Griesi v. Atlantic General Hospital Corp.

HARRELL, Judge. Mr. James V. Griesi (“Griesi”), Appellant, filed suit in the Circuit Court for Worcester County against Atlantic General Hospital Corporation (“Atlantic General”), Appellee, alleging, among other things, that Atlantic General negligently misrepresented material facts during the course of pre-employment negotiations upon which Griesi relied to his ultimate detriment. Pursuant to Rule 2-322 1 of the Maryland Rules of Civil Procedure, the Circuit Court granted Appellee’s motion to dismiss for failure to state a claim upon which relief can be granted. Griesi appealed to the Court of Special Appeals.

Before that court considered his appeal, however, we granted certiorari (on our initiative) 2 to consider the following question: ⁴ Whether the trial court erred in its determination that Appellant’s Second Amended Complaint fails to state a legally cognizable claim of Negligent Misrepresentation upon which relief can be granted, pursuant to Maryland common law and the Maryland Rule 2-322(b)(2) standard of review? We hold that Griesi’s second amended complaint alleges a cognizable claim under Maryland common law and reverse. I. Griesi filed suit in the Circuit Court for Worcester County on 13 November 1998. He filed a Second Amended Complaint on 5 March 1999 alleging breach of an employment contract (Count I) 3 and negligent misrepresentation in employment negotiations (Count II).

According to the allegations of the Second Amended Complaint 4 , Griesi, a resident of Montgomery County, is a trained physical therapist who, in August 1998, forwarded a cover letter and resume to Atlantic General, located in Berlin, Maryland, applying for a position as a physical therapist. On 1 September 1998, Griesi telephoned Atlantic General’s then Chief Executive Officer (CEO), Mr. Earl Slater, and scheduled an interview for 3 September 1998. During the interview, Slater and Griesi spoke at length about Griesi’s credentials and Slater’s desire to train and mentor him. After receiving from Griesi a list of references, Slater took him on a tour of the hospital facilities. ⁵ Griesi and Slater next spoke by telephone on 17 September 1998.

Slater stated he expected to be able to make an offer of employment soon. He ended the conversation by telling Griesi, “I want you here!” On 21 September 1998 and again three days later, Griesi called to check on the status of the potential offer, but Slater advised he would have to call him back. Apparently not having pinned all of his hopes at that time on Atlantic General, Griesi had explored the job market elsewhere. He received an employment offer on 24 September 1998 from an entity called MOST, located in Silver Spring, Maryland.

Griesi immediately telephoned Slater to see if Atlantic General was prepared to make an offer. Slater responded that he would let him know no later than the next Monday, 28 September 1998. Between 28 September and 2 October 1998, Griesi and Slater discussed, on several occasions, a proposed specific starting date and starting salary for a management position in Atlantic General’s Physical Therapy Department. Slater stated he would present the proposal to the Board of Directors of Atlantic General and get back to him.

On 5 October, Slater, on behalf of Atlantic General, called Griesi and communicated an oral offer of employment as a Physical Therapy Manager to start on 2 November 1998 at an annual salary of $55,000, plus benefits. Slater stated that the chairman of the Board approved the offer. Griesi responded he had offers from other potential employers 5 and would need to think about the offer from Atlantic General. Slater advised that he would forward a written contract offer by the next week.

The next day, Griesi called Slater and orally accepted the 5 October oral offer of employment. On 10 October, he received the promised written offer from Atlantic General, in a letter ⁶ signed by Slater, on Atlantic General’s letterhead, and dated 7 October 1998. The letter explained, in pertinent part: As we have discussed, I am pleased to offer you the position of Physical Therapy Manager at a salary of $55,000 per year effective November 2, 1998. In this full-time position, you will be responsible for all facets of departmental operation.

As you know, I have provided notice to the present contractor[ 6 ] in accordance with the ninety day provision in the contract. As a result of an exclusivity clause in the contract with the contractor, you will be unable to render patient care during November until December 23rd. For this reason, another full-time physical therapist will not join us until this period of exclusivity has expired. Once the period expires, both of you will commence clinical assessments for inpatients, outpatients, and patients on our Long Term Care Unit.

In addition, I have shared with you the possibility of providing services to the neighboring nursing home in the future. Please advise me of your decision in writing at your earliest convenience. I am confident that this opportunity will provide mutual growth opportunities for you and the Hospital. Sincerely, [signature of Slater] Earl B. Slater, Jr. Interim President/Chief Executive Officer On 15 October, Griesi responded with an unconditional written acceptance in a letter to Slater. 7 ⁷ On 20 October 1998, Ms. Kim Justice, a supervisor in the Physical Therapy Department at Atlantic General, telephoned Griesi.

