Sedghi v. PatchLink Corporation
Filing
133
MEMORANDUM OPINION. Signed by Judge Ellen L. Hollander on 10/17/11. (mps, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
VAHID SEDGHI,
Plaintiff,
v.
Civil Action No.: ELH-07-01636
PATCHLINK CORP.,
Defendant.
MEMORANDUM OPINION
Vahid Sedghi, plaintiff, brought suit against his former employer, PatchLink Corporation
(“PatchLink”),1 defendant, an Arizona software company, claiming PatchLink failed to honor an
oral promise made in 2004 to pay Sedghi a commission of 1% on all of PatchLink’s sales.2
Seeking damages in excess of $600,000, Sedghi brought claims for breach of contract, loss of
commission under the Maryland Wage Payment and Collection Law, loss of commission under
the
Wholesale
Sales
Representatives
Statute,
unjust
enrichment,
fraud/intentional
misrepresentation, negligent misrepresentation, and promissory estoppel.3
On September 30, 2010, the Honorable Judge J. Frederick Motz, to whom this case was
previously assigned, considered the parties’ cross-motions for summary judgment, and granted
defendant’s motion for summary judgment as to all claims (ECF 107). Sedghi v. PatchLink
Corp., No. JFM–07–1636, 2010 WL 3895472 (D. Md. Sept. 30, 2010). On appeal, the Court of
Appeals for the Fourth Circuit upheld Judge Motz’s rulings, with the exception of his disposition
1
PatchLink is now known as Lumension Security, Inc. Defendant uses the spelling
“Patchlink,” while plaintiff uses the spelling “PatchLink.” I will use “PatchLink,” as that is the
spelling used by Judge Motz, to whom the case was previously assigned, and the Fourth Circuit,
in their opinions regarding this case.
2
Jurisdiction is based on diversity of citizenship. See 28 U.S.C. §§ 1332(a).
3
In 2009, plaintiff dismissed claims under 42 U.S.C. § 1981 and Title VII.
of the promissory estoppel claim. With regard to that claim, the Fourth Circuit reversed and
remanded for further proceedings (ECF 119). Sedghi v. PatchLink Corp., No. 10–2229, 2011
WL 2938069 (4th Cir. July 22, 2011). Subsequently, the case was transferred to me.
On remand, defendant filed a “Motion To Strike Jury Demand And Supporting
Memorandum” (“Motion,” ECF 128), as to the promissory estoppel claim. Plaintiff opposes the
Motion, insisting that he is entitled to a jury trial on that claim. See “Plaintiff’s Response In
Opposition To Defendant’s ‘Motion To Strike Request For Jury Trial’” (“Opposition,” ECF
131); “Memorandum Of Grounds And Authorities In Support Of Plaintiff’s Response In
Opposition To Defendant’s ‘Motion To Strike Request For Jury Trial’” (“Opposition Memo,”
ECF 131-1).4 In response to plaintiff’s Opposition, defendant submitted a “Reply In Support Of
PatchLink’s Motion To Strike Jury Demand” (“Reply,” ECF 132).
The issues have been fully briefed and the Court rules now pursuant to Local Rule 105.6,
no hearing being necessary.
Factual and Procedural Background5
PatchLink was founded in 1999 by Sean Moshir (“Sean”) and managed by Sean and his
brother, Kourosh Moshir (“Kourosh”).6 In 2004, after a venture capital investment in PatchLink
of about $35 million, Sean asked plaintiff, a college friend, to join the company as Director of
Sales Engineering.
See “Memorandum Of Law In Support Of Defendant PatchLink
Corporation’s Motion For Summary Judgment” (“MSJ Memo,” ECF 77) at 1-2. On September
4
Plaintiff has appended to his Opposition Memo a copy of Allen v. Citimortgage, Inc.,
No. CCB-10-2740, 2011 WL 3425665 (D. Md. Aug. 04, 2011).
5
The statement of facts that follows has been heavily drawn from Judge Motz’s opinion
with respect to the defendant’s summary judgment motion.
6
I shall use the first names of the Moshirs merely to distinguish them.
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3, 2004, Plaintiff signed the company’s standard employment agreement. MSJ Memo, at Exh. 5.
