Friedman & Fuller, P.C. v. Funkhouser

CATHELL, Judge. Appellant, Friedman & Fuller, P.C. (F & F), appeals entry in the Circuit Court for Montgomery County of summary judgment in favor of the appellees, Gregg Funkhouser (Funkhouser), and Hollrah & Bernstein, P.C., and its principals, Jeffrey Bernstein and Glenn Hollrah (collectively, H & B). Appellant brought suit, alleging, inter alia, breach of an employment contract with Funkhouser, to which appellees asserted a Statute of Frauds defense.

On appeal, appellant poses the following questions for our review: 1. Did the trial court err by granting summary judgment based on the Maryland Statute of Frauds where Funkhouser acknowledged the existence of an agreement in his deposition testimony? 2. Did the trial court err by granting summary judgment based on the Maryland Statute of Frauds where Funkhouser signed [] one of several connected writings constituting the entire memorandum? 3. Did the trial court err by granting summary judgment based on the Maryland Statute of Frauds where F & F's performance removed the Employment Agreement from within the Statute of Frauds? 4.

Did the trial court err by granting summary judgment based on the Maryland Statute of Frauds where Funkhouser’s promises to prepare and sign a writing es-topped him from raising the Statute of Frauds as a defense to the Employment Agreement? 5. Did the trial court err by granting summary judgment based on the Maryland Statute of Frauds where the parties intended to save provisions performable within a year even if other provisions were unenforceable under the Statute of Frauds? 6. Did the trial court err by granting summary judgment on F & F’s interference with contract and p[ro]spective business advantage claims solely because the Employ-. ment Agreement was not enforceable under the Statute of Frauds? ⁹⁷ THE FACTS Funkhouser was hired by F & F in July of 1990 to market the firm’s accounting services to government contractors. In July of 1992, Funkhouser and F & F’s president, Barry Friedman, began negotiating a new employment relationship, under which Funkhouser would be placed on a track leading him toward an ownership interest in the firm.

In drafting the agreement, Funkhouser and F & F worked from a sample contract normally used by F & F, on which Funkhouser noted modifications in accord with the negotiations. Funkhouser agreed to draft and present for signature a memorial of the agreed-upon terms and modifications of the sample contract. The proposed terms allegedly included, inter alia, the non-competition and trade secrets provisions at issue in the instant case. Also incorporated within the contemplated agreement were provisions respecting Funkhouser’s acquisition of an ownership interest in F & F. Specifically, Funkhouser was to receive a retroactive salary increase of $5,000 and “career path incentive” bonuses upon the achievement of differing levels of total sales revenues.

It is undisputed that Funkhouser began drafting the agreement, utilizing F & F’s computers and that, on August 3, 1992, consonant with the as yet unmemorialized employment agreement, he applied for and received a specified bonus and increase in salary for achieving $250,000 in total sales, benefits he would not otherwise have been entitled to receive previously. As of the receipt of the benefits, a written rendering of the agreement had not been completed. In the fall of 1992, Funkhouser requested and was granted a change in the noncompetition provision. Again, Funkhouser agreed to memorialize the agreement to conform with the negotiations.

Indeed, Funkhouser had prepared several revisions of the agreement as the negotiations progressed and terms were refined and finalized. In his affidavit, Friedman avers that, between January and May of 1993, his repeated requests for a copy of the completed agreement went unheeded; Funkhouser assured him that the draft, encompassing all ⁹⁸ agreed-upon terms and modifications, was completed and affirmed his commitment thereto but failed to produce one bearing his signature. Although the precise date is not clear, by the middle of 1993, Funkhouser had begun discussions regarding employment with H & B. It was also around that time that F & F began detecting a “deterioration” in Funkhouser’s work product. On August 9, 1993, Funkhouser tendered his resignation from F & F and began working at H & B. F & F alleges that Funkhouser then “immediately” began soliciting its clients.

