Kolb v. ACRA CONTROL, LTD. et al
Filing
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MEMORANDUM OPINION. Signed by Judge Paul W. Grimm on 5/16/2014. (kns, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
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JOHN R. KOLB, JR.
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Plaintiff,
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v.
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ACRA CONTROL, LTD., d/b/a
ACRA CONTROL, INC., et al.,
Case No.: PWG–12–2782
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Defendants.
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MEMORANDUM OPINION
At its core, this case is a straightforward, one-count action for breach of contract in which
Plaintiff John R. Kolb, Jr. sues his former employer, ACRA Control Ltd. (“ACRA Ireland”), an
Irish company.
Yet, corporate acquisitions and later contractual relationships add complexity
and, as a result, issues have arisen with regard to whether the contract at issue has expired and if
not, what companies may be liable under that contract. At this juncture, I must determine
(1) whether Kolb may amend his Complaint to add ACRA Ireland’s subsidiary, ACRA
Control, Inc. (“ACRA U.S.A.”), a Maryland corporation, and/or Curtiss-Wright
Controls (UK) Limited (“Curtiss-Wright UK”), the company that acquired ACRA
Ireland, as defendants and to include counts for unjust enrichment and violation of the
Maryland Wage and Payment Collection Law, Md. Code Ann., Lab. & Empl. §§ 3501 – 3-509 (“MWPCL”);
(2) whether Defendants1 may raise issues of Irish law; and
(3) whether Kolb waived or released his claim for breach of contract by executing a later
contract and related documents with Curtiss-Wright UK, and if so, whether the parties
should brief the matter of sanctions that Defendants raise. 2
In the interest of justice, I will grant Kolb leave to amend his Complaint to add a count for unjust
enrichment against ACRA U.S.A.3 But, I will deny Kolb’s motions to amend insofar as he seeks
to add Curtiss-Wright UK as a defendant with regard to his breach of contract claim, because the
claim would be futile, and I will deny Kolb’s motion to add a count for violation of the MWPCL
1
Although neither Curtiss-Wright UK nor ACRA U.S.A. was a defendant when Defendant
ACRA Ireland filed its pending motions and its oppositions to Plaintiff’s pending motions, both
joined Defendant ACRA Ireland in all of these filings. Therefore, for convenience only, I refer
to the three companies collectively as Defendants.
2
Pending are Plaintiff’s September 10, 2013 Motion for Leave to File Amended Complaint and
Memorandum of Law in Support (“Plaintiff’s First Motion to Amend”), ECF No. 32, to which
Defendant ACRA Ireland filed an Opposition, ECF No. 33; Plaintiff’s February 10, 2014 Motion
for Leave to File an Amended Complaint and Memorandum of Law in Support (“Plaintiff’s
Second Motion to Amend”), ECF No. 52, which the parties fully briefed, ECF Nos. 56 & 59;
Defendants’ Motion for Summary Judgment, ECF No. 46, which the parties fully briefed, ECF
Nos. 46-1, 54 & 58; and Defendants’ Motion for Sanctions and Memorandum in Support, ECF
No. 42, to which I have not ordered Plaintiff to respond, see Loc. R. 105.8(b). Additionally,
after Defendants filed a Notice of Intention to Raise Issues of Foreign Law, ECF No. 44,
Plaintiff filed a Motion to Find Defendants Have Waived the Right to Raise an Issue of Foreign
Law and Expert Testimony in Summary Judgment Proceedings (“Motion Re Waiver of Irish
Law”), ECF No. 45, which also is pending and to which Defendants filed an Opposition, ECF
No. 49. Plaintiff has not filed a Reply with regard to his First Motion to Amend or his Motion
Re Waiver of Irish Law, and the time for doing so has passed. See Loc. R. 105.2(a). For the
reasons stated in this Memorandum Opinion, Plaintiff’s First Motion to Amend IS GRANTED
IN PART and DENIED IN PART; his Second Motion to Amend IS DENIED; Plaintiff’s Motion
to Find Defendants Have Waived the Right to Raise an Issue of Foreign Law and Expert
Testimony in Summary Judgment Proceedings IS DENIED; Defendants’ Motion for Summary
Judgment IS GRANTED; and Defendants’ Motion for Sanctions IS DENIED. This
Memorandum Opinion disposes of ECF Nos. 32, 42, 45, 46 & 52.
3
As discussed below in Part IV, although Kolb sufficiently stated a claim against ACRA U.S.A.
for this amendment not to be “futile” as the term is used in the context of amendment, the claim
cannot survive Defendants’ Motion for Summary Judgment. As such, ACRA U.S.A. only is
reintroduced as a defendant in this case long enough for summary judgment to be entered in its
favor.
2
against ACRA Ireland, because he has not shown good cause for his delay. Additionally, as I
find that Plaintiff had sufficient notice that Defendants likely would raise issues of Irish law, I
will deny Plaintiff’s motion to find that Defendants waived their ability to raise such issues.
Finally, because I find as a matter of law that Plaintiff waived the claims he now brings through
a provision in the agreement he entered into with Curtiss-Wright UK, such that Defendants
ACRA Ireland and ACRA U.S.A. are entitled to judgment as a matter of law, I will grant
Defendants’ motion for summary judgment. I will deny Defendants’ motion for sanctions.
I.
BACKGROUND
ACRA U.S.A. and Defendant ACRA Ireland are companies that “suppl[y] airborne data
acquisition networks and recording systems and real-time data processing ground stations to the
aerospace industry.” Compl. ¶ 2, ECF No. 1; see Fergal Bonner Aff. ¶ 2,4 Defs.’ Mot. to
Dismiss Mem. Ex. 1, ECF No. 7-3. ACRA Ireland hired Plaintiff to be ACRA U.S.A’s president
in 1999, at which time Plaintiff and ACRA Ireland entered into an Employment Agreement and a
Performance Incentive Compensation Plan (“PICP”), the contract that Plaintiff contends ACRA
Ireland has breached. Compl. ¶ 6. Pursuant to the PICP, Plaintiff could purchase shares in
ACRA Ireland when it notified him that “the average turnover (ATO) of the company due to US
sales, as defined, exceeds one million ($1,000,000) dollars.” PICP 1, Compl. Ex. A, ECF No. 11 (emphasis removed). This provision lasted “for a minimum of five (5) years during the period
of employment unless mutually agreed in writing.” Id.
Plaintiff also had options to purchase shares pursuant to other contracts. Specifically, in
2003 and again in 2010, Plaintiff and ACRA Ireland executed Option Agreements for Plaintiff to
purchase shares of ACRA Ireland.
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Plaintiff exercised his rights under the 2003 Option
The Bonner Affidavit and all exhibits attached to it appear as ECF No. 46-4.
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Agreement, purchasing 100 shares of ACRA Ireland. Defs.’ Summ. J. Mem. 12; Pl.’s Summ. J.
Opp’n 5–6.
