Preview:

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1226 September Term, 1995

JEFFREY W. LUBORE

v.

RPM ASSOCIATES, INC., ET AL.

Moylan, Davis, Murphy, JJ. Opinion by Davis, J.

- 2 -

Filed: April 4, 1996

This is an appeal from a June 15, 1995 order of the Circuit Court for Montgomery County granting a motion to dismiss. Three

questions are presented on this appeal; we restate (and rearrange) them as follows: I. Did the circuit court err in motion to dismiss for failure claim upon which relief can with respect to appellant's breach of contract? Did the circuit court err in motion to dismiss for failure claim upon which relief can with respect to appellant's fraud and deceit? granting a to state a be granted claim for granting a to state a be granted claim for granting a to state a be granted claim for

II.

III. Did the circuit court err in motion to dismiss for failure claim upon which relief can with respect to appellant's negligent misrepresentation?

We respond in the negative to the first question and in the affirmative to the second and third questions. We, therefore,

affirm in part and reverse and remand in part the judgment of the circuit court.

FACTS
On April 12, 1995, appellant Jeffrey M. Lubore filed a

complaint in the Circuit Court for Montgomery County against appellees RPM Associates, Inc. (RPM), a Maryland corporation, and Robert P. Miller, Jr. (Miller), president of RPM. complaint contained three counts: Appellant's

Count I for "Fraud and Deceit,"

- 2 Count II for "Negligent Misrepresentation," and Count III for "Breach of Contract." Given the procedural posture of this case,

the following facts are taken directly from appellant's complaint. On several occasions during the fall of 1993 and summer of 1994, appellant and Jeffrey A. Simpson, a manager and part owner of RPM, discussed RPM's growth and its future need to employ a marketing and sales executive. These discussions culminated with

Simpson asking appellant whether he would be interested in a position with RPM, directing business development operations,

beginning on January 1, 1995.

On September 14, 1994, appellant and

appellee Miller met while attending a trade show in Atlanta, at which time they discussed the prospect of appellant working for RPM. In early December 1994, appellant and Miller met for lunch and discussed an outline of an employment contract. luncheon, Miller told appellant that he knew During this appellant was

currently employed in a lucrative position with another company, and that appellant would have to be offered a substantial equity position in RPM in order to leave his current employer. The two

then proceeded to discuss the structure of a compensation and equity package, and the nature of appellant's duties. Ultimately,

it was agreed that there would be a follow-up meeting between appellant, Miller, and Simpson.

- 3 That follow-up meeting was held in late December 1994, when appellant, Miller, and Simpson discussed salary, a benefits

package, and an equity stake in RPM.

The three men also discussed At the

appellant's responsibilities should he accept the position.

conclusion of their meeting, Miller agreed to confirm an offer of employment in writing. On January 19, 1995, appellant met with Miller for a third time. They again discussed compensation and duties of the

position.

Two days later, on January 21, 1995, Miller faxed a

written offer of employment to appellant, offering him the position of "Business Development Vice President," in accordance with the terms discussed at the late December and January 19 meetings. The

offer reflected a base salary of $150,000 with a sales bonus of 4% of revenue, and equity terms, among other things, as follows: vest after 15 months," and "3% option after 36 months." "2%

The offer

also contained a "Projected Year 1" total salary of $310,000, and a "Projected Year 2" total salary of $470,000. The next day, on January 22, 1995, appellant responded to the offer by fax. Appellant's fax response stated that the "offer

looks great," but informed Miller that there were some further questions. telephone. Later that day, appellant and Miller spoke on the During their conversation, after Miller clarified the

terms and conditions of the offer, appellant "formally accepted"

- 4 the offer. They agreed to a March 1, 1995 start date. Also during

this conversation, Miller requested that appellant begin working on a business development plan to be completed on March 1, 1995. Following the telephone conversation of January 22, 1995, appellant resigned from his current employer, effective January 31, 1995. Miller knew that appellant would resign effective January

31, 1995, because this was also discussed during their January 22, 1995 telephone conversation. Indeed, when appellant informed

Miller that he would resign on January 31, 1995 because he wanted to take a month off before starting with RPM on March 1, 1995, Miller responded that taking a month off was a "`great idea.'" Between January 22, 1995 and February 15, 1995, appellant placed several telephone calls to Miller, requesting a letter "reaffirming the terms of the offer of employment by RPM and [appellant's] acceptance of that offer." On February 15, 1995,

