SUSAN K. GAUVEY, United States Magistrate Judge.
Pending before the Court are Peterbilt Motors Company's, John C. Arscott's, Peterbilt of Baltimore LLC's, and Pete Store — Delaware's motions to dismiss the counterclaim of Elliot Wilson Capitol Trucks LLC. (ECF No. 55, 56 respectively). Briefing is complete. A hearing was held on October 25, 2012. For the reasons set forth herein, the motions are DENIED in part and GRANTED in part.
Peterbilt Motors Company ("Peterbilt" or "counterdefendant") is a manufacturer of heavy and medium-duty trucks and auto parts. (ECF No. 1, ¶ 3). Elliot Wilson Capitol Trucks LLC ("EWCT") and Elliot Equipment Company ("EEC") (collectively "Wilson" or "counterplaintiffs"), both managed by George Wilson III, are franchisees of Peterbilt and maintain dealerships in Landover and Eastern, Maryland respectively. (Id., ¶ 4). The Wilson dealerships are non-exclusive franchises, selling both Peterbilt and other lines of trucks and auto-parts.
This motion arises out of a dispute over Wilson's attempt to sell the Landover dealership to Norris Automotive Group ("Norris"). In March 2011, Wilson sold their Ford franchise to Norris. (ECF No. 39, ¶ 38). As a result of the sale, Norris assumed control over some aspects of the operation of the Landover dealership. (ECF No. 39, ¶ 37-39). In July 2011, Peterbilt filed suit against Wilson, alleging that the Norris partnership was entered into without their knowledge or consent, and therefore constituted a material breach of their Dealer Agreement. (ECF No. 1, ¶¶ 50-53). Peterbilt also requested declaratory relief regarding their rights and obligations under the Dealer Agreement, and declaratory relief under Maryland's Vehicle Dealer Act. (Id., ¶ 58-69).
In the midst of these events, Wilson and Norris expanded their deal to include Wilson's Peterbilt franchise. (ECF No. 39, ¶ 50). Wilson submitted the proposed deal to Peterbilt in August 2011. (ECF No. 39, ¶ 52). In response, Peterbilt rejected the proposed transfer and terminated Wilson's franchise. (ECF No. 39, ¶¶ 56-58). Wilson and Norris pushed forward, however, and in October 2011 signed a binding letter of intent, which was submitted to Peterbilt. (ECF No. 39, ¶ 62). The proposal was again rejected. (ECF No. 39, ¶ 63). In February 2012, however, Peterbilt exercised its right of first refusal as to the Norris transfer, and withdrew its August termination notice. (ECF No. 39, ¶ 68-69).
Wilson filed a counterclaim in September 2011, and an amended counterclaim in April 2012. (ECF No. 13; ECF No. 44). The counterclaim names Peterbilt, John Arscott ("Arscott"), Peterbilt of Baltimore LLC ("PB of Baltimore"), and Pete Store of Delaware as defendants, although in the course of briefing Wilson dropped all counts against Pete Store of Delaware. John Arscott is the owner of PB of Baltimore and a competitor of Wilson.
The counterclaim alleges that Peterbilt acted in violation of its statutory and contractual obligations by, inter alia: (1)failing to make best efforts to approve both the proposed Norris transaction and an earlier transaction involving both EWCT and EEC with Hunter Truck Sales and Service ("Hunter"), and ultimately denying the Norris transaction; (2) coercing Wilson to accept a transfer to Arscott instead of its preferred transferees; (3) terminating
Peterbilt, Arscott, PB of Baltimore and Pete Store filed the pending motions to dismiss in June 2012. (ECF No. 55).
In evaluating a motion to dismiss, a court "accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff." Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir.2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 663, 129 S.Ct. 1937, 1940, 173 L.Ed.2d 868 (2009) quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). A claim "has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "[T]he complaint should be read as a whole, not parsed piece by piece to determine whether each allegation in isolation, is plausible." Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir.2009).
Plaintiff is not under an obligation to "forecast" evidence sufficient to prove the elements of the claim. Walters v. McMahen, 684 F.3d 435, 439 (4th Cir.2012). Plausibility does not entail a probability requirement, but does require more than the sheer possibility that a defendant has acted unlawfully. Id. "Legal conclusions, elements of a cause of action, and bare assertions devoid of factual enhancement," in addition to "unwarranted inferences, unreasonable conclusions, or arguments," fail to constitute well-pled facts. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir.2009). Ultimately, plaintiff must allege sufficient factual allegations "to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
In several counts, counterplaintiffs have named both Arscott, individually, and PB of Baltimore collectively, as defendants. Arscott is the manager of the PB of Baltimore. He argues as an initial matter that all claims against him as an individual should be dismissed. (ECF No. 56-3, 7).
Maryland generally recognizes a presumption against "piercing the corporate veil," and holding corporate officers liable for activities performed in a corporate capacity. As noted by Arscott, Section 4A-301 of the Corporations and Associations Article of the Annotated Code of Maryland provides:
Under Maryland law, the "general rule is that shareholders are not held liable for debts or obligations of the corporation except when it is necessary to prevent fraud or enforce a paramount equity." Damazo v. Wahby, 259 Md. 627, 633, 270 A.2d 814 (Md.1970). The "common thread running through the Maryland cases ... is that the corporate entity will be disregarded only when necessary to prevent fraud or to enforce a paramount equity." Bart Arconti
Arscott argues that as the counterclaim contains no allegations of fraud, or of a paramount equity at stake, the claims against Arscott individually should be dismissed. (ECF No. 56-3, 8).