Additionally, Plaintiff signed a Notice of Option Exercise, in which Plaintiff
exercised his right to purchase shares of ACRA Ireland immediately before Curtiss-Wright UK
acquired ACRA Ireland in 2011. Bonner Aff. ¶ 11 & Ex. 17. Thus, Plaintiff, as a shareholder of
ACRA Ireland, was party to the 2011 Share Purchase Agreement (“SPA”) between CurtissWright UK and ACRA Ireland’s shareholders. Aug. 13, 2013 Mem. Op. 4, ECF No. 19; see
SPA, Defs.’ Mot. to Dismiss Mem. Ex. 14, ECF No. 7-16.
Yet, ACRA Ireland never informed Plaintiff that he had the option to purchase shares
pursuant to the PICP, and therefore Plaintiff never exercised that option. According to Plaintiff,
he should have had that option for fiscal years 2004 – 2010, because the ATO from U.S. sales
exceeded one million dollars for each of those years and Plaintiff worked for ACRA Ireland
during that entire period. Compl. ¶¶ 8, 11 & 13. He claims that ACRA Ireland breached the
PICP because he was not provided notice so that he could exercise the option to purchase shares
for any of those years. Id. ¶ 16.
II.
MOTIONS TO AMEND
Originally, Plaintiff also named Curtiss-Wright U.S.A. and ACRA U.S.A. as defendants.
See Compl. 1. I granted summary judgment in favor of Defendant Curtiss-Wright U.S.A.,
reasoning that “[i]t is the successor of ACRA Ireland that would be bound by the contract and
consequently should be named as a defendant in this case,” and the SPA shows that CurtissWright UK, not Curtiss-Wright U.S.A., acquired ACRA Ireland on July 28, 2011.” Aug. 13,
2013 Mem. Op. 12. I directed Plaintiff that if he wanted to name Curtiss-Wright UK as a
defendant, “he should file a motion to amend, with specific grounds and supporting authority for
any proposed amendments and accompanied by a redlined complaint” by August 27, 2013. Id. at
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13.
Likewise, I granted Defendants’ motion to dismiss the claim against ACRA U.S.A.,
reasoning that “ACRA U.S.A. is not a party to the PICP and therefore cannot owe a contractual
obligation.” Id. at 14. I stated that “[i]f Plaintiff believes that he can state a claim in quantum
meruit or [for] unjust enrichment, he may file a motion to amend, with specific grounds and
supporting authority for any proposed amendments and accompanied by a redlined complaint”
by August 27, 2013. Id. at 14.
Plaintiff filed a timely Motion for Leave to File Amended Complaint and Memorandum
of Law in Support (“Plaintiff’s First Motion to Amend”).5 He proposed adding Curtiss-Wright
UK as a defendant with regard to the breach of contract claim and adding a claim for unjust
enrichment against ACRA U.S.A. Pl.’s 1st Mot. to Am. 1–2. More than five months later, on
February 10, 2014, Plaintiff filed another Motion for Leave to File an Amended Complaint and
Memorandum of Law in Support (“Plaintiff’s Second Motion to Amend”), ECF No. 52. In
Plaintiff’s Second Motion to Amend, Plaintiff seeks to add a count for violation of the MWPCL
against ACRA Ireland, in addition to the previously-requested amendments. Pl.’s 2d Mot. to
Am. 1–2.
A. Standard of Review
Whether to grant a motion for leave to amend is within this Court’s discretion. Foman v.
Davis, 371 U.S. 178, 182 (1962). Rule 15(a)(2) typically provides the standard for whether to
grant a motion for leave to amend that a plaintiff files more than twenty-one days after the
defendant files a responsive pleading or motion to dismiss. See id.; Fed. R. Civ. P. 15(a)(2).
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Plaintiff filed his original Amended Complaint and Motion to Amend, ECF Nos. 25 & 26,
incorrectly on August 27, 2013. ECF No. 27. He filed the corrected First Motion to Amend,
ECF No. 32, which now is pending, on September 10, 2013.
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Plaintiff’s First Motion to Amend is timely and governed by Rule 15(a)(2). See Foman, 371
U.S. at 182; Fed. R. Civ. P. 15(a)(2).
Pursuant to Rule 15(a)(2), “[t]he court should freely give leave [to amend] when justice
so requires.” The Court only should deny leave to amend if amendment “would prejudice the
opposing party, reward bad faith on the part of the moving party, or . . . amount to futility,” MTB
Servs., Inc. v. Tuckman-Barbee Constr. Co., No. RDB-12-2109, 2013 WL 1819944, at *3 (D.
Md. Apr. 30, 2013); see Foman, 371 U.S. at 182 (stating that the court also may deny leave if the
plaintiff has amended more than once already without curing the deficiencies in the complaint);
Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). Otherwise, “[i]f the underlying facts or
circumstances relied upon by a plaintiff may be a proper subject of relief,” and the plaintiff
moves to amend, the Court should grant the motion so that the plaintiff has the “opportunity to
test his claim on the merits.” Foman, 371 U.S. at 182.
Determining whether amendment would be futile does not involve “‘an evaluation of the
underlying merits of the case.’” MTB Servs., 2013 WL 1819944, at *3 (quoting Next Generation
Grp. v. Sylvan Learning Ctrs., LLC., No. CCB–11–0986, 2012 WL 37397, at *3 (D. Md. Jan. 5,
2012)). Rather, “the merits of the litigation” are only relevant to the Court’s ruling on a motion
for leave to amend if “a proposed amendment may clearly be seen to be futile,” Davis v. Piper
Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980), such as “if the proposed amended complaint
fails to state a claim under the applicable rules and accompanying standards,” Katyle v. Penn
Nat. Gaming Inc., 637 F .3d 462, 471 (4th Cir. 2011); see MTB Servs., 2013 WL 1819944, at *3.
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,” Fed. R. Civ. P. 8(a)(2), or does not state “a
plausible claim for relief,” as “[t]hreadbare recitals of the elements of a cause of action,
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supported by mere conclusory statements, do not suffice,” Ashcroft v. Iqbal, 556 U.S. 662, 678–
79 (2009). “A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. at 663.
When a plaintiff moves to amend after the deadline established in the scheduling order
for doing so, Rule 16(b)(4) becomes the starting point in the Court’s analysis. CBX Techs., Inc. v.
GCC Techs., LLC, No. JKB-10-2112, 2012 WL 3038639, at *3 (D. Md. July 24, 2012). Plaintiff
filed his Second Motion to Amend on February 10, 2014. See Pl.’s 2d Mot. to Am. The
Scheduling Order that I issued on August 13, 2013 allowed the parties to move for joinder of
additional parties and amendment of pleadings until September 27, 2013. ECF No. 21. Contrary
to Plaintiff’s assertions,6 none of my later orders superseded the deadline for amendment.
Therefore, Plaintiff “‘first must satisfy the good cause standard of Rule 16(b),’” and if he
succeeds, he “‘then must pass the tests for amendment under [Rule] 15(a).’” CBX Techs., Inc.,
2012 WL 3038639, at *3 (quoting Odyssey Travel Ctr., Inc. v. RO Cruises, Inc., 262 F. Supp. 2d
618, 631 (D. Md. 2003)); see Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298 (4th Cir.
2008).