The compensation portion of the contract states, id.:
a. As compensation for the services provided by employee under this
AGREEMENT, EMPLOYER will pay EMPLOYEE an initial annual salary of
$135,000 dollars. . . .
b. Employer will provide N/A stock option to the employee. . . .
c. Commission is paid according to PatchLink sales policy.
d. There are no other compensation, incentive, bonuses, payments, stocks,
deferred payments, deferred salary, stock options or any other payment due to the
employee other than what is set forth in this agreement unless otherwise added as
amendment to this contact [sic] and signed by both the EMPLOYEE and the
president of the company.
The language about commissions, set forth in ¶ “c,” was used in employment contracts
for a range of employees, many of whom were not eligible for commissions. MSJ Memo at 4.
At least some employees who qualified for commissions had clearly defined commission plans
in writing. Id.
According to plaintiff, defendant was to pay commissions pursuant to the PatchLink
Sales Policy, referenced in ¶ “c.” “Second Amended Complaint” (“Complaint,” ECF 27) ¶ 11.
Therefore, in January 2006, plaintiff asked Senior Vice President Richard Halavka and Sean for
a copy of the policy. Id. ¶ 12. Plaintiff claims that Mr. Halavka and Sean advised him “that the
company would get back to [him] regarding payment for the commissions,” id. ¶¶ 14, 16, and
that Sean “advised Plaintiff that accounting is doing the paperwork for the financing of the
commissions.” Id. ¶ 15.
During plaintiff’s employment, several changes in his compensation were memorialized
in documents placed in his personnel file, pursuant to ¶ “d” of his contract, including eligibility
for a bonus, a pay increase, and stock options. MSJ Memo at 2-3. Plaintiff alleges, however,
that in September 2004 Sean also agreed to pay plaintiff a commission of one percent of “all
sales.” Id. at 4-5. Plaintiff was to be paid this commission upon completion of his first year of
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work for the company, at which point they would “hammer out a new compensation package.”
Id. at 5. Although no writings memorialized this alleged change to plaintiff‘s employment
contract, id., both Sean and Kourosh corroborated plaintiff’s claim in their deposition testimony.
Plaintiff contends that, “[a]t the close of the Second Quarter of 2005, [Sean] advised Plaintiff
that . . . [Sean would] take care of the commissions owed to date in October, 2005.” Complaint ¶
18.
According to plaintiff, Sean was terminated by PatchLink in September 2005. Id. ¶ 19.
Around that time, plaintiff wrote to PatchLink’s new CEO, Corey Smith, requesting payment for
overtime work, reimbursement of unpaid expenses, and the immediate vesting of his stock
options. MSJ Memo at 6. Although plaintiff did not mention sales commissions in that initial
request, id., plaintiff avers that he repeatedly asked Smith about his commissions. Complaint ¶
21. Smith initially declined to pay plaintiff overtime or vest his stock options, but did request
that Sedghi promptly submit his expenses for payment. MSJ Memo at 6. When plaintiff pressed
the issues of overtime and the stock options, Smith instructed the company to pay plaintiff a
corporate management bonus of $5,000. Id.
On October 31, 2005, plaintiff began working under Carl Lytikainen, PatchLink’s new
Vice President of Technical Services. Id. at 7. Just three days after Lytikainen began working at
PatchLink, plaintiff asked to speak with him about compensation. Id. Plaintiff did not mention
commissions in his emails to Lytikainen, but Lytikainen confirmed in his deposition testimony
that they were discussed. Id.; see also MSJ Memo, Exh. 26. Plaintiff’s version accords with
defendant’s. He states: “Plaintiff . . . approached Mr. Lytikainen and advised him that [Sean]
told Plaintiff [PatchLink would] pay Plaintiff’s sales commissions and upscale his compensation
package in October of 2005.” Complaint ¶ 25. Lytikainen stated that he “asked [Sedghi] to . . .
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show some documentation” to substantiate Sedghi’s claim that he was owed commissions. MSJ
Memo, Exh. 26, at 19:3-4. However, as plaintiff was unable to produce such documentation, he
was not paid commissions at that time. Id. Plaintiff asserts that he reiterated his request for
commissions to Lytikainen, “as well as others within PatchLink.” Complaint ¶ 27.
In early 2006, PatchLink increased Plaintiff‘s base pay and added a provision to his
compensation agreement allowing him to earn up to fifteen percent of his base pay as a bonus.
