Opinion
CIVIL NO. JFM-03-1227
July 14, 2003
MEMORANDUM
Theodore Plana has brought suit alleging that ShoreSales, LLC ("ShoreSales"), exsportise, Inc. ("exsportise"), Richard George, and Developers Diversified Realty Corp. ("DDR") breached an oral agreement with Plana to develop plans for an air show to be held in Long Beach, California in October 2003. Now pending before me are defendants' motions to dismiss Plana's first five causes of action and to strike Plana's sixth claim for relief for unfair competition. For the reasons discussed below, the motion to dismiss will be granted in part and denied in part and the motion to strike will be granted.
I.
My recitation of the facts is based upon the allegations in the Complaint.
Plana has been in the business of planning, developing, managing, coordinating, and operating air shows, in which military jet teams and private pilots perform aerial demonstrations for the public, for over twenty years. (Compl. ¶ 12.) Plana has developed an excellent reputation in the air show industry and is currently the director of the nation's largest air show — the Fort Lauderdale Air and Sea Show. (Id.)
In June 2001, George, the CEO of exsportise, asked Plana to determine the feasibility of conducting an air show in Long Beach, California. (Id. ¶ 14.) George informed Plana that DDR was interested in sponsoring a major event to coincide with the planned grand opening of a retail center it was developing in Long Beach. (Id.) Plana subsequently visited the Long Beach site, planned and fitted the aerobatic boxes (the airspace where the pilots would perform), and had preliminary discussion with representatives of the Long Beach airport, the Federal Aviation Administration ("FAA"), and military demonstration teams. (Id.)
In August 2001, Plana again met with George. (Id. ¶ 15.) Plana informed George that an air show in Long Beach was feasible. George, on behalf of exsportise, and Plana entered into an oral agreement regarding a major public air and sea show to be performed in Long Beach in the fall of 2003 and modeled after the Fort Lauderdale Air and Sea Show. The parties agreed that Plana would be paid a fee and be in charge of all operations. All profits were to be divided equally between exsportise and Plana. (Id.)
Based on this oral agreement, Plana began to plan the 2003 Long Beach air show. (Id. ¶ 16.) In October 2001, Plana planned a meeting with representatives of the Long Beach airport to discuss the air show. (Id. ¶ 17.) Plana, George, and Daniel DiCillo of DDR attended the meeting and made a presentation to the airport representatives regarding the proposed event. At the conclusion of the meeting, the airport representatives agreed to proceed and to take the project to the City Manager of Long Beach for approval. (Id.) Also in October 2001, Plana and George agreed that Plana would develop an overall, detailed budget to present to DDR in order to help obtain sponsors. (Id. ¶ 18.)
In December 2001, Plana met with George at the International Council of Air Shows convention. (Id. ¶ 19.) Plana delivered to George the budget for the Long Beach air show. The budget included a fee for Plana of $100,000. Plana and George discussed the budget and orally agreed on the scope of Plana's participation and the costs, including Plana's $100,000 fee. George and Plana confirmed the August 2001 agreement and modified it to proceed on the basis of Plana's budget, with Plana being paid $100,000, plus 20% of any sponsorship fees that Plana brought in, plus 10% of the amount, if any, by which the final cost of the Long Beach air show was less than the agreed-upon budget. (Id.)
In May 2002, Plana helped exsportise host Long Beach city officials at the Fort Lauderdale Air and Sea Show in an effort to gain city approval and obtain sponsors for the Long Beach show. (Id. ¶ 20.) In June 2002, Plana attended a two-day planning meeting at the exsportise office in Annapolis, Maryland. (Id. ¶ 21.) At the meeting, George and DiCillo confirmed to Plana that he would be the director of the Long Beach air show, which was named "Shorefest at the Pike," and that he would have complete control over the budget and operations of the show. (Id.)
Additionally, Plana was informed at the June 2002 meeting that exsportise and DDR had formed a new company, ShoreSales, to own and operate "Shorefest at the Pike." (Id. ¶ 22.) Exsportise and DDR attempted to persuade Plana to agree to be a hired party, rather than a partner in the Long Beach show. Exsportise and DDR also tried to make material modifications in the budget that had been agreed to in December 2001. Plana rejected the modifications and continued to try to persuade exsportise to abide by the December 2001 agreement. (Id.)
Despite defendants' efforts to modify the agreement, Plana continued to work on the Long Beach air show because in order to secure a commitment from one of the two premier military jet demonstration teams, a request had to be submitted to the Department of Defense (the "DD 2535") by July 31, 2002. (Id. ¶ 23.) The DD 2535 had to include the signature of an FAA representative and Plana was the only person involved in the project with the expertise to persuade an FAA representative to sign the DD 2535. (Id.)
