parties, their course of dealing and usages of the particular business are all relevant. 

The full opinion is available in PDF.

Muffoletto v. Towers (Ct. of Special Appeals)

Muffoletto v. Towers (Ct. of Special Appeals)

Filed: January 30, 2020

Opinion by: James A. Kenney, III

Holdings: (1) An action seeking a declaration concerning the location of a common boundary line between adjacent boat slips was barred by the applicable statute of limitations. (2) Substantive and substantial discovery violations warranted the imposition of sanctions.

Facts: In the early 1980’s, a residential condominium was established in Dorchester County, Maryland.  Appurtenant to each condominium unit was a license to use a boat slip.  According to the 1982 site plan for the condominium, two adjacent boat slips were to be established as fourteen-feet-seven-inches wide each, separated by mooring piles.  However, according to an aerial photograph of the subject boat slips, taken in 1984, one slip was nineteen feet wide, and the adjacent slip was thirteen feet wide.

In 2004, the plaintiff purchased the condominium unit and corresponding slip license related to the thirteen-foot-wide boat slip.  Shortly thereafter, the plaintiff noticed the disparate sizes of the adjacent boat slips when he attempted to berth his boat.  In 2010, the plaintiff became a member of the condominium’s council of unit owners (the “council”), at which time he allegedly learned of a policy enacted by the council in 1999 requiring a unit owner who had made changes to the location of any mooring piles to return the piles to their original location when the appurtenant condominium unit is sold.  Title to each of the condominium units corresponding to the subject boat slips (and the related boat slip licenses) had been transferred multiple times before being transferred to the parties to this lawsuit.

In 2016, the plaintiff filed suit in the Circuit Court for Dorchester County, seeking (i) a declaration that the adjacent boat slips were intended and initially constructed to be of equal width and (ii) specific performance and injunctive relief, requiring that the mooring piles be moved to establish the adjacent boat slips as being equal in width.  During discovery, the defendants served the plaintiff with interrogatories.  Despite multiple court orders directing the plaintiff to respond to the interrogatories, the plaintiff failed to properly respond.

The Circuit Court entered sanctions against the plaintiff for failing to provide discovery responses as ordered, finding that the defendants had been prejudiced as a result.  Thereafter, the Circuit Court entered summary judgment in favor of the defendants, finding that the possible movement of the mooring piles was not a disputed material fact because they were placed in their current location no later than 1984 (when the aerial photograph was taken), and any legal action related to their present location was thus barred by the applicable three-year limitations period.  The plaintiff timely appealed the rulings to the Court of Special Appeals.

Analysis:  The Court of Special Appeals first addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the statute of limitations.  The plaintiff argued that the statute of limitations had been tolled by virtue of the “continuing harm” doctrine, which provides that claims in the nature of a continuous tort may toll the running of limitations based on new occurrences over time.  The court discussed Maryland case law applying the doctrine, and found that “courts have consistently held that the continuing harm doctrine rests on a new affirmative act” and does not apply to a “continuing ill effect” of a prior act.  The court then concluded that the continuing harm doctrine did not apply under the circumstances of this case because the act causing the harm was the alleged moving of the mooring piles, which occurred sometime before the photograph taken in 1984, and that “leaving them in place is a continuing effect of that act.”  Ultimately, the court held that the plaintiff’s claims were barred by the statute of limitations, noting that the action was filed six years after the plaintiff allegedly became aware that the piles may have been moved, twelve years after the plaintiff attempted to berth his boat in the slip, and more than twelve years after he bought the condominium unit (and corresponding boat slip license).

The Court of Special Appeals next addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the doctrine of laches.  The court noted that laches is an equitable doctrine intended to ensure fairness, and that it is “based upon grounds of sound public policy by discouraging fusty demands for the peace of society.”  The court also noted that, generally, “an action for declaratory judgment will be barred to the same extent that the applicable statute of limitations bars an underlying action in law or equity.”  The court concluded that the plaintiff’s claims were barred by the doctrine of laches because the mooring piles had been in place for thirty-five years and the only people who would have had definitive knowledge regarding when and if the piles had been moved (the developer and the person who initially bought the nineteen-foot-wide slip in 1983) had died before the suit was filed.

