ELLEN LIPTON HOLLANDER, District Judge.
Eugene J. Manning and J. Frederick Manning (the "Mannings") brought suit
Mercatanti has moved to dismiss the Complaint, pursuant to Fed.R.Civ.P. 12(b)(6) ("MTD," ECF 16). The Mannings have filed an opposition ("Opposition to MTD," ECF 21), as well as their own motion for summary judgment ("MSJ," ECF 20). The motions have been fully briefed, and no hearing is necessary to resolve them.
On December 17, 2004, pursuant to an Asset Purchase Agreement, Manning Broadcasting, Inc. agreed to sell and/or assign to Nassau Broadcasting I, LLC and Nassau Broadcasting III, LLC, "the assets and property used in the operation of two radio stations" in Hagerstown, Maryland. See Guaranty at 1
The Employment Agreements provide for the Mannings' employment for ten years, commencing in 2005, upon the closing for the transfer of the radio stations. Id. ¶ 1. Paragraph 5 of the Employment Agreements, titled "Termination," states: "This contract shall terminate at the Termination Date, unless earlier terminated by written agreement of [Nassau] or [the Mannings]."
Under the Employment Agreements, the Mannings are obligated to provide "advisory services" with respect to both radio stations, although they are not "required to devote any minimum number of hours," nor are they required to be "physically located at any office of [Nassau] or at the [radio s]tations." Id. ¶ 2. In exchange for these services, the Mannings are to receive two million dollars each, payable over ten years, ending in July 2015. Complaint
Initially, plaintiffs were to be paid in sixteen increments of $50,000 every three months, followed by a lump sum installment of $1,080,000, and then twenty-four incremental payments of $5,000 every three months. Id.; see also id. at Attachment 1. However, by amendments to the Employment Agreements on August 27, 2009 (the "Amendments"), Complaint ¶¶ 8, 10, the compensation schedule was modified; beginning on May 15, 2009, the Mannings were to receive monthly payments of $16,000 for the remainder of the ten year term. See plaintiffs' Ex. C, E ¶ 1; see also id. at Attachment A. The Amendments are appended to the Complaint as plaintiffs' Exhibits C and E.
Nassau did not pay the Mannings the $16,000 payments due on October 15, 2011. Complaint ¶ 15. The Employment Agreements state that, if Nassau "fails to render payment of any amount due hereunder when said payment is due and payable," it "constitute[s] an event of default." See plaintiffs' Ex. B, D, ¶ 14. And, the Amendments provide that, in the event of default, the balance due under the Employment Agreements "shall immediately and automatically become due and payable in full...." See plaintiffs' Ex. C, E, ¶ 2(b)(v).
Plaintiffs contend that Nassau is in default because it "ha[s] not paid the Mannings the remaining sums due under the Employment Agreements." Complaint ¶ 18. They assert that, as of October 15, 2011, each plaintiff was owed $736,000 under the Employment Agreements. See plaintiff's Ex. C, E at Attachment A.
As noted, Mercatanti executed the Guaranty on April 13, 2005, "concurrently with the Employment Agreements as security for the repayment of Nassau's obligations under the Employment Agreements." Complaint ¶¶ 4, 11. The Guaranty identifies Mercatanti, who "holds all of the ownership interests in Nassau," as Guarantor, and the Mannings as beneficiaries. Id. By its terms, it "guarantees to [the Mannings] the full and prompt payment" of Nassau's obligations under the Employment Agreements. Id.
It is undisputed that "Mercatanti has not paid the Mannings any amounts under the Guaranty." Id. ¶ 19. As a result, the Mannings allege breach of contract as their sole claim in the Complaint. They assert: "Mercatanti's failure to pay the Mannings in full all sums due under the Guaranty, including the amounts due (as accelerated) under the Employment Agreements and the amounts representing the Mannings' costs and expenses, constitutes a breach of the Guaranty...." Id. ¶ 22. The Mannings each seek $736,000, for a total of $1,472,000, "together with all interest and other charges due under the Employment Agreements through the date of full satisfaction of the judgment, pursuant to the terms of the Guaranty," including "costs and expenses, including reasonable attorneys' fees and expenses." Id. at 5.
Additional facts are included in the Discussion.