In July 2002, Plana attended a meeting at defendants' request to discuss the services Long Beach would need to provide in connection with the air show. At that meeting, Plana briefed the FAA representative regarding the plans for the show in order to persuade the FAA representative to sign the DD 2535. (Id. ¶ 24.) In late July 2002, at defendants' request, Plana allowed himself to be identified on the DD 2535 for the "Shorefest at the Pike" as the "Point of Contact for Aviation Activities at this Event." (Id. ¶ 25.) Plana also arranged for the local Aviation Safety Inspector for the FAA to sign the Shorefest DD 2535 and helped persuade the Long Beach city manager to sign the form. (Id.) Plana alleges that the inclusion of his name on the DD 2535 was crucial to obtaining the services of the Navy Blue Angels, which in turn, was crucial to enabling defendants to obtain financial sponsors. (Id. ¶ 26.)
In August 2002, Plana and George met in Chicago. (Id. ¶ 29.) George gave Plana a proposed written contract between Plana and ShoreSales relating to his services for Shorefest at the Pike. The written contract did not reflect the oral agreement reached between Plana and George in December 2001. George, however, told Plana not to worry about the variances because George expected that the agreement would be modified to reflect the December 2001 oral agreement. According to Plana, George deliberately waited until August 2002 to present him with the written contract because he wanted Plana's name to appear on the DD 2535 and he wanted Plana to persuade the FAA and Long Beach representatives to sign the form. (Id. ¶ 29.) In August 2002, Plana, at defendants' request, traveled to Long Beach from his home in Chicago to meet with employees of the Long Beach Airport to discuss arrangements for the air show. (Id. ¶ 30.) According to Plana, defendants' knew that his expertise was vital to this meeting. Moreover, in August 2002, Plana formally requested the participation of the Canadian Snowbirds in Shorefest at the Pike. Plana alleges the Snowbirds have agreed to participate, partially in reliance on the belief that he was the Long Beach air show director. (Id. ¶ 31.) Finally, in October 2002, Plana, at defendants' request, participated in a three-day planning meeting for Shorefest at the Pike in Maryland. (Id. ¶ 32.)
Overall, Plana alleges that between August 2001 and November 2002 he invested substantial time, skill, labor, and money in preparing for the Long Beach air show. (Id. ¶ 33.)
From August 2002 to November 2002, Plana and his representatives attempted to persuade defendants to abide by their December 2001 oral agreement and modify the written agreement to accurately reflect the terms of the oral agreement. Defendants refused to do so and ended all conversations with Plana in November 2002. Defendants also told Plana that he would have no role in Shorefest at the Pike and would not be paid for any of the activities he had already performed. Another person was hired to direct Shorefest at the Pike. (Id. ¶ 34.)
On January 14, 2003, Plana initiated this suit in the United States District Court for the Central District of California. Plana's complaint, in which he seeks both monetary and injunctive relief, includes seven counts: breach of oral agreement against exsportise and ShoreSales; inducing breach of contract against DDR; fraud against George and exsportise; negligent misrepresentation against George and exsportise; misappropriation against ShoreSales, exsportise, and DDR; unfair competition against all defendants; and unjust enrichment against ShoreSales, exsportise, and DDR. On April 21, 2003, in ruling upon defendants' motion to transfer, the Honorable Dean D. Pregerson transferred the suit to this Court pursuant to 28 U.S.C. § 1404(a).
II.
The first issue is what law applies in resolving the current motions. "[T]he transferee district court must under § 1404(a) apply the laws of the State of the transferor district court." Van Dusen v. Barrack, 376 U.S. 612, 642 (1964). "The laws of the transferor State" to be applied by the transferee court include the transferor's choice-of-law rules. See Ferens v. John Deere Co., 494 U.S. 516, 519 (1990); Myelle v. American Cyanamid Co., 57 F.3d 411, 414 (4th Cir. 1995). Accordingly, California's choice-of-law rules apply to the pending motions.In granting the motion to transfer, Judge Pregerson determined that under California's government interest test, Maryland law should be applied in this action. Plana v. ShoreSales, LLC, No. 03-00354, slip op. at 15-18 (C.D.Cal. April 21, 2003). I will abide by Judge Pregerson's well-reasoned analysis and apply Maryland law to the instant motions.