Counterplaintiffs agree that this is not a case justifying the piercing of the corporate veil. (ECF No. 67, 25). They do not argue that veil piercing is necessary to prevent fraud, or that a paramount equity is at stake. Instead, while not specifically categorizing it as such, counterplaintiffs allege a separate theory of corporate officer liability, commonly known as the "participation theory". Mark Cohen and Sierra K. Swearingen, Cause of Action to Establish Liability of Corporate Director or Officer for Corporation's Wrongful Conduct, 36 Causes of Action 2d 441 (originally published in 2008); Bethea v. Bristol Lodge Corp., 2002 WL 31859434, *14 (E.D.Pa.2002). Under the corporate veil theory, the individual is liable because the corporation is not a bona fide independent entity: the acts are therefore truly the individuals. Id. In contrast, under the participation theory, liability attaches "where the record establishes the individual's participation in the tortious activity." Id.
In general, a corporate director or officer cannot escape personal liability for torts in which he or she participated merely by claiming he or she acted as an agent of the corporation. See id.; see also, Restatement Second, Agency § 343 (agents are liable for their torts generally regardless of whether they acted on the principal's behalf). The Court of Appeals of Maryland supports this view, and has held that "under certain circumstances, an officer of a corporation may be held personally liable for torts of the corporation in which the officer was personally involved." Insurance Co. of N. Am. v. Miller, 362 Md. 361, 385, 765 A.2d 587 (Md.2001). Under Maryland law, "corporate officers... are personally liable for those torts which they personally commit ... even though performed in the name of an artificial body." Id.; Metromedia Co. v. WCBM Maryland, Inc., 327 Md. 514, 520, 610 A.2d 791, 794 (1992); see also L'Occitane, Inc. v. Tran Source Logistics, Inc., WMN-09-2499, 2009 WL 4738073, 2009 U.S. Dist. LEXIS 112736 (D.Md. Dec. 3, 2009).
To illustrate, in Fletcher v. Havre De Grace Fireworks Co., 229 Md. 196, 200-01, 177 A.2d 908, 910 (1962), the Maryland Court of Appeals found that an officer and director of a fireworks company would be personally liable in an action for trespass if they "specifically directed, or actively participated or cooperated in, a particular act" that led to a series of explosions. In Levi v. Schwartz, 201 Md. 575, 583-84, 95 A.2d 322, 327 (1953), the court held the president of a development corporation personally liable for the corporation's tortious removal of lateral support from an adjacent landowner's lot of ground, when the president had directly supervised the operation.
In their counterclaim, counterplaintiffs allege that Arscott is individually liable for the torts of unfair competition, (ECF No. 39, ¶ 101), tortious interference with contract, (ECF No. 39, ¶ 117), tortious interference with prospective economic relations, (ECF No. 39, ¶ 121), civil conspiracy, (ECF No. 39, ¶ 126), and aiding and abetting tortious conduct (ECF No. 39, ¶ 129). To the extent that those claims are plausible, and if they properly allege that Arscott personally oversaw and directed the tortious conduct, these claims against Arscott individually will stand. If Wilson fails to establish that Arscott "specifically directed, or actively participated or cooperated in" such acts, however, they will be
Each claim will be discussed individually infra.
Wilson alleges that Peterbilt has in several instances violated its obligations under Section 15-206.1(b) of the Maryland Transportation Code. (ECF No. 39, ¶¶ 75-79, 85-89). Section 15-206.1(b) provides that a
Good faith in this context "means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." § 15-206.1(a). Good faith requires that "one party to a contract not frustrate the other party's performance." Lanham Ford, Inc. v. Ford Motor Co., 273 F.Supp.2d 691, 694 (D.Md.2003), aff'd, 101 Fed.Appx 381 (4th Cir.2004); Jaguar Land Rover N. Am., LLC v. Manhattan Imported Cars, Inc., 738 F.Supp.2d 640, 653 (D.Md.2010).
Wilson alleges that there are eleven instances of Peterbilt's violation of this duty by its:
(ECF No. 39, ¶ 78). Wilson further contends that Peterbilt's lack of good faith is evidenced in part by the violations of Maryland Transportation Code § 15-211(e)
In its motion to dismiss, Peterbilt notes that courts in the Fourth Circuit have found that the "good faith obligation does not impose new or additional obligations on the franchising party," or "change the terms of the contract." Jaguar Land Rover North America, LLC, v. Manhattan Imported Cars, Inc., 738 F.Supp.2d 640, 653 (D.Md.2010); Waller v. Maryland Nat'l Bank, 95 Md.App. 197, 620 A.2d 381, 388 (1993); (ECF No. 55-3, 26). Peterbilt also points to two decisions in other circuits analyzing analogous statutes and holding that a franchisor's actions are not in bad faith if motivated by legitimate business interests. See Hickman v. American Honda Motor Co., 982 F.Supp. 881, 885-86 (N.D.Ga.1997), Schott Motorcycle Supply, Inc. v. American Honda Motor Co., 976 F.2d 58, 63 (1st Cir.1992). Finally, Peterbilt contends that "a manufacturer does not violate Section 15-206.1 merely by seeking to enforce the bargained-for terms of its agreements with its dealers." Jaguar, 738 F.Supp.2d at 653, (ECF No. 55-3, 20).