On December 23, 1993, F & F filed a Complaint, naming Funkhouser as a defendant, seeking injunctive relief and damages for Funkhouser’s alleged violation of the noncompetition and trade secrets provisions of the employment agreement. As discovery progressed, F & F verified H & B’s involvement in the matter and, on May 2, 1994, amended its Complaint to include H & B. In addition to seeking permanent injunctive relief against appellees for breach of the covenant and misappropriation of trade secrets (Count 1) and damages therefor (Counts 2, 3, and 6), F & F also sought damages for fraud and negligent misrepresentation (Count 4), tortious interference with prospective business advantage and unfair competition (Count 5), civil conspiracy (Count 7), and conversion (Count 8). On May 16, 1994, appellees filed their Answer, along with a Motion to Dismiss Amended Complaint. In the motion, appellees sought dismissal of Counts 1, 2, 4, 5, and 7 on Statute of Frauds grounds, supporting same with Funkhouser’s affidavit attesting to his failure to sign the agreement.

Pursuant to Rule 2-322(c), 1 appellees’ motion was considered to be a ⁹⁹ motion for summary judgment. Appellant opposed the motion, relying on, inter alia, Barry Friedman’s affidavit. The trial court ordered that summary judgment be entered in favor of all appellees on counts 1, 2, 4, and 7 on September 28, 1994. Appellant agreed, per Rule 2-506(a), to a voluntary dismissal of the remaining claims, without prejudice, rendering the September 28,1994 Order final for purposes of appeal.

Appellant then noted this appeal from that Order. THE STANDARD OF REVIEW In reviewing the grant of a summary judgment motion, we are concerned with whether a dispute of material fact exists. King v. Bankerd, 303 Md. 98, 110-11 , 492 A.2d 608 (1985). See also Hartford Ins.

Co. v. Manor Inn of Bethesda, Inc., 335 Md. 135, 144 , 642 A.2d 219 (1994); Arnold Developer, Inc. v. Collins, 318 Md. 259, 261-62 , 567 A.2d 949 (1990); Bachmann v. Glazer & Glazer, Inc., 316 Md. 405, 408 , 559 A.2d 365 (1989); Nationwide Mut. Ins. Co. v. Scherr, 101 Md.App. 690, 694 , 647 A.2d 1297 , cert. denied, 337 Md. 214 , 652 A.2d 670 (1994); Markey v. Wolf, 92 Md.App. 137, 170 , 607 A.2d 82 (1992). “A material fact is a fact the resolution of which will somehow affect the outcome of the case.” King, 303 Md. at 111 , 492 A.2d 608 (citing Lynx, Inc. v. Ordnance Prods., Inc., 273 Md. 1, 8 , 327 A.2d 502 (1974)). “A dispute as to a fact ‘relating to grounds upon which the decision is not rested is not a dispute with respect to a material fact and such dispute does not prevent the entry of summary judgment.’ ” Seaboard Sur. Co. v. Richard F. Kline, Inc., 91 Md.App. 236, 242-43 , 603 A.2d 1357 (1992) (quoting Salisbury Beauty Schs. v. State Bd. of Cosmetologists, 268 Md. 32, 40 , 300 A.2d 367 (1973)).

In order for there to be disputed facts sufficient to render summary judgment inappropriate, “there must be evidence on which the jury could reasonably find for the plaintiff.” Seaboard, 91 Md.App. at 244 , 603 A.2d 1357 . If the motion and response thereto demonstrate that there is no ¹⁰⁰ genuine dispute as to any material fact, the moving party is entitled to judgment as a matter of law. See Lowman v. Consolidated Rail Corp., 68 Md.App. 64, 70 , 509 A.2d 1239 , cert. denied, 307 Md. 406 , 514 A.2d 24 (1986) (Once the moving party has provided the trial court with sufficient grounds for summary judgment, “[i]t is ... incumbent upon the other party to demonstrate that there is indeed a genuine dispute as to a material fact.”). See also King, 303 Md. at 112 , 492 A.2d 608 ; Hurt v. Stillman & Dolan, Inc., 35 Md.App. 644, 647 , 871 A.2d 1137 (1977).

DISCUSSION A. Appellant avers that there existed a genuine issue of material fact as to the existence of a memorandum sufficient to satisfy the Statute of Frauds or sufficient to except it from the Statute’s requirement of a writing, so as to preclude entry of summary judgment in favor of Funkhouser. We agree and reverse the judgment of the trial court in that respect. We explain. In approaching any matter potentially involving the Statute of Frauds, we first determine whether the case is one that falls within its provisions, as set forth in Maryland Code (1957, 1993 Repl.Vol.), Art. 39C § 1.