Miller sent a letter by fax to appellant "memorializing the terms of RPM's previous offer of employment . . . as modified by The

[appellant] and Miller's January 22, 1995 oral agreement." opening portion of this letter reads: As promised, here is a letter outlining the offer to you from RPM Associates, Inc. As you understand, the purpose of this letter is to reach agreement on terms under which you will come to work for RPM Associates. I am looking forward to you joining RPM Associates. Here is the outline of my offer:

- 5 Miller's letter concluded: "Finally, there is a contract that must

be signed by each employee." On March 1, 1995, appellant began working for RPM. At 5 p.m.

on the next day, appellant received by fax a fifteen-page document entitled "Employment Agreement." According to appellant, the

Employment Agreement, and many of its terms, were not previously disclosed to him. The Employment Agreement contains, among other

things, new terms and provisions that we restate as follows: (1) (2) (3) A $1,000,000 provision; liquidated damages

A provision allowing RPM to terminate appellant's employment at will; A provision allowing RPM to decrease the part of appellant's compensation based on revenue at RPM's sole discretion; A provision allowing RPM to assign the agreement and to convert it from an employment at will agreement to a twoyear term agreement in the event of a company consolidation, merger, or tender offer; and An extensive non-competition and nonsolicitation clause covering a large geographic area pertaining to existing, previous, and prospective clients, and precluding him from working for a period of time in the field of network integration services or any other business similar to that engaged in by RPM.

(4)

(5)

From March 1, 1995 to March 23, 1995, appellant "continued to work for RPM, and at the same time attempted to resolve the

- 6 disagreement regarding RPM's attempt to modify the terms of the January 22, 1995 employment agreement." On March 23, 1995,

however, Miller informed appellant that because appellant refused to sign the Employment Agreement "`as is,'" the employment offer was "`rescinded.'" Later that day, Miller sent appellant a letter

by fax terminating appellant's employment. After alleging the foregoing facts, appellant's complaint set forth a claim for fraud and deceit (Count I). pertinent part, reads: During the course of negotiations, [appellant] and Miller agreed to the terms pursuant to which [appellant] would be willing to leave his lucrative position with CommVision and accept employment with RPM. Ultimately, these terms were memorialized in a letter which Miller transmitted on behalf of RPM to [appellant] on February 15, 1995 (Exhibit "D"). 19. Prior to [appellant's] acceptance of RPM's offer of employment, Miller and RPM failed to disclose to [appellant] that they intended to condition his employment with RPM upon his acceptance of a fifteen (15) page document entitled Employment Agreement which contained additional unconscionable terms . . . 20. [Appellant] relied on the belief that Miller and RPM intended to honor the employment agreement of January 22, 1995 as memorialized in the February 15, 1995 letter (Exhibit "D"), and he was justified in his reliance. This count, in

- 7 21. As a result of Miller and RPM's fraud and deceit, [appellant] has suffered damages. 22. Miller and RPM's concealment of the additional unconscionable terms upon which they intended to condition [appellant's] continued employment with RPM was willful, intentional and malicious. The complaint also alleges a claim for negligent

misrepresentation (Count II), as follows: 24. Miller and RPM owed [appellant] a duty of care and made misrepresentations of material facts to [appellant], including but not limited to: (1) that RPM intended to employ [appellant] pursuant to the terms and conditions set forth in Miller's facsimile transmission of January 21, 1995 (Exhibit "A"), as orally modified and accepted by [appellant] on January 22, 1995, and reaffirmed by Miller in his February 15, 1995 correspondence. 25. Miller and RPM made the misrepresentations intending that [appellant] would act in reliance on them. 26. Miller and RPM knew, or should have known, that [appellant] was likely to rely on the misrepresentations, which if false would cause injury or loss to [appellant]. 27. [Appellant] reasonably relied on [appellees'] material misrepresentations. [appellant] known the truth concerning misrepresentations, he would not have left employment with CommVision. the Had the his

28. As a direct, proximate, and foreseeable result of the [appellees'] material misrepresentations, [appellant] has suffered damages . . . .