The Court of Special Appeals also addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the doctrine of adverse possession or prescription.  The court noted that whether or not the doctrine applies to riparian rights is unsettled in Maryland.  Ultimately, the court, without concluding that the doctrine applied to the boat slip licenses at issue, held that the requisite period of adverse possession (i.e., twenty years) had not run.

Finally, the Court of Special Appeals addressed the Circuit Court’s imposition of sanctions against the plaintiff for discovery violations.  The court first noted that circuit courts have very broad discretion to determine whether sanctions should be imposed.  The court then outlined the factors that circuit courts should consider when deciding whether to impose sanctions (noting that the factors need not be analyzed on a compartmentalized basis), which factors include (1) whether the sanctioned violations were “persistent and deliberate”; (2) whether the discovery violation was technical or substantial; (3) the timing of disclosures made; (4) any reason for the violation; (5) the degree of evidentiary prejudice resulting from the violation; and (6) whether the resulting prejudice might be cured by postponement and the desirability of a continuance.  Applying these factors, the court affirmed the Circuit Court’s imposition of sanctions.

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.

Small Business Financial Solutions, LLC v. Pearl Beta Funding, LLC (Cir. Ct. Mont. Cnty)

Filed: September 29, 2017

Opinion by: Harry C. Storm

Holding: A claim that a small business finance lender tortiously interfered with a contract and with the rights of a senior secured lender under the UCC could not be resolved on summary judgement because the lender had entered into a loan agreement with a customer despite having notice of the terms of an agreement between the customer and another lender, and questions of intentionality and collusion central to the plaintiff’s claims were questions of fact.

Facts: Plaintiff loaned a Kentucky-based chiropractic practice (the “Practice”) monies, which would be repaid through daily bank account debits. Under the loan agreement, Plaintiff had a security interest in the personal property and proceeds of the Practice. Also, the Practice was prohibited from disposing of Plaintiff’s collateral outside the ordinary course of business. Furthermore, as conditions of default, the Practice was prohibited from (1) selling any existing or future account receivables to any third party without the Plaintiff’s consent or (2) entering into any financing agreement requiring daily or weekly repayments. 

Plaintiff filed a UCC-1 Financing Statement and sent Notice Letters to small business finance lenders, including a predecessor-in-interest to Defendant. The Notice Letters notified the businesses of the terms of the loan agreements and warned that engaging in activities that violated the terms constituted an interference with Plaintiff’s contracts.

Subsequently, the Practice sought additional loans, including one from Defendant. In its application, the Practice disclosed the existing loans with Plaintiff. Defendant learned of the daily debits to Plaintiff and of the UCC-1 Financing Statement. Defendant required the Practice to represent and warrant that contracting with Defendant would not cause it to default on any other loans. Under the loan agreement, Defendant would receive all of the Practice’s future accounts and payments from its clients, and a grant of a security interest in its property.

Two weeks later, the Practice asked Defendant to reduce the amount of its daily debits. One of Defendant’s representatives concluded that the Practice was overfunded, and Defendant temporarily reduced the debits. Subsequently, the Practice stopped paying both parties. Eventually, Defendant was repaid in full and the Practice and Plaintiff came to a settlement.

Analysis: 

Plaintiff sought relief under two theories: tortious interference of the loan agreement and interference of Plaintiff’s rights as a senior secured lender under Maryland UCC Section 9-625. Defendant moved for summary judgment, which the Court denied because the issues could not be resolved as a matter of law. The summary judgement standard requires the Court to enter judgement where there is no genuine dispute as to any material fact and a party is entitled to judgment under matter of law.

Tortious interference with contract has five elements; one is intentional interference. “Intentional interference” requires intentionality, interference, and impropriety. The intentionality issue hinged on several facts, including the receipt of the Notice Letter, the filing of the UCC-1 Financing Statement, and the information known to Defendant through the application process.  Next, purposeful conduct, however subtle, may be enough to constitute inducement. Furthermore, if a fact-finder determined that Defendant interfered with the contract, this determination may suffice to show that the interference was improper. Thus, these issues were matters of fact rather than of law. 

