Dual v. Lockheed Martin Corporation

HARRELL, Judge. On 1 October 2001, J. Frederick Dual, Jr. (“Dual”), purporting to act in the capacities of “President and sole shareholder” of Dual, Incorporated (“Dual, Inc.”), filed a complaint in the Circuit Court for Baltimore City against Lockheed Martin Corporation and two of its subsidiaries (collectively “Lockheed”). In the complaint, Dual alleged various torts related to the terminations of two contracts: one between Dual, Inc. and Lockheed, and another between Dual, Inc. and the United States Air Force (“Air Force”). Dual, a non-lawyer, filed the complaint pro se, identifying both himself and Dual, Inc. as plaintiffs.

At the time suit was filed, the corporate charter for Dual, Inc. was forfeit. This complaint, however, was never served on Lockheed. One year later and after reviving Dual, Inc.’s corporate charter, Dual and Dual, Inc., now with counsel’s assistance, filed an amended complaint modifying some of the previously pleaded counts and adding additional counts. After Lockheed was served with the amended complaint on 11 October 2002, it responded with a motion to dismiss based essentially on the statute of limitations.

Lockheed’s position was that: (a) all of the wrongful conduct alleged by Dual/Dual, Inc. was completed by no later than May-June 1999; (b) any complaint based thereon had to be filed by no later than June of 2002, under the applicable three year statute of limitations; (c) the original complaint was a nullity because Dual, Inc.’s corporate charter was forfeit at the time of filing and Dual improperly, both as a non-lawyer and otherwise, initiated the suit in a derivative or representational capacity; and (d) the amended complaint, filed after the June 2002 deadline, was time-barred. The Circuit Court agreed with Lockheed and dismissed the suit in its entirety, entering judgment in favor of Lockheed on 1 October 2003. Dual and Dual, Inc. appealed to the Court of Special Appeals. Before the intermediate appellate court ¹⁵⁸ could consider the appeal, we, on our initiative, issued a writ of certiorari.

We shall affirm the Circuit Court’s judgment. I. Based on his experiences as a Vietnam-era veteran of the United States Navy, Dual formed Dual, Inc. in 1983 to engage in the aircraft simulator business. Dual, Inc. was an attractive business partner because it was certified by the U.S. Small Business Administration as a “Section 8” minority-owned enterprise as a result of Dual’s physical disability incurred during the war. In 1994, Lockheed awarded a subcontract to Dual, Inc. to provide Lockheed with engineering designs and related support for its Johnson Space Center Science Engineering and Technology (“SEAT”) contract with the National Aeronautics & Space Administration (“NASA”).

Also in 1994, Dual, Inc. received a direct contract from the Air Force to develop a flight simulator to test the Air Force’s Joint Surveillance Target Attack Radar System (“JSTARS”). For reasons that are not entirely clear on this record, Dual, Inc.’s Maryland corporate charter was forfeited on 2 October 1997. The charter was not revived until 25 July 2002. The Air Force terminated the JSTARS contract “for cause” on 29 April 1999.

Lockheed terminated Dual’s SEAT subcontract on 17 May 1999. On 10 June 1999, the Air Force changed the basis of the termination of the JSTARS contract to “for the convenience of the' government.” Why these contracts were terminated animated the initiation of the present litigation. Dual, Inc. and Dual alleged in the original complaint that in 1999 Lockheed engaged in a scheme to drive Dual, Inc. out of business in order to assume its employees, contracts, and client base, most notably in the latter two regards the JSTARS contract and the Air Force, respectively. To accomplish these objectives, it was alleged that Lockheed worked behind the scenes with Air Force officials to bring about the termination of Dual, Inc.’s involvement with the JSTARS ¹⁵⁹ contract.

In addition, after Dual, Inc. protested the Air Force’s termination of the JSTARS contract “for cause,” Lockheed allegedly retaliated within a few weeks by terminating the SEAT subcontract with Dual, Inc. Lockheed continued its alleged scheme to destroy Dual, Inc. by subsequently “reassigning” many of Dual, Inc.’s employees to Lockheed’s own projects, effectively inducing them to become employees of Lockheed. It was claimed further that, after terminating the SEAT subcontract, Lockheed seduced Dual, Inc. with false promises of “bigger and better” subcontracts, all the while draining Dual, Inc.’s ability to engage in other business opportunities. On the other front, Appellants’ protests to the Air Force subsequently fell short of complete success when the Air Force upheld the termination of the JSTARS contract, although changing the reason to “for the convenience of the government.” 1 Nonetheless, Dual, Inc. claimed that the actions of Lockheed by that time already had undermined Dual, Inc.’s ability to carry on its business and effectively destroyed the company. Dual, Inc. contended that it first learned of Lockheed’s duplicity in early to mid-2000.

