Coin Automatic Laundry Equipment Company v. Hampton Plaza, LLLP
MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 2/16/2017. (dass, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
COIN AUTOMATIC LAUNDRY EQUIPMENT
HAMPTON PLAZA, LLLP,
Civil Action No. GLR-16-0695
THIS MATTER is before the Court on Hampton Plaza, LLLP’s
(“Hampton Plaza”) Motion to Dismiss or, in the Alternative, for
disposition, and no hearing is necessary.
See Local Rule 105.6
For the reasons outlined below, the Court will
grant in part and deny in part the Motion.
Hampton Plaza (“CALECO Lease”) on April 13, 2009 to lease space
CALECO to install and service
(Compl. ¶ 7, ECF No. 1).
on May 13, 2009 for a six-year term.
The CALECO Lease began
(Compl. Ex. A ¶ 1, ECF No.
The CALECO Lease automatically renews with the same terms
Unless otherwise noted, the Court describes facts taken
from the Complaint and accepts them as true.
See Erickson v.
Pardus, 551 U.S. 89, 94 (2007) (citations omitted).
and conditions unless a party terminates the lease with ninety
days written notice.
(Id. ¶ 7).
The CALECO Lease required a
during the month and required the laundry equipment to remain
contained a right of first refusal (“ROFR”) provision: [CALECO]
“shall have a right of refusal to continue to lease space to
provide laundry services on the same terms as any bona fide bid
(Id. ¶ 8).
On April 15, 2015, Hampton Plaza provided CALECO written
notice of its termination of the CALECO Lease.
(Compl. Ex. B,
ECF No. 1-2).
Two days later, CALECO advised Hampton Plaza, in
(Compl. Ex. C, ECF No. 1-3).
CALECO requested that Hampton
Plaza provide copies of any bona fide bids for laundry services
CALECO alleges Hampton Plaza never provided
any bids, contracts, or other documents in April, May, or June
(See Compl. ¶ 14).
Instead, on July 16, 2016 Hampton
Plaza allegedly executed a new lease (“C&G Lease”) with Caldwell
(Pl.’s Opp. Def.’s Mot. Dismiss Alt. Summ. J. [“Pl.’s
Opp.”] Ex. A, ECF No. 13-1).2
In the C&G Lease, Hampton Plaza
premises” to C&G for the purpose of installing and maintaining
washers and dryers.
C&G allegedly signed the C&G Lease
a day later, on July 17, 2015.
CALECO that she never received a
proposal for laundry services from CALECO, Hampton Plaza “signed
continue on a month-to-month basis.
(Compl. Ex. E, ECF No. 1-
On July 22, 2015, CALECO again informed Hampton Plaza that
it intended on exercising its rights under the ROFR provision.
(Compl. Ex. F, ECF No. 1-6).
Hampton Plaza failed to provide
August, or September 2015, despite continuing requests.
Compl. ¶ 14).
On October 2, 2015, Hampton Plaza, in writing,
At this stage in the litigation, the Court may consider
documents referred to and relied upon in the Complaint, “even if
the documents are not attached as exhibits.” Coulibaly v. J.P.
Morgan Chase Bank, N.A., No. DKC 10-3517, 2011 WL 3476994, at *6
(D.Md. Aug. 8, 2011) (quoting Fare Deals Ltd. v. World Choice
Travel.com, Inc., 180 F.Supp.2d 678, 683 (D.Md. 2001) (internal
quotation marks omitted).
Here, the Complaint alleges that
“Hampton [Plaza] signed a new contract with C&G without
providing CALECO with the bona fide bid from that vendor.”
(Compl. ¶ 30).
Accordingly, because the Complaint refers to,
and relies on, the C&G Lease, the Court will consider it at this
Hampton Plaza’s letter advised CALECO that Hampton Plaza decided
to purchase its own laundry equipment and as a result, “there
are no lease terms to match” under the ROFR provision.
executed an “Addendum”
to the C&G Lease that terminated the
original C&G Lease (“Termination Addendum”).
ECF No. 13-1).
(Pl.’s Opp. Ex B,
That same day, Hampton Plaza and C&G executed a
Dismiss Alt. Summ. J. (hereinafter “Def.’s Mot. Dismiss”) Ex. 3,
purchased washers, dryers, and other laundry equipment from C&G.