Based on this foundation, Peterbilt urges the Court to scrutinize each instance of lack of good faith in Count I striking those factual allegations that do not state a violation of the contract or a statute or constitute a tort. However, a complete breakdown and analysis of these 11 allegations made in Count I is not necessary or helpful at this stage. Indeed, trial courts are admonished to read a complaint "as a whole, not parsed piece by piece to determine whether each allegation in isolation, is plausible." Braden, 588 F.3d at 594. In reviewing a motion to dismiss, a court is to look at the gestalt, not the fragments. A court is to focus on the forest, not each tree. Accordingly, the motion to dismiss Count I must be denied on several bases.
First, the alleged violations of Peterbilt's good faith duty that Wilson alleges, evaluated at the "10,000 feet" of an Iqbal/Twombly review, are sufficiently specific and plausible. Second, the majority of the factual allegations in Count I are examined in more detail infra, as they form the basis for later counts. When examined as individual claims, several sufficiently state a claim cognizable under the law. For example, the facts of allegation nos. 3 and 7 in Count I form the predicate for Wilson's Count II (violation of Maryland Commercial Code, § 15-207). Similarly, the facts of allegation nos. 2 and 8 in Count I form the predicate for Wilson's Count V (Breach of Contract).
Accordingly, Count I will rise or fall based on the success of at least one of these subsidiary counts. As the Court has found several of these counts to be sufficient at this early stage and allegation no. 11 is unchallenged, Count I withstands the motion to dismiss.
Count II of Wilson's counterclaim alleges various violations of the Maryland Commercial Code, § 15-207. Specifically, Wilson alleges that (1) Peterbilt attempted to coerce Wilson to sell their franchises to Peterbilt or Arscott in violation of 15-207(b); (2) coerced Wilson to become an exclusive dealer in violation of 15-207(d); and (3) discriminated among dealers in violation of 15-207(j). The Court will analyze each of these claims in turn.
Section 15-207(b) currently provides that:
The statute was amended in 2009 to include the underlined language, to "add and clarify prohibitions for the protection of motor vehicle dealerships from discriminatory or coercive business practices." 2009 Maryland Laws Ch. 747 (S.B. 668); MD 90 Day Rep., 2009 Sess., Part G. This amendment obviously expanded the scope of prohibited "coerc[ion]."
Prior to 2009, the meaning of the term "coerce" under Maryland law was considered comparable to the interpretation of the term in the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221 et seq. ("ADDCA"). Hale Trucks of Md., LLC v. Volvo Trucks N. Am., Inc., 224 F.Supp.2d 1010 (D.Md.2002); Antwerpen Dodge, Ltd. v. Herb Gordon Auto World, Inc., 117 Md.App. 290, 699 A.2d 1209, 1219 (Md. App.1997); Colonial Dodge, Inc. v. Chrysler Corp., 11 F.Supp.2d 737, 744 (D.Md. 1996). In order for there to be wrongful "coercion" under the ADDCA, "`the dealer must demonstrate that the manufacturer exercised coercion or intimidation or made threats against the dealer ... to achieve an improper or wrongful objective.'" Hale Trucks, 224 F.Supp.2d at 1030 (quoting Antwerpen Dodge, 699 A.2d at 1219 n. 9). Every federal court of appeals that has addressed the issue under the ADDCA has held that coercion or intimidation must include a wrongful demand accompanied by the threat of sanctions for noncompliance. Colonial Dodge v. Chrysler Corp., 11 F.Supp.2d 737, 743 (D.Md.1996). However, these cases are questionable precedent for interpreting the Maryland statute after the expansion of the concept of coercion in the 2009 amendments.
Wilson claims that Peterbilt violated Section 15-207(b) by "attempting to force EWCT and EEC to agree with Peterbilt to sell their franchise back to Peterbilt and Arscott, and not to any other parties such as Hunter or Norris." (ECF No. 39, ¶ 81). Wilson alleges that Peterbilt repeatedly suggested Arscott as a potential buyer, (ECF No. 39, ¶ 18), informed Wilson that they would not approve of the sale to anyone other than Arscott or Peterbilt (ECF No. 39, ¶ 24, 33), and stated that they should give up their attempts to find another buyer. (ECF No. 39, ¶ 41). The counterclaim further alleges that Peterbilt "unilaterally imposed unrealistic multi-million dollar facility improvement requirements on EWCT" in an attempt to coerce the Wilsons into selling EWCT to Arscott. (ECF No. 39, ¶ 41(E)). Finally, the counterclaim alleges that shortly after the filing of the instant lawsuit, Peterbilt's lead counsel contacted EWCT counsel and noted that "the only way out of litigation was for Wilson to contact Conroy about selling the dealership back to Peterbilt." (ECF No. 39, ¶ 51).
