Electronics Store, Inc. v. Cellco Partnership

ADKINS, Judge. This is an appeal from the granting of a motion for summary judgment in the Circuit Court for St. Mary’s County in favor of Célico Partnership and Bell Atlantic NYNEX Mobile (collectively, Bell Atlantic), appellees, and Cedar Point Federal Credit Union and Cedar Point Financial Services, Inc. (collectively, Cedar Point), co-appellees, against The Electronics Store, Inc. (Electronics), appellant. Appellant timely noted this appeal. Appellant asks us to determine whether: 1) the plain meaning of the parties’ agreement justifies a judgment for Bell Atlantic on appellant’s claim for breach of contract; 2) the agreement is ambiguous and requires parol evidence to explain its terms; and 3) there are factual issues that preclude the entry of summary judgment.

For the reasons that follow, we affirm in part and reverse in part, and remand the case to the circuit court for further proceedings consistent with this opinion. FACTS In the late 1980s, Electronics was interested in expanding its business, which sold consumer electronic products and offered an electronic repair service, to include sales of cellular telephones and service. At that time, the cellular telephone market was beginning to develop, and Electronics wished to provide consumers in the Southern Maryland area with cellular products. In pursuit of this interest, Electronics and Bell Atlantic entered into an agreement on July 2, 1990, to market Bell Atlantic’s cellular service. ³⁹¹ The agreement was a retail agency agreement in which Electronics could sell only Bell Atlantic’s cellular service, but not related products.

Electronics leased space, advertised, and opened a retail store to coincide with the “light-off’ of the first cellular tower in St. Mary’s County. Shortly after the opening of its store, Electronics became an authorized Bell Atlantic non-exclusive sales agent pursuant to an agency contract entered into on August 1, 1991 (the Agreement). 1 Thereafter, Electronics was able to sell Bell Atlantic products, in addition to its cellular service, in a defined geographic area on a non-exclusive basis. In the Agreement, Electronics was limited to selling only Bell Atlantic services and could not offer any competitive services. In addition, Electronics was not able to solicit purchasers and subscribers who were already receiving Bell Atlantic’s services through either Bell Atlantic itself or another retailer.

The Agreement provided, inter alia, that Electronics could draw potential subscribers “from all classes of potential users.... ” It further provided: “Bell Atlantic reserves the right to market [cellular service] through its own direct sales organization, or other Agents, resellers, or otherwise, in the Area.” The Agreement, as amended, stated: “Nothing herein shall restrict or prohibit Bell Atlantic from, in its sole discretion, offering potential Subscribers in the Area, through its direct sales force or otherwise, volume discounts, promotional offers, new or modified price plans or any other special offers of [cellular service].” In other words, Bell Atlantic’s in-house sales department was not restricted by the contract from marketing its service in the same area in which Electronics was authorized to market Bell Atlantic’s services. As compensation under the Agreement, Electronics received a commission for any subscriber “obtained by [Electronics] and accepted by Bell Atlantic” upon the activation of service to that subscriber by Bell Atlantic. A subscriber was defined as ³⁹² the “ultimate user of [cellular service] provided by or through Bell Atlantic.” By 1994, Electronics had successfully developed a loyal customer base. There was a steady increase in subscriber activations from 1991 to 1994, and Electronics received an achievement award from Bell Atlantic for outstanding sales.

An increase in sales was also realized by the in-house direct sales force of Bell Atlantic. A portion of these sales from the in-house sales department caused this lawsuit. Appellant’s complaints primarily surround the enrollment of Cedar Point members by the Bell Atlantic in-house direct sales force. In February 1993, Betty Koehl, then CEO of Cedar Point Federal Credit Union, purchased a cellular telephone for business use from Electronics.

She also enrolled in an individual program. According to appellant, in late 1994, a member of Cedar Point’s Board of Directors telephoned Electronics and inquired about a discounted pricing program for Cedar Point. Electronics called upon its contact person at Bell Atlantic to begin the process of enrolling Cedar Point members. The process for enrolling a subscriber is set forth in the Agreement as follows: Agent shall solicit Subscribers by using Bell Atlantic’s [cellular service] agreements and forms (the ‘Service Forms’), and shall comply with all Bell Atlantic procedures and practices for solicitation of, presentations to, and enrollment of, Subscribers.

Agent shall forward Service Forms, together with all security deposits within 24 hours of receipt of an executed Service Form. Notwithstanding the foregoing, if Agent fails to forward Service Forms within seven (7) days of its receipt, Agent shall not be entitled to a Commission for such Subscriber. ³⁹³ No contract between Bell Atlantic and a Subscriber shall exist until the Service Form is accepted and approved by Bell Atlantic. Prior to forwarding the Service Forms, Electronics was informed by Bell Atlantic that the proposed major pricing plan for Cedar Point was denied because Cedar Point was a credit union. Shortly thereafter, 2 a member of Bell Atlantic’s in-house sales staff contacted the CEO of Cedar Point and successfully negotiated a pricing plan.

