CBX Technologies, Inc. v. GCC Technologies, LLC

Filing 46

MEMORANDUM. Signed by Judge James K. Bredar on 12/3/12. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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CBX TECHNOLOGIES, INC.,

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Plaintiff

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v.

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GCC TECHNOLOGIES, LLC,
Defendant
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CIVIL NO. JKB-10-2112

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MEMORANDUM
Pending before the Court are Defendant’s motion to dismiss or, in the alternative, motion
for summary judgment (ECF Nos. 39 & 40), Plaintiff’s cross-motion for partial summary
judgment (ECF No. 43), and Plaintiff’s motion for reconsideration (ECF No. 41) of the Court’s
order denying Plaintiff’s motion for leave to amend the complaint (ECF No. 38). The motions
have been briefed (ECF Nos. 42, 43, 44, 45), and no hearing is necessary, Local Rule 105.6.
Defendant’s motion will be granted and Plaintiff’s motions will be denied.

I. Procedural History
This case was filed by CBX Technologies, Inc., on August 2, 2010, against “GCC
Technologies, LLC, formerly known as, Government Contract [sic] Consultants, LP.” (Compl.,
ECF No. 1.) On November 15, 2010, then-presiding Judge Quarles entered a scheduling order
that noted the deadline of November 22, 2010, for requests for modification of the initial
scheduling order and further stated, “Thereafter, the schedule will not be changed except for
good cause.” (ECF No. 6.)1 Included in the scheduling order was a deadline of December 30,
2010, for moving for amendment of pleadings. No such motions were filed by the deadline.
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This case was reassigned to the undersigned on January 12, 2011.

GCC’s motion to dismiss, filed February 21, 2011 (ECF No. 11), was granted on March 18, 2011
(ECF No. 16). CBX’s appeal to the Fourth Circuit was thereafter docketed, and that Court
vacated and remanded the March 18 judgment for further proceedings. CBX Technologies, Inc.
v. GCC Technologies, LLC, No. 11-1380, 2011 WL 6160227 (4th Cir. Dec. 13, 2011).
On February 8, 2012, this Court entered a revised scheduling order stating the following:
In the Fourth Circuit’s opinion accompanying its order remanding this
case to this Court for further proceedings, it was stated:
The dispositive factual issues – issues that were not properly resolved on
the face of the pleadings – are (1) whether work began before the
November 9, 2009 retroactive effective date of the Subcontract
Agreement, and if so, (2) whether a breach occurred before November 9,
2009.
CBX Techs., Inc. v. GCC Techs., LLC, No. 11-1380, slip op. at 8 (4th Cir. Dec.
13, 2011) (per curiam) (unpublished). The parties have requested a discovery
period of 60 days. Accordingly, the following schedule is applicable to this case:
April 9, 2012
April 16, 2012
May 9, 2012

Discovery deadline; joint submission of status report
Requests for admission
Dispositive pretrial motions deadline

This schedule will not be changed except for good cause. All
requirements of the original scheduling order (ECF No. 6) that are pertinent to
this portion of the case remain in effect.
(ECF No. 24.)
On April 30, 2012, CBX filed a motion for leave to file an amended complaint (ECF No.
27), which was opposed (ECF No. 32), supplemented with exhibits to a reply (ECF Nos. 33, 34,
and 35), and denied on July 25, 2012 (ECF No. 38). The deadline for dispositive motions was
twice extended without opposition. (ECF Nos. 29 & 37.)
II. CBX’s Motion for Reconsideration
CBX has requested the Court to reconsider its order denying Plaintiff’s motion for leave
to amend the complaint. In the earlier order, this Court denied the motion because CBX failed to
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show good cause for changing the deadline for moving for amendment of pleadings. Although
CBX acknowledges that the Court followed Fourth Circuit precedent in its ruling, it is now
asking this Court to rule anyway on CBX’s Federal Rule of Civil Procedure 15 argument in the
event the Fourth Circuit finds this Court erred in its Rule 16 analysis. This Court adhered to the
Fourth Circuit’s caselaw on motions for leave to amend in the earlier ruling and is unpersuaded
that ruling should be reversed. CBX’s arguments have been considered and its motion to
reconsider will be denied.
III. GCC’s Motion for Summary Judgment
A. Standard for Summary Judgment
“The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing predecessor to
current Rule 56(a)). The burden is on the moving party to demonstrate the absence of any
genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If
sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing
the motion, then a genuine dispute of material fact is presented and summary judgment should be
denied. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, the “mere
existence of a scintilla of evidence in support of the [opposing party’s] position” is insufficient to
defeat a motion for summary judgment. Id. at 252. The facts themselves, and the inferences to
be drawn from the underlying facts, must be viewed in the light most favorable to the opposing
party, Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir.
2008), who may not rest upon the mere allegations or denials of his pleading but instead must, by
affidavit or other evidentiary showing, set out specific facts showing a genuine dispute for trial,
Fed. R. Civ. P. 56(c)(1). Supporting and opposing affidavits are to be made on personal
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knowledge, contain such facts as would be admissible in evidence, and show affirmatively the
competence of the affiant to testify to the matters stated in the affidavit. Rule 56(c)(4).
B.

