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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : SWEDISH CIVIL AVIATION ADMIN. : v. : Civil Action No. DKC 2001-1507

: PROJECT MANAGEMENT ENTERPRISES, INC. : MEMORANDUM OPINION Presently pending and ready for resolution in this breach of contract and fraud case is the motion of the Defendant, Project Management Enterprises, Inc. ("PMEI"), to dismiss all counts

against it pursuant to Fed R. Civ. P 12(b)(6) for failure to state a claim, and in part for failure to plead fraud with specificity under Fed. R. Civ. P. 9(b). The issues have been fully briefed and Local Rule 105.6. For reasons

no hearing is deemed necessary.

that follow, PMEI's motion to dismiss will be granted in part and denied in part. I. Background The following facts are alleged by Swedish Civil Aviation Administration ("SCAA") in its complaint. SCAA is the state

enterprise in charge of the safety and oversight of civil aviation in Sweden. Pursuant to urging by the International Civil Aviation ("ICAO"), a regulatory body which develops

Organization

international aviation safety standards, SCAA began to develop a concept utilizing new technology whereby aircraft transmit their positions from a receiver on board the aircraft over a radio data

link with or without the support of ground stations.

This new

technology, named VDL Mode 4 by ICAO, is radically different from the ground-based radar air traffic control systems currently in operation. If properly implemented, SCAA alleges that VDL Mode 4

technology would replace the current navigation and surveillance infrastructure, thereby improving traffic flows and safety while reducing costs. From 1990-1994, SCAA verified, refined and tested the

prototype VDL Mode 4 technology, sponsoring several demonstrations for the international aviation community. After responding

positively to these demonstrations, several international aviation entities requested in 1994 that SCAA create international standards for the technology through ICAO so that the technology could be implemented throughout the world. ICAO, formed under the auspices of the United Nations,

consists of 185 member states, including the United States. One of the primary activities of ICAO is to implement international standards and recommended practices and procedures for the

technical fields of aviation.

ICAO develops these standards

through expert panels and working groups comprised of the member states. has When a working group determines that a draft standard it is sufficiently comprehensive after debate and

developed

revisions, it refers the draft standard to an ICAO Validation Subgroup ("VSG") which further reviews and validates the standard,

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ultimately submitting it to the ICAO Secretariat.

The Secretariat

circulates the draft standard to the member states for comments and subsequently to the ICAO Council for a vote to approve it. Upon

approval, the standard is incorporated into the appropriate Annex to the CONVENTION
ON

INTERNATIONAL CIVIL AVIATION.

Each ICAO member state

is free to implement the standard in its own territory or provide notice to ICAO of the differences between its standard and that of ICAO. In late 1994, after deciding to attempt to standardize its version of the VDL Mode 4 technology through the ICAO process, SCAA determined that it would need to retain an English-speaking

confidential consultant to help draft submissions to the ICAO working group and assist SCAA with the ICAO process. SCAA

interviewed a number of technical consulting firms to determine which best possessed the requisite technical expertise in air traffic control technology and familiarity with the ICAO

standardization process. One of the firms SCAA interviewed was PMEI, a Bethesda, Maryland consulting firm whose president is Prasad Nair. SCAA had

become familiar with him during ICAO meetings in the early 1990's. At that time, Nair was a member of the United States Federal Aviation Administration ("FAA") delegation to ICAO. In late 1994

and early 1995, Johnny Nilsson of SCAA interviewed Nair several times. Nair, who articulated the merits of and expressed his

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support for the new VDL Mode 4 system he had witnessed in Sweden, emphasized PMEI's expertise in aviation communications systems and its familiarity with the ICAO process. Nair represented to SCAA that PMEI could provide valuable and unique confidential consulting and technical support services with respect to drafting the standard for VDL Mode 4 technology and advancing SCAA's position in the ICAO standardization process. Relying on PMEI's representations, SCAA accepted PMEI's proposal to provide confidential consulting and technical support in a January 23, 1995, letter from Kenneth Eideberg of SCAA to Nair. The

parties agreed that the information provided and the work performed would be kept confidential. On January 28, 1995, Nilsson and Dr. Hakan Lans, the inventor of the VDL Mode 4 technology, both representing SCAA, met with Nair at PMEI's offices in Bethesda to conduct a "project launch

meeting."