Under the Service and Collection Contract, Hampton Plaza
agreed to pay C&G a monthly fee to service and maintain the
laundry equipment Hampton Plaza purchased.
11, 2015, Hampton Plaza disconnected CALECO’s laundry equipment
and removed it from Hampton Plaza’s property.
(Compl. ¶ 28).
On March 8, 2016, CALECO sued Hampton Plaza, raising one
claim for breach of contract.
(Compl. ¶¶ 32–36).
CALECO alleges Hampton Plaza violated the ROFR provision when it
The Complaint alleges that “Hampton [Plaza] attempted to
re-characterize the new agreement as an arrangement that would
not run afoul of the existing [CALECO] Lease.”
(Compl. ¶ 30).
Because the Complaint refers to, and relies on, the C&G Purchase
Agreement, the Court will consider it at this stage. See note 2
signed the C&G Lease because Hampton Plaza never provided CALECO
with C&G’s bona fide bid.
(See Compl. ¶ 30).
alleges Hampton Plaza violated the CALECO Lease when it signed
the C&G Purchase Agreement because the agreement was “meant to
CALECO and executed the C&G Purchase Agreement in bad faith.
disconnected and removed CALECO’s laundry equipment in violation
of the CALECO Lease.
(Compl. ¶ 34(e)).
On May 9, 2016, Hampton
Plaza filed a Motion to Dismiss, or in the Alternative, for
(ECF No. 8).
CALECO filed a Response on June
10, 2016, (ECF No. 13), and Hampton Plaza filed a Reply on July
8, 2016 (ECF No. 16).
Standards of Review
Conversion to Summary Judgment
As a threshold matter, the Court must determine how to
motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)
or, in the alternative, for summary judgment under Rule 56.
motion styled in this manner implicates the Court’s discretion
Montgomery Cty., 788 F.Supp.2d 431, 436–37 (D.Md. 2011), aff’d
sub nom., Kensington Volunteer Fire Dep’t, Inc. v. Montgomery
Cty., 684 F.3d 462 (4th Cir. 2012).
This Rule provides that
when “matters outside the pleadings are presented to and not
material beyond the pleadings that is offered in conjunction
with a Rule 12(b)(6) motion and rely on it, thereby converting
the motion, or to reject it or simply not consider it.’”
Bey v. Kopp, No. ELH-12-2319, 2013 WL 1700927, at *5 (D.Md. Apr.
Procedure § 1366, at 159 (3d ed. 2004, 2012 Supp.)).
The United States Court of Appeals for the Fourth Circuit
has articulated two requirements for proper conversion of a Rule
12(b)(6) motion to a Rule 56 motion: notice and a reasonable
opportunity for discovery.
See Greater Balt. Ctr. for Pregnancy
Concerns, Inc. v. Mayor of Balt., 721 F.3d 264, 281 (4th Cir.
When the movant expressly captions its motion “in the
alternative” as one for summary judgment and submits matters
outside the pleadings for the court’s consideration, the parties
are deemed to be on notice that conversion under Rule 12(d) may
(Def.’s Mot. Dismiss Exs. 1, 2, 4–6, ECF
Nos. 8-2, 8-3, 8-5 through 8-8).
Thus, the Court concludes that
Hampton met the notice requirement.
parties have not had an opportunity for reasonable discovery.”
E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d
435, 448 (4th Cir. 2011).
To sufficiently establish that more
“specified reasons” why “it cannot present facts essential to
justify its opposition.”
Importantly, “Rule 56(d) affidavits
may not demand discovery for discovery’s sake; a Rule 56(d)
request is properly denied ‘where the additional evidence sought
. . . would not have by itself created a genuine issue of
material fact sufficient to defeat summary judgment.’”
v. United States, No. JKB-15-2874, 2016 WL 2594826, at *4 (D.Md.
May 4, 2016) (quoting Strag v. Bd. of Trs., 55 F.3d 943, 954
(4th Cir. 1995)).
describing events related to the CALECO Lease, C&G Lease, and
C&G Purchase Agreement.
(Def.’s Mot. Dismiss Ex. 1, ECF No. 8-
Smith states all of her actions and decisions were made in
(Id. ¶ 10).