MSJ Memo at 8. Plaintiff was unhappy with this new plan, however, and emailed Lytikainen to
demand payment for 800 overtime hours from the previous year and payment based on “[the]
commission plan that was discussed with the previous management and the previous CEO
(Corey Smith).” Id.; Id., Exh. 24. In that email, plaintiff provided no description of the basis for
the requested commission, the rate of the commission, or other details—he merely referred to
“my commission plan.” Id. at 8; Id., Exh. 24. Given the lack of documentation supporting
Sedghi’s assertion that he was entitled to a commission plan, Lytikainen declined to pay plaintiff
a commission. Id. at 8.
In January 2006, plaintiff’s job title changed to Director of Professional Services.
Complaint ¶ 28. But, plaintiff was informed that the original contract of September 3, 2004,
would remain in place, with the same terms and conditions. Id. ¶ 29. Plaintiff alleges that he
continued to ask for “his commissions” for the remainder of 2006. Id. ¶ 34. Defendant contends
that in October 2006 plaintiff again “raised a concern” and expressed “frustration” about the
perceived inadequacy of his compensation. MSJ Memo at 8. Defendant asserts that plaintiff did
not raise the issue of commissions at that time, but disputed whether his bonus was to be paid
quarterly or biannually. Id.
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In the spring of 2007, the company decided to restructure plaintiff‘s position because he
was technically a supervisor, but none of his supervisees operated in the same region. Id.
PatchLink offered plaintiff a choice between a severance package or a different position, which
would have reduced his base salary but given him a commission package that defendant alleges
would have increased plaintiff’s total compensation. Id. Negotiations stretched over a period of
weeks. Id. According to the defendant, on April 6, 2007, in the course of negotiations, plaintiff
asserted that he was entitled to a commission of one percent of all sales. Id. at 9.
No agreement was reached, and plaintiff alleges he was terminated.7 Complaint ¶ 44.
This suit followed. As noted, plaintiff lodged a number of claims; only the promissory estoppel
claim remains. The parties disagree about whether plaintiff is entitled to a jury trial with regard
to that claim.
Discussion
Pursuant to FED.R.CIV.P. 39(a)(2),8 defendant has moved to strike plaintiff’s jury demand
as to the promissory estoppel claim. Claiming that the claim is equitable, defendant maintains
that plaintiff has no statutory or constitutional right to a jury trial. Motion at 1-3.
Plaintiff disagrees with defendant’s position, asserting: “The right to jury trial in
promissory estoppel claims is well-recognized in this Circuit.”
Opposition Memo at 12.
According to plaintiff, “the right to a jury trial depends on the nature of the remedy sought,” and
“not merely on the classification of the claim as ‘equitable’ or ‘legal’ in nature.” Opposition at 2
(emphasis in original). Noting that plaintiff has consistently sought monetary damages, plaintiff
7
In its “Answer To Second Amended Complaint And Affirmative Defenses” (ECF 31),
defendant denies that plaintiff was terminated. Id. at 6 ¶ 44. But, no alternative account of
plaintiff’s departure from the company has been given.
8
Rule 39(a)(2) provides that, when a jury trial is demanded in accordance with FED. R.
CIV. P. 38, the trial “must be by jury unless . . . the court, on motion or on its own, finds that on
some or all of those issues there is no federal right to a jury trial.”
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insists that, in Maryland, this is sufficient to classify a cause of action as “legal,” so as to trigger
the right to a trial by jury. Id. at 3.9
“[T]he right to a jury trial in the federal courts is to be determined as a matter of federal
law in diversity as well as other actions.”
Simler v. Conner, 372 U.S. 221, 222 (1963).
Defendant is essentially correct in stating that there is no jury trial right with regard to equitable
claims. Although promissory estoppel is often regarded as equitable, it is not as immediately
apparent as defendant would suggest that such a claim cannot be tried to a jury.
“[T]he
characterization of [a] state-created claim as legal or equitable for purposes of whether a right to
jury trial is indicated must be made by recourse to federal law.” Id.