“‘“[G]ood cause” means that scheduling deadlines cannot be met despite a party’s
diligent efforts.’ . . . Carelessness is not compatible with a finding of diligence and offers no
reason for a grant of relief.” CBX Techs., Inc., 2012 WL 3038639, at *4 (quoting Potomac Elec.
Power Co. v. Elec. Motor Supply, Inc., 190 F.R.D. 372, 375 (D. Md. 1999) (citation omitted)).
The Court focuses “less . . . on the substance of the proposed amendment and more . . . [on] the
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Plaintiff argues at length that “Federal Rule of Civil Procedure 16(b) is not implicated because
the initial scheduling order was effectively replaced by the Court’s implementation of phased
discovery.” Pl.’s Reply 4; see id. at 2–3; Pl.’s 2d Mot. to Am. 2–3.
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timeliness of the motion to amend ‘and the reasons for its tardy submission.’” Id. (quoting
Rassoull v. Maximus, Inc., 209 F.R.D. 372, 373–74 (D. Md. 2002)). This is because “[a] court’s
scheduling order ‘is not a frivolous piece of paper, idly entered, which can be cavalierly
disregarded by counsel without peril.’” Id. (quoting Potomac Elec. Power Co., 190 F.R.D. at
376 (citation and quotation marks omitted)). Specifically, the Court considers whether the
moving party acted in good faith, the length of the delay and its effects, and whether the delay
will prejudice the non-moving party. Tawwaab v. Va. Linen Serv., Inc., 729 F. Supp. 2d 757,
768-69 (D. Md. 2010). When “at least some of the evidence needed for a plaintiff to prove his or
her claim did not come to light until after the amendment deadline,” a plaintiff has “good cause”
for moving to amend at a later date. Id. at 768; see In re Lone Star Indus., Inc. Concrete R.R.
Cross Ties Litig., 19 F.3d 1429, 1994 WL 118475, at *11 (4th Cir. Apr. 7, 1994) (concluding
that district court abused its discretion when it denied motion to amend to add a new claim after
deadline set in scheduling order had passed).
B. First Motion to Amend
1. Breach of contract claim against Curtiss-Wright UK
Plaintiff insists that Curtiss-Wright UK is a proper defendant for his breach of contract
claim because it is “responsible for ACRA Ireland’s liabilities,” whether Curtiss-Wright UK
acquired ACRA Ireland through a “stock purchase” or an “asset purchase.” Pl.’s 1st Mot. to Am.
3–4. Defendants counter that “allowing Plaintiff to amend his Complaint to add a claim against
Curtiss-Wright UK would be futile” because the breach of contract claim against Curtiss-Wright
UK “would not survive a motion to dismiss.” Defs.’ Opp’n to Pl.’s 1st Mot. to Am. 3. They
argue:
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Curtiss-Wright UK’s status as the sole shareholder of ACRA Ireland (which today
continues to have a separate, ongoing legal existence as a subsidiary of CurtissWright UK), in and of itself, as a matter of law, does not cause it to be liable for
the breach of contract entered into by ACRA Ireland.
Id.
To state a claim against Curtiss-Wright UK for breach of contract, Plaintiff first must
allege that Curtiss-Wright UK owed it “‘a contractual obligation.’” Bezmenova v. Ocwen
Financial Corp., No. AW-13-0003, 2013 WL 3863948, at *3 (D. Md. July 23, 2013) (quoting
Taylor v. NationsBank, N.A., 776 A.2d 645, 651 (Md. 2001)). As I noted in my August 13, 2013
Memorandum Opinion, a corporation does not acquire another corporation’s liabilities simply by
acquiring its assets. Aug. 13, 2013 Mem. Op. 12 (citing PCS Nitrogen Inc. v. Ashley II of
Charleston LLC, 714 F.3d 161, 174 (4th Cir. 2013)). A successor corporation only acquires its
predecessor’s liabilities if “‘(1) the successor expressly or impliedly agrees to assume the
liabilities of the predecessor; (2) the transaction may be considered a de facto merger; (3) the
successor may be considered a “mere continuation” of the predecessor; or (4) the transaction is
fraudulent’” or (5) “where ‘substantial continuity’ exists between a predecessor and successor
corporation.” See PCS Nitrogen Inc., 714 F.3d at 174. In his proposed verified Amended
Complaint, ECF No. 52-4, Plaintiff alleges that “ACRA Ireland was acquired by Curtiss-Wright
U.K. on or about July 28, 2011 through a share purchase agreement,” and that Curtiss-Wright
UK “is the sole shareholder of ACRA Ireland.” Am. Compl. ¶¶ 2 & 4. Additionally, Plaintiff
claims that “[i]n acquiring ACRA Ireland through a share purchase agreement, Curtiss-Wright
U.K. assumed ACRA Ireland’s obligations to Mr. Kolb under the PICP.” Id. ¶ 20.
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Paragraph 20 appears to be a conclusory legal assertion7 that is not sufficient to state a
claim for breach of contract under Iqbal. 556 U.S. at 678–79; see Papasan v. Allain, 478 U.S.
265, 286 (1986) (stating that the Court is not required to accept as true “a legal conclusion
couched as a factual allegation”); Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002) (stating that
the court is not required to accept as true “allegations that are merely conclusory, unwarranted
deductions of fact or unreasonable inferences”). Given the previously cited case law, it certainly
is not a “reasonable inference” to conclude that Curtiss-Wright UK has a contractual obligation
to Plaintiff that makes it “liable for the misconduct alleged” simply by virtue of that fact that it
acquired ACRA Ireland through the SPA. See Iqbal, 556 U.S. at 663; Bezmonova, 2013 WL
3863948, at *3. Indeed, Plaintiff argues to the contrary in his First Motion to Amend, citing SPA
cl. 2.1’s provision that Curtiss-Wright UK “agrees to purchase all of such Shares free from all
Encumbrances,” and asserting that ACRA Ireland’s liabilities were not transferred under the
SPA. See Pl.’s 1st Mot. to Am. 3 (emphasis added). Plaintiff contends that, instead of liability
transferring, ACRA Ireland’s “shareholders, namely Curtiss-Wright UK,” retained liability. See
id. Yet, Plaintiff does not provide any legal authority or contractual provision for the proposition
that any of the shareholders, let alone Curtiss-Wright UK, ever had any liability for ACRA
Ireland.
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I acknowledge that the language of Paragraph 20 is ambiguous, as a reader alternatively could
find that Plaintiff intended it to be a factual allegation, in which Plaintiff is claiming that the SPA
provided that Curtiss-Wright would assume ACRA Ireland’s obligations. However, having
reviewed the SPA, I am aware that the SPA contains no such provision. see SPA, Pl.’s 1st Mot.
to Am. Ex. A, ECF No. 32-4. As I am certain that Plaintiff’s counsel would not violate his
obligations under Rule 11 deliberately, I am construing this statement as a legal conclusion. See
Fed. R. Civ. P. 11 (providing that, at the risk of sanctions, an attorney presenting a pleading to
the Court “certifies that to the best of the person’s knowledge, information, and belief, formed
after an inquiry reasonable under the circumstances . . . the factual contentions have [or likely
will have] evidentiary support”).