In response, CALECO submitted a Rule
56(d) affidavit from Mark A. Schiavo, Esq., an attorney for
(Pl.’s Opp. Ex. B, ECF No. 13-2).
In his affidavit,
Schiavo explains that CALECO seeks discovery regarding Smith’s
“reasons, motives, and intentions behind her actions” related to
the ROFR provision, the C&G Lease, and the Termination Addendum.
(Id. ¶¶ 3, 5).
Because the discovery CALECO seeks relates to
whether Hampton Plaza withheld bona fide bids in violation of
the ROFR provision,4 the Court concludes the discovery CALECO
seeks could lead to the creation of “a genuine issue of material
fact sufficient to defeat summary judgment.’”
Gardner, 2016 WL
2594826, at *4 (quoting Strag, 55 F.3d at 954).
the Court will construe Hampton Plaza’s Motion as a motion to
dismiss under Rule 12(b)(6).
applicability of defenses.”
Edwards v. City of Goldsboro, 178
As the Court will explain below, however, whether Hampton
Plaza entered into the C&G Purchase Agreement in bad faith is
not relevant because the ROFR provision relates to matching a
monthly rental agreement, not a circumstance where Hampton
purchases the laundry equipment and takes control of the laundry
services, as is the case with the C&G Purchase Agreement.
Accordingly, the Court is only referring to bona fide bids
related to the alleged C&G Lease, not the C&G Purchase
F.3d 231, 243–44 (4th Cir. 1999) (quoting Republican Party v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992)).
A complaint fails
to state a claim if it does not contain “a short and plain
statement of the claim showing that the pleader is entitled to
relief,” Rule 8(a)(2), or does not “state a claim to relief that
is plausible on its face,” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
A claim is facially plausible “when the plaintiff
Id. (citing Twombly, 550 U.S. at 556).
supported by mere conclusory statements, do not suffice.”
(citing Twombly, 550 U.S. at 555).
Though the plaintiff is not
claim, the complaint must allege sufficient facts to establish
Goss v. Bank of Am., N.A., 917 F.Supp.2d 445, 449
(D.Md. 2013) (quoting Walters v. McMahen, 684 F.3d 435, 439 (4th
F.App’x 165 (4th Cir. 2013).
In considering a Rule 12(b)(6) motion, a court must examine
the complaint as a whole, consider the factual allegations in
the complaint as true, and construe the factual allegations in
the light most favorable to the plaintiff.
Albright v. Oliver,
510 U.S. 266, 268 (1994); Lambeth v. Bd. of Comm’rs of Davidson
Rhodes, 416 U.S. 232, 236 (1974)).
But, the court need not
accept unsupported or conclusory factual allegations devoid of
any reference to actual events, United Black Firefighters v.
Hirst, 604 F.2d 844, 847 (4th Cir. 1979), or legal conclusions
couched as factual allegations, Iqbal, 556 U.S. at 678.
The Scope of the ROFR Provision
The C&G Purchase Agreement
inapplicable to the C&G Purchase Agreement because under the
operates the laundry services themselves.
appear to concede that the terms of the ROFR provision do not
apply to the C&G Purchase Agreement.
CALECO only alleges that
the C&G Purchase Agreement was Hampton Plaza’s attempt to “not
run afoul” of the ROFR provision.
(Compl. ¶ 30; see also Pl.’s
Opp. at 8 (arguing that the C&G Purchase Agreement was “meant to
Instead, CALECO’s allegations focus on Hampton Plaza’s
intent to design the C&G Purchase Agreement so that it fell
outside the ROFR
provision, thus violating its duty of good
faith and fair dealing.
(Compl. ¶ 34(g)).
The Court agrees
that the ROFR
Contracts in Maryland contain an implied duty of good faith
and fair dealing. See, e.g., Clancy v. King, 954 A.2d 1092,
1106–07 (Md. 2008).
As CALECO indicates, this duty extends to
property owners and ROFR holders in land-sale contracts.
A. Bramble, Inc. v. Thomas, 914 A.2d 136, 148–49 (Md. 2007); see
Straley v. Osborne, 278 A.2d 64, 70 (Md. 1971) (holding that
including the premises of a junkyard that is subject to a ROFR
provision with the surrounding land to avoid application of the
ROFR would violate the duty of good faith).