In order to ascertain whether a claim is legal or equitable, “the Court must examine both
the nature of the action and . . . the remedy sought. First, we compare the statutory action to
9
Plaintiff does not specify the basis for his claim that Maryland law applies here. In its
Reply, defendant argues at length that Arizona law applies to plaintiff’s promissory estoppel
claim. Reply at 4-7.
Notably, Judge Motz applied Maryland law as to the promissory estoppel claim, “because
the Fourth Circuit has characterized a claim for promissory estoppel as one in tort, see Jordan v.
Alt. Res. Corp., 458 F.3d 332, 348 (4th Cir. 2006), and . . . the law of the forum state probably
applies to a tort claim.” Sedghi v. Patchlink Corp., No. JFM–07–1636, 2010 WL 3895472, at *7
(D. Md. Sept. 30, 2010). He added: “In any event, I believe that it is prudent to apply Maryland
law because that is the law for which Plaintiff argues, and I am ruling against Plaintiff on the
claim.” Id. But, the Fourth Circuit did not address the choice of law issue. Therefore, the
mandate rule does not apply. See U.S. v. Bell, 5 F.3d 64 (4th Cir. 1993) (“[The] ‘mandate rule’
is. . . a ‘specific application of the law of the case doctrine’ . . . [which] compels compliance on
remand with the dictates of a superior court and forecloses relitigation of issues expressly or
impliedly decided by the appellate court.”).
However, I need not make a choice of law determination. In a footnote in its Motion,
PatchLink argues that “Arizona law should apply to the promissory estoppel claim,” but
concedes that, “[f]or the purposes of this motion . . . a choice of law determination need not be
made, as the claim is equitable in nature in both jurisdictions.” Motion at 3 n.1. Moreover, apart
from the similarities between Maryland and Arizona law as to promissory estoppel, plaintiff’s
right to a jury trial must be assessed in light of federal law.
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18th-century actions brought in the courts of England prior to the merger of the courts of law and
equity . . . . Second, we examine the remedy sought and determine whether it is legal or equitable
in nature.” Tull v. United States, 481 U.S. 412, 417-18 (1987) (internal citations omitted). Of
import here, “[t]he second stage of this analysis is more important than the first.”
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 42 (1989). In addition, “[t]he Court has …
considered the practical limitations of a jury trial and its functional compatibility with
proceedings outside of traditional courts of law in holding that the Seventh Amendment is not
applicable to administrative proceedings. . . . But the Court has not used these considerations as
an independent basis for extending the right to a jury trial under the Seventh Amendment.” Tull,
481 U.S. at 418 n. 4.
The doctrine of promissory estoppel defies easy characterization. See, e.g., Big Bear
Import Brokers, Inc. v. LAI Game Sales, Inc., No. CV-08-2256-PHX-DGC, 2010 WL 729208, at
*5 n. 4 (D. Ariz. Mar. 02, 2010) (“It is not clear that [plaintiff] is entitled to a jury trial on its
promissory estoppel claim. . . . The parties should address this issue in their proposed final
pretrial order.”).10 It seems that the question of entitlement to a jury trial with respect to a claim
for promissory estoppel rarely arises, because it is usually coupled with other claims, for which
the jury trial right is well established. See, e.g., Berry v. WorldWide Language Resources, Inc.,
No. 1:08–cv–00438–JAW, 2011 WL 4336714 (D.Me. Sept. 15, 2011) (resolving promissory
estoppel claim by a jury trial, but in conjunction with plaintiff’s breach of contract claim). On
other occasions, the question is disposed of summarily, with little detail. See, e.g., Nimrod
Marketing (Overseas) Ltd. v. Texas Energy Inv. Corp., 769 F.2d 1076, 1080 (5th Cir. 1985)
10
This case settled before the issue was resolved.
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(“Promissory estoppel is an equitable form of action in which equitable rights alone are
recognized. . . .Defendants had no right to trial by jury”).11
I have not located clear authority from the Fourth Circuit. However, it appears that jury
trials are typically contemplated with respect to promissory estoppel claims. See, e.g., Nguyen v.