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Plaintiff also argues, alternatively, that Curtiss-Wright UK acquired ACRA Ireland’s
liability when it acquired its predecessor’s shares, “under the ‘mere continuation’ exception.”
See Pl.’s 1st Mot. to Am. 3. However, as Defendants note, “[t]he traditional rule with regard to
the ‘mere continuation’ exception is that a corporation is not to be considered the continuation of
a predecessor unless, after the transfer of assets, only one corporation remains, and there is an
identity of stock, stockholders, and directors between the two corporations.” United States v.
Carolina Transformer Co., 978 F.2d 832, 838 (4th Cir. 1992). Here, prior to and after the stock
purchase, ACRA Ireland and Curtiss-Wright UK remained separate entities. See Pl.’s 1st Mot. to
Am. 3; Defs.’ Opp’n to Pl.’s 1st Mot. to Am. 7. Therefore, Curtiss-Wright UK did not acquire
ACRA Ireland’s liability under the “mere continuation” exception. See Carolina Transformer
Co., 978 F.2d at 838. Consequently, Plaintiff’s proposed amendment to state a claim for breach
of contract against Curtiss-Wright UK is futile. See Katyle, 637 F .3d at 471; see MTB Servs.,
2013 WL 1819944, at *3. Plaintiff’s First Motion to Amend is DENIED insofar as he seeks to
add Curtiss-Wright UK as a defendant.
2. Unjust enrichment claim against ACRA U.S.A.
Defendants did not oppose Plaintiff’s First Motion to Amend insofar as it pertained to the
unjust enrichment claim against ACRA U.S.A.
Defs.’ Opp’n to Pl.’s 1st Mot. to Am. 3.
However, in opposing Plaintiff’s Second Motion to Amend, Defendants argue that “[a]ny
amendment to add claims for unjust enrichment or for a violation of the MWPCL would be futile
because Plaintiff has released and/or waived any such causes of action . . . .” Defs.’ Opp’n to
Pl.’s 2d Mot. to Am. 6. Essentially, Defendants contend that the affirmative defenses of release
and waiver would bar Plaintiff from recovering on any claims that he might have had prior to
executing the SPA. See id.
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It is true that a plaintiff fails to state a claim where the allegations on the face of the
complaint show that an affirmative defense would bar any recovery. Jones v. Bock, 549 U.S.
199, 214–15 (2007) (citing Fed. R. Civ. P. 8(c)); see Brooks v. City of Winston–Salem, 85 F.3d
178, 181 (4th Cir. 1996) (noting that dismissal is proper “when the face of the complaint clearly
reveals the existence of a meritorious affirmative defense”). But, the affirmative defenses of
release and waiver are not apparent on the face of Plaintiff’s Complaint, as originally filed or as
amended. Indeed, Defendants do not argue as much. Rather, they assert that the futility of these
causes of action is “set forth in detail” in their summary judgment argument. Defs.’ Opp’n to
Pl.’s 2d Mot. to Am. 7. They concede that “[t]ypically, an amendment is deemed futile if the
amendment could not survive a motion to dismiss,” and that “Plaintiff’s requested amendment to
add a cause of action for an alleged violation of the MWPCL may not be ‘futile’ under a motion
to dismiss standard.” Defs.’ Opp’n to Pl.’s 2d Mot. to Am. 6–7 (emphases added). Thus, as the
summary judgment standard is inapplicable to the futility analysis for purposes of a motion to
amend, Defendants have not set forth any argument to support denying Plaintiff leave to amend
to state a claim for unjust enrichment. See Foman, 371 U.S. at 182; MTB Servs., Inc., 2013 WL
1819944, at *3. Plaintiff’s First Motion to Amend is GRANTED insofar as he seeks to add a
claim for unjust enrichment against ACRA U.S.A. Nonetheless, Plaintiff’s victory in this regard
is fleeting, because his unjust enrichment claim will not survive summary judgment, as discussed
below in Part IV.
C. Second Motion to Amend
Plaintiff now seeks to add a claim for violation of the MWPCL against ACRA Ireland,
based on facts that he allegedly learned when deposing ACRA Ireland’s corporate designee.
Pl.’s 2d Mot. to Am. 4–5. According to Plaintiff, he learned “that despite the removal of the
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stock option incentive from Plaintiff’s 1999 employment contract, ACRA Ireland regarded the
PICP as part of Plaintiff’s overall compensation scheme and not some ancillary agreement,” such
that Plaintiff could state a claim under the MWPCL. Pl.’s Reply to 2d Mot. to Am. 5; see also
Pl.’s 2d Mot. to Am. 7 (“[T]he corporate designee made clear that . . . ACRA Ireland regarded
the PICP as previously agreed upon compensation in exchange for Plaintiff’s employment
services.”).8
He justifies the late filing of his proposed amendment by asserting that the
deposition “was delayed because of scheduling conflicts with the appointed corporate designee,
who traveled from Ireland to the United States exclusively for the deposition.” Pl.’s 2d Mot. to
Am. at 5. In his view, adding a MWPCL claim “will not result in prejudice to Defendants as this
matter remains in a preliminary phase of discovery” and “Plaintiff is amenable to any reasonable
extension of time Defendants may need to address the potential MWPCL count in their
dispositive motion.” Id.
Defendants counter that Plaintiff has not shown good cause to amend at this late date
because he has been aware of the facts that allegedly form the basis of his MWPCL violation
claim “since the inception of this case.”9 Defs.’ Opp’n to Pl.’s 2d Mot. to Am. 4. In particular,
they assert that Plaintiff “must have . . . known” that “‘Defendants contemplated the PICP as part
of Plaintiff’s overall compensation agreement’ . . . as early as 1999 when the PICP was entered
8
While Plaintiff also claimed in his Second Motion to Amend that he learned additional
information through the deposition, Pl.’s 2d Mot. to Am. 8, in his Reply, he only identifies the
fact that “ACRA Ireland regarded the PICP as part of Plaintiff’s overall compensation scheme”
as information that he “learned through discovery,” Pl.’s Reply to 2d Mot. to Am. 5. Perhaps
this is because the other information he identified as newly-learned already appeared as
allegations in his Complaint. See Compl. ¶¶ 9, 10, 13 & 16.
9
Alternatively, Defendants insist that this amendment, like the addition of an unjust enrichment
claim, is futile because Plaintiff has waived or released his claim. See Defs.’ Opp’n to Pl.’s 2d
Mot. to Am. 6–7. As discussed above, Defendants’ argument is unavailing.
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into” because “the PICP provided that Plaintiff was to be compensated, in part, through the
potential option to purchase shares in ACRA Ireland in connection with his original employment
with ACRA Ireland.” Id. (quoting Pl.’s 2d Mot. to Am. 8).