Defendant has moved to dismiss the case pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. When deciding a motion to dismiss pursuant to Rule 12(b)(6), a court "`must accept as true all of the factual allegations contained in the complaint,'" and must "`draw all reasonable inferences
A defendant may test the adequacy of a complaint by way of a motion to dismiss under Rule 12(b)(6). Both Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), make clear that, in order to survive a motion to dismiss under Rule 12(b)(6), a complaint must contain facts sufficient to "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570, 127 S.Ct. 1955; see Iqbal, 556 U.S. at 684, 129 S.Ct. 1937 ("Our decision in Twombly expounded the pleading standard for `all civil actions' ...") (citation omitted); see Simmons v. United Mortgage and Loan Inv., 634 F.3d 754, 768 (4th Cir.2011); Andrew v. Clark, 561 F.3d 261, 266 (4th Cir.2009); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.2008). If the "well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," the complaint has not shown that "`the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citation omitted).
In resolving a Rule 12(b)(6) motion, the court is not required to accept legal conclusions drawn from the facts. See Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); Monroe v. City of Charlottesville, Va., 579 F.3d 380, 385-86 (4th Cir.2009), cert. denied, ___ U.S. ___, 130 S.Ct. 1740, 176 L.Ed.2d 214 (2010). Moreover, a motion pursuant to Rule 12(b)(6) "does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir.1999) (internal quotation marks omitted).
In his motion to dismiss, Mercatanti insists that "the guaranteed promises contained in the underlying employment agreements contain options of non-performance on the part of the Plaintiffs, which render the Plaintiffs' obligations illusory and unenforceable." MTD at 1. Indeed, defendant maintains that plaintiffs "promise[d] nothing." MTD Memo at 6. Claiming that the Employment Agreements were not supported by consideration, defendant insists that both the Employment Agreements and the Guaranty are "unenforceable." Id. at 4.
In support of his position that plaintiffs' obligations were illusory Mercatanti maintains that "[t]here are no allegations in the Complaint concerning any services that the Plaintiffs actually provided for Nassau in exchange for compensation." Id. at 3. He also focuses on what he terms plaintiffs' "right to resign, without cause, the instant [the Employment Agreements] were signed...." Id. at 5. Mercatanti relies on the interplay of three provisions in the Employment Agreements to establish his claim that the contract is illusory, because the Mannings enjoyed the immediate right to resign, without consequence.
In Mercatanti's view, "the Employment Agreements, on their face, do not represent legally enforceable contracts in that they gave Plaintiffs a right to resign, without cause, the instant they were signed, without relieving Nassau or Mercatanti of their payment obligations...." MTD Memo at 5. Claiming that the Employment Agreements are not binding or enforceable, defendant posits: "Because of the simple fact that the Plaintiffs promised nothing to Nassau or to Mercatanti under the Employment Agreements, Plaintiffs' promises were illusory, and the Employment Agreements were void ab initio." Id. at 7.
The Mannings counter that "the Employment Agreements are enforceable because they are supported by ... promises that independently, and collectively, provide adequate consideration." Opposition to MTD at 4. In particular, they note, id., that, under ¶ 2 of Employment Agreements, they are obligated, for ten years, to "`provide ... advisory services with respect to the [radio s]tations'"; they are barred from "engag[ing] in other activities or businesses if they `directly and materially interfere with [their] performance of [their] duties' under the Employment Agreements," Opposition to MTD at 5 (quoting ¶ 2 of Employment Agreements); and they are obligated to "maintain in `strict confidence at all times and to not disclose to any third party any sales, technical, financial, programming or other date or practices of [Nassau],'" and this obligation "shall `survive expiration of termination of [the Employment Agreements].'" Opposition to MTD at 5 (quoting ¶ 6 of Employment Agreements). Plaintiffs add that this "confidentiality obligation was particularly important since the Mannings had operated the radio stations for over 20 years." Opposition to MTD at 5. Further, they argue that "the Employment Agreements have as additional consideration the sale and purchase of the radio stations...." Id. And, citing ¶ 5 of the Employment Agreements, they observe: "Instead of the Mannings having the unilateral right to resign, the Employment Agreements provide that the parties may agree to terminate the Employment Agreements." Opposition to MTD at 5-6 (emphasis added).