She wanted to meet him because the only documentation on him she had were copies of his resume and his 15 October acceptance letter. The next day, Ms. Joan Kindell, Vice President of Human Resources at Atlantic General, telephoned Griesi requesting to join the meeting with Justice. Kindell suggested the three meet on 2 November 1998, the date of Griesi’s expected first day of work at Atlantic General. Ostensibly alarmed from these calls about potential delay in starting his employment, Griesi telephoned Mr. Barry Bee-man, Atlantic General’s new CEO, that same day, but Beeman was unavailable to take the call.

Instead, Griesi reached Slater 8 , who said he was upset with the way the matter was being handled and assured Griesi that the corporation’s Board of Directors approved the offer of employment. Slater asked to be given some time to resolve any misunderstanding. On 22 October, Slater called Griesi and explained that he spoke with Beeman who expressed concern that Griesi did not have a physical therapy license. Griesi faxed a copy of his license to Slater who said he would forward it to Beeman.

On 24 October 1998, Slater telephoned Griesi to say that he had spoken with Beeman again and with the chairman of the Board, and he did not foresee any more confusion between Griesi and Atlantic General. Slater stated that the starting date of Griesi’s employment remained valid. Two days later, Griesi and Beeman discussed the licensing process. Griesi stated he was prepared to begin work on 2 November.

Beeman asked if he had scheduled an appointment with Ms. Justice. Griesi replied that an appointment was scheduled for his first day on the job. Beeman responded “we will take it from there.” Griesi met with Justice, Kindell, and a Ms. Soots, Atlantic General’s Director of Operations, on 2 November. Soots, ⁸ speaking for the three, stated that they had no knowledge that physical therapy services at Atlantic General were to be changed from its present outside contractor to in-house employees; no one knew of Griesi other than from his resume and acceptance letter; Slater never consulted them about hiring him; and, therefore, the purpose of the meeting was “fact-finding.” They then interviewed Griesi at length, including the details and chronology of the hiring process he underwent with Slater.

Although conceding that Slater and the Chairman of the Board probably did make the decision to hire Griesi, Soots maintained that she ran the hospital and Justice, Kindell, and herself had to approve potential new hires. She explained that, although she was impressed with Griesi’s resume, she doubted whether she had the time or resources to train him. She also stated that Atlantic General recently had hired another physical therapist. Soots said she would call Griesi regarding his status by 6 November 1998, after she consulted with other personnel of Atlantic General.

On 6 November, Kindell telephoned Griesi and told him that Atlantic General decided not to hire him. She advised him that she had forwarded his resume for consideration to the hospital’s outside consultant for physical therapy services. Apparently the consultant did not offer Griesi employment as, at the time the second amended complaint was filed in the Circuit Court on 5 March 1999, he continued to allege that he was seeking a job comparable with that Atlantic General had offered. In paragraphs 46 through 52 of his second amended complaint, Griesi specifically alleged the following as to his negligent misrepresentation claim: 46.

Defendant Atlantic through its agent, employee, and acting Chief Executive Officer, Earl Slater, owed a duty of care to Plaintiff Griesi, a job applicant. 47. Defendant Atlantic through its agent, employee, and acting Chief Executive Officer, Earl Slater, negligently misrepresented several present facts during Plaintiff and De ⁹ fendant’s employment negotiations regarding Defendant’s need for, and desire to employ Plaintiff as, a Physical Therapist Manager. 48. Defendant Atlantic through its agent, employee, and acting Chief Executive Officer, Earl Slater, negligently misrepresented several related present facts at the time the offer of employment was extended to the Plaintiff, including: (1) that Slater was authorized to make an offer of employment and hire employees for Defendant Atlantic; (2) that Defendant’s interviewing and selection process was complete; (3) that Defendant Atlantic would not require Plaintiff Griesi to submit [to] further interviews or assessment of his qualifications, or other pre-employment requirements; and (4) upon timely acceptance of Defendant’s offer, Plaintiff Griesi could rely on Defendant’s performance. 49. Defendant Atlantic made the misrepresentations intending that the Plaintiff would act in reliance on its oral and written representations. 50.