III. A.
Defendants first move to dismiss Plana's breach of contract claim on the basis that Plana was not ready, willing, and able to perform. A party bringing suit for breach of contract must be ready, willing, and able to perform. Prescon Corp. v. Savoy Constr. Co., 267 A.2d 222, 225 (Md. 1970). Defendants, relying solely on a declaration of George, assert that Plana "was barred from contracting directly with defendants by his contract with MDM Group, Ltd., a company that organizes air shows." (Defs.' Mem. at 8 (citing George Decl. ¶¶ 4-5, 16-18).) Plana, however, has presented his own declaration stating that he did "not have a contract with MDM" and that "nothing prohibits [him] from taking on other work in connection" with air show events other than the Fort Lauderdale show, which is produced by MGM Group, Ltd. (Plana Decl. ¶ 2.)
In support of this assertion, defendants present evidence beyond the allegations in the complaint. Thus, defendants essentially ask me to convert their motion to dismiss into one for summary judgment on this issue. Because Plana also submitted a declaration in opposition to defendants' motion, I will covert the motion into one for summary judgment on those issues for which the declarations are relevant.
Accordingly, there is a material dispute of fact and summary judgment will be denied on this basis.
To the extent defendants seek to dismiss this claim as insufficiently pled, Plana's allegation that he "performed all of his obligations under the agreement except to the extent his performance has been excused or defendants have prevented him from performing," (Compl. ¶ 39), is sufficient to allege that he was ready, willing, and able to perform the agreement.
B.
Defendants next argue that the first count fails because the oral agreement that was allegedly breached does not comply with the statute of frauds. The Maryland Statute of Frauds states, in relevant part:
Unless a contract or agreement upon which an action is brought, or some memorandum or note of it, is in writing and signed by the party to be charged or another person lawfully authorized by that part, an action may not be brought:
. . .
(3) On any agreement that is not to be performed within 1 year from the making of the agreement.
Md. Code Ann., Cts. Jud. Proc § 5-901; see also Friedman Fuller, P.C. v. Funkhouser, 666 A.2d 1298, 1303-04 (Md.Ct.Spec.App. 1995). It is undisputed that no agreement between Plana and any of the defendants was ever placed in writing. Moreover, it is undisputed that the alleged oral agreement was not to be performed within one year of the making of the agreement. Thus, Plana must establish that one of the exceptions to the statute of frauds applies in order to survive the motion to dismiss.
Plana relies on two exceptions to the statute of frauds: estoppel and partial performance. Plana first argues that "Defendants are estopped from asserting the statute of frauds as a means to skirt their contractual obligations." (Pl.'s Opp'n at 14.) Under Maryland law, "detrimental reliance can remove a case from the statute of frauds." Pavel Enters., Inc. v. A.S. Johnson Co., Inc., 674 A.2d 521, 532 n. 28 (Md. 1996). To establish promissory estoppel, and thus remove the case from the statute of frauds, the plaintiff must demonstrate:
1. a clear and definite promise; 2. where the promisor has a reasonable expectation that the offer will induce action or forbearance on the part of the promisee; 3. which does induce actual and reasonable action or forbearance by the promisee; and 4. causes a detriment which can only be avoided by the enforcement of the promise.
Id. at 532; see also Union Trust Co. of Maryland v. Charter Med. Corp., 663 F. Supp. 175, 178 (D.Md. 1986). Plana has clearly alleged that defendants made a clear and definite promise to him that he would be director of the Long Beach Air Show and would be compensated a certain amount for undertaking that role. (Compl. ¶¶ 15, 19.) Plana further alleges that defendants knew he would rely upon that promise and that he did, in fact, rely upon that promise. (See, e.g., id. ¶¶ 16, 18, 21, 24, 25, 29, 30, 33-35.) Finally, Plana alleges that he was never compensated for his work on the Long Beach air show and removed as director of the show. (Id. ¶ 34, 35.)
Accordingly, claim one will not be dismissed because of the statute of frauds. Plana's allegations are sufficient to establish that estoppel may apply.
Although the allegations of promissory estoppel are sufficient to deny the motion to dismiss, I will briefly address the second exception relied upon by Plana — partial performance.
The doctrine of part performance is premised upon the notion that to allow a party to escape his performance of an oral agreement after he has permitted the plaintiff to perform in reliance on both the agreement and the defendant's inducements would effect a fraud upon the plaintiff. We note that part performance is not a substitute for the writing required by the Statute but rather, it may be viewed as a means to estop the defendant from asserting the Statute as a defense.