After approval by Cedar Point’s Board of Directors, Bell Atlantic and Cedar Point entered an agreement in February 1995 for cellular telephone service to Cedar Point at a discounted price. This occurred within months after Electronics requested Bell Atlantic to quote a discounted pricing plan for Cedar Point. Subsequently, Electronics requested permission from Bell Atlantic to directly enroll Cedar Point members who “walked-in” to the store in the major pricing program. Bell Atlantic deferred to the CEO of Cedar Point who authorized Electronics to enroll “walk-in” customers in the program under the condition that: “The customers have to be credit union members in good credit standing and be approved by me.

The Electronics Store can not advertise this program in any way.” Additionally, Cedar Point reserved the right to cancel the agreement with Electronics. Less than three months after the agreement between Electronics and Cedar Point to allow Electronics to enroll “walk-in” customers on behalf of Bell Atlantic, Cedar Point canceled the agreement because of alleged violations by Electronics. ³⁹⁴ Electronics now claims that Bell Atlantic’s direct sales force improperly interfered with its potential sales to Cedar Point members. As a result, Electronics asserts that it has “suffered substantial damages in the form of lost commissions, lost revenues from servicing the equipment of these customers, lost sales of related equipment to these customers, and other lost profits, and future lost revenues and lost business potential.” Electronics filed a complaint against Bell Atlantic in the Circuit Court for St. Mary’s County alleging breach of contract, tortious interference with a contract, tortious interference with business relations, unfair competition, concerted refusal to deal, and civil conspiracy. The complaint included counts against Cedar Point for concerted refusal to deal and civil conspiracy.

Following a hearing, the trial court granted appellees’ motions for summary judgment on all counts. This appeal followed. DISCUSSION Appellant contends that the trial court erred in granting summary judgment in favor of Bell Atlantic on appellant’s claims for: 1) breach of contract; 2) interference with Electronics’s contracts and business relations; and 3) unfair competition and civil conspiracy. Bell Atlantic argues that its actions could not constitute a breach of the Agreement because under the Agreement: 1) Electronics was not permitted to sell to corporate accounts at discounted prices; and 2) Bell Atlantic was permitted to reject the enrollment of any subscriber, in its sole discretion.

Bell Atlantic also argues that it cannot interfere with a contract or business relationship to which it is a party, it did not unfairly compete against Electronics, and Electronics did not offer any evidence of a conspiracy or restraint on trade. Co-appellees, Cedar Point, contend that Electronics failed to present evidence to support the claims of concerted refusal to deal or conspiracy. ³⁹⁵ L Standard of Review Maryland Rule 2 — 501(e) provides that a court may grant a motion for summary judgment “in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” In considering a motion for summary judgment, the trial court does not determine any disputed facts, but instead rules on the motion as a matter of law. See Southland Corp. v. Griffith, 332 Md. 704, 712 , 633 A.2d 84 (1993). The court views the facts, including all inferences, in the light most favorable to the party against whom the court grants the judgment.

See Beard v. American Agency Life Ins. Co., 314 Md. 235, 246 , 550 A.2d 677 (1988). In reviewing the trial court’s decision, we must determine whether the trial court was legally correct in granting summary judgment, since a trial court decides issues of law, not fact, when granting the motion. See Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 591 , 578 A.2d 1202 (1990).

We are therefore confined ordinarily to the basis relied on by the trial court in our review. See Warner v. German, 100 Md.App. 512, 517 , 642 A.2d 239 (1994).

II

Breach of Contract The trial court determined that, by reason of the plain terms of the Agreement, Electronics’s claim for breach of contract fails as a matter of law. The court relied on a section of the Agreement requiring Electronics to solicit subscribers using the specific process set forth, including the use of Bell Atlantic’s service forms and approval by Bell Atlantic. The court found that Electronics failed to state a single instance where the requirements of the Agreement were satisfied and a commission was not paid. In granting the summary judgment, the trial court relied on Sinopoli v. North ³⁹⁶ River Ins.