CNA Corp., 44 F.3d 234, 241 (4th Cir. 1995) (concluding that, as “the facts in this case do not
create a genuine issue of fact upon which a reasonable jury could find in Nguyen's favor,” the
trial court “did not err in granting summary judgment . . . on the promissory estoppel claim”)
(emphasis added); Lane Const. Corp. v. Cardinal Industries, Inc., 978 F.2d 1255 (4th Cir. 1992)
(affirming a jury verdict awarding damages to plaintiff with respect to a promissory estoppel
action); see also Young v. Antar, No. WDQ-08-1912, 2010 WL 2039091, at *5 (D. Md. May 20,
2010) (denying defendant’s motion for summary judgment with respect to plaintiff’s promissory
estoppel claim because “[a] reasonable jury could conclude that Antar's promise should be
enforced”) (emphasis added).
Merex A.G. v. Fairchild Weston Systems, Inc., 29 F.3d 821, 824 (2d Cir. 1994), provides
guidance. At issue in that case was defendant Fairchild Weston Systems, Inc.’s plan to sell
military surveillance systems to China.
Id. at 822.
Fairchild engaged Merex, a German
company, to broker the sale. Id. Negotiations regarding how Fairchild was to compensate
Merex for its services broke down, and Fairchild eventually consummated a sale of two
surveillance systems to China, without Merex’s assistance. Id. at 823. When Fairchild refused
to pay Merex, the company sued Fairchild in federal court in New York under theories of breach
of contract, quantum meruit, and promissory estoppel, alleging an oral promise by Fairchild to
11
Nimrod addressed a factually dissimilar circumstance (an action for cancellation
charges and expenses resulting from a breach of a purchasing agent agreement), and, to my
knowledge, has never been cited by the Fourth or Fifth Circuits for the proposition that there is
no right to a jury trial with respect to promissory estoppel claims.
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pay Merex a commission with respect to any direct sale to China. Id. In particular, “Merex
sought to recover expectation damages under the alleged oral commission agreement,” the sum
certain of $1,680,000, representing eight percent of the price of the two surveillance systems
Fairchild sold. Id. at 825.
The trial court determined that Merex's claims for breach of contract and quantum meruit
were barred by New York's Statute of Frauds. Id. at 823. But, an advisory jury12 returned a
verdict in favor of Merex on the promissory estoppel claim. Id. Nevertheless, the court entered
judgment in favor of Fairchild. Id. Merex appealed, challenging the decision to treat the verdict
as merely advisory and insisting that promissory estoppel is a legal claim, not an equitable one,
and thus the Seventh Amendment guaranteed the right to a jury trial. Id.
On appeal, the Second Circuit thoroughly addressed the two-step process outlined in Tull,
discussed supra. It looked first to the nature of the promissory estoppel claim and its relation to
actions brought in the courts of England prior to the merger of the courts of law and equity, and
second to the nature of the remedy sought.
With respect to the first prong, the Court said: “Although ‘promissory estoppel’ per se
was unknown to the courts of 18th-century England . . . its modern uses have historical
antecedents in both law and equity.” Id. at 824. In examining common uses of the doctrine of
promissory estoppel, the Court said:
The modern doctrine of promissory estoppel may be invoked in two situations.
First, and most traditionally, the doctrine allows for the enforcement of a promise
in the absence of bargained-for consideration. . . . This is known as the theory of
detrimental reliance. Promissory estoppel has also become increasingly available
to provide relief to a party where the contract is rendered unenforceable by
operation of the Statute of Frauds. . . . Precedent for the rule that detrimental
reliance may render a gratuitous promise enforceable can be found in ‘the
decisions of the courts of common law from the very beginnings of the action for
12
See Fed. R. Civ. P. 39(c).
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assumpsit.’ . . . This would suggest a legal root for the doctrine. On the other
hand, as its surname suggests, the doctrine of promissory estoppel is a direct
descendent of equitable estoppel. . . . Although equitable estoppel was ultimately
recognized by the courts of common law, the doctrine was first fashioned in the
courts of equity. . . .”
Id. (internal citations omitted).
Notably, the Court concluded that “the protean doctrine of ‘promissory estoppel’ eludes
classification as either entirely legal or entirely equitable, and the historical evidence is
equivocal. It is clear, however, that both law and equity exert gravitational pulls on the doctrine,
and its application in any particular case depends on the context in which it appears.” Id. at 825.
In response to this contextual inquiry, the Court reasoned: “For example, where a plaintiff sues
for contract damages and uses detrimental reliance as a substitute for consideration, the analogy
to actions in assumpsit (law) is compelling. By contrast, when the plaintiff uses promissory
estoppel to avoid a draconian application of the Statute of Frauds, the pull of equity becomes
irresistible.” Id.