The vehicle of discovery was Dual, Inc.’s acquisition sometime during that period of a copy of a 6 December 1999 final status report by Lockheed to the Department of Defense outlining Lockheed’s efforts to complete the JSTARS contract. From information and clues discerned from this report, Appellants apparently formed a belief that Lockheed had engaged in a scheme to destroy Dual, Inc.’s business and assume its clients and employees. More than a year and a half later, Dual filed the first complaint ¹⁶⁰ framing counts including breach of fiduciary duty, breach of good faith and fair dealing, tortious interference with contractual relations, tortious interference with economic and business relations (and “prospective advantage”), misappropriation of trade secrets, and breach of contract. The amended complaint, filed on 2 October 2002, added counts of breach of partnership agreement, fraud in the inducement, quantum meruit, and unjust enrichment. 2 Lockheed, in response to the amended complaint, filed a motion to dismiss.

Lockheed argued that the initial complaint was a nullity for the purpose of tolling the statute of limitations because it was filed improperly on behalf of a defunct corporation by a non-lawyer. Lockheed also argued that the claims in the amended complaint were time-barred because they accrued no later than 26 June 1999, more than three years before the filing of the amended complaint. The Circuit Court agreed with Lockheed that the initial complaint was invalid and that the amended complaint was time-barred by the statute of limitations. Dual/Dual, Inc. appealed the judgment of the Circuit Court.

Before the Court of Special Appeals could decide the case, we granted certiorari on our own initiative, 379 Md. 224 , 841 A.2d 339 (2004), in ¹⁶¹ order to consider the following questions, which we have rephrased for the sake of clarity: 3 1. Was the trial court correct in holding that the initial complaint was invalid? 2. Did the trial court err in ruling that all of the claims in the amended complaint were time-barred by the statute of limitations because they each accrued no later than 26 June 1999?

II

In considering Lockheed’s motion to dismiss and Dual/Dual, lnc.’s opposition, the record indicates that the Circuit Court considered factual matters, placed before it by the parties, beyond those alleged in the complaint or amended complaint. For example, the facts of the forfeiture and revival of Dual, Inc.’s corporate charter and a copy of Lockheed’s 6 December 1999 report to the Department of Defense regarding its performance under the JSTARS contract were submitted to the Circuit Court and apparently considered in acting on the motion. When a party presents factual matters outside the pleadings, and the court does not exclude them from consideration in the course of acting on a facial motion to dismiss, the court must treat the motion as a motion for summary judgment. See Md. Rule 2-322(c) (“If, on a motion to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 2- ¹⁶² 501, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 2-501.”).

Therefore, Lockheed’s motion to dismiss amounted to a motion for summary judgment under Md. Rule 2-501. A trial court’s grant of a summary judgment motion is proper if “there is no genuine dispute as to any material fact and ... the party in whose favor judgment is entered is entitled to judgment as a matter of law.” Md. Rule 2-501(e). Maryland courts hold that a “material fact is a fact the resolution of which will somehow affect the outcome of the case.” Arroyo v. Bd. of Educ., 381 Md. 646, 654 , 851 A.2d 576, 581 (2004) (citations omitted). Once the moving party provides the trial court with a prima facie basis in support of the motion for summary judgment, the non-moving party is obliged to produce sufficient facts admissible in evidence, if it can, demonstrating that a genuine dispute as to a material fact or facts exists.

These tendered facts should be given under oath, based on the personal knowledge of an affiant. Id. at 655 , 851 A.2d at 581 . “Bald, unsupported statements or conclusions of law are insufficient.” Id. (citations omitted). If no genuine dispute of material fact is found to exist, a court then considers whether the movant is entitled to judgment as a matter of law.

See Md. Rule 2-501. On appellate review of the grant of summary judgment, we review the trial court’s conclusions of law de novo. Messing v. Bank of America, N.A., 373 Md. 672, 683-84 , 821 A.2d 22, 28 (2003). As we consider the trial court’s conclusions of law, “we construe the facts properly before the court, and any reasonable inferences that may be drawn from them, in the light most favorable to the non-moving party.” Jurgensen v. New Phoenix Atl.

Condo. Council of Unit Owners, 380 Md. 106, 114 , 843 A.2d 865, 869 (2004).