As for damages, Plaintiff claimed that Defendant’s funding caused the Practice to breach its loan agreement because it was unable to sustain the volume of debits. Defendant argued that its infusion of funds actually allowed the Practice to make some repayments to Plaintiff. Both positions had support in the record; thus, summary judgement was inappropriate. 

As for the UCC claim, Section 9-625(b) states that a “transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts in collusion with the debtor in violating the rights of the secured party.” Defendant is a transferee of the collateral shared with Plaintiff. Its rights to the collateral depend on whether it colluded with the practice. A comment to another UCC section defines the term “collusion” to include a scenario where one party knows that the other’s conduct constitutes a breach and gives substantial assistance or encouragement to the other. This is a question for the fact-finder. 

The opinion is available in PDF here.

Boland v. Boland; Boland v. Boland Trane Associates, Inc. (Ct. of Appeals)

Filed: October 25, 2011
Opinion by Judge Sally D. Adkins.

Held:

Holding 1: After a motion to dismiss or for summary judgment against a derivative plaintiff, Maryland courts must review a special litigation committee's ("SLC") independence, and whether it made a reasonable investigation and principled, factually-based conclusions. In this inquiry, the SLC is not entitled to a presumption that it was sufficiently independent from a corporation's directors.

Holding 2: When a court grants summary judgment in a derivative suit based on an SLC's determination that continuing the lawsuit is not in the corporation’s best interest, that court decision is not a final adjudication on the merits so as to preclude a direct suit under the doctrine of res judicata. The court makes no determination of the merits of the allegations when reviewing an SLC's decision. Moreover, a direct action, which asserts individual rights, is an entirely different cause of action than a derivative action, which is brought on behalf of the corporation.

Facts: Two lawsuits arose when a family business, consisting of two corporations and owned primarily by eight siblings (collectively, the "Corporation"), attempted to repurchase the stock of one sister upon her death pursuant to a Stock Purchase Agreement. When the sister's estate refused to sell the stock, the Corporation filed a declaratory judgment action seeking enforcement of the Stock Purchase Agreement. Meanwhile, non-director siblings who had learned of earlier stock transactions that resulted in director siblings acquiring additional corporate stock for themselves, sent a demand for litigation to the Corporation and filed a derivative action in the Circuit Court alleging self-dealing and a breach of fiduciary duty. They also filed "direct" claims, as cross-claims in the declaratory judgment action.

In response, the corporations appointed an SLC consisting of two newly hired "independent directors" to examine the claims. The SLC determined that the stock transactions were legitimate and the Stock Purchase Agreement was enforceable.

The Circuit Court, applying the business judgment rule, deferred to the judgment of the SLC and granted summary judgment to the Corporation on the derivative action. The Circuit Court also dismissed the cross-claims relying on res judicata.

Analysis: On appeal in the Court of Appeals, the Court upheld the application of the business judgment rule by the Circuit Court and held that after a motion to dismiss or for summary judgment against a derivative plaintiff, Maryland courts must review the SLC’s independence, and whether it made a reasonable investigation and principled, factually-based conclusions. However, in this inquiry, the SLC is not entitled to a presumption that it was sufficiently independent from the directors. Because the Circuit Court presumed the independence and good faith of the SLC without requiring that the Corporation prove the SLC's independence, the Court of Appeals vacated the Circuit Court's judgment and remanded for further proceedings.

The Court referred to its holding as an "Auerbach enhanced" standard, in reference to Auerbach v. Bennett, 393 N.E.2d 994 (N.Y. 1979). In so holding, the Court rejected the so-called Zapata standard under which Delaware courts review a SLC’s recommendation on the merits, applying their “independent business judgment.”

The Court reasoned that "a procedural review under the business judgment rule, although clearly the more deferential standard [toward the Corporation], nonetheless provides for a thorough review of an SLC’s independence, good faith, and methodology, and such inquiry gives trial courts the ability to scrutinize SLC decisions and protect shareholders against collusive practices or inadequate investigations."

On the issue of whether the non-director siblings' "direct" claims, brought as cross-claims in the declaratory judgment action were precluded by res judicata, the Court held that the Circuit Court's grant of summary judgment in the derivative action, based on a recommendation of the SLC, does not form a basis for res judicata because it is not a determination on the merits. Accordingly, the Court held that a trial court's resolution of a derivative complaint, when based on the recommendation of an SLC, cannot be said to be a final judicial resolution on the merits of the claims.