Defendant urges us to adopt this line of reasoning, and apply it to the case at bar.
Defendant explains: “Here too, Plaintiff’s alleged commission agreement was supported by
adequate consideration (i.e., payment in exchange for work he allegedly performed for
PatchLink) and he brings his promissory estoppel claim to enforce an alleged promise which the
court previously held is barred by the statute of frauds. . . . Accordingly, Plaintiff’s claim is
equitable in nature.” Reply at 13.
Applying the Second Circuit’s reasoning, plaintiff’s promissory estoppel claim arguably
sounds in equity. He asks to avert what he perceives as an injustice by upholding an alleged oral
promise, because his contract claim was barred by the statute of frauds.
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However, the analysis does not end there. The nature of the requested relief cannot be
ignored, because the requested relief is “more important” than the nature of the claim itself.
Granfinanciera, 492 U.S. at 42. “Money damages are, of course, the classic form of legal
relief.”
Mertens v. Hewitt Associates, 508 U.S. 248, 255 (1993) (emphasis in original).
Moreover,
overwhelmingly, courts characterize claims according to the remedies sought
rather than according to subject matter or substantive rules involved. If the
remedy sought is a coercive order, the claim is equitable; if the remedy sought is a
judgment to be enforced in rem by seizure of property, the claim is legal. An
action for ordinary money judgment, for replevin, or for ejectment is an action at
law. In contrast, a suit for injunction or one for specific performance is equitable.
DAN B. DOBBS, LAW OF REMEDIES, VOL. 1, 156-57 (2d ed., West Publishing Co. 1993).
Indeed, the United States Supreme Court has said that even traditionally equitable actions
can be considered actions at law when the relief sought is in the nature of monetary damages.
“‘Almost invariably . . . suits seeking (whether by judgment, injunction, or declaration) to
compel the defendant to pay a sum of money to the plaintiff are suits for ‘money damages,’ as
that phrase has traditionally been applied, since they seek no more than compensation for loss
resulting from the defendant's breach of legal duty.’” Great-West Life & Annuity Ins. Co. v.
Knudson, 534 U.S. 204, 210 (2002) (internal citation omitted) (holding that plaintiff’s restitution
action was legal in nature because, in spite of the traditional equitable nature of restitution, the
relief sought was damages via the imposition of personal liability on the defendant, rather than
the restoration to plaintiff of particular funds or property in defendant’s possession). See also
Simler, 372 U.S. at 223 (holding that “[t]he fact that the action,” a suit “to determine and
adjudicate the amount of fees owing to a lawyer by a client,” was brought as “a declaratory
judgment case should not obscure [its] essentially legal nature”) (internal citations omitted).
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Plaintiff insists that the nature of relief sought in the instant case is purely legal, positing:
“Sedghi here does not seek any equitable form of relief—‘only money.’” Opposition Memo at 9
(emphasis in original). Like plaintiff in the case at bar, the plaintiff in Merex sought to recover a
commission pursuant to an alleged oral agreement that was deemed invalid under the Statute of
Frauds. The Second Circuit stated that, “[b]ecause expectation damages for breach of contract
are traditionally legal in nature, the pull of law with its attendant right to a jury trial is distinctly
felt.” 29 F.3d at 825. Nevertheless, the Court ruled against Merex, stating, id. at 826:
[W]hile we recognize the legal nature of expectation damages generally, we remain
unpersuaded that Merex's prayer for money damages outweighs the undeniably equitable
nature of the promissory estoppel claim as a whole, particularly where, as here, the
measure of damages plaintiff seeks is inappropriate.
In characterizing plaintiff’s claim for damages as “inappropriate,” the Court cited the
following: its discretion to mold relief “as justice requires”; a law review article arguing against
the practice of awarding contract damages in cases where promissory estoppel is used to enforce
an alleged promise barred by the statute of frauds; and a Second Circuit case, Arcadian
Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir.1989), which held that “[p]revailing
on a promissory estoppel claim … sometimes entitles a party only to its out-of-pocket expenses,
rather than to benefit-of-the-bargain damages” (emphasis added).