Especially in light of the recently expanded definition of "coercion" under Maryland law, Wilson here has made a plausible claim for relief under § 15-207(b). Wilson has made detailed allegations regarding Peterbilt's categorical refusal to consider suggested buyers for the Wilson franchises, their stance that the only viable buyers for the franchise were either Peterbilt or Arscott, and their efforts to discourage potential buyers like Hunter. These demands, as alleged, are wrongful and the accompanying sanctions or threat of sanctions include, inter alia, continued litigation, denial of training, imposition of facility improvements requirements.
Section 15-207(d) provides in relevant part:
"Coerce" in this context has the same meaning as in § 15-207(b). Jaguar Land Rover N. Am., LLC v. Manhattan Imported Cars, Inc., 738 F.Supp.2d 640, 651 (D.Md.2010).
Wilson alleges in briefing that "one of — perhaps the single largest — motivating factor for Peterbilt's conduct has been that EWCT and EEC are not exclusive Peterbilt dealers." (ECF No. 67, 29). Count II of the counterclaim asserts, in conclusory fashion, that "[P]eterbilt has violated subsection (d) by, inter alia, requiring EWCT and EEC to become exclusive Peterbilt dealers or face retribution." (ECF No. 39, ¶ 82).
In support of this contention, counterplaintiffs have alleged a widespread practice of favoritism towards exclusive dealers, including systemic preferential treatment that has resulted in a "substantially reduced" number of independent, non-exclusive dealers. (ECF No. 39, ¶ 11-13). More specifically, they describe a letter from Arscott to Peterbilt in which he emphasizes that his dealership is exclusive, and therefore an attractive candidate to acquire the Wilson franchises. (ECF No. 39, ¶ 20). As noted supra, Wilson has adequately alleged that Peterbilt attempted to coerce them to sell their franchise to Arscott and ignored opportunities to sell the franchise to others. It is certainly plausible, based on these facts, that this coercion was motivated by a desire to force Wilson to transform their franchises — through sale or otherwise — into exclusive dealerships. As such, counterplaintiffs have presented a plausible claim for relief under 15-207(d).
Section 15-207(j) provides that a dealer:
Section 15-207(j) was also enacted in the 2009 amendment to § 15-207. Neither party cites to any decisions interpreting the provision, and the Court has found no Federal or Maryland case-law specific to 15-207(j). As Peterbilt notes, however, 15-207(j) is clearly limited to a "program that provides assistance" to dealers. (emphasis added). (ECF No. 55-3, 41-42). Presumably this limitation was designed to disqualify allegations of individual or isolated favoritism, in contrast to more systemic discrimination. Peterbilt argues that the complaint does not go beyond isolated accounts of favoritism, and therefore should be dismissed. (ECF No. 55-3, 49-50).
This is perhaps the weakest of Wilson's claims of statutory violation, and may well be susceptible to dismissal as facts are developed and as the meaning of "discriminate"
The Federal Automobile Dealers Day in Court Act establishes a private cause of action against a manufacturer for its "failure ... to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating ... the franchise with said dealer. 15 U.S.C. § 1221 et seq. The statute defines good faith as:
Both sides agree that the analysis under the FADDCA is similar to that under the Maryland's good faith provision. (ECF No. 55-3, 51); (ECF No. 67, 30). As such, the Court applies the same analysis to Count III as to Count I. The Count stands.
In the course of briefing this motion to dismiss, counterplaintiffs withdrew Count IV of their complaint, but sought leave to amend, stating that Peterbilt did not honor the notice provisions of the Dealer Agreement nor act in a commercially reasonable manner by installing a dealership without having conducted a market study. (ECF No. 67, 33). Peterbilt opposes Wilson's request to amend. (ECF No. 76, 2-3). Wilson may file a motion for leave to amend within one week of the date of this memorandum opinion and order.
Counterplaintiffs allege that Peterbilt breached its Dealer agreement with EWCT and EEC
Counterplaintiffs' first breach of contract claim under Count V is based on Addendum E to the franchise agreement, which sets forth the parties' respective rights and obligations with respect to the dealer's sale of its business. It provides, in relevant part:
The two parties have differing views of Peterbilt's obligations under the Addendum.
Peterbilt argues that under the Addendum E they "may conditionally approve a buyer candidate and, in doing so, waive its right of first refusal; or ... may refuse to conditionally approve a buyer candidate and subsequently decide whether or not to exercise its right of first refusal."
Essentially, Peterbilt seems to argue that the "best efforts" clause is meaningless. Under their interpretation they may approve or disapprove of a buyer candidate as they please, with the sole contractual requirement that if they do approve a buyer, they waive their right of first refusal.
Wilson believes that the two final sentences of the Addendum E burden Peterbilt with two distinct obligations. First, Peterbilt must use best efforts to conditionally approve a buyer; second, if they do so approve, they must waive their right of first refusal. (ECF No. 67, 34). Wilson goes further, however, suggesting that the best efforts clause includes an obligation that Peterbilt "may not unreasonably withhold its consent" to a proposed transfer. (ECF No. 67, 35). They take this phrase from § 15-211(e) of the Maryland Transportation Code, which dictates that a manufacturer's consent to a transfer may not be "unreasonably withheld." Md.Code Ann., Transp. § 15-211(e).