Defendant Atlantic could reasonably foresee that the Plaintiff would rely on the misrepresentations. 51. Defendant Atlantic could reasonably foresee that if its representations were false, the Plaintiff would incur injury or loss. 52. Plaintiff Griesi took actions in reasonable and justified reliance on Defendant’s negligent misrepresentations, which resulted in his suffering damages. In the ad damnum portion of the second amended complaint, Griesi sought compensatory damages of “no less than $165,-000.” Atlantic General filed a motion to dismiss Griesi’s complaint arguing, among other things, that his count of negligent misrepresentation failed to state a claim upon which relief could be granted.

The Circuit Court granted the motion on the ground that Maryland does not recognize the tort of negligent misrepresentation in employment at-will situations. ¹⁰ II. A. Griesi asserts that he has a valid claim of economic loss due to his reliance on Atlantic General’s negligent misrepresentations made to him during pre-employment negotiations. He argues that Slater and he formed a special relationship during employment negotiations which gave rise to Slater’s owing him a duty to exercise reasonable care in disseminating information regarding the true employment situation at Atlantic General. Griesi argues that he made it abundantly clear during his conversations with Atlantic’s CEO that he was actively seeking employment and had at least one other offer pending.

It is not unreasonable to presume that Griesi would probably rely on information provided to him by Atlantic’s CEO in making a career decision about which corporation could best me[e]t his present and future, personal and professional, needs and plans. Businessmen routinely rely on statements made about the workings of a corporation by its Chief Executive Officer. Due to the nature and purpose of the relationship between the parties, it is clear that if the CEO voluntarily gave specific, relevant and persuasive information to Griesi about the corporation in the course of their serious and deliberate negotiations, and Griesi relied on that information to make a decision about whether to enter into a contract with Atlantic, and that information was false, as is alleged in the Appellant’s Second Amended Complaint, foreseeable and considerable harm would undoubtedly befall the Appellant. Appellant’s Brief at 17.

Atlantic General responds that Griesi’s negligent misrepresentation claim is not cognizable under Maryland’s employment at-will jurisprudence. Under the at-will doctrine, the employer or employee may terminate the employment relationship for any reason unless prohibited by law or public policy. This principle, Atlantic General suggests, applies at any time during the course of the employer-employee relation ¹¹ ship, including pre-employment negotiations. Atlantic General envisions an assault of “massive litigation in Maryland” if this Court recognizes negligent misrepresentation as a viable cause of action in the present case.

We do not share Atlantic General’s reasoning or alarm. We have explained that, in its most general sense, negligent misrepresentation arises when the defendant owes a duty of care in communicating information to the plaintiff and that duty is breached, causing pecuniary or personal injury to the plaintiff. See Village of Cross Keys, Inc. v. U.S. Gypsum Co., 315 Md. 741, 755-57 , 556 A.2d 1126, 1131 (1989); Weisman v. Connors, 312 Md. 428, 443-48 , 540 A.2d 783, 790-93 (1988)(discussing the history of negligent misrepresentation in Maryland); Martens Chevrolet, Inc. v. Seney, 292 Md. 328, 334-37 , 439 A.2d 534, 538-39 (1982). It has been said that “the most common example of the duty to speak with reasonable care is based on a business or professional relationship, or one in which there is a pecuniary interest.” Giant Food, Inc. v. Ice King, Inc., 74 Md.App. 183, 190 , 536 A.2d 1182, 1185 (1988)(discussing Prosser and Keeton on the Law of Torts § 107, at 105 (5th Ed.1984, 1988 Supp.)).

In Weisman , we reaffirmed the five elements of negligent misrepresentation as: (1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement; (2) the defendant intends that his statement will be acted upon by the plaintiff; (3) the defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury; (4) the plaintiff, justifiably, takes action in reliance on the statement; and (5) the plaintiff suffers damage proximately caused by the defendant’s negligence. 312 Md. at 444 , 540 A.2d at 791 (citing Martens Chevrolet, Inc., 292 Md. at 337 , 439 A.2d at 537 ). See also Village of Cross Keys, Inc., 315 Md. at 755-56 , 556 A.2d at 1133 . ¹² B. A claim sounding in ñegligence requires that the defendant owe the plaintiff a duty of care. “[I]t should be recognized that ‘duty’ is ... an expression of the sum total of those considerations of policy which lead the law to say that the plaintiff is entitled to protection.” Jacques v. First Nat. Bank of Maryland, 307 Md. 527, 533 , 515 A.2d 756, 759 (1986)(citing Prosser and Keeton on The Law of Torts § 53, at 357 (1984)). In Williams v. Mayor & City Council of Baltimore, 359 Md. 101, 142 , 753 A.2d 41, 63 (2000), we recently had the occasion to reiterate a long held legal principle: [T]here can be no negligence where there is no duty that is due; for negligence is the breach of some duty that one person owes to another.

