S.A.S. Personnel Consultants, Inc. v. Pat-Pan, Inc.

Davidson, J., delivered the opinion of the Court. This case presents two questions. The first is whether, under Maryland Code (1975), § 7-301 of the Corporations and Associations Article, an employment agency, which is a foreign corporation not registered or qualified in Maryland, and which procured an employee for a Maryland employer, is “doing business in this State” and is therefore precluded from maintaining a suit in Maryland for an alleged breach of contract. The second is whether Maryland Code (1957, 1972 Repl.Vol., 1978 Cum.Supp.), Art. 56, § 161 requires such an employment agency to be licensed in order to recover damages in Maryland for such an alleged breach of contract.

The facts appearing in the pleadings and affidavits, none of which were disputed in the trial court, show that the appellant, S.A.S. Personnel Consultants, Inc. (S.A.S.), is an employment agency incorporated in the District of Columbia, which at the time here relevant was not registered, qualified or licensed in Maryland. The appellee, Pat-Pan, Inc. (Pat-Pan), is the owner of a restaurant located in Anne Arundel County, Maryland. On 14 October 1977, Pat-Pan called S.A.S. at its District of Columbia office. During that telephone conversation, Pat-Pan indicated that it needed a chef.

It agreed “to work with” S.A.S. as an employment agency, and S.A.S. informed it that it would be responsible for S.A.S.’s fees. On the same day, S.A.S. sent Pat-Pan a letter in which it described itself as the “largest hospitality personnel service ³³⁷ in the Washington metropolitan area.” It enclosed a copy of its advertisement in Washingtonian Magazine, a periodical circulated in Maryland, and a copy of its “contract and fee schedule.” On or about 21 October 1977, S.A.S. referred Mr. Gilíes L. Foucard to Pat-Pan. After an interview, Pat-Pan told S.A.S. that even though it was interested in Mr. Foucard, it would not then hire him because business was “seasonably slow.” Pat-Pan indicated that it would reevaluate its position and contact S.A.S. in mid-January, 1978. Instead, in mid-January, Pat-Pan hired Mr. Foucard without contacting S.A.S. or paying a fee.

On 7 June 1978, in the Circuit Court for Anne Arundel County, S.A.S. filed a declaration and a motion for summary judgment seeking damages for an alleged breach of contract. Pat-Pan filed a “Motion Raising Preliminary Objections” under Maryland Rule 323, on the grounds, insofar as here relevant, that S.A.S. lacked capacity to sue because it was a foreign corporation “doing business” in Maryland without being registered under § 7-301 of the Corporations and Associations Article, or licensed under Art. 56, § 161. It requested that the suit be dismissed with prejudice. On 7 August 1978, the trial court entered an order which granted the motion and dismissed the case.

We issued a writ of certiorari to the Court of Special Appeals before consideration by that Court. We shall reverse. I Maryland Code (1975), § 7-202(a) of the Corporations and Associations Article provides: “Unless it is qualified to do business under § 7-203 of this subtitle, before doing any interstate or foreign business in this State, a foreign corporation shall register with the Department.” ³³⁸ Section 7-203(a) of the Corporations and Associations Article provides: “Before doing any intrastate business in this State, a foreign corporation shall qualify with the Department.” Section 7-301 of the Corporations and Associations Article provides in pertinent part: “If a foreign corporation is doing or has done any intrastate, interstate, or foreign business in this State without complying with the requirements of Subtitle 2 of this title, neither the corporation nor any person claiming under it may maintain a suit in any court of this State....” The initial question before us is whether an unregistered or unqualified foreign corporation, which procured an employee for a Maryland employer, is “doing business in this State.” 1 ³³⁹ “[A] foreign corporation is doing business within a state when it transacts some substantial part of its ordinary business therein.” Chesapeake Supply & Equip. Co. v. Manitowoc Eng'r Corp., 232 Md. 555, 562 , 194 A.2d 624, 627 (1963).

The party asserting that an unregistered or unqualified foreign corporation is “doing business within the state” carries the burden of proof. Rudden v. Gro-Plant Indus., Inc., 269 Md. 173, 176 , 304 A.2d 812, 814 (1973). See Quinn v. Bowmar Publishing Co., 445 F.Supp. 780, 786 (D.Md. 1978); United Merchants & Mfrs. Inc. v. David & Dash, Inc., 439 F.Supp. 1078, 1087 (D.Md. 1977).

A determination whether a particular act or set of acts constitutes “doing business” depends upon the facts of each individual case, and rests not on a single factor, but rather on the nature and extent of the business and activities which occur in the forum state. White v. Caterpillar Tractor Co., 235 Md. 368, 372 , 201 A.2d 856, 858 (1964); State ex rel. Bickel v. Pennsylvania Steel Co., 123 Md. 212, 218 , 91 A. 136, 138 (1914). Factors which may be taken into account include the payment of state taxes; the maintenance in the state of property, an office, telephone listings, employees, agents, inventory, research and development facilities, advertising, and bank accounts; the making of contracts; and the extent or pervasiveness of management functions including supervision and control of distributors and services for customers within the state.

Gilliam v. Moog Indus., Inc., 239 Md. 107, 109 , 210 A.2d 390, 391 (1965); White v. Caterpillar Tractor Co., 235 Md. at 373 , 201 A.2d at 858 ; Thomas v. Hudson Sales Corp., 204 Md. 450, 464-65 , 105 A.2d 225, 231 (1954). Where there is solicitation, shipment of goods, and an extensive set of activities or management functions, foreign corporations have been held to be “doing business.” White v. Caterpillar Tractor Co., 235 Md. at 374 , 201 A.2d at 859 ; Thomas v. Hudson Sales Corp., 204 Md. at 465-66 , 105 A.2d at 231 . Foreign corporations which merely solicit orders or sales, or engage in activities in Maryland directly related to such solicitation or sales, including the interstate delivery of goods, have, however, been held not to be “doing business.” Gilliam v. Moog Indus., Inc., 239 Md. at 109 , 210 A.2d at 391 ; ³⁴⁰ G.E.M., Inc. v. Plough, Inc., 228 Md. 484, 488 , 180 A.2d 478, 481 (1962); Feldman v. Thew Shovel Co., 214 Md. 387, 396-97 , 135 A.2d 428, 432 (1957). See United Merchants & Mfrs.

Inc. v. David & Dash, Inc., 439 F.Supp. at 1087-89 ; Johns v. Bay State Abrasive Prods. Co., 89 F.Supp. 654, 660 (D.Md. 1950). Here there are insufficient facts to show that S.A.S. was “doing business” in Maryland. Its office was in the District of Columbia where it was incorporated.

Before 30 January 1978, it did not maintain an office in Maryland. None of its employees was physically present in Maryland, and none of them conducted employment agency operations in Maryland. There are no facts to show that S.A.S. paid