A "best efforts" contractual term "necessarily takes its meaning from the circumstances." First Union Nat'l Bank v. Steele Software Sys. Corp., 154 Md.App. 97, 138, 838 A.2d 404 (Md.Ct. Spec.App.2003). While contract interpretation is generally a question of law, "a factual determination may be required as to what is deemed to be `best efforts.'" Id. The best efforts standard "has diligence as its essence," and, unlike the good faith standard that is read into every contract, best efforts are "imposed only on those contracting parties that have undertaken such performance." Id.; see also Farnsworth, FARNSWORTH ON CONTRACTS § 7.17c (2d ed. 2001). Parties are not required to define a "best efforts" provision in order for such a provision to be enforceable. Id.; Baron Fin. Corp. v. Natanzon,
At the least, the best efforts clause in Addendum E requires that Peterbilt exercise some diligence in considering a potential buyer for Wilson's franchises. What exactly this diligence necessarily entails must be determined from all the circumstances. Considering the statutory background during the formation of the contract, under which a dealer may not unreasonably withhold consent to a transfer, the diligence required here must include an obligation to make reasonable efforts to approve a transfer, or, conversely, to not unreasonably reject a transfer. See Randolph Stuart Sergent, Do Your Best with "Best Efforts:" Using Open Contract Terms, Md. B.J., March/April 2007, at 49 ("In terms of content, the Maryland courts have found that a promise to exercise best or reasonable efforts, whether express or implied, contains two separate requirements of "good faith" and "reasonable diligence" in pursuing the stated goal."). In essence, the clause dictates that Peterbilt must view the proposed transfer in the most favorable light possible to the dealer. It can be said that Peterbilt is to "extend itself" to conditionally approve a potential buyer, to "facilitate" or assist the dealer in its negotiations. If the transfer is deemed unacceptable as a rational business matter even in this light, Peterbilt may reject the proposal and exercise its right of first refusal. If the counterclaim contains sufficient facts to support a plausible claim that Peterbilt did not exert this required effort, however, the claim should stand.
In support of Count V, the counterclaim alleges that Peterbilt: (1) "engaged for months in backroom maneuvering to discourage the [Hunter] transaction and to push the Wilsons toward Arscott," (ECF No. 39, ¶ 18), (2) informed Wilson that Arscott was the only potential buyer that Peterbilt would consider, (Id. at ¶ 25), (3) refused to communicate or meet with Andrew Franklin (CEO of Norris) about a potential deal with Norris, (Id. at ¶ 58), (4) consistently communicated with Arscott regarding attempts to block both deals. (Id. at ¶ 20-24, 40).
The counterclaim unquestionably has laid out a plausible claim for relief. Wilson has, with significant detail, alleged a scenario in which Peterbilt, single-mindedly interested in a transfer to Arscott, made little or no effort to consider alternative buyers for the Wilson franchises. Indeed, the counterclaim alleges that Peterbilt told Wilson they would consider no other buyer other than Arscott, suggesting that Peterbilt made no effort to consider the alternative deals put before it. The facts alleged conclusively rise above speculative, and therefore survive Peterbilt's motion to dismiss.
Counterplaintiffs also allege under Count V that Peterbilt breached the Franchise Agreement by refusing to allow EWCT personnel to attend Peterbilt-required training programs and conferences. (ECF No. 39, ¶ 99). In support of its claim, counterplaintiffs point to the Franchise Agreement's provision mandating that:
Peterbilt counters that it denied Wilson's request to send staff to training events
The Court finds that Wilson has made a plausible showing that Peterbilt's refusal to allow Wilson employees to attend training sessions was a breach of the Dealer Agreement. Peterbilt does not dispute that it had an obligation under the contract to allow EWCT employees to attend training events. (ECF No. 55-3, 51). While there is some dispute as to whether these employees were still technically EWCT employees — the countercomplaint does acknowledge that the "payroll function" of the dealership was controlled by Norris at that point — at this early stage Wilson must only provide a plausible showing that it is entitled to relief. (ECF No. 39 ¶ 39). Considering the facts in the light most favorable to counterclaimants, the Court finds it plausible that employees working at EWCT were entitled mandatory training, even if Norris had some degree of control over the dealership. As such, this claim survives Peterbilt's motion to dismiss.
Wilson has alleged several instances of allegedly unfair competitive behavior by Arscott and PB of Baltimore. These allegations include both disparaging remarks to customers made by representatives of the company, informing them that Wilson was likely to lose its franchise in the near term and that Peterbilt was suing Wilson to terminate the franchise (ECF No. 39, ¶ 48), and allegations against Arscott individually for tortiously interfering with Wilson's contract with Peterbilt and disrupting Wilson's deal with both Hunter and Norris (ECF No. 39, ¶¶ 20, 40, 102, 117). Wilson alleges that as the result of these actions they lost both customers and the opportunity to pursue partnerships. (ECF No. 39, ¶¶ 48, 102).
The allegations in the complaint form the basis of a plausible claim for relief and will stand as to both Arscott and PB of Baltimore. The jury will have to decide whether Peterbilt's alleged conduct constitutes an actionable "unfair method" that is "damaging or jeopardizing [Peterbilt's] business," or "substantially interfer[ing] with the ability to compete ... or conflicts with accepted principles of public policy." Baltimore Bedding Corp. v. Moses, 182 Md. 229, 237, 34 A.2d 338, 342 (1943); Restatement (Third) on Unfair Competition § 1 (1995).
