Hogans v. Hogans Agency, Inc.

WOODWARD, J. Franklin T. Hogans, Jr., appellant, is a minority shareholder of a Maryland corporation, Hogans Agency, Inc., appellee. In ⁵⁶⁵ 2014, appellant filed a complaint in the Circuit Court for Kent County, seeking a court order compelling appellee to allow appellant to inspect and copy appellee’s books of account. Appellee filed a motion for summary judgment, which the circuit court granted in an order requiring appellant to sign a confidentiality agreement before reviewing the corporation’s records. On appeal, appellant presents three questions, which we have rephrased and condensed into one: 1 Did the circuit court err in granting the motion for summary judgment by order requiring appellant to execute a confidentiality agreement before inspecting appellee’s books of account?

For the reasons stated below, we shall affirm the judgment of the circuit court. FACTUAL BACKGROUND The following facts are undisputed: 2 appellant owns 37.5% of stock in appellee, an insurance and real estate brokerage company. Appellant also owns Eshore Realty, LLC, another real estate brokerage company that is a competitor of appel- ⁵⁶⁶ lee. On December 19, 2013, appellant sent a letter to appellee requesting inspection of the company records, pursuant to Sections 2-512 and 2-513 of the Corporations and Associations Article.

See Md.Code (1975, 2014 Repl. Vol.) §§ 2-512 to -513 of the Corporations and Associations Article (“CORP”). On January 2, 2014, appellee responded to appellant’s request by providing copies of the company bylaws, minutes of the proceedings of stockholders, an annual statement of affairs for the tax year ending July 31, 2012, and the name, address, and shares of each stockholder. Appellee also agreed to schedule a time for appellant to inspect and copy the books of account, conditioned upon appellant signing a confidentiality agreement that would prohibit appellant from disclosing the information to third parties.

Appellant refused to sign the confidentiality agreement. On February 5, 2014, appellant filed pro se a Complaint for Stockholder’s Right to Inspect. Appellant’s request for relief included that the court order appellee (1) to allow appellant’s immediate inspection and copying of appellee’s books of account, (2) to allow appellant to use appellee’s photocopier free of charge, (3) to pay for a complete audit of company records, and (4) to pay appellant’s attorney’s fees and costs. On March 7, 2014, appellee filed a motion to dismiss, or in the alternative, motion for summary judgment, and request for hearing, arguing that it was permitted to require appellant to sign a confidentiality agreement “to prevent [appellant] and his agent from disclosing confidential company information collected during the inspection process to third parties, including for use by [appellant] in his competing real estate brokerage business.” Appellant filed a response to the motion on March 24, 2014, denying that he sought the information to cause harm to appellee, but rather to investigate a theft from the company by one of appellee’s employees in 2013.

On April 1, 2014, the circuit court, apparently without a hearing, denied appellee’s “Motion to Dismiss.” ⁵⁶⁷ On April 4, 2014, appellee filed a reply and requested that the court grant its motion for summary judgment. Appellant filed another response, and the matter was scheduled for a hearing. On May 30, 2014, appellant appeared pro se and appellee appeared with counsel for a hearing on appellee’s motion for summary judgment. At the hearing, appellee informed the court that it did not object to appellant’s right to inspect the books of account, but wanted appellant to first sign the confidentiality agreement.

Appellee also objected to bearing the cost of an audit or photocopying as requested by appellant, as well as appellant’s request for attorney’s fees, because appellant was not represented by counsel. Appellant argued that summary judgment would be premature because of the lack of discovery, and that he was not required by law to sign a confidentiality agreement before inspecting appel-lee’s books of account. At the close of the hearing, the trial court signed an order granting appellee’s motion for summary judgment, ordering that (1) appellee permit appellant to inspect company records as authorized by CORP §§ 2-512 and 2-513, (2) appellant sign a confidentiality agreement prior to inspecting the records, (3) the parties share the cost of copying the documents, (4) appellant’s request for an audit paid for by appellee be denied unless further warranted after the inspection, and (5) appellant’s request for attorney’s fees be denied. 3 On June 27, 2014, appellant filed a timely notice of appeal. 4 DISCUSSION We review the decision of a circuit court granting summary judgment de novo. Powell v. Breslin, 195 Md.App. ⁵⁶⁸ 340, 345, 6 A.3d 360 (2010), aff'd, 421 Md. 266 , 26 A.3d 878 (2011).

