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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND QUALITY SYSTEMS, INC. v. SAMUEL WARMAN, ET AL : : : : :

CIVIL NO. L-99-2658

MEMORANDUM This is a suit between competitors. Plaintiff, Quality

Systems, Inc. ("QSI")1, contends that Defendant, Windermere2, engineered a mass raid on QSI's workforce and customers. Defendants,

in turn, contend that Plaintiff defamed and competed unfairly against them. Extensive discovery established that neither the Complaint nor Accordingly,

the Counterclaim are strong enough to warrant a trial.

for the reasons stated below, the Court will by separate order: (i) GRANT Defendants' Motion for Summary Judgment; and (ii) GRANT Counterclaim Defendants' Motion for Summary Judgment. I. A. Background The Parties QSI and Windermere both supply technical personnel to United States defense, aerospace, and intelligence agencies, including the National Security Agency ("NSA"). The agencies typically obtain

personnel by contacting a central government agency, the Maryland

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QSI is a Virginia corporation that employs over 1,000 employees.

Windermere owns both WITS and Windermere HDS, LLC. WITS performs predominantly the same type of services as its parent Windermere, and employs approximately 165 employees.

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Procurement Office ("MPO").

The MPO obtains personnel through a QSI and Windermere are

network of contractors and subcontractors. two such subcontractors.

Although the staffers physically work at the government agency, often for years, they remain employees of the subcontractor. The

subcontractor bills the contractor (or the MPO) for the staffer's services at a contract rate. salary and benefits. The subcontractor pays the staffer's

In any given project, the staffers may be

supervised by the government agency or the subcontractor. This case concerns two contracts, IISS and SWIFT, that MPO uses to obtain technology staff for the NSA. To recruit personnel for

NSA, MPO entered into a prime contract with Computer Sciences Corporation ("CSC"). CSC, in turn, utilizes a number of

subcontractors to provide NSA with technology workers.3 The subcontractors will submit resumes of potential staffers to CSC. CSC will vet the resumes and submit the appropriate candidates The MPO makes the ultimate decision about whom to hire

to the MPO.

for a particular position. Defendant David Warman was a manager at QSI. Warman tendered

his resignation on July 1, 1999; his last day at QSI was July 7, 1999. Warman began working at Windermere on July 7th. While at QSI,

Warman supervised the other individual Defendants, all of whom were managers:
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Bernard Bigelow, Robert George, Richard Hippert, Timothy

Neither QSI nor Windermere have an exclusive contract with CSC to work on the IISS or the SWIFT contract. 2

Johnson, Ronaldo Serrano, and Albert Villines.

This close-knit group

was colloquially known within QSI as the "Friends of Dave." Within six weeks of Warman's departure, the other individual Defendants had all left QSI to join Windermere. After the departure

of the Individual Defendants, 31 non-managerial, technical employees also left QSI for Windermere. None of the Individual Defendants or

non-managerial staff had signed either an employment contract with QSI or a covenant-not-to-compete. B. Procedural History QSI filed suit in August 1999. Along with the Complaint, QSI

filed a motion for a Temporary Restraining Order and a Preliminary Injunction. QSI primarily alleged that Warman, before leaving his

employment at QSI: (i) breached a duty of loyalty by orchestrating a mass defection of QSI employees and soliciting business for Windermere; and (ii) misappropriated trade secrets. Windermere and Warman deny these allegations. Warman contends

that prior to his departure he did not contact QSI employees about working for Windermere. The Defendants maintain that neither Warman

nor the other individual Defendants solicited business for Windermere while on the QSI payroll. any QSI trade secrets. In November 1999, the Defendants filed a counterclaim alleging (i) defamation, and (ii) tortious interference with contractual relations. In their counterclaim, Defendants contend that QSI spoke They also assert that they did not take

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disfavorably about Windermere to QSI employees and customers in order to dissuade them from associating with Windermere. Plaintiffs maintain that even if they made the alleged statements, (i) the statements were not defamatory; (ii) the statements were true; and (iii) Defendants cannot prove they were injured by the statements. On November 17, 1999, the Court held a hearing on the motion for a preliminary injunction. parties proceeded to discovery. In May 2000, Defendants and the Counterclaim Defendants filed motions for summary judgment. On January 29, 2001 and February 5, The Court denied the motion and the