Arscott and PB of Baltimore urge a narrow interpretation of the tort of unfair competition. They argue that the counterclaim must allege misleading or deceptive behavior in order to state a claim for unfair competition. (ECF No. 56-3, 15).
The Court disagrees that misleading or deceptive conduct is a necessary element of every unfair competition claim. First, Maryland courts' description of the tort is not so narrowly drawn. The law prohibits "damaging or jeopardizing another's business by fraud, deceit, trickery or unfair methods of any sort." Baltimore Bedding Corp. v. Moses, 182 Md. 229, 237, 34 A.2d 338 (1943) (emphasis added). The Court acknowledges that in this same opinion the Maryland Court of Appeals also stated that the tort of unfair competition is founded on the "general principle that all dealings must be done on the basis of common honesty and fairness, without taint of fraud or deception." Baltimore Bedding, 182 Md. at 237, 34 A.2d 338 (emphasis added). Since there was indisputably misleading or deceptive advertising found in the Baltimore Bedding case (claim that the defendant had 39 years of experience when it had less than one), the Court did not need to reach the question of whether Maryland recognized the tort of unfair competition in the absence of at least "a taint of fraud or deception." Id. However, the admitted dicta in Baltimore Bedding forbidding "damaging or jeopardizing another's business by ... unfair methods of any sort" is wholly consistent with the general view of the law in this area. Id.; see also Mascaro v. Snelling & Snelling of Baltimore, Inc., 250 Md. 215, 232, 243 A.2d 1, 10 (1968)("As the law [of unfair competition] developed, proof of fraudulent deception was no longer essential for relief, and this is the Maryland rule.").
Second, key treatises recognize the necessarily open-ended nature of the tort of unfair competition. While the Restatement (Third) on Unfair Competition identifies several specific categories of conduct constituting unfair competition, it includes "a residual category encompassing other business practices determined to be unfair." Restatement (Third) of Unfair Competition § 1 (1995) Accord 9 Bus. & Com. Litig. Fed. Cts. § 105:67 (3d ed.) (Unfair competition is a "broad and flexible doctrine" and "essential allegations can vary with the type of unfair competition the plaintiff is claiming.") The Restatement does not require that "other unfair business practices" implicate deceptive or misleading behavior, instead finding a tort where the conduct "substantially interferes with the ability to compete on the merits of their products or otherwise conflicts with accepted principles of public policy recognized by statute or common law." Restatement (Third) of Unfair Competition § 1 (1995).
Finally, the Fourth Circuit's decision in Trimed, Inc. v. Sherwood Medical Co., 977 F.2d 885 (4th Cir.1992) (interpreting Maryland law), strongly suggests that a finding of unfair competition can be based on an array of actions that interfere with vital
Trimed, Inc. v. Sherwood Medical Co., 977 F.2d 885, 891 (4th Cir.1992). (emphasis added).
The appellant did not argue the exact point here, that is, that the instruction was in error because the complained-of conduct was neither deceptive or misleading. However, the appellant did object to the instruction on the related point that the complained-of conduct was lawful competitive conduct, and especially in the absence of a "competitive justification" instruction.
Accordingly, given the expansive definition of the Maryland tort in Baltimore Bedding and the Fourth Circuit's endorsement of that expansive definition in Trimed, in line with the general view of the necessarily flexible contour of the unfair competition tort in changing business environment, the Court shall let Count VI stand.
In the course of briefing, Counterclaimants withdrew their claim for abuse of process. (ECF No. 67, 34).
To establish a claim for tortious interference with contract under Maryland law, a plaintiff must allege the following five elements: (1) a contract exists between the plaintiff and a third party, (2) the defendant knows of that contract, (3) the defendant intentionally interferes with that contract (and the interference is wrongful and without justification); (4) the third party breaches that contract; and (5) the plaintiff suffers damages from the breach. Océ North Am., Inc. v. MCS Servs., 795 F.Supp.2d 337, 346 (D.Md. 2011); see also Macklin v. Robert Logan Assocs., 334 Md. 287, 298, 639 A.2d 112 (Md.1994).
Tortious interference with contract is often viewed in comparison to a related tort, tortious interference with prospective economic relations. Tortious interference with contract is reserved for situations in which parties are bound by a contract that is not terminable at will. Macklin v. Robert Logan Assocs., 334 Md. 287, 298, 639 A.2d 112 (Md.1994). It is a stricter standard: in cases involving a terminable contract, "the circumstances in which a third party may interfere with the performance of that contract are more narrowly restricted." Id.; Restatement (Second) of Torts § 768 (1979) ("[A]n existing contract, if not terminable at will, involves established interests that are not subject to interference on the basis of competition alone."). In contrast, cases implicating terminable contracts are analyzed under tortious interference with economic relations. These cases present a more lenient standard: where a contract that is terminable at will is at issue, "a broader right to interfere with economic relations exists." Id.
The threshold question, therefore, is whether the Franchise Agreement is terminable at will. Arscott suggests that it is, noting that "one can not interfere with a contract which is lawfully terminable by one party or another." (ECF No. 75, 11).
Arscott misstates the law. A close reading of the contract demonstrates that it is not terminable at will by Peterbilt and a close reading of the case law reveals that interference with non-terminable at will contracts is actionable.