At this meeting, the parties agreed to the scope and

content of materials to be drafted and submitted to ICAO, including an agreement that PMEI would prepare the initial draft standards and recommended practices and guidance materials for SCAA's review. The parties agreed that they would review and refine those

materials through discussion, with PMEI acting in confidence and in a manner that would further SCAA's interests. In a February 15, 1995, letter from Nair to Eideberg, PMEI presented SCAA with a description and schedule of its immediate

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tasks and requested an advance payment to cover costs for its initial work and expenses. PMEI informed SCAA it would bill on a

monthly basis and that payment would be due within 30 days of receipt of PMEI's invoices. schedule. SCAA and PMEI met several times to review and discuss SCAA began paying PMEI on this

developmental aspects of the VDL Mode 4 technology. course of these and a conversations, relationship SCAA and SCAA of provided and

During the confidential respect

information developed

trust Using

mutual

between PMEI

PMEI. draft

this and

confidential recommended After a

information,

prepared

standards

practices and attended ICAO working groups and meetings.

May 1995 ICAO meeting in which the ICAO panel established the process for drafting international standards for the VDL Mode 4 technology, PMEI submitted a proposed budget to SCAA laying out anticipated fees and expenses arising from its continued consulting services. PMEI performed as a confidential consultant through

1995, 1996, and 1997 in order to support SCAA's efforts to gain standardization of its technology, gaining access to these working groups by virtue of its status as an SCAA representative. During this time, SCAA routinely shared confidential information with PMEI and PMEI presented papers and working materials to SCAA for review prior to presentation before the ICAO working groups.

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In April 1997, the ICAO working group determined that the draft standards for the VDL Mode 4 technology sponsored by SCAA were sufficiently mature to be verified and validated by an ICAO VSG. The complaint then alleges that, beginning in late 1997 and 1998, PMEI failed to provide SCAA with copies of the draft

standards and working materials in a timely manner prior to their submission to the ICAO VSG, thereby prohibiting SCAA's ability to review and approve documents in advance. At the same time, PMEI

began to undermine SCAA's position in the ICAO process by inserting its own unapproved changes and analyses into the draft standards and working materials submitted to the VSG. Further, PMEI publicly advocated positions at ICAO sessions that it knew to be contrary to the positions advocated by SCAA and, SCAA alleges on information and belief, made disparaging comments and remarks to other ICAO members about the fundamental technology underpinning the SCAA sponsored VDL Mode 4 technology. SCAA alleges that PMEI began using confidential information it gained from its consultant relationship with SCAA to begin

preparation for manufacturing and selling equipment using VDL Mode 4 technology and, from 1997 to the present, has provided pricing information for such equipment PMEI to airlines an and aviation company,

manufacturers.

Further,

created

affiliated

Aviation Data System Innovations, LLC ("ADSI"), to produce and

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market the VDL Mode 4 related equipment and computer software. This equipment and software was developed using the confidential information provided by SCAA to PMEI. Nair, PMEI's president, is

also the president of ADSI, which operates out of PMEI's Bethesda office. Through 1998, PMEI continued to undermine SCAA's position in the ICAO standardization process by altering the SCAA sponsored technical concept through the advocacy of what SCAA characterizes as unnecessary changes to the developing standard. For example,

during a May 24-28, 1998, VSG meeting, PMEI advocated for the incorporation of a "rapid net entry" conceptual element into the draft ICAO standard for VDL Mode 4 technology despite SCAA's objection to the inclusion of the concept. Rapid net entry

significantly altered and diminished SCAA's original concept for the technology. In a December, 1998, VSG meeting, PMEI specifically and deliberately opposed an SCAA proposal concerning a particular ground synchronization method and, when pressed by SCAA to explain its position, stated that it was not at liberty to explain its position or actions. SCAA was forced to expend time and resources

to respond to PMEI's allegations disparaging its version of the VDL Mode 4 technology, in addition to the $2,066,544.21 it paid to PMEI for consulting services between January 1995 and January 1999.