2001, the Court heard oral argument. C. The Hearing The facts developed at the summary judgment hearing establish the following: (i) QSI cannot demonstrate that the Defendants took any trade secrets with them when they left, or that Defendants have misused any trade secrets in operating Windermere. Moreover, most, if not all,

of the information allegedly misappropriated does not qualify as a trade secret. (ii) In exiting QSI, neither Warman nor the other Defendants improperly raided QSI's workforce. (iii) Before leaving QSI, several of the individual Defendants were in contact with QSI customers. There is no evidence, however,

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from which a reasonable jury could conclude that the contacts played any part in a customer's decision to withhold business from QSI or give business to Windermere. (iv) The statements made by QSI manager William Shernit were not defamatory. Windermere has offered no evidence that the In fact, at the hearing, counsel for

statements caused damage.

Windermere stated that QSI's heavy-handed reaction to the employee resignations alienated many QSI staffers, prompting them to quit QSI and seek jobs at Windermere. II. Summary Judgment Standard The Court may grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp.

v. Catrett, 477 U.S. 317, 322-23 (1986); see also Felty v. GravesHumphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987) (recognizing that trial judges have "an affirmative obligation" to prevent factually unsupported claims and defenses from proceeding to trial). In determining whether there is a genuine issue of material fact, the Court must view the facts, and all reasonable inferences to be drawn from them, in the light most favorable to the non-moving party. Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 The Court must take care not to foreclose trial

(4th Cir. 1987).

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when the case presents genuinely disputed, material facts. Nevertheless, as the Fourth Circuit made clear in Thompson Everett, Inc. v. National Cabe Advertising, L.P, 57 F.3d 1317, 1322 (4th Cir. 1995), (i) "the mere existence of some disputed facts does not require that a case go to trial," (ii) "[t]he disputed facts must be material to an issue necessary for the proper resolution of the case," and (iii) "the quality and quantity of the evidence offered to create a question of fact must be adequate to support a jury verdict." Id. at 1323 (citations omitted)(emphasis added).4 Further, the complexity of a case does not make summary judgment inappropriate. To the contrary, Rule 56 may prove a

particularly appropriate and useful tool for sorting out the "unusual entanglement of legal and factual issues frequently presented in [complex cases such as] antitrust cases... [and] is favored as a mechanism to secure the just, speedy and inexpensive determination of a case, when its proper use can avoid the cost of trial." 1322 (citations omitted). The essential question is whether a reasonable fact finder could return a verdict for the non-movant or whether the movant Id. at

Thus, "if the evidence is merely colorable or not significantly probative, it may not be adequate to oppose entry of summary judgment.... While we have recognized generally that when considering a motion for summary judgment, the district court must draw any permissible inference from the underlying facts in the light most favorable to the party opposing the motion, we hasten to add that those inferences must, in every case, fall within the range of reasonable probability and not be so tenuous as to amount to speculation or conjecture." Thompson Everett, 57 F.3d at 1323 (citations omitted)(emphasis added). 6

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would, at trial, be entitled to judgment as a matter of law.

See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970); Shealy v. Winston, 929 F.2d 1009, 1012 (4th Cir. 1991). III. A. Analysis Breach of Loyalty In every employment contract, there is an implied duty that an employee must act solely for the benefit of his employer in all matters within the scope of his employment. See Maryland Metals v. Metzner, 382 A.2d 564, 567 (Md. 1978). There is no set rule denoting

when an employee has breached his fiduciary duty; rather, a court must examine the facts of each particular case. In analyzing the

facts of the instant case, it is helpful to see what other courts have considered to be a breach of loyalty. An employee is free to search for another job prior to leaving his current position. See id. at 569. A group of employees may

agree to leave together, such as when a partner at a law firm leaves with his associates. (1957). See Restatement (Second) of Agency

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