Alternatively, the Mannings argue that, even if the Employment Agreements were not enforceable, "Mercatanti specifically waived defenses relating to the enforceability of the Employment Agreements." Opposition to MTD at 2. They rely on Section 5 of the Guaranty, captioned "Guaranty Unconditional," which states (emphasis added):
In reply, Mercatanti argues that the Mannings' commitment to provide advisory services and promises of non-competition and confidentiality were illusory because the Mannings could have resigned at any time, prior to gaining any confidential knowledge, before providing any advisory services, and without being restricted from engaging in any competitive opportunities. See MTD Reply at 4. He asserts: "Plaintiffs did not take on any binding obligations because they had, from the outset, the option of terminating their `promise(s)' the instant they signed the Employment Agreements, while Nassau did not have a commensurate right to terminate its obligations to compensate the Plaintiffs." MTD Reply at 3. Mercatanti adds, id. at 4:
Defendant also rejects the view that the sale and purchase of the radio stations served as consideration for the Employment Agreements. He argues: "The sale and purchase of radio stations were addressed in separate, fully integrated agreements that are separate and apart from the Employment Agreements at issue here." Id.
With respect to the matter of waiver of defenses, defendant counters: "Mercatanti did not, and indeed could not, waive all defenses respecting the Employment Agreements." Id. at 5. In his view, Section 5 of the Guaranty, quoted above,
MTD Reply at 6 (emphasis in original).
Put another way, defendant contends that "[t]he waiver language at issue applies to defenses available under the Guaranty itself," but does not waive "defenses that could have been asserted by Nassau under the Employment Agreements...." Id. Moreover, Mercatanti insists: "Maryland law does not permit a waiver of all defenses." Id. at 8.
Ordinarily, a contract is not enforceable unless it is supported by consideration. Harford Cnty. v. Town of Bel Air, 348 Md. 363, 381, 704 A.2d 421, 430 (1998). "In Maryland, consideration may be established by showing `a benefit to the promisor or a detriment to the promisee.'" Cnty. Comm'rs for Carroll Cnty. v. Forty W. Builders, Inc., 178 Md.App. 328, 384-85, 941 A.2d 1181, 1213 (citations and some internal quotation marks omitted), cert. denied, 405 Md. 63, 949 A.2d 652 (2008). The Maryland Court of Appeals has said: "A promise becomes consideration for another promise only when it constitutes a binding obligation. Without a binding obligation, sufficient consideration does not exist to support a legally enforceable agreement." Cheek v. United Healthcare of Mid-Atl., Inc., 378 Md. 139, 148, 835 A.2d 656, 661 (2003).
An illusory promise cannot constitute valid consideration. See 2 ARTHUR L. CORBIN, CORBIN ON CONTRACTS § 5.28 (2003) (stating that "an illusory promise is neither enforceable against the one making it, nor is it operative as consideration for a return promise," and that "if there is no other consideration for a return promise, the result is that no contract is created."); RESTATEMENT OF CONTRACTS 2d § 77 cmt. a (1981) ("Where the apparent assurance of performance is illusory, it is not consideration for a return promise."). In Cheek, the Maryland Court of Appeals explained that "[a]n `illusory promise' appears to be a promise, but it does not actually bind or obligate the promisor to anything," because performance is "`entirely optional.'" Cheek, 378 Md. at 148-49, 835 A.2d at 662 (2003) (quoting RESTATEMENT OF CONTRACTS 2d § 2 cmt. e.). When the promisor "`retains an unlimited right to decide later the nature or extent of his performance,'" this "`unlimited choice in effect destroys the promise and makes it merely illusory.'" Cheek, 378 Md. at 149, 835 A.2d at 662 (quoting 1 SAMUEL WILLISTON & RICHARD A. LORD. A TREATISE ON THE LAW OF CONTRACTS § 4:24 (4th ed. 1990) ("WILLISTON ON CONTRACTS")).
As noted, ¶ 2 of the Employment Agreements provides: "Employee shall devote such business time as Employee deems reasonably necessary to provide [advisory] services but shall not be required to devote any minimum number of hours." Despite Mercatanti's claim, this language does not give the Mannings the "unilateral right to perform zero hours of work for Nassau," so as to render the Mannings' promises illusory and the Employment Agreements unenforceable.