Friedman Fuller, 666 A.2d at 1306-07; see also Mann v. White Marsh Props., Inc., 581 A.2d 819, 822 (Md. 1990); Collins v. Morris, 716 A.2d 384, 390 (Md.Ct.Spec.App. 1998). The Statute of Frauds "is not satisfied by part performance based upon acts that are equivocal as to the existence of a contract." Mann, 581 A.2d at 822. Indeed, "the part performance itself `must furnish evidence of the identity of the contract; and it is not enough that it is evidence of some agreement, but it must relate to and be unequivocal evidence of the particular agreement. . . .'" Beall v. Beall, 434 A.2d 1015, 1019 (Md. 1981) (quoting Semmes v. Worthington, 38 Md. 298, 326-27 (1873) (emphasis omitted)).
Here, Plana has alleged a significant number of actions he took on behalf of the defendants in furtherance of the Long Beach air show. None of these actions, however, unequivocally establish Plana's alleged compensation or that Plana was to direct the Long Beach air show. In fact, Plana's actions could merely mean that he was trying to impress defendants so that they would hire him as the director. The fact that Plana's actions are "susceptible of a variety of interpretations" causes Plana's reliance on the doctrine of part performance to fail. Friedman Fuller, 666 A.2d at 1307; Semmes, 38 Md. at 326.
IV.
Defendants next seek to dismiss Plana's claim for inducing breach of contract.
[T]he two general types of tort actions for interference with business relationships are inducing the breach of an existing contract and, more broadly, maliciously or wrongfully interfering with economic relationships in the absence of a breach of contract. The principle underlying both forms of the tort is the same: under certain circumstances, a party is liable if he interferes with and damages another in his business or occupation. The two types of actions differ in the limits on the right to interfere which will be recognized in either case. Thus, where a contract between two parties exists, the circumstances in which a third party has a right to interfere with the performance of that contract are more narrowly restricted. A broader right to interfere with economic relations exists where no contract or a contract terminable at will is involved.
Natural Design, Inc. v. Rouse Co., 485 A.2d 663, 674 (Md. 1984) (footnote omitted); see also Prof'l Staff Nurses Ass'n v. Dimensions Health Corp., 677 A.2d 87, 94 (Md.Ct.Spec.App. 1996), aff'd, 695 A.2d 158 (Md. 1997).
"[T]he defendant tortfeasor cannot be a party to the contractual or economic relations with which he has allegedly interfered." Travelers Indem. Co. v. Merling, 605 A.2d 83, 89 (Md. 1992); see also K K Mgmt. v. Lee, 557 A.2d 965, 973-74 (Md. 1989); Ronald M. Sharrow, Chartered v. State Farm Mut. Auto. Ins. Co., 511 A.2d 492, 497 (Md. 1986); Natural Design, Inc., 485 A.2d at 674; Wilmington Trust Co. v. Clark, 424 A.2d 744, 754 (Md. 1981) ("[T]here is no cause of action for interference with a contract when suit is brought against a party to the contract.").
Likewise, "[i]f the actor who is interfering with the relationship is an agent of one of the actors in the relationship, their claim for tortious interference fails." Byington v. Vega Biotechnologies, Inc., 869 F. Supp. 338, 342-43 (D.Md. 1994).
Plana concedes that his allegation is "that he has an enforceable agreement with both exsportise and ShoreSales." (Pl.'s Opp'n at 19 (emphasis omitted).) Plana also concedes that DDR is a 50% owner in ShoreSales. (Id.) Such ownership, however, does not make DDR a party to the alleged agreement. Moreover, Plana alleges that DRR induced a breach of the agreement for the purpose of increasing DDR's share of the revenues, rather than ShoreSales share. (Comp. ¶ 43.) Based on this allegation, Count II will not be dismissed.
V.
Defendants next seek to dismiss Plana's claim for fraud on the basis that the oral agreement is unenforceable and that Plana knew he could not rely on the alleged oral contract. This argument fails. As discussed above, the oral agreement may be enforceable. Further, Plana alleges more than a "bald allegation of fraud" in his complaint. (See, e.g., Compl. ¶¶ 27-28, 35, 51-54.) Accordingly, the motion will be denied as to Count III.
Kwang Dong Pharm. Co. v. Hahn, 205 F. Supp.2d 489 (D.Md. 2002), which defendants rely upon in arguing that Plana's allegations of fraud are insufficient, is distinguishable. In Kwang Dong Pharm., the plaintiff "failed to allege any specific facts, only his general assertions that [Defendant] never intended to honor the Agreements it signed with [Plaintiff]." Id. at 495. In this case, Plana has alleged specific facts to support his fraud claim, including, that the DD 2535 identified Plana as the point of contact, when, in fact, defendants had no intention of making him the director of the air show and that George delayed until after the DD 2535 had been submitted until he presented Plana with the proposed written agreement.