It is hard to fathom how a compensation plan executed in conjunction with an
employment agreement, such as the PICP, could be regarded as anything other than a part of the
overall plan for the employer to compensate the employee. At a minimum, these facts, which
Plaintiff certainly knew when he filed his original Complaint, would provide a sufficient basis
for claiming that the employer considered any compensation to be provided under the
compensation plan to be a part of the employee’s overall compensation. Thus, assuming without
deciding that Plaintiff has stated a claim under the MWPCL, he could have done so just as
readily when he filed his original Complaint or his timely First Motion to Amend as when he
filed his Second Motion to Amend, more than four months after the deadline established by the
Scheduling Order. See Ashcroft v. Iqbal, 556 U.S. 662, 663 & 678–79 (2009). Plaintiff has not
shown that he made diligent efforts to meet the scheduling deadline. See CBX Techs., Inc., 2012
WL 3038639, at *4.
Consequently, although the delay may not prejudice ACRA Ireland,
Plaintiff has not demonstrated good cause for his delay. See id; Tawwaab v. Va. Linen Serv.,
Inc., 729 F. Supp. 2d 757, 768-69 (D. Md. 2010). Plaintiff’s Second Motion to Amend is
DENIED.
III.
PLAINTIFF’S MOTION TO FIND DEFENDANTS HAVE WAIVED ISSUE
OF FOREIGN LAW/EXPERT
In their Notice of Intention to Raise Issues of Foreign Law, Defendants announced that
they intend to raise issues of Irish law regarding (1) contract “construction, interpretation and
application,” (2) the affirmative “defenses of waiver, release, laches, and estoppel,” and (3) “the
question of whether Curtiss-Wright Controls (UK) Ltd. assumed any liability of ACRA Control,
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Ltd. and/or ACRA Control, Inc. in connection with the Share Purchase Agreement.” Defs.’
Notice 1–2. In Plaintiff’s view, Defendants should not be allowed to raise issues of foreign law
because they had known for sixteen months that they would be raising these issues, but they did
not disclose their intention until the eve of filing their summary judgment motion, despite “ample
opportunity,” in contravention of Fed. R. Civ. P. 44.1. Pl.’s Mot. Re Waiver of Irish Law 3.
In Opposition, Defendants insist that “explicit and repeated assertions and arguments by
Defendants in filings with the Court since the inception of this case that the affirmative defenses
arising from the 2011 Notice of Option Exercise, the SPA and other related documents are
governed by Irish law” put Plaintiff on notice that Defendants intended to raise issues of Irish
law. Defs.’ Opp’n to Pl.’s Mot. Re Waiver of Irish Law 1–2. Indeed, Plaintiff agrees that Irish
law governs the SPA and the Notice of Option Exercise. Pl.’s Summ. J. Opp’n 11–12 & 18.
Federal Rule of Civil Procedure 44.1 provides that “[a] party who intends to raise an
issue about a foreign country’s law must give notice by a pleading or other writing.” In this case,
the focus of the Memorandum of Law in Support of Defendants’ Motion to Dismiss Plaintiff’s
Complaint or, in the Alternative, for Summary Judgment, ECF No. 7-1, was on Defendants’
assertion that venue is improper because “even assuming arguendo that Plaintiff can successfully
assert his claim, which Defendants deny, he must do so in Ireland pursuant to Irish law.” Defs.’
Mot. to Dismiss Mem. 2. This certainly put Plaintiff and the Court on notice that Defendants
believed that Irish law applied to the issues in this case. No more formal notice was necessary.
See In re Griffin Trading Co., 683 F.3d 819, 822–23 (7th Cir. 2012) (concluding that the
complaint “sufficed to give notice about the applicability of foreign law” because it “explicitly
cite[d] . . . trading activity in London as the precipitating event, and point[ed] to the transfer to
. . . a Netherlands entity that used a German bank[] as the cause for liability,” which “was
15
enough to put all parties on notice that the transactions might be governed by foreign law”;
reasoning that “[a]lthough it is true that Rule 44.1 requires any party who intends to present
evidence of foreign law to ‘give notice by a pleading or other writing,’ the language of the rule
itself reveals that no particular formality is required. Any ‘other writing’ will do, as long as it
suffices to give proper notice of an intent to rely on foreign law”); In re Eternity Shipping, Ltd.,
Eurocarriers, S.A. for Exoneration from or Limitation of Liability, 444 F. Supp. 2d 347, 382 n.95
(D. Md. 2006) (noting that “a Rule 44.1 Notice was not necessary because all parties have been
aware since the beginning of the case that the Court must decide the effect that Ms. Gonzales’s
case in the Philippines has on the instant lawsuit”). Therefore, Defendants have not waived their
right to raise issues of Irish law.
Additionally, Plaintiff contends that Defendants “waived their right to provide expert
testimony in the Summary Judgment proceedings” because they “failed to timely submit an
expert report and accompanying disclosures.”
Pl.’s Mot. Re Waiver of Irish Law 5–6.
Differentiating expert testimony used to determine foreign law from “expert testimony submitted
under Federal Rule of Evidence 702,” Defendants argue that “the stringent requirements of
F.R.C.P. 702, 703 or 705 are inapplicable to experts on foreign law proffered under F.R.C.P.
44.1” Defs.’ Opp’n to Pl.’s Mot. Re Waiver of Irish Law 6.
It is true that Fed. R. Civ. P. 44.1, not Fed. R. Evid. 702, governs the use of testimony
regarding foreign law. See Fed. R. Civ. P. 44.1. Rule 44.1 provides that, “[i]n determining
foreign law, the court may consider any relevant material or source, including testimony,
whether or not submitted by a party or admissible under the Federal Rules of Evidence.” Fed. R.
Civ. P. 44.1. Therefore, Defendants have not waived their right to offer testimony regarding
foreign law. See id.
16
Plaintiff also insists that Defendants should not be able to raise issues of “laches and
estoppel which are clearly outside of the scope of this Court’s discovery and scheduling order.”
Pl.’s Mot. Re Waiver of Irish Law 4. Because I do not reach the issue of estoppel, this argument
is moot. Plaintiff’s Motion Re Waiver of Irish Law IS DENIED.
IV.
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Summary judgment is proper when the moving party demonstrates, through “particular
parts of materials in the record, including depositions, documents, electronically stored
information, affidavits or declarations, stipulations . . . , admissions, interrogatory answers, or
other materials,” 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), (c)(1)(A); see Baldwin v. City of
Greensboro, 714 F.3d 828, 833 (4th Cir. 2013).
If the party seeking summary judgment
demonstrates that there is no evidence to support the nonmoving party’s case, the burden shifts to
the nonmoving party to identify evidence that shows that a genuine dispute exists as to material
facts. See Celotex v. Catrett, 477 U.S. 317 (1986). The existence of only a “scintilla of
evidence” is not enough to defeat a motion for summary judgment. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 251 (1986). Instead, the evidentiary materials submitted must show facts
from which the finder of fact reasonably could find for the party opposing summary judgment.
Id.
Defendants move for summary judgment “primarily on the grounds that Kolb expressly
released and/or waived the breach of contract claims asserted in the Complaint” when he signed
three documents on July 28, 2011: the SPA, the Notice of Option Exercise, and a “waiver/release
letter . . . in connection with the SPA” (“Letter”). Defs.’ Summ. J. Mem. 1–2. The SPA, which
Plaintiff signed as a “Seller,” provides: “At Completion each Seller shall irrevocably waive any
17
claims against any Group Company its agent, or employees which he/she may have outstanding
at Completion.” SPA cl. 5.6. The SPA defines “Group” as “the Company and each Subsidiary
Undertaking for the time being.” SPA cl. 1.1. It defines “Group Company” as “any one of” the
Company, i.e., ACRA Ireland, and its Subsidiary Undertakings, which include ACRA U.S.A.