Generally, a contract terminable only for cause is not considered an at-will contract. Greene v. Nat'l Head Start Ass'n, No. 1:09CV546, 2010 WL 1779677, *4, 2010 U.S. Dist. LEXIS 42738, *9-10 (E.D.Va. Apr. 30, 2010), Henderson v. Capital Constr., No. 3:08cv207, 2010 WL 793667, 2010 U.S. Dist. LEXIS 19847 (E.D.Va. Mar. 4, 2010); Eric P. Voigt, Driving Through the Dense Fog: Analysis of and Proposed Changes to Ohio Tortious Interference Law, 55 Clev. St. L. Rev. 339, 363 (2007)("Either party to an at-will contract may ... terminate it at any time and for any reason (i.e., without good or just cause.")).
The agreement here provides that the dealer may terminate the Agreement at any time with 30 days notice. (ECF No. 55-4, 13). Peterbilt may terminate only with cause. (ECF No. 55-4, 14). Circumstances allowing immediate termination include fraudulent or illegal activity on the part of the dealer or the dealer's bankruptcy. (ECF No. 55-4, 14). The agreement also gives the option to terminate with 60 days notice under certain circumstances,
As the terms of the Franchise Agreement dictate Peterbilt could only terminate for cause and under specific circumstances, the Agreement is not terminable at will. Accordingly, Wilson is entitled to the heightened common law protection offered by tortious interference with contract under the Franchise Agreement.
Turning to the elements of the claim, counterplaintiffs easily have alleged with plausibility four of the elements of a tortious interference claim: a contract between counterplaintiffs and Peterbilt, Arscott's awareness of the contract, and Peterbilt's breach of the contract by failing to use best efforts in approving proposed transfers and refusing to allow EWCT personnel to attend training. As such, the only remaining issue is whether Wilson has made a sufficient showing that Arscott intentionally and wrongfully interfered with the contract so as to induce these alleged breaches.
Maryland largely follows The Restatement (Second) of Torts with respect to this cause of action. MCS Services, 795 F.Supp.2d at 346. In general, courts may evaluate several factors in determining whether such an action is wrongful, including the nature and motive of the actor's conduct, and the social interest in protecting the contractual interests at stake.
As discussed above, Peterbilt was obligated to make a reasonable effort to approve the proposed Hunter and Norris deals: it could not reject them out of hand. As such, any wrongful effort by Arscott to induce Peterbilt to not exercise the diligence necessary under the contract in considering these proposed deals could plausibly form the basis of a tortious interference with contract claim. Wilson has detailed several instances in which Arscott (1) allegedly encouraged Peterbilt to ignore without consideration the proposed deals with Hunter and Norris and (2) attempted to convince Peterbilt to only consider Arscott as a potential buyer, (ECF No. 39, ¶ 20, 24). As such, Wilson has made a plausible case in its counterclaim that Arscott sought to induce Peterbilt to breach its contract with Wilson to Arscott's benefit.
Finally, counterplaintiffs have alleged that Arscott had personal involvement in these efforts, making personal contact with Peterbilt on several occasions in order to dissuade them from making the deal.
Whereas the tort in Count VIII applies to interference with existing non-terminable contracts, this tort applies to "maliciously or wrongfully interfering with economic relationships in the absence of breach of contract." Natural Design, Inc. v. Rouse Co., 302 Md. 47, 485 A.2d 663, 674 (1984). Because the tort applies to non-contractual relationships, "[a] broader right to interfere with economic relations exists." Natural Design, Inc. v. Rouse Co., 302 Md. 47, 485 A.2d 663, 674 (1984); Oce N. Am., Inc. v. MCS Services, Inc., 795 F.Supp.2d 337, 348 (D.Md.2011).
While counterplaintiffs title their count "Tortious Interference with Prospective Economic Relations," the caselaw uses different labels for the tort, including Malicious Interference with Business and Tortious Interference with Prospective Economic Advantage. Natural Design, Inc. v. Rouse Co., 302 Md. 47, 68, 485 A.2d 663, 674 (1984); Williams v. Wicomico County Bd. of Educ., 836 F.Supp.2d 387, 398 (D.Md.2011). Although variously named, the tort requires a showing of (1) an intentional and willful act; (2) calculated to cause damage to the plaintiff in his lawful business; (3) done with the unlawful purpose to cause such damage and loss; without right or justifiable cause on the part of the defendants (which constitutes malice); and (4) that caused actual damage or loss. Williams v. Wicomico County Bd. of Educ., 836 F.Supp.2d 387, 398 (D.Md. 2011), K & K Mgmt., Inc. v. Lee, 316 Md. 137, 557 A.2d 965, 973 (1989), Natural Design, Inc. v. Rouse Co., 302 Md. 47, 71, 485 A.2d 663, 675 (1984). As the various labels for the same or similar torts can muddy the waters, the Court's analysis will be guided only by those cases that have applied the four factor test above.
