Advance Telecom Process LLC v. DSFederal, Inc.

GRAEFF, J. Advance Telecom Process, LLC (“Advance”), appellant, appeals from the order of the Circuit Court for Montgomery County granting the motion filed by DSFederal, Inc. (“DSFederal”), appellee, to dismiss Advance’s complaint for failure to state a claim upon which relief could be granted. Advance raises three questions for our review, which we have rephrased slightly, as follows: 1. Did the circuit court apply the proper standard in granting DSFederal’s motion to dismiss? 2. Did the circuit court correctly determine that the Teaming Agreement was not an enforceable contract, and therefore, that Count I of the complaint failed to state a cause of action for breach of contract? 3.

Should this Court allow Advance leave to amend its circuit court complaint? ¹⁶⁸ For the reasons that follow, we shall affirm the judgment of the circuit court. FACTUAL AND PROCEDURAL BACKGROUND On June 3, 2014, Advance filed an eight-count complaint against DSFederal, alleging that DSFederal unlawfully terminated a Teaming Agreement between the parties and committed a variety of other torts. 1 Because this appeal involves the propriety of the circuit court’s ruling granting a motion to dismiss for failure to state a claim upon which relief could be granted, the relevant facts are those alleged in the complaint, set forth as follows. Advance is a Virginia limited liability company and a certified Small Disadvantaged Business 8(a) Contractor, as defined by the U.S. Small Business Administration (“SBA”). 2 DSFed-eral is a Maryland corporation and a woman-owned SBA 8(a) Contractor. DSFederal also is certified by the U.S. General Services Administration as an 8(a) STARS Contractor. 3 ¹⁶⁹ The Complaint alleged that, over a twelve-month period, Advance created and developed two projects: (1) Enterprise Applications Security, Identity Management & Access Management, and (2) Rapid Development of “Proof Concept” Application.

Advance then submitted a White Paper to U.S. Citizenship & Immigration Services, U.S. Department of Homeland Security (“USCIS-DHS”), proposing the projects. The White Paper was formatted in a way that “it could be submitted to other federal agencies for implementation into their systems once it had been fully approved, implemented and deemed a success by USCIS-DHS, thereby increasing its value as a selling point of’ Advance. After Advance presented the White Paper, USCIS-DHS notified Advance that it would accept the proposal under a sole-source contract, based upon Federal Acquisition Regulations (“FAR”) 6.3. USCIS-DHS also informed Advance that the sole-source contract would be subject to the 8(a) STARS II GWAC program.

Advance then began researching the available certified 8(a) STARS contractors, and it was referred to DSFederal. Advance contacted DSFederal and disclosed “all the relevant facts and details involving” the proposal. DSFederal then entered into a contractual relationship with Advance. The Complaint characterized this relationship as including “the parties’ execution of any and all Teaming Agreement(s), subcontract(s), and/or any and all required necessary documentation for the purpose of obtaining and working on the sole-source contract of the proposed project that [Advance] had submitted to USCIS-DHS.” DSFederal agreed and contracted with Advance to “jointly develop and submit a bid to USCIS-DHS for said project.” Based on the contractual relationship between the parties, Advance submitted DSFed-eral’s name to USCIS-DHS as the 8(a) STARS contractor for the project.

Thereafter, Advance and DSFederal “actively pursued, developed and created a proposal and bid to submit to USCIS-DHS,” which offer and proposal included “the relationship ¹⁷⁰ between” Advance and DSFederal. Advance and DSFederal also entered into a Teaming Agreement, which the complaint alleged incorporated the scope of work to be performed by each party. According to the complaint, the Teaming Agreement provided that, within ten days of receipt of the contract from USCIS-DHS, DSFederal was to provide a copy of the contract to Advance, DSFederal was required to issue a subcontract to Advance “for consulting support to meet the overall solicitation requirement of the USCIS-DHS contract,” and DSFederal was to “use its best efforts to award [Advance] a target work share of fifty-eight (58%) percent of effort based on labor costs awarded under the contract or the valuable consideration of the Teaming Agreement and expected and required Subcontract.” Advance was required to provide DSFederal with “proprietary information and industry expertise.” Advance and DSFederal worked together to complete all applicable requirements of the pre-bid solicitation. Sometime after submitting the bid, DSFederal was awarded a sole-source GWAC by the USCIS-DHS to develop and implement the two projects based on the “combined efforts of the parties.” Thereafter, the Complaint alleges, DSFederal “constructively terminated” Advance, despite a clause in the Teaming Agreement requiring mutual termination.

Count I of the Complaint, alleging breach of contract, stated that DSFederal had a contractual obligation to execute a subcontract with Advance “that it knows, and knew, is, and was always, required by USCIS-DHS, in order for [Advance] to work, and continue to work, to complete this project, but has failed to do so.” DSFederal also failed to present Advance with a copy of the contract with USCIS-DHS, failed to allow Advance’s staff to begin work, and illegally terminated the Teaming Agreement. Advance sought damages in the amount of $2,200,000. DSFederal filed a motion to dismiss the complaint. It attached as Exhibit 1 the Teaming Agreement, which Advance did not attach to the complaint.