Id. & SPA Sched. 2 Part 2.
The Notice of Option Exercise provides: “I confirm and
acknowledge that apart from the Option and the 100 Shares of which I am the legal and
beneficial owner, I have no other rights or entitlements in respect of Shares.” Notice of Option
Exercise ¶ 6, Bonner Aff. Ex. 17. The Letter provides:
I have no claim or right of action of any kind outstanding against the Group or
any of its officers or employees arising from my ownership of shares in the Group
or otherwise. To the extent that any such claim exists or may exist, I irrevocably
waive such claim and release the Group, its officers and employees from any
liability in respect thereof[.]
Ltr. ¶ 1, Bonner Aff. Ex. 20. The parties agree that these three documents all relate to “CurtissWright UK’s proposed purchase of all shares of ACRA Ireland.” See Defs.’ Summ. J. Mem. 9;
see also id. at 1; Pl.’s Opp’n 12 n.12 & 18. Collectively, I will refer to them as the “Purchase
Documents.”
As noted, the parties agree that Irish law governs the Purchase Documents. Pl.’s Summ.
J. Opp’n 11–12 & 18; Defs.’ Summ. J. Mem. 10, 17–18; see SPA 33, § 14.14 (choice of law
provision); Notice of Option Exercise ¶ 7 (choice of law provision). Defendants have provided
an expert report on Irish law as it pertains to this dispute, see Expert Report of Denis McDonald
(“McDonald Rpt.”), Defs.’ Summ. J. Mem. Ex. E, ECF No. 46-6; Supplemental Report of Denis
McDonald (“McDonald Supp. Rpt.”), Defs.’ Summ. J. Reply Ex. A, ECF Nos. 58-1 & 58-2, and
Plaintiff has done the same, see Expert Report of Rory Kirrane (“Kirrane Rpt.”), Pl.’s Summ. J.
Opp’n Ex. 13, ECF No. 54-13. I have considered both experts’ reports and cases they cited, as
18
well as conducted my own independent research, in my analysis of the relevant law. See Fed. R.
Civ. P. 44.1 (“In determining foreign law, the court may consider any relevant material or
source, including testimony, whether or not submitted by a party or admissible under the Federal
Rules of Evidence. The court’s determination must be treated as a ruling on a question of law.”).
A. Whether the Purchase Documents Contain a Waiver of Plaintiff’s Rights under
PICP
Plaintiff argues that none of the provisions in the Purchase Documents is a waiver of his
rights under the PICP when construed under Irish law. The parties agree that “the SPA must be
interpreted objectively.” McDonald Supp. Rpt. ¶ 13; see Kirrane Rpt. ¶ 27. Further, they agree
that the basic tenets of Irish contract law are, as stated in Investor Compensation Scheme v. West
Bromwich Building Society, [1998] 1 WLR 896, 912, an English case, and adopted by the
Supreme Court of Ireland in Analog Devices B.V. v. Zurich Insurance Co., [2005] 1 IR 274, 280–
81:
(1)
Interpretation is the ascertainment of the meaning which the document
would convey to a reasonable person having all the background knowledge which
would reasonably have been available to the parties in the situation in which they
were at the time of the contract.
(2)
. . . Subject to the requirement that [the background] should have been
reasonably available to the parties and to the exception to be mentioned next, it
includes absolutely anything which would have affected the way in which the
language of the document would have been understood by a reasonable man.
(3)
The law excludes from the admissible background the previous
negotiations of the parties and their declarations of subjective intent. . . .
(4)
The meaning which a document . . . would convey to a reasonable man is
not the same thing as the meaning of its words. The meaning of words is a matter
of dictionaries and grammar; the meaning of the document is what the parties
using those words against the relevant background would reasonably have been
understood to mean. . . .
(5)
The “rule” that words should be given their ‘natural and ordinary
meaning’ reflects the common sense proposition that we do not easily accept that
people have made linguistic mistakes, particularly in formal documents. . . .
19
McDonald Rpt. ¶ 14; Kirrane Rpt. ¶¶ 21–22, 26.
Mr. Kirrane states that “in Irish law the ultimate issue of the construction of the meaning
of a written contract is a question of law,” but “[a]scertaining the meaning of particular words is
a question of fact.” Kirrane Rpt. ¶ 25. Notably, “‘[w]here the parties have used unambiguous
language, the court must apply it.’” Sidney Frank Importing Co., Inc. v. Beam Inc., ---- F. Supp.
2d ----, 2014 WL 643696, at *9 (S.D.N.Y. Feb. 14, 2014) (interpreting contract under Irish law
and quoting Rainy Sky S.A. v. Kookmin Bank, [2011] 1 WLR 2900, 2908, 2011 WL 5077782,
23); see Kirrane Rpt. ¶ 26 (“If . . . a term of a contract is unambiguous and can only have one
meaning, the court cannot interpret that unambiguous meaning so as to seek to interpret the
intentions of the parties.” (quoting Lac Minerals v. Chevron, (6 Aug. 1993, unreported), High
Court)). “‘Particularly in the field of commerce,’” the court must adhere to this rule because “‘it
is essential for [the parties] to be confident that they can rely on the court to enforce their
contract according to its terms.’” Sidney Frank Importing Co., 2014 WL 643696, at *9 (quoting
Marlan Homes Ltd. v. Walsh, [2012] IESC 23, at ¶ 52(Ir.) (quoting Charter Reinsurance v.
Fagan, [1997] A.C. 313 (H.L.) 388 (Lord Mustill))).
“Loyalty to the text of a commercial contract, instrument, or document read in its
contextual setting is the paramount principle of interpretation. But in the process
of interpreting the meaning of the language of a commercial document the court
ought generally to favour a commercially sensible construction. The reason for
this approach is that a commercial construction is likely to give effect to the
intention of the parties. Words ought therefore to be interpreted in the way in
which a reasonable commercial person would construe them. And the reasonable
commercial person can safely be assumed to be unimpressed with technical
interpretations and undue emphasis on niceties of language.”
Rainy Sky S.A., 2011 WL 5077782, at 25 (quoting Society of Lloyd’s v. Robinson, [1999] 1 All
ER (Comm) 545, 551).
20
1. Scope of Claims Waived under Clause 5.6
Clause 5.6 of the SPA provides: “At Completion each seller shall irrevocably waive any
claims against any Group Company, its agent or employees, which he/she may have outstanding
at Completion.” Plaintiff contends that, “[a]ccording to Mr. Kirrane, when the complete first
sentence [of SPA Clause 5.6] is analyzed, as would be required under Irish law, the intention that
no future claims were waived or released becomes apparent.” Pl.’s Summ. J. Opp’n 13. Mr.