III

We hold that the initial complaint filed in this case was a nullity and therefore ineffective for the purpose of tolling the ¹⁶³ running of the statute of limitations. A corporation, the charter for which is forfeit, is a legal non-entity; all powers granted to Dual, Inc. by law, including the power to sue or be sued, were extinguished generally as of and during the forfeiture period. See Md.Code (1975, 1999 Repl.Vol.), §§ 2-103(2), 3-503(d) of the Corporations & Associations Article (stating that after the State Department of Assessments and Taxation declares a corporation’s charter forfeit, “the powers conferred by law on the corporations are inoperative, null, and void as of the date of the proclamation, without proceedings of any kind either at law or in equity”); see also Stein v. Smith, 358 Md. 670, 675 , 751 A.2d 504, 507 (2000) (stating that upon forfeiture of the corporate charter, a corporation loses the power to sue). In this case, Dual, Inc.’s charter became forfeit on 2 October 1997.

Therefore, generally any suit filed on behalf of Dual, Inc. while its charter was forfeit, was a nullity as a matter of Maryland law. Stein, 358 Md. at 675 , 751 A.2d at 507 . Dual argues, however, that he filed the October 2001 complaint in his capacity as a trustee of Dual, Inc. under Md.Code (1975, 1999 Repl.Vol.), § 3-515 of the Corporations & Associations Article. This argument is unavailing.

Section 3-515 provides that “[w]hen the charter of a Maryland corporation has been forfeited, until a court appoints a receiver, the directors of the corporation become the trustees of its assets for purposes of liquidation.” Md.Code (1975, 1999 Repl.Vol.), § 3-515(a) of the Corporations & Associations Article (emphasis added). Assuming that Dual intended to file the suit as a director-trustee, 4 § 3-515 granted him no legal authority to do so under the circumstances of this case. The powers granted to directors-trustees by § 3-515 clearly are intended only for the “winding up” of a corporation’s affairs. Patten v. Bd. of Liquor License Comm’rs, 107 Md.App. 224, 233-234 , 667 A.2d ¹⁶⁴ 940, 944-945 (1995); see Md.Code (1975, 1999 Repl.Vol.), § 3-515(a), (c)(4) of the Corporations & Associations Article.

Thus, a trustee only may sue in the trustee’s own name if there is a “rational relationship” between the suit and a legitimate “winding up” activity of the corporation. Patten, 107 Md.App. at 234 , 667 A.2d at 945 . In Patten , a board director, purporting to act on behalf of a corporation whose charter had been forfeit for four years, attempted to express to a board of license commissioners the corporation’s opposition to a licensee’s request to transfer the ownership and location of an alcoholic beverage license. 5 107 Md.App. at 228 , 667 A.2d at 942 . The protesting director had not engaged in any activity normally associated with “winding up” the corporation’s affairs during the four years between forfeiture of the charter and the purported corporate opposition to the license transfer in question.

Id. at 234 , 667 A.2d at 945 . Although the director argued that the protest vote came within the “winding up” powers listed in § 3-515, the Court of Special Appeals held that such statutory powers are merely “administrative in nature” and pertain only to the completion of existing corporate business. Id. In addition, the intermediate appellate court concluded that “even if the vote cast by [the director] was consistent with “winding up’ duties, the length of time between forfeiture of the charter and the casting of the vote raises an unexplained, perhaps unexplainable, doubt as to there being any logical association between these two actions.” Id.

As a result, the Court of Special Appeals held that nothing in § 3-515 gave the protesting director the power to vote on behalf of the defunct corporation. Id. at 233, 667 A.2d at 944 . ¹⁶⁵ Dual’s initiation of the litigation in the present case is analogous to the circumstances in Patten . There are no allegations in the initial or amended complaint to support Dual’s argument that he was “winding up” Dual, Inc.’s affairs at the time of the October 2001 complaint or at any time between forfeiture and these filings. The only support in the record for his argument is a vague allusion to “significant creditors that have to be paid,” asserted by Dual’s attorney at oral argument before the Circuit Court in an apparent reference to at least some of the intended beneficiaries of the money damages sought from Lockheed.

That is inadequate. In fact, the record indicates not that Dual was “winding up” Dual, Inc.’s affairs after its charter became forfeit in 1997, but rather that he actively was conducting business during this time on behalf of a corporation with a forfeit charter. 6 Dual, Inc. purported to continue performance under contracts with both the Air Force and Lockheed as late as April and May of 1999, respectively, before the contracts were terminated. Dual even alleged that Dual, Inc. was in lengthy negotiations with Lockheed as late as June of 1999, culminating in a new “bigger and better” subcontract. 7 Such activities directly contradict the notion that Dual merely was attempting to wind up existing corporate business and dispose of Dual, Inc.’s assets following the 1997 charter forfeiture. Furthermore, nothing in the record indicates that Dual made any attempt to dispose of existing assets, debts, or obligations of Dual, Inc. between June of 1999 and October of 2001.