The duty of good
faith and fair dealing, however, does not require parties to
take “affirmative actions” that they are “clearly not required
to take” under the contract.
E. Shore Mkts., Inc. v. J.D.
Assocs. Ltd. P'ship, 213 F.3d 175, 182 (4th Cir. 2000) (quoting
1992)) (internal quotation marks omitted).
Hence, the duty does
silent, even if inclusion of the obligation is thought to be
logical and wise.”
Id. at 184.
Rather, the only obligations
required are ones “inherent in expressed promises.”
purchased laundry equipment from C&G and employed C&G to service
and maintain the equipment.
(Def.’s Mot. Dismiss Ex. 3).
only gives CALECO a right of first
refusal “to continue to lease space to provide laundry services
on the same terms as any bona fide bid received” by Hampton
(Compl. ¶ 11 (emphasis added)).
The duty of good faith,
therefore, does not “interpose” a “new obligation” on Hampton
agreements other than leases -- even if they relate to providing
the same laundry services
-- because the ROFR
silent” about bids and agreements other than leases.
Shore Mkts., 213 F.3d at 184.
Nor is such an obligation “inherent” in the CALECO Lease.
monthly rent of sixty-percent of its monthly revenues, and the
laundry equipment remained CALECO’s property.
¶¶ 2, 4).
(Compl. Ex. A
But in the C&G Purchase Agreement, Hampton Plaza is
purchasing laundry equipment and employing C&G to service and
maintain the equipment.
(Def.’s Mot. Dismiss Ex. 3).
obligation to give CALECO an opportunity to sell and service
“logical and wise” due to the presence of the ROFR provision,
but is not an obligation under the duty of good faith and fair
See E. Shore Mkts., 213 F.3d at 184.
extent CALECO seeks damages for Hampton Plaza’s execution of the
C&G Purchase Agreement.
The C&G Lease
Hampton Plaza next argues that CALECO’s claim should be
dismissed to the extent it seeks damages as a result of the
first C&G Lease because Hampton Plaza “mere[ly] contemplate[d]”
the C&G Lease and it went “unconsummated.”
(Def.’s Mot. Dismiss
Plaza and C&G consummated the C&G Lease in violation of the ROFR
The Court agrees with CALECO.
Hampton Plaza relies on Smith’s affidavit to demonstrate
that Hampton Plaza and C&G never entered into a valid, binding
lease, and therefore never triggered the ROFR provision.
Coulibaly, 2011 WL 3476994, at *6.
The Court must consider the
factual allegations in the Complaint as true, and construe the
Albright, 510 U.S. at 268; Lambeth, 407 F.3d at 268
(citing Scheuer, 416 U.S. at 236).
Smith’s affidavit aside, CALECO alleges that on April 17,
2015, it sent a letter to Hampton Plaza informing Hampton Plaza
that it intended to exercise the ROFR provision and requested
copies of any bona fide bids for laundry services.
CALECO further alleges that Hampton Plaza never provided
any bids, contracts, or other documents in response.
CALECO asserts that instead, Hampton Plaza signed the
(See Compl. ¶ 30).
According to the C&G Lease,
within the premises” to C&G for the purpose of installing and
maintaining washers and dryers.
(Pl.’s Opp. Ex. A).
next to the C&G Lease’s signatures reveal that Hampton Plaza
signed the lease on July 16, 2015 and C&G signed it on July 17,
Thus, CALECO has sufficiently pled that Hampton
Plaza and C&G executed the C&G Lease.
Validity of the ROFR Provision
Hampton Plaza further argues that the ROFR provision itself
is invalid because it constitutes an unreasonable restraint on
alienation of property and it violates Maryland’s Rule against
CALECO argues neither rule invalidates the ROFR
The Court agrees with CALECO.
Alienation of Property
The rule against unreasonable restraints on alienation of
property “prevents grantors from unreasonably depriving grantees
of the power to alienate their estates.”
Ferrero Const. Co. v.
Dennis Rourke Corp., 536 A.2d 1137, 1142–43 (Md. 1988).
assertion that the ROFR provision is invalid under the rule.
Id. at 1144.
The Court of Appeals, however, did
restraint on alienation of property.