The relevant caselaw includes varying interpretations of the meaning of "malice" in this context. Natural Design, Inc. v. Rouse Co., 302 Md. 47, 71, 485 A.2d 663, 675 (1984). Some courts have given "malice" its traditional meaning of ill will or spite. Id.; Willner v. Silverman, 109 Md. 341, 355, 71 A. 962 (1909). In other contexts, "malice" means "a wrongful act done intentionally without just cause or excuse." Natural Design, Inc. v. Rouse Co., 302 Md. 47, 71, 485 A.2d 663, 675 (1984). A judge in our district court has found that malice in this context takes the later meaning: a "wrongful act done intentionally without just cause or excuse." havePOWER, LLC v. Gen. Elec. Co., 183 F.Supp.2d 779, 784 (D.Md.2002). In general, however, what acts are required to fall under this tort is decided on a case by case basis. Natural Design, 302 Md. at 71, 485 A.2d 663.
This Count is brought against both Peterbilt and Arscott. As to Arscott, the same facts relevant to Count VIII are relevant here. For similar reasons, the Court finds that Wilson has stated a claim for tortious interference with Prospective Economic Relations. While this tort is slightly more lenient towards Arscott than that in Count VIII, Wilson has presented an equally plausible case that Arscott's actions encouraging Peterbilt to disregard proposed deals with Hunter and Norris and only deal with Arscott constitute actionable wrongful acts. Further, Wilson plausibly alleges that as a result of these acts, Wilson could not complete transfers in its best interest, and therefore suffered harm. As with Count VIII, Arscott has personal involvement in these alleged tortious actions, and therefore may be held personally liable.
In Maryland, the elements of civil conspiracy are (i) a confederation of two or more persons by agreement or understanding; (ii) some unlawful or tortious act done in furtherance of the conspiracy or use of unlawful or tortious means to accomplish an act not in itself illegal; and (iii) actual legal damage resulting to the plaintiff. Lloyd v. General Motors Corp., 397 Md. 108, 154, 916 A.2d 257, 284 (2007). An unlawful act connotes a tort, breach of contract or other actionable wrong. Paul Mark Sandler, James K. Archibald, Pleading Causes of Action in Maryland, PCA MD-CLE 3-133; Columbia Real Estate Title Ins. Co. v. Caruso, 39 Md.App. 282, 289, 384 A.2d 468, 472 (1978). Civil conspiracy is "not a separate tort capable of independently sustaining an award of damages in the absence of other tortious injury to the plaintiff." Haley v. Corcoran, 659 F.Supp.2d 714, 726 (D.Md. 2009).
As an initial matter, all counterdefendants argue that as their position is that all underlying torts alleged should be dismissed, Count IX, too, should be dismissed. (ECF No. 56-3, 19). They do not present any other arguments as to this claim. As discussed supra, counterplaintiffs' tort claims for interference with contract, interference with prospective economic relations, and unfair competition survive this motion. Counterplaintiffs have alleged that Arscott and Peterbilt agreed that no sale would be made to anyone other than Arscott and PB of Baltimore, and in the course of this agreement unfairly competed, breached Wilson's Franchise Agreement, and interfered with Wilson's prospective economic relations. (ECF No. 39, ¶ 14, 15, 20, 22). Accordingly, Count X will stand as to these underlying torts.
Counterdefendants also argue that any allegations of civil conspiracy to violate the statutes at issue here should fail. Counterdefendants note that conspiracy claims presuppose that "the coconspirator is legally capable of committing a tort, that is, that she owes a duty to the plaintiff recognized by law and is potentially subject to liability for breach of that duty." Bahari v. Countrywide Home Loans, 2005 WL 3505604, *6 (D.Md. Dec. 16, 2005). Because the statutes cited by counterplaintiffs "indisputably do not create any duty owed by Arscott, PB of Baltimore, or PS-D to Counterclaim Plaintiffs," counterdefendants argue that they "cannot have `conspired' to violate those statutes." (ECF No. 55-3, 53).
Counterdefendants are correct. The statutes at issue here prescribe the duties owed by a manufacturer to its dealers. (ECF No. 55-3, 53). They do not create any duties owed by existing dealers. Counterplaintiffs have implicitly acknowledged this: all remaining counts against Arscott and PB of Baltimore are tort claims. Counterplaintiffs do not argue that Arscott and PB of Baltimore have any obligations under the statutes at issue here. As such, the civil conspiracy count is dismissed to the extent that it included any statutory violations as predicate acts.
To establish a cause of action for aiding and abetting, a plaintiff must establish that (1) there is a violation of the law by the principal, (2) that the defendant knew about the violation, and (3) that the
Counterplaintiffs have also brought this claim against Peterbilt for "furthering Arscott's PB of Baltimore's, and PSD's tortious and wrongful conduct toward EWC and EEC." (ECF No. 39, ¶ 136). The only claims remaining against Arscott and PB of Baltimore relate to unfair competition and interfering with a contract between Peterbilt and Wilson. The claim will stand against Peterbilt for allegedly aiding and abetting Arscott and PB of Baltimore in their unfairly competitive actions. It makes little sense, however, to allege that Peterbilt encouraged Arscott to induce Peterbilt to breach the Franchise Agreement. Peterbilt was clearly the "principal" in this conduct, not Arscott. For Peterbilt, therefore, the Count will only stand as to its alleged aiding and abetting of Arscott and PB of Baltimore in unfairly competing with Wilson.
For the reasons set forth herein, the motion to dismiss is DENIED in part and GRANTED in part. A separate Order accompanies this Memorandum Opinion.