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Since proceedings

January through

1999, its

PMEI

has

remained and sale

privy of VDL

to

ICAO 4

manufacture

Mode

technology, an activity SCAA alleges was made possible solely by the confidential information provided to PMEI by SCAA. alleges that PMEI attempted to hinder the feasibility SCAA and

marketability of SCAA's original VDL Mode 4 technology by delaying the standardization process through the introduction of numerous changes to the original concept. PMEI did this, SCAA alleges, so

that it could profit from the marketing of its competing version of the technology and by providing consulting services to other international aviation entities. SCAA brings a thirteen count complaint alleging breach of contract, fraud, and a variety of quasi-contract and tort claims based on the factual allegations set forth above. PMEI moves to dismiss all counts. II. Standard of Review A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) ought not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." (1957). Conley v. Gibson, 355 U.S. 41, 45-46 In response,

All that the Federal Rules of Civil Procedure require of

a complaint is that it contain "`a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley

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v. Gibson, 355 U.S. 41, 47 (1957); Comet Enters. Ltd. v. Air-APlane Corp., 128 F.3d 855, 860 (4th Cir. 1997). "Given the Federal

Rules' simplified standard for pleading, `[a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the

allegations.'" Swierkiewicz v. Sorema N.A., 534 U.S. __ ,__ , 122 S.Ct. 992, 2002 WL 261807 (2002), Spalding, 467 U.S. 69, 73 (1984). In reviewing the complaint, the court accepts all well-pled allegations of the complaint as true and construes the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff. Cir. 1997). Ibarra v. United States, 120 F.3d 472, 473 (4th quoting Hishon v. King &

The court must disregard the contrary allegations of A.S. Abell Co. v. Chell, 412 F.2d 712, 715

the opposing party. (4th Cir. 1969).

The court need not, however, accept unsupported

legal conclusions, Revene v. Charles County Comm'rs, 882 F.2d 870, 873 (4th Cir. 1989), legal conclusions couched as factual

allegations, Papasan v. Allain, 478 U.S. 265, 286 (1986), or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). III. Analysis SCAA alleges that PMEI misrepresented itself to SCAA in order to gain access to confidential information relating to SCAA's 9

version of VDL Mode 4 air traffic technology.

Further, SCAA

alleges that PMEI used this information for its own purposes, including engaging in other consulting contracts, marketing and selling its own VDL 4 software and hardware, and seeking ICAO approval of its own system while purportedly representing SCAA's interest before the ICAO. All of SCAA's claims against PMEI arise

out of (1) representations of PMEI which allowed it to create a relationship with SCAA and gain access to confidential information, (2) PMEI's alleged misuse of this information, and (3) PMEI's alleged failure to disclose conflicts of interest between its independent marketing of alternative technology and its

relationship with SCAA.

A.

Breach of Contract and Quasi-Contract claims 1. Breach of Contract (Count IV)

PMEI contends that SCAA's pleading is insufficient because the complaint merely alleges that PMEI was obligated to provide SCAA with confidential consulting, but does not allege that PMEI

breached this obligation.

Further, PMEI

seeks to establish that

it has not violated the plain language of a "Letter Agreement" in which Eideberg references earlier discussions of the parties

leading to an agreement.

Paper no. 11, at 3.

Whether these or any

other provisions are part of the contract has yet to be determined, but SCAA's allegations as to what constituted the contract and its

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breach are sufficient to state a claim.

In order to survive a

motion to dismiss, a complaint for breach of contract must allege facts showing a contractual obligation owed by the defendant to the plaintiff and a breach of that obligation by the defendant.

Continental Masonry Co., Inc. v. Verdel Constr. Co., Inc., 279 Md. 476, 480 (1977). At this stage, SCAA does not have to forecast

evidentiary support for its allegations. SCAA alleges that there was a contractual agreement reached by the parties in 1995 whereby PMEI agreed to provide SCAA with confidential consulting and aid SCAA in its efforts to gain an ICAO standard for its technology. The complaint further alleges that as of 1998, PMEI breached the contract by failing to provide the contracted for consulting services, by undermining SCAA's efforts to gain ICAO approval for it its had technology, gained in the and by sharing of the

confidential

information

course

consulting relationship with other parties.

Furthermore, PMEI

asserts that it is insufficient for the complaint to allege that PMEI, "engag[ed] in activities that directly undermined the

purpose, spirit, and benefit of the services it was contractually obligated to provide to SCAA." Complaint, at

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