Kirrane emphasizes that the sentence cannot be read without its final three words, “outstanding
at Completion,” as he suggests Mr. McDonald attempts to do. Kirrane Rpt. ¶ 32. Mr. Kirrane
opines that “it can be contended with particular force that the proper construction of Clause 5.6
of the contract is directed to claims existing at the time of Completion and not resolved, rather
than future claims.” Id. In Plaintiff’s view, this means that each seller waived any claims that he
or she already made “at Completion,” that is, when the sale and purchase of ACRA Ireland’s
shares had been completed, SPA cl. 1.1, but did not waive any “future claims” that he or she has
not made yet. Pl.’s Summ. J. Opp’n 13. Mr. Kirrane reaches the same result by considering
Clause 5.6 “in context with the related sections of the SPA,” namely, Items 14 and 16 of
Schedule 3. Id. at 13–14; Kirrane Rpt. ¶ 32.
Mr. Kirrane is correct that the clause must be read in its entirety and in the context of the
agreement as a whole. See Paul Anthony McDermott, Contract Law § 9.28, at 361–62 (Tottel
Publ’g), McDonald Supp. Rpt. Exs., ECF No. 58-2. Of import, elsewhere in the document, the
SPA unambiguously states that the Shares to be sold and purchased through the SPA “represent
the entire issued share capital of the Company,” i.e., ACRA Ireland, SPA Bkgrd. (C), and the
sale and purchase will be of all “Shares free from all Encumbrances,” id. cl. 2.1, with
“Encumbrance” defined to include “any adverse claim or right,” id. cl. 1.1. Thus, a reasonable
21
person would read this unambiguous language to conclude that Curtiss-Wright UK would
purchase the Shares unencumbered by any existing claims. This is consistent with Mr. Kirrane’s
opinion.
The issue, then, is when a party “may have” a “claim.” Despite the experts’ divergent
opinions, “claim” is an unambiguous term that I must give its “natural and ordinary meaning.”
See Investor Compensation Scheme, 1 WLR at 912 (citation and quotation marks omitted);
Analog Devices, 1 IR at 280–81; Rainy Sky, 1 WLR at 2908. Mr. Kirrane employs a nonsensical
meaning under which a party does not “have” a “claim” until he or she voices that claim. See
Kirrane Rpt. ¶ 32. This interpretation flies not only in the face of reason but also in the face of a
reasonable understanding of the objective intent of the SPA to convey all Shares without threat
of future challenges to that conveyance that could have been brought before the SPA was
finalized.
In contrast, Mr. McDonald provides an explanation of the term “claim” that is consistent
with its ordinary meaning and the SPA as a whole: “[A] claim is capable of extending not only to
a demand for something that is currently due, but also a right or ground which currently exists
which would serve as a basis for a demand to be made in the future.”
McDonald Supp. Rpt.
¶ 14. Additionally, he states that “[b]oth species of claim . . . can be ‘outstanding’ at any
particular point in time. Thus, one can have demands outstanding at the date of completion of
the SPA. One can equally have grounds for making of future demands outstanding at the date of
completion of the SPA.” Id. A reasonable person in the parties’ position and with their business
backgrounds would share this understanding of the unambiguous language of Clause 5.6. As
Mr. McDonald notes, the claims that Plaintiff raises in this lawsuit “relate[] to facts or
circumstances which undisputedly existed at the time of execution of the SPA,” McDonald
22
Supp. Rpt. ¶ 15, even if Plaintiff had not voiced these claims at that time. Accordingly, I find
that the plain language of SPA Clause 5.6 provides for a waiver of the claims Plaintiff now
brings in this Court.
2. Effects of Clause 14.6 on Clause 5.6
Clause 14.6 of the SPA, governing “Remedies and Waivers,” provides that “[n]o delay or
omission by any party to this Agreement in exercising any right, power or remedy provided by
law or under this Agreement shall . . . operate as a waiver of [that power or remedy],” SPA cl.
14.6(a), and that “[t]he rights, powers and remedies provided in this Agreement are cumulative
and not exclusive of any rights, powers and remedies provided by law,” SPA cl. 14.6(c). In
arguing that “Clause 14.6 of the SPA overrides Clause 5.6,” Plaintiff relies on Mr. Kirrane’s
conclusion that, because “‘Clause 14.6 is specifically and carefully directed to preserving all the
parties’ rights provided by law,’” any argument for waiver under Clause 5.6 “‘would likely
falter.’” Pl.’s Summ. J. Opp’n 16–17 (quoting Kirrane Rpt. ¶ 42). Mr. Kirrane opines that
“[t]here is in fact a reasonable probability that the Irish Court would construe the terms of Clause
14.6 as overriding the terms of Clause 5.6” because “[t]he terms of Clause 14.6 are particularly
express and the provision that rights are cumulative rather than exclusive would appear to negate
the operation of Clause 5.6.” Kirrane Rpt. ¶ 43.
In Mr. McDonald’s opinion, an Irish court would not “read Clause 14.6 in the manner
suggested by Mr. Kirrane” because such a reading “would render meaningless the substance of
Clause 5.6.” McDonald Supp. Rpt. ¶ 16. Indeed, a contract should not be read to include
meaningless or superfluous language. See Compagnie Tunisienne de Navigation SA v Compagnie
d'Armement Maritime SA, [1971] A.C. 572, 583 (1970-07-14) (“Normally where a clause was
drafted by the parties or their agents we can assume that they must have intended it to mean
23
something.”).
A reasonable person with the parties’ background knowledge would read
Clauses 5.6 and 14.6(a) together to provide that, although a party’s failure to exercise its rights
would not constitute a waiver under Clause 14.6(a) in and of itself, the express waiver contained
in Clause 5.6 is a waiver of the rights specified in Clause 5.6. Put another way, Clause 14.6(a)’s
provision that a failure to act is not waiver does not mean that rights cannot be waived in another
way, such as through an express waiver like Clause 5.6. Likewise, a reasonable interpretation of
Clauses 5.6 and 14.6(c) is that, while the parties retain various rights outside of the agreement,
they expressly waive those rights mentioned in Clause 5.6. Consequently, I find that Clause 14.6
does not override Clause 5.6, and therefore, SPA Clause 5.6 functions as a waiver of Plaintiff’s
pending claims.
B. Unilateral Waiver
Plaintiff insists that, even if the Purchase Documents contained a waiver provision, he
could not have waived his rights under the PICP, a contract between him and ACRA Ireland,
through the Purchase Documents because the SPA is a contract he entered into with CurtissWright UK, to which ACRA Ireland was not a party. Pl.’s Summ. J. Opp’n 14–15. It is true that
the PICP provides that it “will be in effect and maintained for a minimum of five (5) years during
the period of employment unless mutually agreed in writing,” PICP 1 (original emphasis
removed; emphasis added).
Yet, under both Maryland and Irish law, when a contractual
provision is, “on the face of the contract,” clearly “for the exclusive benefit of one party,” it is
“waivable unilaterally by him.” McKillop v. McMullan [1979] N1 85, McDonald Rpt. App’x 7,
ECF No. 46-6; see McDonald Rpt. ¶ 57 (“It is well established [in Irish law] that a party to an
agreement may unilaterally waive a term of an agreement which is for his exclusive benefit.