Therefore, the Circuit Court’s determination that Dual was not winding up Dual, Inc.’s affairs when he filed his initial complaint in October of 2001 was not erroneous. As a result, Dual’s October 2001 complaint was not sanctioned by § 3-515. Because Dual could not sue on behalf of Dual, Inc. while its ¹⁶⁶ charter was forfeit, the Circuit Court correctly determined the October 2001 complaint to be a nullity for. the purpose of tolling the applicable statute of limitations. 8 Dual, Inc. argues that the claims alleged in its amended complaint, filed after the revival of its corporate charter, should relate back to the original complaint for statute of limitations purposes. Because Dual’s October 2001 complaint was a nullity, however, no cause of action repeated ' in Dual, Inc.’s October 2002 amended complaint may relate back to the original complaint for statute of limitations tolling purposes.

Stein, 358 Md. at 674 , 751 A.2d at 506 . While the revival of a corporate charter may validate retrospectively the capacity of a corporation to sue in certain circumstances, Chrysler Credit Corp. v. Superior Dodge, Inc., 538 F.2d 616, 618 (4th Cir.1976), such a revival does not restore rights that were divested during the period when the corporate charter was forfeit. See Md.Code (1975, 1999 Repl.Vol.), § 3-512 of the Corporations & Associations Article (stating that all assets and rights of a corporation are restored after the revival of its . charter “except those sold or those of which [the corporation] was otherwise divested while the charter was void”); Stein, 358 Md. at 676 , 751 A.2d at 507 . Therefore, under Maryland law, where a corporation’s claim is barred by the applicable statute of limitations, that claim is not resuscitated thereafter when the corporation’s charter is revived.

U.S. v. Firemen’s Ins. Co. of Newark, N.J., 869 F.Supp. 347, 348-49 (D.Md. 1994). All causes of action alleged in the amended complaint accruing before 2 October 1999 also are time-barred. Thus, ¹⁶⁷ the Circuit Court was correct in entering judgment for Lockheed as to all of Dual, Inc.’s alleged causes of action related to the SEAT subcontract. 9 We consider next whether Dual, Inc.’s claims arising out of Lockheed’s alleged conduct regarding the JSTARS contract were divested by the statute of limitations before Dual, Inc. filed its amended complaint.

IV

We also agree with the Circuit Court’s determination that Dual, Inc.’s claims with regard to the JSTARS contract are time-barred. As a matter of law, the termination of the JSTARS contract between Dual, Inc. and the Air Force put Dual, Inc. on notice to investigate any claims that might arise from that termination. Absent any specific facts demonstrating fraud or concealment designed to frustrate a potentially aggrieved party’s ability to discover evidence of wrongdoing connected with the termination of a contract, the statute of limitations begins to run when the harmed party becomes aware of the termination. 10 Under Maryland’s discovery rule, the statute of limitations does not begin to accrue on a claim until the plaintiff knows or should know of the potential claim. Lumsden v. Design Tech Builders, Inc., 358 Md. 435, 443-44 , 749 A.2d 796, 801 (2000).

The discovery rule acts to balance principles of fairness and judicial economy in those situations in which a diligent plaintiff may be unaware of an injury or harm during the statutory period. Pennwalt Corp. v. Nasios, 314 Md. 433, 440-41 , 550 A.2d 1155, 1159 (1988). This stan ¹⁶⁸ dard, however, does not require actual knowledge on the part of the plaintiff, but may be satisfied if the plaintiff is on “inquiry notice.” Am. Gen.

Assurance Co. v. Pappano, 374 Md. 339, 351 , 822 A.2d 1212, 1219 (2003); Doe v. Archdiocese of Washington, 114 Md.App. 169, 188-89 , 689 A.2d 634, 644 (1997). A plaintiff is put oh inquiry notice when he, she, or it possesses “facts sufficient to cause a reasonable person to investigate further, and ... [that] a diligent investigation would have revealed that the plaintiffs were victims of ... the alleged tort.” Pennwalt, 314 Md. at 448-49 , 550 A.2d at 1163—64. Y. We hold that, absent a showing of fraud or intentional concealment, the statute of limitations for a claim for tortious interference with contractual relations, based on the termination of a contract, begins to accrue on the date that the contract was terminated. See D’Arcy and Assocs., Inc. v. K.P.M.G. Peat Marwick, L.L.P., 129 S.W.3d 25, 30 (Mo.Ct. App.2004) (stating that the “tortious conduct was complete when [the defendant] induced or caused the breach”); see also Hwang v. Dunkin’ Donuts, Inc., 840 F.Supp. 193, 196 (N.D.N.Y.1994) (holding that the “statute of limitations for a claim of tortious interference [with] contractual relations begins to run when the contract in question has been breached”); Trembath v. Digardi, 43 Cal.App.3d 834 , 118 Cal.Rptr. 124, 126 (1974) (holding that tort actions based on inducement of breach of contract begin to accrue “no later than the date of the breach [that] has been tortiously