Analysis
Briefly recounted, CBX’s complaint asserted one count for breach of a teaming

agreement between it and GCC. The teaming agreement allowed for GCC to be considered the
primary contractor and CBX to be the subcontractor on a government contract involving the U.S.
Department of Education’s Federal Student Aid (“FSA”) program. (Compl. ¶ 6.) CBX alleged
that the teaming agreement directed that GCC would provide 51 percent of the full-time
employees for the FSA program and receive 51 percent of the contract’s value, while CBX
would provide 49 percent of the full-time employees assigned to the contract and receive 49
percent of the value. (Id.) In late September 2009, GCC was awarded the FSA contract, which
had a value of $2,401,494.40. (Id. ¶ 7.)
In its complaint, CBX alleged it had five employees in place on or about October 1, 2009,
to begin work. (Id. ¶ 8.) It also alleged that GCC’s president, Jim Bailey, began to interfere
“almost immediately” with CBX’s employees, and that, as a result, all but one of the five CBX
employees assigned to work on the FSA contract left CBX by early 2010.

(Id. ¶ 10.)

Additionally, CBX alleged that GCC and CBX entered into a written subcontract agreement that
was signed on June 6, 2010, and that had an effective date of November 9, 2009. (Id. ¶ 9.)
Attached to GCC’s original motion to dismiss (ECF Nos. 11 & 12) were copies of the
teaming agreement and the subcontract agreement. (Id. Attachments 2 & 3.) CBX did not
dispute their authenticity in its response in opposition, and the Court accordingly relied upon
them in its subsequent ruling, as did the Fourth Circuit. This Court concluded that the teaming
agreement automatically expired on November 9, 2009, based upon a termination clause in the
teaming agreement in conjunction with a provision of the subcontract to the effect that it
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superseded the teaming agreement. That portion of this Court’s prior ruling was not vacated by
the Fourth Circuit.
However, the Fourth Circuit vacated the portion of this Court’s prior judgment for GCC
that concluded CBX’s complaint failed properly to allege a material breach of the teaming
agreement. The appeals court noted that the complaint had alleged CBX had five employees in
place on or about October 1, 2009, and reasoned that a breach of the teaming agreement could
have occurred between that date and November 9, 2009. In its order remanding the case, the
Court stated that two dispositive factual issues were present that could not be resolved on the
pleadings: “(1) whether work began before the November 9, 2009 retroactive effective date of
the Subcontract Agreement, and if so, (2) whether a breach occurred before November 9, 2009.”
The appeals court also noted that these dispositive factual issues governed both the
Rule 12(b)(1) inquiry into subject-matter jurisdiction and the merits of the case. Thus, dismissal
was not proper either under Rule 12(b)(1) or under Rule 12(b)(6).
The parties have now had a full opportunity to engage in discovery, and GCC has
renewed its motion for dismissal for lack of subject-matter jurisdiction and moved, in the
alternative, for summary judgment. Because of the intertwined nature of the jurisdictional
inquiry and the determination of the merits, the Court will address, first, the motion for summary
judgment.
GCC has provided solid factual evidence to support its motion for summary judgment,
and CBX has failed to present any evidence that refutes GCC’s evidence. The key points of
GCC’s evidence are the following:
1. Five CBX employees began working on the FSA contract between October 26 and
November 2, 2009. (Bailey Aff. ¶ 9, Attach. 2, email 10/23/2009.)
2. CBX first had five employees in place in November 2009. (D’Andrade Dep. 127:3-4,
Apr. 4, 2012.)
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3. GCC did nothing during October 2009 to interfere with CBX’s ability to hire employees
for performance of work under the subcontract. (Id. 141:2-12.)
4. GCC did nothing prior to November 9, 2009, to preclude CBX from performing work for
GCC under the teaming agreement. (Id. 142:4-12.)
5. Through December of 2009, CBX’s president, Chris D’Andrade, thought the relationship
with GCC was going well. (D’Andrade Dep. 179:19-22, Apr. 5, 2012.)
6. The relationship between CBX and GCC stopped going well when D’Andrade “couldn’t
replace the people [he] needed to replace,” around January 2010. (Id. 180:1-5.)
7. D’Andrade attempted to change his testimony about GCC not precluding CBX from