The full opinion is available in PDF.

Hovnanian Land v. Annapolis Towne Centre (Ct. of Appeals)

Filed: July 20, 2011
Opinion by Judge Sally D. Adkins

Held: A condition precedent may be waived by a party’s conduct despite a non-waiver clause found in a purchase agreement that requires waiver to be in writing.

Facts: Respondent is the owner and developer of a 33-acre, mixed-use development project. Respondent intended to sell parcels while retaining ownership over a few common parcels that were to be maintained through a collection of an annual Common Area Maintenance (“CAM”) fee from the owners of each parcel.

Respondent entered into a Purchase Agreement with Petitioner for the sale of two parcels where the Petitioner was planning on constructing three residential towers. The Purchase Agreement required the Respondent to establish CAM fees for the Petitioner’s parcels, and provide common area maintenance funding for the other parcels as conditions precedent to the Petitioner completing the purchase, which the Petitioner could enforce or waive. The Purchase Agreement also contained a non-waiver clause that required any waiver to be in writing.

Commencing on May 11, 2006 and continuing until January 2007, Respondent drafted a declaration and a proposed Supplemental Agreement between the parties to handle the CAM fees and the Petitioner had questions on each draft concerning them. Declarations were even recorded on October 30, 2006, December 20, 2006 and January 22, 2007. Prior to the recording of the January 2007 Declaration, Petitioner expressed concerns that there were some changes to the documents agreed upon by the parties that did not appear. Respondent notified Petitioner that it would address its concerns in a Supplement Agreement.

Over the next year, the project proceeded towards closing, and as they approached the original closing date, Petitioner paid $100,000 to extend that date, and soon afterward, Petitioner realized the extent to which the recent housing collapse had reached the markets. Petitioner sought an additional extension and/or a discount from Respondent and the parties could not agree on an acceptable extension deal and throughout these negotiations, Petitioner referenced market difficulties as the major reason for the requests.

On February 1, 2008, Petitioner’s president sent a letter to Respondent asserting that Respondent failed to fulfill the conditions precedent. On March 3, 2008, Respondent responded in a letter asserting that it satisfied the conditions because the Amended Declaration provided for annual assessments through the use of Supplemental Agreements.

Respondent filed a complaint in the Circuit Court seeking a declaratory judgment that Petitioner breached the Purchase Agreement. Petitioner answered, claiming that its obligations were relieved by Respondent’s failure to comply with the terms of the Purchase Agreement.

After both parties moved for summary judgment, the Circuit Court granted Respondent’s motion for summary judgment. Petitioner appealed to the Court of Special Appeals, and in an unreported opinion, the court affirmed the Circuit Court’s decision.

Petitioner then sought certiorari from this Court.

Analysis:

The threshold issue considered by the Court is whether a party can waive a contract right through its actions even if the contract contains a “non-waiver” clause. Relying on Freeman v. Stanbern Const. Co., 205 Md. 71, 106 A.2d 50 (1954), the Court held that oral modifications of a written contract may be established by the preponderance of the evidence even if a contract provides that the contract cannot be varied except through a written agreement by the parties.

The Petitioner argued that there is a distinction between “mutual” waiver and the waiver of a condition precedent. The Court held that there was no distinction and that case law does require mutual knowledge and acceptance, whether implicit or explicit, of the non-conforming action, and that in this case, the alleged waiver was “mutual” in that Respondent drafted and proposed the assertedly non-compliant declaration while Petitioner scrutinized it and provided substantial feedback. The Court added that a condition precedent usually benefits one of the two parties, and the benefited party’s actions will weigh more heavily in those cases.

Based on that analysis, the Court reviewed the Circuit Court’s grant of Respondent’s motion for summary judgment. The Circuit Court, apparently at the suggestion of the parties, resolved the issue on summary judgment, concluding as a matter of law that Hovnanian had waived the condition precedent. Yet, whether subsequent conduct of the parties amounts to a modification or waiver of their contract is generally a question of fact to be decided by the trier of fact. Further, nonwaiver clauses, although not favored by courts, must be considered by the trier of fact. Given the highly factual nature of the waiver inquiry, it is an uncommon case in which the issue can be resolved by summary judgment.