Maryland Rule 2-501© provides that a trial court shall grant a motion for summary judgment “if the motion and response show that there is no genuine dispute as to any material fact and that the [moving] party ... is entitled to judgment as a matter of law.” “Maryland’s summary judgment rule makes clear that a trial court determines issues of law; it makes rulings as a matter of law, resolving no disputed issues of fact. In this regard, the standard for appellate review of a trial court’s grant of a motion for summary judgment is simply whether the trial court was legally correct.” Hamilton v. Kirson, 439 Md. 501, 522 , 96 A.3d 714 (2014) (citations and internal quotation marks omitted). “As such, ... we review independently the record to determine whether the parties generated a dispute of material fact and, if not, whether the moving party was entitled to judgment as a matter of law.” Id. (citing Tyler v. City of Coll. Park, 415 Md. 475, 498-99 , 3 A.3d 421 (2010)).

We review the record in the light most favorable to the non-moving party. Bednar v. Provident Bank of Md., Inc., 402 Md. 532, 542 , 937 A.2d 210 (2007). Appellant contends that the trial court erred in granting summary judgment, because (1) it was granted prematurely, before appellant had the chance to conduct discovery; (2) there was no evidence that appellant intended to use the right to inspect for “improper or unlawful purposes” or “in bad faith”; and (3) the law does not require that a stockholder sign a confidentiality agreement prior to inspection of the corporation’s records. Appellant argues that “possible competition” between a shareholder and a corporation is not sufficient to deny a stockholder his right of inspection.

Appellee responds that the trial court did not err in granting summary judgment, because appellant failed to identify any material facts in dispute. Moreover, appellee argues, it is entitled to summary judgment as a matter of law, because requiring a confidentiality agreement “is an acceptable prophylactic measure that does not infringe on Appellant’s right of inspection or to use the information he discovers to protect ⁵⁶⁹ his shareholder interests, but protects Appellee from misuse of the information by dissemination to third parties.” We do not believe that the trial court’s grant of summary judgment was premature. Appellant contends that he needed additional time for discovery, but he has not identified, either in the trial court or on appeal, what discovery he needed. Appellant also did not ask the court for additional time to conduct discovery before or at the hearing on the motion for summary judgment.

Rather, appellant responded to appellee’s request for a hearing “that such a hearing is unnecessary.” Appellant also failed to raise a genuine dispute of material fact. The only fact that appellant disputes on appeal is whether he intended to use the right to inspect for “improper or unlawful purposes” or “in bad faith.” This fact is not material to the case. “A material fact is a fact the resolution of which will somehow affect the outcome of the case. Consequently, a dispute over a non-material fact will not preclude summary judgment.” King v. Bankerd, 303 Md. 98, 111 , 492 A.2d 608 (1985) (citation omitted). As we shall explain, a trial court may grant a corporation’s request for a stockholder who is a direct competitor of the corporation to sign a confidentiality agreement before inspecting the corporations books of account.

Appellant’s actual intent in using the information is irrelevant. Moreover, appellant did not file a legally sufficient affidavit raising a dispute of material facts, because the affidavit filed was based upon appellant’s “knowledge, information and belief.” See Cnty. Comm’rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 103 , 747 A.2d 600 (2000) (stating that “affidavits that are based on ‘the best of one’s knowledge, information, and belief,’ or similar attestation, are insufficient to support a motion for summary judgment or an answer in opposition to such motion”). Finally, we determine whether appellee was entitled to judgment as a matter of law.

The primary dispute in this case is whether a stockholder may be required to sign a confidentiality agreement prior to allowing inspection of a ⁵⁷⁰ corporation’s books of account pursuant to CORP §§ 2-512 and 2-513. Appellant contends that “possible competition” between a shareholder and a corporation is not sufficient to deny a stockholder his right of inspection. We disagree and shall explain. CORP § 2-512 provides for the inspection of corporate documents by any shareholder: (a) Any stockholder, holder of a voting trust certificate in a corporation, or his agent, on written request, may inspect and copy during usual business hours any of the following corporate documents: (1) Bylaws; (2) Minutes of the proceedings of the stockholders; (3) Annual statements of affairs; and (4) Voting trust agreements deposited with the corporation at the corporation’s principal office in accordance with § 2-510(2) of this subtitle.

(b) Within 7 days after a request for