"`[O]pen term' performance contracts are premised upon a mutually enforceable agreement that the non-specific standard selected by the parties will be interpreted and applied by a fact-finder `after the fact,' based on all the circumstances surrounding the parties' course of dealing." 8621 Ltd. P'ship v. LDG, Inc., 169 Md.App. 214, 229-30, 900 A.2d 259, 268 (citation omitted), cert. denied, 394 Md. 480, 906 A.2d 943 (2006); see also Mark P. Gergen, The Use of Open Terms in Contract, 92 COLUM. L. REV. 997, 1000 (1992) ("Gergen") (stating that contracts using open terms usually require performance "under a negligence-like term" such as reasonableness). Of import here, open contract terms do "not preclude formation of an enforceable contract if that is what the parties intended." First Union Nat. Bank, 154 Md.App. at 173, 838 A.2d at 449. See 8621 Ltd. P'ship, supra, 169 Md.App. at 228, 900 A.2d at 267 ("Lack of specific terms ... does not necessarily make a ... clause in a contract meaningless.").
It is also noteworthy that Maryland law generally implies a covenant "to act in good faith and deal fairly with the other party or parties to a contract." Questar Builders, Inc. v. CB Flooring, LLC, 410 Md. 241, 273, 978 A.2d 651, 670 (2009). This principle "governs the manner in which a party may exercise the discretion accorded to it by the terms of the agreement." Id. In performing, the "party with discretion is limited to exercising that discretion in good faith and in accordance with fair dealing." Id. Accordingly, there is no merit to Mercatanti's assertion that the language of the Employment Agreements allows the Mannings to work "zero hours" and still receive compensation. MTD Memo at 7.
Even assuming the advisory services clause does not amount to valid consideration, the "non-compete" and "confidentiality" clauses of the Employment Agreements constitute valid consideration. As noted, the Employment Agreements require the Mannings to refrain from engaging in other activities or businesses that may "directly and materially interfere with [their] performance of [their] duties" under the Employment Agreements, and "to keep in strict confidence at all times and to not disclose to any third party any sales, technical, financial, programming or other data practices of [Nassau]," an obligation that "shall survive expiration or termination of [the Employment Agreements]." Plaintiffs' Ex. B, D, ¶¶ 2, 6.
Any "benefit to the promisor or ... detriment to the promisee is sufficient valuable consideration to support a contract." Vogelhut v. Kandel, 308 Md. 183, 191, 517 A.2d 1092, 1096 (1986) (citation omitted). Accord Cheek, 378 Md. at 148, 835 A.2d at 661. "Legal detriment means `giving up something which immediately prior thereto the promisee was privileged to retain, or doing or refraining from doing something which he was then privileged not to do, or not to refrain from doing.'" Vogelhut, 308 Md. at 191, 517 A.2d at 1096
The determination as to consideration is not undercut even if the Mannings had "a right to resign, without cause, the instant [the Employment Agreements] were signed...." MTD Memo at 5. It is true that, under the terms of the Employment Agreements, Nassau is not relieved of its obligation to pay the Mannings in the event of termination of the Employment Agreements.
Mercatanti correctly asserts that the plaintiffs have not set forth "allegations in the Complaint concerning any services that the plaintiffs actually provided for Nassau." MTD Memo at 3. However, this omission does not establish the failure to state a claim for relief based on breach of contract; failure to perform is an affirmative defense. Notably, the Employment Agreements and the Guaranty were executed in April 2005, and Nassau made the requisite payments until October 2011. Thus, for more than six years Nassau provided compensation to the Mannings, apparently without protest.
To be sure, Paragraph 8 of the Employment Agreements states: "Nothing herein
Furthermore, as parties to a ten year, fixed term employment contract, the Mannings were subject to an implied covenant of good faith and fair dealing. Hrehorovich v. Harbor Hosp. Ctr., 93 Md.App. 772, 796, 614 A.2d 1021, 1033 (1992), cert. denied, 330 Md. 319, 624 A.2d 490 (1993). "`[U]nder the covenant of good faith and fair dealing, a party [exercising discretion must] refrain from doing anything that will have the effect of frustrating the right of the other party to receive the fruits of the contract between them.'" Questar Builders, 410 Md. at 281, 978 A.2d at 675 (citation and some internal quotation marks omitted) (alteration in Questar Builders.) "This means that each party must `do nothing to destroy the rights of the other party to enjoy the fruits of the contract and [] do everything that the contract presupposes they will do to accomplish its purpose.'" Id. (citation omitted) (alteration in Questar Builders.)