Defendants also seek to dismiss Plana's claim for negligent misrepresentation. Under Maryland law,
the elements that constitute the tort of negligent misrepresentation are: (1) The defendant, owing a duty of care to the plaintiff, negligently asserts a false statement; (2) The defendant intends that his statement will be acted upon by the plaintiff; (3) The defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury; (4) The plaintiff, justifiably, takes action in reliance on the statement; and (5) The plaintiff suffers damages proximately caused by the defendant's negligence.
Law v. Int'l Union of Operating Engineers Local No. 37, AFL-CIO, 818 A.2d 1136, 1145 (Md. 2003). The alleged false statements made by defendants were promises and representations that Plana would be a partner in the Long Beach air show; would be a director of the air show; and would be paid $100,000, plus 20% of any sponsorship fees that Plana brought in, plus 10% of the amount, if any, by which the final cost of the Long Beach air show was less than the agreed-upon budget. (Compl. ¶¶ 52, 58.) These alleged false statements "are the same predictive or promissory statements cited in support of the fraud/deceit/intentional misrepresentation claim." Miller v. Fairchild Indus., Inc., 629 A.2d 1293, 1304 (Md.Ct.Spec.App. 1993). Because the alleged false statements are predictive or promissory ones, Plana must show that they were made with the present intention not to perform. Id. "But any promise that is made with the present intention not to perform or any prediction that is made with present knowledge that the predicted event will not occur is, perforce, an intentional misrepresentation, not a negligent one, and thus cannot sustain an action for negligent misrepresentation." Id. Accordingly, Count IV will be dismissed.
VI.
Plana also asserts a claim for misappropriation. In arguing that Maryland recognizes a such a claim, Plana relies solely on GAI Audio of New York, Inc. v. Columbia Broadcasting Sys., Inc., 340 A.2d 736, 747 (Md.Ct.Spec.App. 1975). In GAI, the Maryland Court of Special Appeals, relying on Int'l News Serv. v. Assoc. Press, 248 U.S. 215 (1918), stated that the elements of a misappropriation claim are: "(1) time, labor, and money spent in the creation of the thing misappropriated, (2) a competitive relationship between plaintiff and defendant and (3) commercial damage to the plaintiff." GAI, 340 A.2d at 747.
In discussing the common law claim for misappropriation, the Ninth Circuit noted:
The vagueness of the elements of common law misappropriation has engendered various preemption analyses. For example, in Warner Bros. v. American Broadcasting Cos., 720 F.2d 231, 247 (2d Cir. 1983), the court stated unequivocally: "state law claims that rely on the misappropriation branch of unfair competition are preempted." Nimmer generally concludes that misappropriation that "consisted simply of the acts of reproduction and distribution . . . undoubtedly constitutes a right within the general scope of copyright as specified by 17 U.S.C.S. section 106." 1 Nimmer on Copyright, § 1.01[B][1] at 1-20.3. At least one court, however, has found no preemption of misappropriation. See Sargent v. American Greetings Corp., 588 F. Supp. 912, 924 (N.D.Ohio. 1984).
Summit Mach. Tool Manuf. Corp. v. Victor CNC Sys., Inc., 7 F.3d 1434, 1441 (9th Cir. 1993) (alterations omitted). The Court in Summit Mach. further explained that to remove a case from preemption by federal copyright and patent law, the misappropriation claim must allege an "extra element," such as, an alleged breach of fiduciary duty, alleged breach of a confidential relationship, or the alleged palming off of the defendant's products as those of its competitor. Id.
California misappropriation law also finds its origin in Int'l News Serv. and contains the exact elements recited in GAI.
I find the reasoning of Summit Mach. to be persuasive. Therefore, because Plana has not alleged an "extra element," but rather simply alleges that the defendants appropriated and used his "work product" without his consent, Count V will be dismissed.
VII.
Finally, Defendants move to strike Plana's claim for unfair competition. That competition claim is brought pursuant to Cal. Bus. Prof. Code § 17200. As discussed above, Maryland law, rather than California law, applies to this litigation. Accordingly, Plana's sixth claim will be dismissed. I will, however, grant Plana leave to amend his complaint in order to bring an unfair competition claim pursuant to Maryland law, if he deems such an amendment appropriate.
A separate order is being entered herewith.
ORDER
For the reasons stated in the accompanying memorandum, it is, this 14th day of July 2003
ORDERED that
1. Defendants' motion to dismiss Counts I-V is granted in part and denied in part;
2. Counts IV, and V are dismissed; and
3. Defendants' motion to strike Count VI is granted with leave to amend.