- 8 The contract. complaint finally contained a count for breach of

In this count, appellant alleged that on "January 22,

1995, RPM entered into an employment agreement with [appellant]," and that on "March 23, 1995, RPM materially breached its employment agreement with [appellant] by terminating [appellant's] employment because he refused to sign the fifteen (15) page document entitled Employment Agreement . . . which was received by him on March 2, 1995, after he had begun working for RPM." Appellant alleged that

as a result of this breach he incurred a substantial monetary loss. On May 24, 1995, in response to this complaint, appellees filed a motion to dismiss the complaint pursuant to MARYLAND RULE 2322(b)(2) for failure to state a claim upon which relief can be based. On June 15, 1995, the circuit court conducted a hearing on At the conclusion of the hearing, the circuit court

the motion.

issued a ruling from the bench granting appellees' motion to dismiss. From this ruling, appellant appeals to this Court.

- 9 -

DISCUSSION I
Before addressing the merits of this appeal, we shall first set forth our standard of review. Under MARYLAND RULE 2-322(b)(2)

(1996), a defendant may seek a dismissal on the ground that the complaint granted." fails "to state a claim upon which relief can be

When moving to dismiss, a defendant is asserting that,

even if the allegations of the complaint are true, the plaintiff is not entitled to relief as a matter of law. Hosp. Ctr., 93 Md. App. 772, 784 (1992). Hrehorovich v. Harbor Thus, in considering a

motion to dismiss for failure to state a claim, the circuit court examines only the sufficiency of the pleading. Id. "The grant of

a motion to dismiss is proper if the complaint does not disclose, on its face, a legally sufficient cause of action." Id. at 785.

This Court, therefore, shall assume the truth of all well-pleaded relevant facts as alleged in appellant's complaint and all

reasonable inferences drawn therefrom. Preserving, 340 Md. 519, 531 (1995).

Morris v. Osmose Wood Accordingly, because they

were directly taken from appellant's complaint, we shall assume the truth of the facts set forth above.

II
First, we shall determine whether the circuit court erred in dismissing appellant's breach of contract claim. As to this count,

appellees argue that appellant failed to allege properly (1) the

- 10 existence of a contract; and, in the alternative, (2) a breach of that contract. With respect to the first argument, appellees contend that a contract was never formed because appellant refused to sign the Employment Agreement. Citing Eastover Stores, Inc. v. Minnix, 219

Md. 658, 665 (1959), and Peoples Drug Stores, Inc. v. Fenton Realty Corp., 191 Md. 489, 494 (1948), appellees argue that, because the parties in the instant dispute intended to reduce their agreement to writing and intended that a manifestation of assent shall only be evidenced by their signature to the Employment Agreement, any prior oral understandings were not enforceable. Benson, 225 Md. 456, 462 (1961). Appellant disagrees, however, that such was the intent of the parties. Rather, appellant asserts that the parties merely See Binder v.

intended to memorialize a previously executed oral contract by a written document. See Peoples Drug, 191 Md. at 493. Thus,

according to appellant, whether that intent was as appellees describe it or was as appellant describes it is a factual issue that cannot be resolved on a motion to dismiss for failure to state a claim. We agree with appellant. Viewing all facts and reasonable

inferences therefrom in appellant's favor, appellant's complaint sufficiently alleged the existence of appellees' offer of

employment and appellant's acceptance of that offer.

In addition,

- 11 the reasonable inferences drawn from the facts contained in the complaint support appellant's claim that any post-contractual

writing merely was to serve as "evidence" or as a "memorialization" of a prior agreement. The complaint alleges that, on January 22,

1995, appellant "had a phone conversation with Miller during which the terms of the offer [as allegedly made in Miller's January 21, 1995 fax] were clarified by Miller and formally accepted by

[appellant]." alleged offer

Also, according to the complaint, following the and acceptance, and following appellant's

resignation, Miller sent appellant a letter on February 15, 1995 referring to "a contract that must be signed by each employee." From the chronology of these allegations, it is reasonable to infer that appellant and appellees intended the offer and acceptance to be binding, and merely intended the "contract that must be signed by each employee," to be a document -- under RPM's company policy -- memorializing that agreement. Although appellant alleged the existence of a contract, we hold that his claim must fail because he did not allege a breach of that contract. Appellees were legally entitled to terminate the

contract at any time (and, therefore, did not breach it) because it was an at-will employment contract. In other words, because

appellant was an at-will employee and not hired for a fixed period of time, RPM could terminate appellant at its pleasure. See, e.g.,