It is salient that the Mannings did not resign immediately, or at all. Immediate resignation might have violated the covenant of good faith and fair dealing, but that is not what occurred. See 1 CORBIN ON CONTRACTS § 1.17, at 49 (Joseph M. Perillo, ed., rev. ed. 1993, 2012 Spring Cum. Supp.) ("The complaint that a promise is illusory often comes in rather poor grace from the addressee of the allegedly illusory promise, particularly where the addressor is ready and willing to carry out the expression of intention. For this reason, courts are quite properly prone to examine the context to conclude that the escape hatch was intended to be taken only `in good faith' or in the `exercise of a reasonable discretion' or upon some other condition not wholly within the control of the promisor. In which case, the conclusion is that the promise is not illusory.").
For these reasons, I conclude that the Employment Agreements are not void ab initio as illusory contracts.
Even if the Employment Agreements are not legally enforceable because of a lack of consideration, under the Guaranty Mr. Mercatanti waived his right to dispute legal enforceability.
"Maryland adheres to the principle of the objective interpretation of contracts." Cochran v. Norkunas, 398 Md. 1, 16, 919 A.2d 700, 709 (2007). "Generally, when seeking to interpret the meaning of a contract our search is limited to the four corners of the agreement." Walton v. Mariner Health of Maryland, Inc., 391 Md. 643, 660, 894 A.2d 584, 594 (2006). The Court considers "what a reasonable person in the same position would have understood as the meaning of the agreement." Id.; see also Hartford Acc. & Indem. Co. v. Scarlett Harbor Assoc. Ltd. P'ship, 109 Md.App. 217, 291, 674 A.2d 106, 142 (1996) ("[T]he court must, as its first step, determine from the language of the agreement what a reasonable person in
However, a contract is ambiguous "when the language of the contract is susceptible of more than one meaning to a reasonably prudent person." Auction & Estate Representatives, Inc. v. Ashton, 354 Md. 333, 340, 731 A.2d 441, 444-45 (1999). "[T]he determination of whether a contract is ambiguous, is a question of law...." Towson Univ. v. Conte, 384 Md. 68, 78, 862 A.2d 941, 946 (2004). And, the construction of "ambiguous contract provisions is a factual determination that precludes dismissal on a motion for failure to state a claim." Martin Marietta Corp., v. Int'l Telecomm. Satellite Org., 991 F.2d 94, 97 (4th Cir.1992).
With this framework, I turn to review again Paragraph 5 of the Guaranty. It states, in part:
Plaintiffs' Ex. A (emphasis added).
Mercatanti argues that "[t]here is no language in Section 5 of the Guaranty that would suggest that Defendant waived defenses that the underlying debtor [i.e., Nassau] could have asserted" with respect to the Employment Agreements. MTD Reply at 7. He asserts that the alleged waiver language does not obligate him "to pay sums due under the unenforceable Employment Agreements even if those sums are not actually due, it merely means that the Guaranty is not discharged as a result of the unenforceability of the Employment Agreements." Id. at 6. Put another way, Mercatanti argues that the waiver language "applies only to defenses to liability `hereunder,' i.e., under the Guaranty." Id. He adds that "the absence of specific language proving that Defendant waived defenses that could have been asserted by Nassau under the Employment Agreements is fatal to Plaintiffs' claim [of] waiver." Id. "[W]ithout such a waiver," Mercatanti argues, "Maryland law expressly provides that `a guarantor possesses all of the defenses available to the principal debtor.'" Id. at 7 (quoting Bessette v. Weitz, 148 Md.App. 215, 239, 811 A.2d 812, 825 (2002), cert. denied, 374 Md. 84, 821 A.2d 371 (2003)).
In addition, defendant contends that to view the waiver clause as urged by plaintiffs would be contrary to the public policy of Maryland. He asserts that, when the
"Waiver, in general, is `the intentional relinquishment of a known right ... and may result from an express agreement or be inferred from circumstances.'" Myers v. Kayhoe, 391 Md. 188, 205, 892 A.2d 520, 530 (2006) (some internal quotation marks omitted). Even constitutional rights "may be relinquished by agreement, provided any such waiver is `voluntary, knowingly, and intelligently made.'" Maryland-National Capital Park & Planning Comm'n v. Washington Nat'l Arena, 282 Md. 588, 613, 386 A.2d 1216, 1233 (1978) (citation omitted). Accord Walther v. Sovereign Bank, 386 Md. 412, 872 A.2d 735 (2005).