Co., 244 N.J.Super. 245 , 581 A.2d 1368, 1370 (App.Div.1990), cert. denied, 127 N.J. 325 , 604 A.2d 600 (1991), for the proposition that if the terms of the contract are clear and unambiguous, the court will not distort the language of the contract. We agree with the trial judge that not all the steps required to be completed by Electronics to fully earn a commission had occurred. The inquiry regarding whether a breach occurred, however, is more properly focused on whether Electronics was entitled to receive a price quote from Bell Atlantic for its proposed solicitation of subscribers from Cedar Point by reason of the language in the Agreement that “ [potential Subscribers may be drawn from all classes of potential users.... ” By virtue of a governing law provision in the Agreement, New Jersey law governs its interpretation. In New Jersey, a contract is construed against the party drafting it, see Michaels v. Brookchester, Inc., 26 N.J. 379 , 140 A.2d 199, 204 (1958), but when the language of the contract is plain and unambiguous, it is not construed against either party.

See Sinopoli, 581 A.2d at 1370 . As in Maryland, a contract must be interpreted in its entirety, rather than construing a provision separate from the surrounding text. Compare Nester v. O’Donnell, 301 N.J.Super. 198 , 693 A.2d 1214, 1220 (App.Div. 1997), and Dahl v. Brunswick Corp., 277 Md. 471, 478-79 , 356 A.2d 221 (1976). a. The Meaning of “all classes of potential users” Bell Atlantic contends that it had no obligation to quote a discounted price for Cedar Point because Electronics had no authority to sell to major customers under a discounted pricing program.

Electronics contends that it did have such right, relying on Section 3.2 of the Agreement, titled “Solicitation and Enrollment.” This section provides in pertinent part: Agent shall retain and train salespersons in the enrollment of Subscribers, the operation of [cellular service] and the . - sale, lease, and rental of Equipment. Bell Atlantic shall ³⁹⁷ have the sole right in its discretion to reject the enrollment of any Subscriber. Agent shall solicit Subscribers by using Bell Atlantic’s [cellular service] agreements and forms (the ‘Service Forms’), and shall comply with all Bell Atlantic procedures and practices for solicitation of, presentations to, and enrollment of, Subscribers. Potential Subscribers may be drawn from all classes of potential users, excepting individual Subscribers currently assigned a Number(s) by or through Bell Atlantic or its resellers....

(Emphasis added). Electronics points out that there is no provision in the Agreement addressing the prices to be charged to subscribers except that amended Section 2, titled “Relationship of the Parties,” provides: Nothing herein shall restrict or prohibit Bell Atlantic from, in its sole discretion, offering potential Subscribers in the Area, through its direct sales force or otherwise, volume discounts, promotional offers, new or modified price plans or any other special offers of [cellular service]. We agree with Bell Atlantic that if the Agreement did not permit Electronics to obtain subscribers by soliciting major accounts at discounted prices, then Bell Atlantic would have had no obligation to quote a price to Electronics for Cedar Point members. This would be so under applicable contract principles, including the implied covenant of good faith and fair dealing, which we discuss below.

The Agreement, however, does not clearly and unambiguously provide that obtaining subscribers from solicitation of major accounts at discounted prices is excluded from the scope of Electronics’s agency relationship with Bell Atlantic. The phrase “all classes of potential subscribers” can reasonably be interpreted to include a group of subscribers who are affiliated with a major corporation or other entity, even if discounted prices are utilized to solicit the business. There is no definition in the Agreement for “classes,” and when asked at oral argument, counsel for Bell Atlantic could not offer any better interpretation of the term. The mere fact that the Agreement reserves to Bell Atlantic the right to offer volume discounts, through its direct sales ³⁹⁸ force or otherwise, does not mean that subscribers obtained by quoting volume discounts are excluded from Electronics’s non-exclusive agency.

Indeed, Bell Atlantic has the right to solicit and sell, by in-house sales agents, to any subscriber in the territory covered by the Agreement, co-extensive with and in direct competition with Electronics. Other documentation supports the interpretation advanced by Electronics. In a document titled, “Direct and Indirect Channel Guidelines — Rules of Engagement,” Bell Atlantic set forth the rules relating to “[p]rospecting a corporate account” as follows: The prospecting efforts of the indirect sales force will be focused on small to medium businesses. The prospecting efforts of the direct sales force will be focused on medium to large corporate businesses.

These guidelines do not prohibit either channel from prospecting any potential customer, but each channel should concentrate their prospecting efforts on their respective target market. (Emphasis in original). This language supports, but does not compel, the inference that the Agreement permitted Electronics, as Bell Atlantic’s agent, to solicit Cedar Point, even though its target market may have been small to medium businesses. There was also deposition testimony supporting Electronics’s interpretation.

Stephen Snider, a former sales executive at Bell Atlantic, testified with regard to the major price plan request form: A: First [in time to submit the form] doesn’t have anything to do with it. The direct channel can submit it on one date. The Electronics Store can submit it on another date. Okay?