The court only held that
property in rejecting the minority view that the Rule against
Perpetuities does not apply to rights of first refusal.
interest should not be subject to the Rule Against Perpetuities
unless that interest constitutes a restraint on alienation, we
subject to the Rule.”).
Hampton Plaza cites no other Maryland authority, and the
Court’s own exhaustive research reveals none, that applies the
rule against unreasonable restraints on alienation of property
to a right of first refusal.
Maryland courts instead apply the
Rule against Perpetuities.
See, e.g., Dorado Ltd. P’ship v.
Broadneck Dev. Corp., 562 A.2d 757, 759 (Md. 1989) (“In our
violates the Rule Against Perpetuities. Consequently, we do not
reach the issues of whether the contract is an unreasonable
Corp. v. Marie, 860 A.2d 886, 890 (Md. 2004).5
Thus, the Court
declines to apply the rule against unreasonable restraints on
alienation of property to the ROFR provision and will only apply
the Rule against Perpetuities.
The Rule against Perpetuities
interest is good unless it must vest, if at all, not later than
twenty-one years after some life in being at the creation of the
Selig v. State Highway Admin., 861 A.2d 710, 717
Perpetuities, § 201 (4th ed. 1942)) (internal quotation marks
The Supreme Court of Vermont has observed that “[c]ourts
have divided over” whether preemptive rights, such as rights of
first refusal, “should be tested under the rule against
unreasonable restraints, and disagree over the extent to which
the two rules overlap.” SKI, Ltd. v. Mountainside Props., Inc.,
114 A.3d 1169, 1178 n.8 (Vt. 2015). The court there cited the
Maryland Court of Appeals’ decision in Ferrero Construction Co.
as an example of a court applying the Rule against Perpetuities
over the rule against unreasonable restraints on alienation.
exceptions to the Rule.
See generally Md. Code Ann., Est. &
property interests created after October 1, 2007 that vest, or
are exercised, within seven years of the interest’s creation.
property interest as a property interest, such as a right of
first refusal, given for consideration.
Id. § 11-102.1(a).
right of first refusal vests when the property owner decides to
sell his or her property interest.
See Bramble, 914 A.2d at 146
(holding that a preemptive right “vests only when the property
owner decides to sell” (quoting Ayres v. Townsend, 598 A.2d 470,
474 (Md. 1991))).
Here, the ROFR provision is valid because it is exempted
from the Rule against Perpetuities under Section 11-102.
consideration provided in the CALECO Lease.
(Compl. Ex. A).
The CALECO Lease contained the ROFR provision after 2007 because
CALECO and Hampton Plaza executed it in 2009.
(Compl. ¶ 7).
The ROFR provision vested within seven years because Hampton
Plaza and C&G executed the C&G Lease on July 17, 2015, a little
over six years later.
(Pl.’s Opp. Ex. A).6
The Court concludes,
therefore, that CALECO sufficiently pled a valid ROFR provision
under Maryland law.
In sum, CALECO sufficiently pleads that the ROFR is valid
and that Hampton Plaza executed the C&G Lease in violation of
the Court will deny
Motion to the extent it seeks to dismiss CALECO’s claims related
to the C&G Lease.
For the foregoing reasons, the Court will GRANT in part and
DENY in part Hampton Plaza’s Motion (ECF No. 8).
The Court will
GRANT the Motion to the extent CALECO seeks damages for Hampton
Plaza’s execution of the C&G Purchase Agreement.
The Court will
DENY the Motion to the extent CALECO seeks damages for Hampton
Plaza’s execution of the C&G Lease.
A separate Order follows.
Entered this 16th day of February, 2017
George L. Russell, III
United States District Judge
Hampton Plaza argues that it never executed the C&G Lease
Because Hampton Plaza solely relies on Smith’s
affidavit to support this contention, for the reasons the Court
described in Section II.B.1.ii supra, at the 12(b)(6) stage the
Court only considers the C&G Lease and construes the dates
contained therein in the light most favorable to CALECO.
Albright, 510 U.S. at 268; Lambeth, 407 F.3d at 268 (citing
Scheuer, 416 U.S. at 236).
Thus, at this time the Court
construes the C&G Lease as executed on July 17, 2015.
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