The Teaming Agreement was ¹⁷¹ executed on September 11, 2013, by DSFederal, “Team Leader,” and Advance, “Team Member.” The Teaming Agreement stated that the parties had “concluded that it is to their mutual benefit to act as a team for the purpose of preparing and submitting a proposal in response to” the Request for Proposal (“RFP”) that the USCIS-DHS would be issuing for Identity, Credential, and Access Management (“ICAM”). It provided that, if USCIS-DHS awarded DSFederal a contract, DSFederal “intends to negotiate a subcontracting agreement with” Advance, and Advance “intends to perform work as set forth in” the statement of work (“SOW”) attached. With respect to the specific obligations of the parties, section 1(e) of the Teaming Agreement provided for duties regarding submission of the proposal, and it stated that, “[i]n the event that the contract awarded by [USCIS-DHS] as a result of proposals submitted in response to the RFP (“the Prime Contract”) is awarded to [DSFederal], the parties will negotiate in good faith and execute a subcontract agreement ... subject to applicable laws and regulations, and, if required by the Prime Contract, the consent/approval of [USCIS-DHS].” Section 1(b) provided that DSFederal “shall, with the assistance of [Advance], prepare the Proposal and submit the Proposal to [USCIS-DHS] identifying [Advance] as a subcontractor providing the services identified in Attachment A.” Attachment A identified two categories of work to be performed by the parties under the headings “Proposal Development” and “Contract Performance Work Distribution.” The work under the “Contract Performance Work Distribution” category was listed as follows: 1. Within 10 calendar days of award, [DSFederal] will issue a Subcontract to [Advance] for consulting support to meet the overall solicitation requirements. 2. [Advance] will designate a corporate executive who will attend periodic team meetings, provide status to DSFederal, and ensure that [Advance] project staff ¹⁷² collaborate with the DSFederal Project Manager, DSFederal management, and staff as necessary to identify and mitigate risks, timely resolve issues, prepare and review deliverables specifically called' out herein or in the SOW. 3.

As required by the Government, [Advance] shall track and report progress and costs in a format to be specified by DSFederal. 4. [Advance] staff will fully cooperate with DSFederal’s efforts to manage the DSFederal project team as an integrated whole, focused on the delivery of high-quality, compliant services to the Government, without respect to employment affiliation. 5. DSFederal will use best efforts to award [Advance] a target work share of 58% of the effort based on labor costs awarded under the contract. 6. Work Share level of work is contingent upon: • [Advance] filling offered positions in a timely manner. • [Advance] performing at such a level that it does not adversely impact on [DSFederal’s] past performance ratings. • [DSFederal’s] performing the minimum level of work required by law or regulation. In its motion to dismiss, DSFederal argued that the Complaint failed to state a cause of action for breach of contract, and therefore, it should be dismissed with prejudice.

In support, it argued that the “Teaming Agreement is nothing more than an agreement to negotiate open issues in good faith to reach a contractual objective within an agreed framework,” i.e., it was an agreement to agree, rather than a valid and enforceable contract. In its opposition, Advance acknowledged the cases holding that teaming agreements were unenforceable contracts. It argued, however, that the Teaming Agreement here was distinguishable because it is clear that the parties intended to negotiate a subcontract, and the essential terms of the Agree ¹⁷³ ment “have been determined or have set in place an objective framework with which to ascertain that essential term.” In reply, DSFederal again asserted that the Teaming Agreement here was merely an unenforceable agreement to agree. In support, it stated that the Agreement provided that the parties would negotiate a subcontract at some point in the future, and it “failed to identify essential terms such as exactly what services [Advance] would provide, how [Advance] would provide them, when [Advance] would provide them, and what [Advance] would be paid for them.” On August 19, 2014, the court held a hearing on the motion. 4 At the conclusion of the hearing, the court granted the motion to dismiss, agreeing with DSFederal that the Teaming Agreement was “an agreement to agree,” and therefore, it was not an enforceable contract.

This appeal followed. STANDARD OF REVIEW “A trial court may grant a motion to dismiss if, when assuming the truth of all well-pled facts and allegations in the complaint and any inferences that may be drawn, and viewing those facts in the light most favorable to the non-moving party, ‘the allegations do not state a cause of action for which relief may be granted.’ ” Latty v. St. Joseph’s Soc’y of the Sacred Heart, Inc., 198 Md.App. 254, 262-63 , 17 A.3d 155 (2011) (quoting RRC Northeast, LLC v. BAA Md., Inc., 413 Md. 638, 643 , 994 A.2d 430 (2010)). The facts set forth in the complaint must be “pleaded with sufficient specificity; bald assertions and conclusory statements by the pleader will not suffice.” RRC, 413 Md. at 644 , 994 A.2d 430 . “ ‘We review the grant of a motion to dismiss de novo.’ ” Unger v. Berger, 214 Md.App. 426, 432 , 76 A.3d 510 (2013) (quoting Reichs Ford Road Joint Venture v. State ¹⁷⁴ Roads Comm’n, 388 Md. 500, 509 , 880 A.2d 307 (2005)). Accord Kumar v. Dhanda, 198 Md.App. 337, 342 , 17 A.3d 744 (2011) (“We review the court’s decision to grant the motion to dismiss for legal correctness.”), aff'd, 426 Md. 185 , 43 A.3d 1029 (2012).