So as long as the account hasn’t been set up, and as long as it is a clean document, okay, that is, all filled out, it can be signed. The only thing — let me be clear about this. The only thing [the major pricing plan request form] does ... [i]s it gives a selling entity the opportunity to offer the customer a price. Mr. Snider’s testimony continued as follows: Q. But you wouldn’t have told the other entity, Electronics ., Store, on January 5, 1995, don’t submit [the request form] ³⁹⁹ because we’re not going to let you do it?

You wouldn’t have told them that? A. No, I wouldn’t have told them that. Q. And [the request form] has to be submitted before you give them the contract to offer the plan; isn’t that correct? A. Yeah, that’s correct.

This deposition testimony could also support the inference that the Agreement contemplated that Electronics could enroll subscribers in major discounted pricing plans. We do not think that the Agreement is clear and unambiguous, however, that a group subscriber induced by a corporate discount plan is necessarily included within the scope of Electronic’s agency. The Agreement does not: 1) mention that Electronics may quote discounted prices; 2) address the prices Electronics may offer; or 3) state whether the prices are retail or discounted for volume. Because the Agreement is ambiguous on this issue, the interpretation of this aspect of the contract becomes one for the jury to decide.

See Michaels, 140 A.2d at 204 . b. Implied Covenant of Good Faith and Fair Dealing Paula Roark, President of Electronics, testified that she spoke to Craig Hall, a representative from Bell Atlantic, several times about enrolling Cedar Point members. When she told Mr. Hall that Electronics was interested in enrolling Cedar Point members, she was told by Mr. Hall that “Bell Atlantic does not do credit unions ... but he would check into it.” She further testified that he later told her that he checked into it and said, “No way, [Bell Atlantic] ... does not do credit unions.” Bell Atlantic argues that the alleged statements by its employee, Craig Hall, were justified because it had the exclusive right to reject potential subscribers. Specifically, the Agreement provides that “Bell Atlantic shall have the sole right in its discretion to reject the enrollment of any Subscriber.” Bell Atlantic contends that this provision effectively ⁴⁰⁰ gives it the ability to reject any potential subscriber that Electronics submits to it for approval, and therefore, the refusal to give Electronics a price quote for Cedar Point cannot support a breach of contract action.

Such argument might prevail if the circumstances surrounding the refusal were different. Under the present alleged circumstances, however, Bell Atlantic’s argument fails to account for the restraints imposed upon a contracting party under the implied covenant of good faith and fair dealing. We explain. Although the Agreement may allow Bell Atlantic to reject any potential subscriber, it still must exercise this right in good faith.

In New Jersey, every contract contains an implied covenant of good faith and fair dealing. See, e.g., Pickett v. Lloyd’s, 131 N.J. 457 , 621 A.2d 445, 450 (1993). The Supreme Court of New Jersey has stated: In every contract there is an implied covenant that ‘neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract; in other words, in every contract there exists an implied covenant of good faith and fair dealing.’ Palisades Properties, Inc. v. Brunetti, 44 N.J. 117 , 207 A.2d 522, 531 (1965) (quoting 5 Williston on Contracts § 670, at 159-60 (3d ed.1961)). This obligation to act in good faith also exists in “contracts that contain express and unambiguous provisions.... ” Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396 , 690 A.2d 575, 587 (1997) (citing United Roasters, Inc. v. Colgate-Palmolive Co., 649 F.2d 985 (4th Cir.), cert. denied, 454 U.S. 1054 , 102 S.Ct. 599 , 70 L.Ed.2d 590 (1981)).

Bell Atlantic argues that the circumstances alleged could not constitute a breach because, under the Agreement, Bell Atlantic had the right to reject any prospective subscriber. The commission to Electronics was not due until the Subscriber was “obtained by [Electronics] and accepted by Bell Atlantic,” and “[e]ach subscriber [would] be deemed effective upon installation of Subscriber’s Equipment and upon activation by Bell Atlantic.” Further, it relies upon the Agreement provi ⁴⁰¹ sion, stating that “[n]o contract between Bell Atlantic and a Subscriber shall exist until the Service Form is accepted and approved by Bell Atlantic.” Read literally and technically, Bell Atlantic has fully performed its obligations under the Agreement because the subscribers were not accepted by Bell Atlantic. Such literal interpretation, however, fails to take into account Bell Atlantic’s obligation of good faith and fair dealing. In Sons of Thunder, the Supreme Court of New Jersey analyzed New Jersey’s common law doctrine recognizing an implied covenant of good faith and fair dealing.

There, the court examined an agreement between a waterman who operated a clam-fishing vessel and a company that produced clam products. Years after the agreement, the company failed to purchase its required minimum amount of shell stock under the agreement and failed to pay the price required by the contract. The company subsequently notified the waterman that