Adler v. American Standard Corp., 291 Md. 31, 35 (1981) (an at-will

- 12 employment contract "can be legally terminated at the pleasure of either party at any time."). Appellant, however, argues that appellees agreed to employ him for at least two years, and points to "a number of factors which [purportedly] support a finding that Appellant was not an at-will employee." We summarize these factors in list form as follows: (1) Appellant was hired not as a low-level employee, but as a Vice President of Business Development; Appellant's compensation included equity in RPM; Appellant and Miller discussed the longterm growth of RPM; Miller requested appellant to draft a business development plan for the purpose of organizing and categorizing those areas which directly affect business expansion in the eastern U.S. during the next nine to fifteen months; Appellant's responsibilities were to include the allegedly long-term responsibilities of "New Account Development," "Personnel Recruitment," "Marketing Strategy," and "Partnership Strategy"; Salaries and bonuses for appellant were projected for Year 1 and Year 2 of appellant's employment; "Appellant was to receive, in addition to a base salary, a sales bonus based on a percentage of revenue, obviously intended to be calculated at the end of the year."; Appellant's projected bonus compensation was a larger proportion of total compensation than was base salary,

(2) (3) (4)

(5)

(6)

(7)

(8)

- 13 allegedly "meaning that the bulk of appellant's annual salary was conditioned upon being employed at the end of each of the two years."; (9) A certain number of appellant's equity shares in RPM would vest after the first year, then a certain number more would vest after the second year;

(10) In his reply letter dated January 22, 1995, appellant stated, "I will be a major part of RPM's explosive growth over the next several years."; (11) The business plan that appellant drafted contains a proposal to increase staff over the next nine months; and (12) Appellant gave up a lucrative position with an established company to accept the position with RPM. None of these factors -- taken together or viewed individually -- indicate that the duration of appellant's position was for a specific period of time or until certain conditions occur. differently, conclude employee. from these factors was it is legally other Stated to

impossible an

that

appellant

anything

than

at-will

We explain.

It is a longstanding principle in Maryland that an indefinite hiring is prima facie a hiring at-will. Gill v. Computer Equip.

Corp., 266 Md. 170, 179 (1972) (citing McCullough Iron Co. v. Carpenter, 67 Md. 554, 557 (1887)). Where, therefore, the

employment contract is of an indefinite duration, the contract is one for at-will employment, and, as we have already stated, either party at any time may legally terminate it. Adler, 291 Md. at 35.

- 14 See also Yost v. Early, 87 Md. App. 364, 384 (1991) (when the length of the employment contract is not specified, the employee is deemed to be an employee at-will). Appellant's litany of factors is legally insufficient to create an inference that appellant's employment was anything other than at-will. Many of the above factors (6, 7, 8, and 9) concern

the manner in which compensation was projected, paid, or calculated in the first two years of appellant's employment. These factors do See

not indicate that appellant was hired for a specific duration.

Gill, 266 Md. at 179 ("`It is also well settled that a hiring at so much a week, month, or year, no time being specified, does not, of itself, make more than an indefinite hiring.'") (quoting McCullough Iron Co., 67 Md. at 557); Board of Trustees v. Fineran, 75 Md. App. 289, 302 (1988) ("Nor would the mere mention of a 12-month salary in Dr. Bellavance's 1984 letter or his 1985 salary memorandum suffice to create a 12-month term."). Factors 3, 4, as 5, they and 11 deal to the with appellant's growth job and

responsibilities

relate

long-term

development of RPM.

According to appellant, these factors indicate

that the parties agreed to a long-term employment situation (to last for at least two years). Although the focus of appellant's

job was long-range business development and marketing, the period of appellant's employment was not tied to the accomplishment of any particularly defined task, the duration of which is fixed or

- 15 finite. 214 Md. This case, therefore, is not akin to Sperling v. Terry, 367, 370 (1957), where the employee was hired to

"`supervise and work on the construction' of the house until completed." As the Court of Appeals noted, "This, ordinarily, Id. Therefore, the

would require between two and four months."

Court affirmed the trial court's determination that the contract was not at-will but, rather, bound the employer to retain the employee until the completion of the job. Id.

In the instant case, therefore, we cannot infer that, because appellant was responsible for RPM's long-term business growth, RPM was prohibited from terminating appellant at any time. even if we were to conclude that the period of Moreover, appellant's

employment was for the "long term," such a period is far too indefinite and non-specific for this Court to conclude that the contract precluded appellees from terminating appellant until after the lapse of a fixed period of time. See Mazaroff, Maryland

Employment Law

Download Lubore v. RPM Associates.pdf

Maryland Law