The Court then analyzed the Circuit Court’s decision to grant the Respondent its summary judgment motion. The Circuit Court held that as a matter of law, the Petitioner waived the condition precedent. Relying on University Nat’l Bank v. Wolf, 279 Md. 512 (1977), the Court held that analyzing the subsequent conduct to determine whether a waiver of a contract term has occurred is generally a question of fact to be decided by the trier of fact. In this case, a party must show the intent to waive both the contract provision at issues and the non-waiver clause.

Conclusion

Applying the foregoing rules, the Court reversed the granting of summary judgment and remanded the case to the lower court for the trier of fact to determine whether any party waived any rights.

The full opinion is available in pdf.

Cloverleaf Enterprises, Inc. v. Maryland Thoroughbred, Horsemen's Association, Inc. (Maryland U.S.D.C.)

Filed: August 25, 2010

Opinion by Judge Richard D. Bennett.

This is a companion opinion to the opinion, the summary of which was posted on August 16, 2010.

Held: (1) Allegations that the defendants conspired to orchestrate an illegal boycott require more proof to survive summary judgment than e-mails informing defendants that other parties to a consent agreement were withdrawing their consent.

(2) Contract provisions that provide that the contract can be terminated if certain governmental approvals or consents are not "private rights of action" to enforce provisions of legislative enactments, but are, instead, contractual provisions.

Facts: Cloverleaf Enterprises, Inc. owns a racetrack in Maryland that accepts horse racing wagers on live simulcast signals provided by other racetracks. The signals come from both Maryland and out-of-state racetracks. As required under federal and Maryland law, Cloverleaf obtained the consent of other Maryland racetracks and certain other groups before receiving the simulcast signals. The consent was in the form of a Cross-Breed Agreement, pursuant to which Cloverleaf paid weekly fees in return for the right to accept wagers on the simulcast races. Cloverleaf and TrackNet Media Group, LLC entered into a Simulcast Agreement, pursuant to which TrackNet agreed to simulcast horseracing content from certain other racetracks.

Cloverleaf breached the Cross-Breed Agreement by failing to pay the required weekly fees. As a result, the other Maryland racetracks withdrew their consent to Cloverleaf receiving the simulcast signals of their own races and out-of-state races. Following the withdrawal of consent, TrackNet informed Cloverleaf it could no longer distribute the horseracing content under the Simulcast Agreement.

Cloverleaf filed a complaint against TrackNet and Churchill Downs Incorporated alleging breach of contract. (Additional claims brought by Cloverleaf are discussed in the posting of August 16, 2010.) Defendants moved for summary judgment.

Cloverleaf contended summary judgment should be denied for three reasons: 1. the Maryland Jockey Club did not have the right under law to withdraw consent; 2. the Simulcast Agreement required approval to be withdrawn from a government entity for termination; and 3. the defendants participated in an illegal group boycott.

Analysis: The court applied Kentucky law to find the Simulcast Agreement was not breached. The agreement was free of ambiguity and "automatically terminated . . . upon the failure to obtain or withdrawal of any approvals required by any applicable laws . . . ." Thus, the agreement terminated when consent was withdrawn.

The court disagreed with all of plaintiff's arguments against summary judgment. First, the legality of the withdrawal of consent is irrelevant because the Simulcast Agreement did not require the defendants to assess the validity of the withdrawal. Second, the use of different words in the Simulcast Agreement, such as "approvals," "consents," and "requirements," did not convey different authorizations as the agreement stated termination can occur upon the "withdrawal of any approvals." Third, as a "party cannot create a genuine dispute of material fact through mere speculation or compilation of inferences," e-mails sent to defendants informing them of the withdrawal of consent lacked sufficient proof of an illegal group boycott to withstand summary judgment.

The full opinion is available in pdf.

TEKsystems, Inc. v. Bolton (Maryland U.S.D.C.)

Filed: February 4, 2010
Opinion by Judge Richard D. Bennett

Held: A covenant not to compete is enforceable even where the competing former employee does not solicit his former employer's clients or use its confidential information if the scope of the restrictive covenant is limited to reasonable temporal and geographical limits, the employer is protecting legitimate business interests with the covenant, the employee has unique and specialized skills, there is no undue hardship on the employee to comply with the restriction and the public interest is served by enforcing the restrictive covenant; and the court held that it would extend the duration of the restrictive covenant for so long as the employee was in breach of it.