Although the Merex Court acknowledged that it must “‘giv[e] greater weight to the latter
[prong],’” i.e., the relief requested, 29 F.3d at 824 (citation omitted), the Court stated: “[W]e
remain unpersuaded that Merex's prayer for money damages outweighs the undeniably equitable
nature of the promissory estoppel claim as a whole.” Id. at 826 (emphasis added). In this case, I
have concluded that the remedy sought is legal, not equitable, so that the scale tips in the other
direction.
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Moreover, the landscape appears to have changed since Merex was decided. As noted,
the Second Circuit reasoned: “A claim for money damages, of course, constitutes ‘legal’ relief,
for such relief was ‘the traditional form of relief offered in the courts of law.’ . . . But this is not
always true. Restitution damages, for example, . . . are not legal in nature.” Id. at 825 (internal
citation omitted). Yet, eight years after Merex was decided, the Supreme Court held in GreatWest Life that restitution damages can be legal in nature. 534 U.S. 204.
Furthermore, as noted, the Merex Court relied on its ruling in Arcadian Phosphates,
which said: “Prevailing on a promissory estoppel claim … sometimes entitles a party only to its
out-of-pocket expenses, rather than to benefit-of-the-bargain damages.”
884 F.2d at 73
(emphasis added). However, in the case at bar, if plaintiff prevails, whether based on Maryland
law or Arizona law, he would be entitled to expectation damages.
In his summary judgment ruling, Judge Motz noted: “It appears that there is no
substantial difference between Arizona law and Maryland law as to a claim for promissory
estoppel. Both accept the Restatement (Second) of Contracts, § 90, as governing the claim.”
Sedghi, 2010 WL 3895472, at *7. It is noteworthy that § 90(d) of the Restatement provides: “A
promise binding under this section is a contract, and full-scale enforcement by normal remedies
is often appropriate.” “Normal remedies” would, of course, include expectation or contract
damages. Moreover, “in Maryland, promissory estoppel is an alternative means of obtaining
contractual relief.” Maryland Transp. Auth. Police Lodge #34 of the Fraternal Order of Police,
Inc. v. Maryland Transp. Auth., 195 Md. App. 124, 215, 5 A.3d 1174, 1227 (2010), rev’d on
other grounds, Maryland Transp. Auth. v. Maryland Transp. Auth. Police Lodge #34 of the
Fraternal Order of Police, Inc., 420 Md. 141, 21 A.3d 1098 (2011). Under Arizona law,
promissory estoppel “is a proper claim for relief as an alternative to the contract claim.” AROK
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Construction Co. v. Indian Construction Services, 174 Ariz. 291, 299, 848 P.2d 870, 878 (Ariz.
App. 1993).
Defendant asserts that, “under Arizona law, the extent of relief under a promissory
estoppel claim may be more limited than the recovery under a contract cause of action.” Reply
at 6. However, in support of that assertion, plaintiff cites AROK Construction, which suggested,
but did not hold, that “the remedy under [a promissory estoppel] theory may be more limited
than damages for breach of contract.”
Id. at 300, 848 P.2d at 879.13
In turn,
AROK
Construction quoted § 90(d) of the Restatement (Second) of Contracts, which goes on to state
that “relief may sometimes be limited to restitution or to damages or specific relief measured by
the extent of the promisee's reliance rather than by the terms of the promise” and notes that
“damages should not put the promisee in a better position than performance of the promise
would have put him.”
The damages sought by Sedghi arguably would put him in the position he would have
been in had the alleged oral contract been fulfilled. In my view, in the context of this case, the
“benefit-of-the-bargain” damages sought by plaintiff are “the classic form of legal relief.”
Mertens, 508 U.S. at 255 (emphasis in original). Particularly as “[t]he federal policy favoring
jury trials is of historic and continuing strength,” defendant’s arguments with respect to the
second prong of the requisite analysis are not persuasive; the second factor outweighs the first.
See Simler, 372 U.S. at 222.
13
The case was remanded for further proceedings.
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I conclude that plaintiff is entitled to a jury trial with respect to his promissory estoppel
claim. Therefore, I will deny defendant’s Motion. A separate Order consistent with this Opinion
follows.
Date: October 17, 2011
/s/
Ellen Lipton Hollander
United States District Judge
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