performing under the teaming agreement by saying, “I guess I misspoke, because it first
started from day one. So he was responsible for some form [sic].” (Id. 259:6-17.)
8. The original CBX employees began to leave in December 2009 or January 2010. (Id.
267:19-22.)
Thus, the evidence establishes that CBX employees began work on the FSA contract
before November 9, 2009, answering the first dispositive factual question posed by the Fourth
Circuit in the affirmative. The evidence produced by GCC also shows, other than D’Andrade’s
bare conclusion that Bailey “started from day one” to do something unspecified to preclude CBX
from performing under the teaming agreement, that GCC and CBX enjoyed a good relationship
through December 2009—well after the November 9, 2009, end of the teaming agreement.
CBX’s opposition to GCC’s motion includes a striking admission:
The second issue, namely, “(2) whether a breach occurred before
November 9, 2009,” is admittedly much thornier due to a lack of evidence beyond
the attestations of Bailey and D’Andrade.
(Pl.’s Opp. 14, ECF No. 43.)
To overcome this deficit, CBX relies upon two emails authored by Bailey. The first is
dated November 3, 2009, and was sent to D’Andrade. It said:
Chris
I have blocked one hour (10:00-11:00) in the conference room on Friday, 6 Nov
09, to meet with you and your staff.
Please let me know if this is OK.
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(Id. Ex. J.) CBX asks this Court to draw from this email the inference that Bailey had quickly
moved to become directly involved with CBX’s employees and, therefore, had breached the
teaming agreement, which provided that “the employees of one shall not be the employees of the
other.” The inference CBX seeks to draw is unwarranted and unreasonable.
The second email is dated Monday, November 16, 2009—clearly, after the relevant date
of the Court’s inquiry—and was sent to the CBX and GCC employees working on the FSA
contract. It said the following:
Good Morning Everyone
Before I departed work on Friday, I had a long conversation with our COR, Mark
Anderson. Mark relayed to me some issues that the Contracting Officer had
passed on to him. These issues emanated from one or more complaints from one
or more Government representatives. They are presented below:
1. Some members of our staff are still using the internet for non-contract related
purposes.
2. Members of our staff are consuming breakfast at their desks, and the
Government is paying for the time used for that purpose.
3. Staff members are spending too much time away from their desks and in
groups talking for extended periods.
All of these practices can place our contract in jeopardy. Therefore, I am
reiterating, or, instituting the following policy effective immediately.
1. If you are caught "surfing" the net for other than market research purposes,
your employment on this contract will be terminated immediately.
2. Consuming breakfast at your desk is no longer permitted. This certainly does
not prohibit you from having breakfast at the café downstairs, or elsewhere,
before you arrive at your work place.
3. You are expected to be at your work space, unless it is necessary for you to
leave it to confer with a Government representative, or other GCC contract
staff member on a matter directly related to your work. Visits to the restroom
are certainly not restricted.
I need your support and cooperation in these areas so that our tenure at the
Department of Education will be a long one.
Thanks
Jim
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(Id. Ex. K.) Even if this email related to the relevant time period, it does not provide evidence of
“interference” with the FSA contract. Notably, the only threat of adverse action is termination of
employment “on this contract.” Whether an employee would remain employed by CBX is a
different matter. Neither of Bailey’s email messages supports a conclusion that GCC breached
the teaming agreement.
IV. CBX’s Cross-Motion for Partial Summary Judgment
CBX asserts it is entitled to partial summary judgment on the theory that the subcontract
was null and void, thus leaving the teaming agreement in place as the only agreement governing
the parties until termination of the relationship in July 2010. It offers alternative reasons as to
why the subcontract was of no effect:
1. Because Government Contracts Consultants, LP, became GCC Technologies, LLC,
on April 20, 2010, the former partnership entity lacked capacity to enter into contracts