If it does, we address the sufficiency of the writing involved; otherwise, the Statute is not applicable. If the writing contains the requisite formalities, our inquiry ceases. If not, we look to find whether the contract is enforceable under equitable theories of estoppel or part performance. See Snyder v. Snyder, 79 Md.App. 448 , 558 A.2d 412 , cert. denied, 317 Md. 511 , 564 A.2d 1182 (1989). 1.

APPLICABILITY OF THE STATUTE OF FRAUDS In order to prevent fraud against one sought to be charged under a contract, the law has determined that certain contracts are so subject to prevarication that they shall not be ¹⁰¹ enforced unless in writing. Contracts to which this rule is made applicable are enumerated in the Statute of Frauds, which “grew out of a purpose to intercept the frequency and success of actions based on nothing more than loose verbal statements or mere innuendoes.” 72 Am.Jur.2d Statute of Frauds § 7 (1974). Although the Statute requires any contract that falls within its scope to be in writing or evidenced thereby, we note that it in no way divests the parties of the right to contract; it merely governs the procedures to which they must adhere so as to render their contract enforceable. See Baldwin v. Grymes, 232 Md. 470, 475 , 194 A.2d 285 (1963) (The Statute affects only the remedy sought and not the validity of the contract at issue.).

Finding its origins in and modeled after the English statute, An Act for the Prevention of Frauds and Perjuries, 29 Car. 2, ch. 3 (1676) (Eng.), the Maryland Statute of Frauds reads, in pertinent part: No action may be brought: (3) Upon any agreement that is not to be performed within the space of one year from the making thereof[.] Unless the ... agreement ... or some memorandum ... is in writing and signed by the party to be charged.... It is with subsection (3) that we concern ourselves in the case sub judice. Subsection 3 of Maryland’s Statute of Frauds comprises what is known as the one-year provision of the Statute encompassing those contracts that cannot possibly be completely performed within a year. See Ellicott v. Turner, 4 Md. 476, 488 (1853); Restatement (Second) of Contracts §§ 110(e), 130 cmt. a (1981).

The one-year period commences upon the completion of the agreement, ie., generally, when the offer is accepted, and “does not turn on the actual course of subsequent events, nor on the expectations of the parties as to the probabilities.” Restatement (Second) of Contracts § 130 cmt. a (1981). See also General Fed. Const., Inc. v. James A. Federline, Inc., 283 Md. 691, 695 , 393 A.2d 188 (1978); Campbell v. Burnett, 120 Md. 214, 224 , 87 A. 894 (1913). A contract ¹⁰² that fails to specify any time frame within which its terms are to be fulfilled is a contract of indefinite duration, and is not within the Statute, though it may extend beyond the year. Ellicott, 4 Md. at 488 ; Campbell, 120 Md. at 224 , 87 A. 894 .

See also Restatement (Second) of Contracts § 130 cmt. a (1981). There are two situations in which the one-year provision will operate to bar a claim: One occurs when the parties ‘“expressly and specifically’ agree[ ] that their oral contracts [are] not to be performed within one year.” Sun Cab Co. v. Carmody, 257 Md. 345, 350 [, 263 A.2d 1 ] (1970). The other occurs when it is impossible by the terms of the contract for it to be performed fully within one year. Chesapeake Financial Corp. v. Laird, 289 Md. 594, 600 [, 425 A.2d 1348 ] (1981).

Griffith v. One Inv. Plaza Assocs., 62 Md.App. 1, 5 , 488 A.2d 182 (1985). The covenants to which Funkhouser is subject are alleged 2 to be as follows: 9. Non-Competition Agreement.

(a) Upon termination of this Employment Agreement: (1) the Employee shall not be entitled to perform the same or similar services (services defined as client development of government contractors) as those rendered for the Corporation for another individual, firm, association, partnership, corporation, group, other person, or entity (together and individually, an “Entity”) located within the Washington metropolitan area for a period of one (1) year; (2) the Employee will not directly or indirectly induce any clients of the Corporation or FF & I or F & F to patronize any person, firm, or association rendering products or services ¹⁰³ similar to those rendered by the Corporation hereinafter referred to as the Competitor, within the Washington metropolitan area for a two (2) year period following termination of this Employment Agreement, nor will the Employee directly or indirectly handle, manage, supervise, render or perform any service for a client of the Corporation similar to those rendered by the Corporation for or on behalf of the Competitor within the Washington metropolitan area for a two (2) year period following termination of the Employment Agreement. (b) In the event of a breach of Provision 9(a)(1), the Employee agrees to pay the Corporation fifty thousand ($50,000) dollars within sixty (60) days f[rom] the date of such breach. (c) In the event of a breach of Provision 9(a)(2), the Employee agrees to pay the Corporation an amount equal to the fees billed by the Corporation (“F & F Fees”) to the applicable client during the two (2) year period prior to and ending on the earlier of the date (the “Engagement Date”) the Employee or Competitor (i) began providing Accounting Services [to] the Corporation client or (ii) accepted an engagement to provide Accounting Services to that Corporation client. Said amount shall be paid in full to the Corporation within fifteen (15) days after the Engagement Date.