It is consequently relative and can have no existence apart from some duty expressly or impliedly imposed. In every instance before negligence can be predicated of a given act, back of the act must be sought and found a duty to the individual complaining, the observance of which duty would have averted or avoided the injury.... As the duty varies with circumstances and with the relation to each other of the individuals concerned, so the alleged negligence varies, and the act complained of never amounts to negligence in law or in fact; if there has been no breach of duty. (citations omitted).

See also Village of Cross Keys, Inc., 315 Md. at 751-52 , 556 A.2d at 1131 . There is no precise formula for determining the existence of a duty of care between two parties. See Williams, 359 Md. at 126-27 , 753 A.2d at 54-55 ; Dan B. Dobbs, The Law of Torts § 472, at 1350 (2000). At a minimum, we have endorsed an analytical approach that encompasses at least two major assessments: examining the nature of legal relationship between the parties and the likely harm that results from a party’s failure to exercise reasonable care within that relationship.

See Jacques, 307 Md. at 534 , 515 A.2d at 759 . For claims of economic loss due .to negligent misrepresentation, the injured party must prove that the ¹³ defendant owed him or her a duty of care by demonstrating an intimate nexus between them. See Jacques, 307 Md. at 534-35 , 515 A.2d at 759-60 . The intimate nexus may be demonstrated by showing contractual privity or its equivalent.

See Weisman, 312 Md. at 446 , 540 A.2d at 791 ; Jacques, 307 Md. at 534-35 , 515 A.2d at 759-60 . Maryland has found the equivalent of contractual privity in special relationships consummated during the course of pre-contract negotiations. See Weisman, 312 Md. at 448-51 , 540 A.2d at 792-94 (holding that negligent misrepresentation is a viable cause of action in pre-contract employment negotiations); Martens Chevrolet, Inc., 292 Md. at 331-338 , 439 A.2d at 536-39 (facts were sufficient for a jury to determine negligent misrepresentation in pre-contractual negotiations where defective financial statements were presented to buyer of a car dealership); Lubore v. RPM Assoc., Inc., 109 Md.App. 312, 338 , 674 A.2d 547, 560 (1996)(holding that employer could be liable to employee who resigned from former job in reliance of employer’s negligent misrepresentation); Giant Food, Inc., 74 Md.App. at 190-91 , 536 A.2d at 1185 (formation of actual contract immaterial to finding of duty if facts sufficient for jury to find special relationship developed between buyer and supplier of ice because of extensive and detailed communications). Finding an intimate nexus requires consideration of numerous factors.

Weisman cited International Products Co. v. Erie R. Co., 244 N.Y. 331 , 155 N.E. 662, 664 (1927) for guidance in determining whether a duty exists between two parties based on such a nexus: “Liability [for negligent misrepresentation] arises only where there is a duty, if one speaks at all, to give the correct information. And that involves many considerations. There must be knowledge, or its equivalent, that the information is desired for a serious purpose; that he to whom it is given intends to rely and act upon it; that, if false or erroneous, he will because of it be injured in person or property. Finally, the relationship of the parties, arising out of contract or otherwise, must be such that in morals ¹⁴ and good conscience the one has the right to rely upon the other for information, and the other giving the information owes a duty to give it with care.

An inquiry made of a stranger is one thing; of a person with whom the inquirer has entered, or is about to enter, into a contract concerning the goods which are, or are to be, its subject, is another.” 312 Md. at 447 , 540 A.2d at 792 . Furthermore, Dobbs has advised that: Clarity in stating and applying the duty can also be improved by recognizing that falsity does not by any means prove negligence. The defendant’s representation might be erroneous because the defendant (1) did not know the facts he should have known, failed to investigate facts, or investigated them with less than reasonable care; (2) knew the facts but used words or other communicative devices poorly; or (3) unreasonably failed to make statements at all, or failed to make statements needed to clarify the plaintiffs understanding. Dan B. Dobbs, The Law of Torts § 472, at 1353 (2000).

The Restatement (Second) of Torts § 552, Comment (a), at 128 (1977), in explaining the scope of liability for negligent misrepresentation as being more narrow than that of fraudulent misrepresentation, states, in pertinent part: [I]t does not follow that every user of commercial information may hold every maker to a duty of care. Unlike the duty of honesty [under a fraudulent misrepresentation action], the duty of care to be observed in supplying information for use in commercial transactions implies an undertaking to observe a relative standard, which may be defined only in terms of the use to which the information will be put, weighed against the magnitude and probability of loss that