To be sure, waivers may be suspect when there is a "`great disparity in bargaining power'" between the parties, or they are not represented by counsel. Atlantic Leasing & Fin., Inc. v. IPM Tech., Inc., 885 F.2d 188, 192 (4th Cir.1989) (citation omitted). In this case, however, there is no allegation that the waiver was made involuntarily or unknowingly. Nor is there any apparent disparity of bargaining power. Indeed, both parties were represented by counsel at the time the relevant documents were drafted and executed.
As noted, Mercatanti insists: "Maryland law does not permit a waiver of all defenses." MTD Reply at 8. In support of this contention, he cites only one case, McGinley v. Massey, 71 Md.App. 352, 525 A.2d 1076 (1987). The case is inapposite. In that case, the Maryland Court of Special Appeals found a guaranty unenforceable because the principal contract "was illegal as violative of a statutory prohibition." Id. at 358, 525 A.2d at 1079. The McGinley Court did not address the issue of waiver. And, there is no contention here that the Employment Agreements violate a statutory prohibition.
Moreover, clauses in guaranties that waive defenses regarding the principal contract have been upheld. Atlantic Leasing & Financial, Inc., supra, 885 F.2d 188, is instructive. In that case, IPM Technology, Inc. ("IPM") served as guarantor for Workman Electronic Products ("Workman"), a previously wholly-owned subsidiary of IPM, with respect to a lease of computer equipment by Workman from Atlantic Leasing & Financial, Inc. ("Atlantic"). Id. at 190. An "Equipment Lease Guaranty" contained a "waiver-of-defenses provision" which provided, id. at 190-91 (emphasis added), that IPM
Workman stopped making lease payments after the computer equipment failed to function properly, or as promised. Id. at 191. In light of the default, Atlantic demanded payment from IPM. Id. A judgment was eventually entered against IPM pursuant to a confessed-judgment provision in the Equipment Lease Guaranty. Id. IPM moved to vacate the judgment on a number of grounds, including "that it was uninformed as to the consequences of the contract terms to which it had agreed...." Id.
A waiver of a challenge to legal enforceability does not equate to a waiver of a claim of breach based on failure to perform.
Mercatanti's position, i.e., that "[t]here is no language in Section 5 of the Guaranty that would suggest that Defendant waived defenses that the underlying debtor could have asserted" with respect to the Employment Agreements, directly contradicts the contractual language in Paragraph 5 of the Guaranty, which expressly states that no "determination of lack of enforceability" of the Employment Agreements "shall discharge all or any part of the liabilities and obligations of the Guarantor pursuant to this Guaranty." Thus, the Guarantor cannot assert as a defense a challenge to the enforceability vel non of the Employment Agreements.
Such a legal defense is "eclipsed by the waiver-of-defenses clause contained in the Guaranty." Id. at 194. See also Outsource Servs. Mgmt., LLC v. Ginsburg, No. 08-5897, 2010 WL 5088190, at *14, 2010 U.S. Dist. LEXIS 129290, at *4041 (D.Minn. Dec. 7, 2010) ("Defendants expressly waived any defense based on the `illegality, invalidity or unenforceability' of the Guaranteed Obligations or Loan.... Thus, the Guaranties are enforceable even if the underlying obligations or agreements are invalid."); Ursa Minor v. Aon Fin. Prods., No. 00-2474, 2000 WL 1010278, at *6, 2000 U.S. Dist. LEXIS 10166, at *20 (S.D.N.Y. July 21, 2000) (holding that a guarantor had "specifically waived all defenses concerning the enforceability" of the underlying obligation, as the guarantee's "plain language ... negate[d] any defense [it] may raise with regard to ... `unenforceability, illegality, or invalidity' ..."), aff'd, 7 Fed.Appx. 129 (2d Cir.2001); Minasian v. Standard Chartered Bank, PLC, No. 93-6131, 1995 WL 530648, at *13, 1995 U.S. Dist. LEXIS 12973, at *40 (N.D. Ill. Sept. 8, 1995) (holding that, "[t]o the extent Plaintiffs[] argue that the obligations under the ... Agreement are unenforceable, they cannot prevail" as they "waived this defense as part of their Guarantees," pursuant to which they "agreed to guarantee payment of all `credit' extended ... regardless [of] `whether such indebtedness may be or hereafter becomes otherwise unenforceable'"; reasoning that "[c]ourts will find a waiver when the guarantee is unconditional and there is an express waiver of the defense that the principal agreement is
In sum, the Employment Agreements are not illusory and are enforceable. Even if they are not legally enforceable, however, pursuant to the Guaranty, Mercatanti expressly waived any challenge to the legal enforceability of the Employment Agreements. Accordingly, I shall deny defendant's motion to dismiss.