and could not, therefore, have validly executed the subcontract in June 2010.
2. GCC never ratified or novated the subcontract.
3. GCC was, as the successor in a merger to Government Contracts Consultants, LP,
bound by the teaming agreement.
(Pl.’s Cross-Mot. Summ. J. 1, ECF No. 43.)
GCC has responded that, under Maryland law, Government Contracts Consultants, LP,
and GCC Technologies, LLC, are the same entity. Under relevant statutes, a partnership may
convert to a limited liability company by filing articles of organization that meet requirements set
forth in the Maryland Code. Md. Code Ann., Corps. & Ass’ns § 4A-211 (LexisNexis Supp.
2012). And a related statute specifically provides:
(a) Same entity. – A general or limited partnership that has been converted to a
limited liability company pursuant to § 4A-211 of this subtitle shall be
deemed for all purposes the same entity that existed before the conversion.
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(b) . . .
(2) All obligations and liabilities of the converting general or limited
partnership or the converting proprietorship remain vested in the converted entity.
Md. Code Ann., Corps. & Ass’ns § 4A-213. Notably, a different part of the Maryland Code
addresses mergers. See § 4A-701 et seq.
GCC has provided documentary evidence to support its assertion that the limited
partnership was converted in accordance with Maryland law to a limited liability company.
(Def.’s Mot. Summ. J., Ex. A, Bailey Aff. ¶ 3; see also Def.’s Opp. to Pl.’s Mot. Amend, Ex. B.)
As well, CBX has supplied a copy of GCC’s articles of organization filed to convert the
partnership to a limited liability company. (Pl.’s Opp. Ex. G, p. 8.) CBX’s entire argument
regarding merger rests on something printed out from the Maryland State Department of
Assessments and Taxation (“SDAT”) that has the word “merged” after “status” for Government
Contracts Consultants, LP. (Id. p. 9.) Given the actual articles of organization and their clear
statement that they “are for the purpose of converting a limited partnership to a limited liability
company,” as well as other documents produced by SDAT, this one piece of paper is
unpersuasive evidence that GCC is not the product of a conversion.
Because GCC was the same entity before and after the conversion, provisions in the
subcontract pertaining to assignment to another party are inapplicable. CBX fails to explain how
GCC could have assigned something to itself. Beyond that, it was logical to have had the
subcontract executed in the name of the partnership rather than the LLC since the effective date
of the subcontract, November 9, 2009, was well before the partnership converted to a limited
liability company. It is not difficult to imagine that, had GCC executed the contract in the name
of the LLC, CBX might well be complaining that GCC had no authority to execute a contract in
its post-conversion name when the contract had an effective date prior to the conversion. The
Court concludes the subcontract was valid and, accordingly, terminated the teaming agreement
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on November 9, 2009. CBX has failed to show that it is entitled to partial summary judgment
and its motion will be denied.
V. GCC’s Motion to Dismiss for Lack of Subject-matter Jurisdiction
GCC presents persuasive evidence that CBX filed this complaint in the absence of
subject-matter jurisdiction. GCC’s argument is based upon the worst-case scenario in the event
GCC was found to have breached the teaming agreement before November 9, 2009. Thus,
computing the greatest possible damages from late-October 2009 to November 9, 2009, the
quantum of recoverable damages is still less than the $75,000 amount required for diversity
jurisdiction. Given, however, the necessity to decide the merits based upon the relationship of
the subcontract to the teaming agreement, the Court holds that, as filed, subject-matter
jurisdiction existed because the complaint was premised upon a much longer term for the
teaming agreement. In retrospect, the teaming agreement had only a very short term. But that
issue was best left to resolution on the merits. Accordingly, GCC’s motion, treated alternatively
as a motion to dismiss for lack of subject-matter jurisdiction, will be denied.
VI. Conclusion
A separate order will issue reflecting the rulings in this memorandum and directing the
Clerk to close the case.
DATED this 3rd_ day of December, 2012.

BY THE COURT:

/s/
James K. Bredar
United States District Judge

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