(e) In the event that a court of competent jurisdiction shall determine in any case that the enforcement of the covenant contained in Section 9(a) or (b) would not be reasonable, but that enforcement of a covenant which is more limited in time or geographic area would be reasonable, it is intended that the more limited covenant determined by such court to be reasonable shall be given effect in such case in lieu of the covenant contained in Section 9(a) or (b). ¹⁰⁴ 11. Proprietary Information. All files, work papers, spreadsheets, records, financial information, data base information, and similar items (including any photocopies or electronic media versions of any of the above) relating to the Corporation as well as any Corporation client or prospective client, whether prepared by the Employee or otherwise coming into the Employee’s possession, will at all times remain the exclusive property of the Corporation. The Employee agrees not to make or retain copies of such materials and to deliver promptly upon the Corporation’s written request all such materials in his/her possession after the date of termination of this Employment Agreement.

In General Fed. Constr., Inc. v. James A. Federline, Inc., supra, 283 Md. 691, 393 A.2d 188 , Federline submitted a bid to do mechanical work on a project headed by General Federal Construction (GFC). GFC used Federline’s bid in submitting its own bid, but then awarded the subcontract to another firm. Federline brought suit based on the alleged breach of “an express oral agreement,” i.e., the bid. 283 Md. at 692-93 , 393 A.2d 188 . GFC unsuccessfully asserted a Statute of Frauds defense at the trial court level, relying on Art. 39C § 1(3).

Though the underlying mechanical work could have been performed within one year, the Court of Appeals noted that certain other obligations under the contract, such as maintenance and inspections, were not scheduled to be, and could not begin to be, performed until after completion of the project, rendering § 1(3) of the Statute applicable. Similarly, when faced with an action under an oral employment contract, in Collection & Investigation Bureau of Maryland, Inc. v. Linsley, 37 Md.App. 66 , 375 A.2d 47 (1977), we held that the covenant not to compete “for a period of two ... years immediately following termination of employment,” 37 Md.App. at 69 , 375 A.2d 47 , contained within a one-year employment agreement was within subsection (3), the one-year provision of the Statute, because, by its terms, it could not be performed in less than two years. Id. at 73 , 375 A.2d 47 . ¹⁰⁵ The trial court therefore properly concluded that the Statute of Frauds applied to the matters presented herein. We shall now determine what the Statute’s provisions require and whether they were complied with in the instant case. 2.

THE WRITING REQUIREMENT OF THE STATUTE OF FRAUDS Operating to render unenforceable certain contracts by reason of their failure to conform with the requisite formalities, Maryland’s Statute of Frauds requires that the contract or agreement upon which the action is brought, or some memorandum or note of it, is in writing and signed by the party to be charged, or some other person lawfully authorized by him. Art. 39C § 1. The writing must contain the names of the parties, set forth the contract’s terms and conditions, describe the subject matter of the contract, and be signed by the party to be charged. Beall v. Beall, 291 Md. 224, 228-29 , 434 A.2d 1015 (1981); Forsyth v. Brillhart, 216 Md. 437, 440 , 140 A.2d 904 (1958); Snyder, 79 Md.App. at 453 , 558 A.2d 412 ; 72 Am.Jur.2d Statute of Frauds § 295 (1974); Restatement (Second) of Contracts § 131 (1981).

It is with the last of these requirements that we now concern ourselves. Appellant asseverates that, despite the lack of a formally signed contract, a memorandum satisfying the Statute exists by virtue of “Funkhouser’s signing of one of several connected writings referencing the Employment Agreement.” 3 By this, appellant refers to the Monthly Commission Report Funkhouser filed on August 3, 1992 to