Plaintiffs have moved for summary judgment pursuant to Fed.R.Civ.P. 56. Under Rule 56(a), summary judgment is properly granted only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citing former Fed.R.Civ.P. 56(c)). In resolving a summary judgment motion, the court must view the facts, including reasonable inferences to be drawn from them, in the light most favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir.2002).
The non-moving party bears the burden of demonstrating that there are disputes of material fact so as to preclude the entry of judgment as a matter of law. Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.Ct. 1348. To meet this burden, the party opposing summary judgment must "do more than simply show that there is some metaphysical doubt as to the material facts." Id.; see also In re Apex Express Corp., 190 F.3d 624, 633 (4th Cir.1999). Stated another way, "[a] party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must' set forth specific facts'" showing that there is a genuine dispute of material facts. Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir.2003) (quoting former Fed.R.Civ.P. 56(e)), cert. denied, 541 U.S. 1042, 124 S.Ct. 2171, 158 L.Ed.2d 732 (2004); see Celotex Corp., 477 U.S. at 322-24, 106 S.Ct. 2548. A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
If "the evidence is such that a reasonable jury could return a verdict" for the non-moving party, there is a dispute of material fact that precludes summary judgment. Id. at 248, 106 S.Ct. 2505. The "judge's function" in reviewing a motion for summary judgment is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id. at 249, 106 S.Ct. 2505.
Ordinarily, summary judgment is inappropriate when, as here, "the parties have not had an opportunity for reasonable discovery." E.I. du Pont de Nemours & Co., supra, 637 F.3d at 448. However, "the party opposing summary judgment `cannot complain that summary judgment was granted without discovery unless that party [has] made an attempt to oppose the motion on the grounds that more time was needed for discovery.'" Harrods Ltd. v. Sixty Internet Domain Names, 302 F.3d 214, 244 (4th Cir.2002) (quoting Evans v. Techs. Applications & Serv. Co., 80 F.3d 954, 961 (4th Cir.1996)). To raise adequately the issue that discovery is needed, the non-movant must file an affidavit or declaration pursuant to Rule 56(d) (formerly Rule 56(f)). Defendant has filed a Rule 56(d) affidavit, as discussed, infra.
The Mannings insist: "[T]he facts are not in dispute and judgment is proper as a matter of law because the Guaranty is plain and unambiguous and Mercatanti has waived all defenses." MSJ Memo at 1.
In his opposition, Mercatanti reiterates the arguments he made with respect to the motion to dismiss: that the Employment Agreements are unenforceable; that he has not waived defenses; and that waiver of the defense of unenforceability is void as against public policy. He also argues that "the waiver of defenses clause does not absolve Plaintiffs' [sic] of their obligation to prove every element of their breach of contract claim." Opposition to MSJ at 5.