Facts: In 1999, the Defendant signed an employment agreement with Plaintiff, containing (among other provisions) a covenant not to compete against Plaintiff for 18 months after his employment terminated and within a 50-mile radius of his former office. Substantively, the covenant prohibited Defendant from engaging “in the business of recruiting or providing on a temporary or permanent basis technical service personnel, industrial personnel, or office support personnel” within these temporal and geographic limitations.

A separate covenant also prohibited Defendant from soliciting or competing for any persons or entities who were clients or customers of Plaintiff within the two years prior to the termination of the Defendant's employment. In 2008, the Defendant resigned from his employment with Plaintiff and, immediately thereafter, accepted a similar position in the IT-staffing business with one of Plaintiff's competitors and within the temporal and geographic limits of the covenant not to compete. None of the IT-staffing placements Defendant made for his new employer (Plaintiff's competitor) involved solicitation of or competition for Plaintiff's clients or customers. Plaintiff admitted at deposition that it was unaware of any such solicitation by Defendant.

Analysis: Under Maryland law, covenants not to compete may be enforced only against those employee who provide unique services or to prevent the future misuse of trade secrets, routes or lists of clients or solicitation of customers. Such covenants will be enforced if the restraint is confined within limits which are no wider as to area and duration than are reasonable for the protection of the business and do not impose undue hardship on the employee or disregard the interests of the public.

In reaching its decision, the court analyzed and concluded on the following:

(1) the 18-month temporal and 50 mile geographic scope of the covenant is facially reasonable and comports with similar limitation upheld by Maryland courts;

(2) the Plaintiff was protecting its legitimate business interests by enforcing the covenant because the employee was critical to the growth in revenue for the region, was key to building the personal relationships with clients in the area as required for the staffing industry, and had access to high level client contacts and confidential information;

(3) the employee at issue possessed unique and specialized skills because of his training and success in the banking industry in New York and had the most knowledge of each customer in the area;

(4) the employee would not suffer undue hardship by enforcing a covenant with the temporal and geographical restraints in this case because the employee was able to conduct business everywhere else in the world except for the area within 50 miles of New York City; and

(5) the public interest is protected by enforcing reasonable restrictive covenants against former employees of high technology and high-growth business.

In reaching its decision with respect to each factor, the court relied on Becker v. Bailey, 268 MD. 93, 299 A.2d 835 (1973); Ruhl v. F.A. Bartlett Tree Expert Co., 245 Md. 118, 225 A.2d 288 (1967); TEKsystems, Inc. v. Spotswood, 05-CV-1532-RDB, Memorandum Opinion (D. Md. June 28 2005); Intelus Corp. v. Barton, 7 F. Supp. 2d 635 (D. Md. 1998) and PADCO Advisors, Inc. v. Omdahl, 179 F. Supp. 2d 600 (D. Md. 2002).

The court granted summary judgment for Plaintiff, finding that Defendant breached the covenant by competing against Plaintiff in the IT-staffing business within the agreed temporal and geographic limits. The Plaintiff, however, would not be awarded monetary relief exceeding nominal damages because there was no proof that the Defendant solicited Plaintiff's customers or clients.

Injunctive relief against future violations of the covenant was warranted. The court held that the Plaintiff was entitled to an equitable extension of the entire 18-month period, running from the date of the court's opinion, because Defendant began violating the non-compete provision almost immediately after the termination of his employment with Plaintiff.

Practice Pointer: Plaintiff's affidavit, alleging that Defendant did, in fact, solicit Plaintiff's clients while working for his new employer, would not be considered on summary judgment. The affidavit contradicted Plaintiff's prior deposition testimony, and there was no showing that the facts asserted in the affidavit were unknown or inaccessible at the time of the deposition. Given this ruling, litigators are cautioned to prepare a Rule 30(b)(6) witness thoroughly. A party may not, on summary judgment, contradict its own Rule 30(b)(6) deposition testimony with evidence that was reasonably accessible at the time of the deposition.

The full opinion is available in PDF.