We will affirm the circuit court’s judgment “ ‘on any ground adequately shown by the record, even one upon which the circuit court has not relied or one that the parties have not raised.’ ” Monarc Constr., Inc. v. Aris Corp., 188 Md.App. 377, 385 , 981 A.2d 822 (2009) (quoting Pope v. Bd. of Sch. Comm’rs, 106 Md.App. 578, 591 , 665 A.2d 713 (1995)). DISCUSSION I. Status of Motion Advance’s first argument is that the circuit court erred by “treating the Motion to Dismiss hearing as a Motion for Summary Judgment” and granting the motion “prior to determining whether material facts existed that were not discernible from the [cjomplaint.” It asserts that “there are genuine disputes of material facts” that “cannot be resolved merely by looking to the [cjomplaint” but must wait until the “parties have had their opportunity to complete discovery.” DSFederal contends that the court correctly decided its motion to dismiss by considering only those facts alleged in Advance’s complaint and the “Teaming Agreement referenced and relied on in the complaint.” It asserts that consideration of the Teaming Agreement did not require the court to treat the motion to dismiss as a motion for summary judgment because Advance’s breach of contract claim was based on this document. It disputes Advance’s argument that the court should have allowed discovery to be completed before considering DSFederal’s motion to dismiss, noting that Advance conceded before the circuit court that the “sufficiency of its claim for breach of contract was properly judged based on the allegations of the [cjomplaint and the text of the Teaming Agreement.” Moreover, it asserts that discovery cannot be ¹⁷⁵ used at the motion to dismiss stage to “provide the multiple and reasonable inferences that its pleading allegations lack.” We begin with Advance’s suggestion that the court’s consideration of the Teaming Agreement converted the motion to dismiss into a motion for summary judgment.

We agree, as a general proposition, that where matters outside of the allegations in the complaint and any exhibits incorporated in it are considered by the trial court, a motion to dismiss generally will be treated as one for summary judgment. See, e.g., Worsham v. Ehrlich, 181 Md.App. 711, 722 , 957 A.2d 161 (The trial court has “discretion to convert a motion to dismiss to a motion for summary judgment by considering matters outside the pleading.”), cert. denied, 406 Md. 747 , 962 A.2d 373 (2008). Where, however, a document such as the Teaming Agreement merely supplements the allegations of the complaint, and the document is not controverted, consideration of the document does not convert the motion into one for summary judgment. See Margolis v. Sandy Spring Bank, 221 Md.App. 703, 710, n. 4 , 110 A.3d 784 (2015) (although the plaintiff did not attach a Deposit Account Agreement to his complaint, “he expressly referred to it and repeatedly alleged that its disclosures that did not satisfy the” Consumer Protection Act; thus, the court properly regarded the agreement as “simply supplementing the allegations in the complaint.”); Smith v. Danielczyk, 400 Md. 98, 105 , 928 A.2d 795 (2007) (because there was no dispute regarding the extraneous material appended to defendant’s motion to dismiss, and plaintiff did not controvert the defendant’s factual averments, appellate court treated the extraneous materials “as simply supplementing the allegations in the complaint”).

Accordingly, the circuit court’s consideration of the Teaming Agreement did not convert the motion to dismiss into a motion for summary judgment. Indeed, the record reflects that the parties and the circuit court proceeded on the understanding that the hearing was addressing a motion to dismiss. Counsel for Advance agreed that the “standard at this stage—and we’re at the motion to dismiss stage—is basically ... whether the complaint, on its ¹⁷⁶ face, discloses a legal and sufficient cause of action.” The contention that the court “erred by treating the motion to dismiss hearing as a motion for summary judgment” is not supported by the record. We thus turn to the propriety of the court’s ruling granting the motion to dismiss.

II

Teaming Agreement On the merits, Advance contends that the circuit court erred in granting DSFederal’s motion to dismiss its complaint for failure to state á claim for breach of contract. In support, it asserts that the court erred in finding “that the Teaming Agreement is an agreement to agree and not a contract.” Advance concedes that “relevant Maryland law, and other jurisdictions, generally speaks to the unenforceability of teaming agreements, where future negotiations between the parties are contemplated.” It argues, however, that in this case, where the terms of the Teaming Agreement are “either explicitly stated and/or provide a framework for interpreting the terms,” the agreement shows mutual assent to be bound, and therefore, the Teaming Agreement is an enforceable contract. DSFederal responds in two ways. Initially, it urges this Court not to consider the merits of Advance’s challenge to the trial court’s “ruling that the Teaming Agreement was an unenforceable agreement to agree,” asserting that Advance offers no explanation of precisely how the trial court erred, and it does not identify the “supposed” explicitly stated terms “or the interpretative framework that it claims exists.” In any event, it contends that Advance’s argument fails on the merits because “it is clear under applicable Maryland precedent that the Teaming Agreement lacked the certainty and definiteness of terms necessary for it to be an enforceable