In his affidavit, Young details the factual disputes he believes should preclude an award of summary judgment prior to discovery. They include "whether and to what extent the Plaintiffs actually performed services for Nassau, and regarding Plaintiffs' calculation and quantum of alleged damages," id. ¶ 6; "who `controlled' or drafted the operative documents relevant to this matter," id. ¶ 7; the significance of the Reaffirmation, including the effect of its New Jersey choice of law provision, id. ¶ 8; "the intentions of the parties ... and performance under the Employment Agreements, including the amendments thereto, and extrinsic evidence concerning the meaning of those agreements," id. ¶ 9a; "the intentions of the parties and performance under the Guaranty," id. ¶ 9b; "the intentions of the parties ... and performance under the Asset Purchase Agreement, Note and separate guaranty, and extrinsic evidence concerning
In plaintiffs' view, the Young affidavit "reveals no genuine issue of material fact," and they urge the court "not [to] require the parties to waste resources on irrelevant and potentially expensive discovery." MSJ Reply at 11. As to the alleged need for discovery concerning the parties' intentions under the Employment Agreements, they argue that "[a]n unambiguous agreement requires no extrinsic evidence to aid in its interpretation." Id. at 8. Moreover, they regard as "irrelevant" the question of whether the Mannings provided services to Nassau, id., and, with respect to the Reaffirmation, assert that it "does not give rise to the need for discovery," as "it simply supports the Mannings' argument that the Employment Agreements are enforceable." Id. at 8-9. The Mannings also view as unnecessary any factual development as to the parties' intentions under the Asset Purchase Agreement, arguing that the document "is relevant only to the extent it serves as consideration for the Employment Agreements and the Guaranty...." Id. at 9. They also assert that the identity of the ownership of Manning Broadcasting, Inc. and the identity of the party who controlled the drafting of the Employment Agreements and Guaranty
As I have made clear, defendant has not set forth a legal impediment to enforcement of the underlying Employment Agreements; I have found that the Employment Agreements are supported by valid consideration, but, even if they are not, Mercatanti waived his right to contest the legal enforceability of the Employment Agreements. This conclusion does not, however, compel the conclusion that plaintiffs are entitled to summary judgment.
"[A] breach of contract is a failure, without legal excuse, to perform any promise that forms the whole or part of a contract.[]" WILLISTON ON CONTRACTS § 63:1 (emphasis added). Mercatanti has asserted that "if this case moves forward," he "will assert a second line of defenses," separate and apart from the matter of enforceability, and that asserting the "second line of defenses" will "require significant factual development in discovery." Opposition to MSJ at 6.
To be sure, defendant has not elucidated the basis of the defenses he intends to raise. Although several seem either irrelevant or specious, he has included
Nor am I convinced that the denial of plaintiffs' motion will unduly "require [them] to waste resources on irrelevant and potentially expensive discovery." MSJ Reply at 11. The issues in this case do not appear to be unduly complex. Moreover, plaintiffs concede that, as to the matter of attorneys' fees, "the issue is not ready for final disposition." Id. at 10. Plaintiffs, then, concede that some level of discovery will be necessary, regardless of the outcome here. And, there is a pending parallel case, Manning Broadcasting, Inc. v. Mercatanti, 12-cv-00195 (the "parallel case"). Although the parallel case has a different plaintiff, Manning Broadcasting, Inc., as opposed to the Mannings, it centers on the same nucleus of operative facts as the case at bar, and the parties in that case are represented by the same attorneys as the parties here. Although a dispositive motion has been filed in the parallel case, see ECF 8, "Defendant's Motion To Dismiss Portion Of Complaint With Prejudice" (emphasis added), it will not resolve the matter in its entirety, even if granted, and that case will proceed through some discovery.
I am also mindful that the Fourth Circuit has "emphasized repeatedly the drastic nature of the summary judgment remedy and ... held that it should not be granted unless it is perfectly clear that there are no genuine issues of material fact in the case." Ballinger v. North Carolina Agric. Extension Serv., 815 F.2d 1001, 1004-05 (4th Cir.1987). At this juncture, in light of the averments in the Opposition, coupled with the Young affidavit, and before any discovery has taken place, I cannot conclude that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).
Accordingly, I will permit defendant to pursue the "second line of defenses" to which he alludes. Opposition to MSJ at 6. However, plaintiffs may renew their arguments in a second motion for summary judgment when they deem appropriate, either during or at the conclusion of discovery.
For the foregoing reasons, the Court will deny "Defendant's Motion To Dismiss Complaint With Prejudice" (ECF 16) and "Plaintiffs' Motion For Summary Judgment" (ECF 20). A separate Order, consistent with this Opinion, follows.
For the reasons set forth in the accompanying Memorandum Opinion, it is this 24th day of August, 2012, by the United States District Court for the District of Maryland, ORDERED:
1) The motion to dismiss filed by defendant Louis F. Mercatanti, Jr. (ECF 16) is DENIED.
2) The motion for summary judgment filed by plaintiffs Eugene J. Manning and J. Frederick Manning (ECF 20) is DENIED, without prejudice.