There would therefore have been nothing to prevent the Plaintiff from waiving his entitlement to
24
the share options under the PICP. In my opinion, to a reasonable degree of certainty, an Irish
court would not see anything in the PICP which requires that any such waiver would have to
specifically refer to the PICP.” (citing McKillop)); Williston on Contracts § 39:24 (“[D]espite the
notion . . . that a waiver must be the result of a mutual agreement of one sort or another, it is well
settled that a contracting party may unilaterally waive a provision of the contract” that is solely
for the waiving party’s benefit.) (footnotes omitted).10 In such circumstances, even when the
contract calls for mutual agreement to alter the contract, “the other’s assent may be implied”
when the unilateral waiver would not “deprive the nonwaiving party of a benefit.” Williston on
Contracts § 39:24.
Plaintiff’s expert does not dispute the possibility of unilateral waiver.
Instead, he argues that any waiver was a part of an agreement to which ACRA Ireland and
ACRA U.S.A. were not parties, such that neither could not “take advantage of” the waiver.
Kirrane Rpt. ¶¶ 33–39. Therefore, the experts do not dispute that Plaintiff could have waived the
benefits he would receive under the PICP through a document to which ACRA Ireland was not a
party. I find that, as a matter of law, Plaintiff unilaterally waived his rights under the PICP
through SPA Clause 5.6.
C. Whether Defendants May Enforce the Waiver
In Plaintiff’s view, even if he waived his rights under the PICP through one or all of the
Purchase Documents, neither ACRA Ireland nor ACRA U.S.A. can enforce any of the Purchase
Documents for two reasons. First, he argues that neither corporation was a party to the SPA.
10
I need not decide which law governs the PICP, see Kirrane Rpt. ¶ 45(i) (stating that “the PICP
. . . is not governed by Irish law”); McDonald Supp. Rpt. ¶ 33 (“It will obviously be a matter for
the Court to form its own view as to the governing law of the PICP”), as the Maryland and Irish
laws are the same on this point.
25
Pl.’s Summ. J. Opp’n 14–15. Second, he contends that he never gave informed consent to the
waiver provision. Id. at 19–20.
1. Privity of Contract
Plaintiff insists that neither ACRA Ireland nor ACRA U.S.A. can enforce a waiver
provision that appears in a document to which neither was a party. Pl.’s Summ. J. Opp’n 14–15.
He notes that his expert opines that “the ‘longstanding doctrine of privity of contract[]’ precludes
ACRA Ireland from enforcing any portion of the SPA” because “‘“no stranger to the
consideration can take advantage of a contract, although made for his benefit.”’” Id. at 14
(quoting Kirrane Rpt. ¶¶ 33–34 (quoting Murphy v. Bower, (1868) IR 2 CL 506)); see id. at 15–
16 (quoting Kirrane Rpt. ¶ 36). Mr. Kirrane relies on three cases, one more than fifty years old
and the others a century older: the English11 case of Tweedle v. Atkinson, (1861) 1 B & S 393,
121 ER 762, and the Irish cases of Murphy v. Bower, (1868) IR 2 CL 506, and Mackey v. Jones,
(1959) 93 ILTR 177. Kirrane Rpt. Exs. In Murphy, the assignees of railway contractors brought
suit for breach of contract against the contractors’ supervisor, an employee of the railway, for
failure to issue the certificates that the contractors needed to receive pay for the work they
performed. IR 2 CL at 506–09. Noting that “the duty of the engineer [supervisor] to give
certificates arises, if at all, out of a contract” to which neither the contractors nor their assignees
were parties, the Irish court concluded that the plaintiffs could not “maintain an action for its
11
Mr. McDonald and Mr. Kirrane agree that relevant English law provides persuasive authority
in the Irish Courts. Kirrane Rpt. ¶ 24 (“The common law of England and Wales is very regularly
cited in the Irish Courts and decisions of the Courts of England and Wales are considered to be
of persuasive authority where relevant and are closely regarded on issues relating to, for
example, the law of contract, tort and associated doctrines.”); McDonald Rpt. ¶ 14 (“[T]he Irish
courts, in matters relating to the common law, frequently follow or adopt the approach taken by
the courts of England & Wales. Insofar as the interpretation of written agreements is concerned,
the Supreme Court of Ireland, in Analog Devices B.V. v. Zurich Insurance Company[] expressly
adopted the approach taken by Lord Hoffman in the [English case] Investor Compensation
Scheme . . . .”) (bold typeface replaced with italics).
26
breach” because “no one can maintain an action who is not a party to the contract.” Id. at 512;
see id. at 514 (stating that plaintiffs “must proceed against the company who contracted with [the
railway contractors]”).
Tweedle and Mackey both involved sons’ attempts to enforce contracts to which one of
their parents was a party. In Tweedle, the court held that a son could not “maintain an action
upon” a contract between his father and his father-in-law because “no stranger to the
consideration can take advantage of a contract, although made for his benefit.” 121 ER at 763–
64 (Wightman, J.). Judge Crompton explained: “[T]he consideration must move from the party
entitled to sue upon the contract. It would be a monstrous proposition to say that a person was a
party to the contract for the purpose of suing upon it for his own advantage, and not a party to it
for the purpose of being sued.” Id. at 764. In Mackey, the plaintiff sued the executrix of his
granduncle’s estate, seeking specific performance of an oral contract that he contended his
granduncle entered into with his mother when the plaintiff was fourteen, under which the
granduncle promised to leave the plaintiff his farm, in exchange for the plaintiff’s labor on the
farm. The court found that there was no contract at all, stating that the conversation “amounted
to nothing more than a statement of intention or wish by the deceased.” 93 ILTR at 177. In
dicta, the court observed that, even if there were a contract, the plaintiff could not have enforced
it because “[h]e was not a party to the proposal.” Id.
Defendants’ expert agrees that “the doctrine of privity of contract would ordinarily
prevent a non-party to the contract from taking legal proceedings to affirmatively enforce that
contract against one of the parties to it.” McDonald Supp. Rpt. ¶ 5 (emphasis in original). He
states that, “[a]s a matter of Irish law, any action to enforce the contract would have to be taken
by a party to it.” Id. (emphasis in original). On that basis, Defendants concede that ACRA
27
Ireland and ACRA U.S.A. “may be precluded from bringing legal proceedings to enforce the
waiver/release.” Defs.’ Summ. J. Reply 5 (emphasis added).
However, the procedural posture of the case before me is different from those that
Plaintiff’s expert cites, where the plaintiffs brought actions to enforce contracts to which they
were not parties. Here, Defendants identify a waiver provision in a contract to which they are
not parties as a defense to the claims that Plaintiff brings.
Emphasizing this distinction,
Defendants maintain that ACRA Ireland and ACRA U.S.A. may rely on the waiver provisions of
the Purchase Documents to defend against Plaintiff’s claim. Defs.’ Summ. J. Reply 5–6, 8.
Defendants’ expert opines that, “[b]ecause the Plaintiff has given up his claim [through the
Purchase Documents], then the claim is extinct as a matter of fact,” such that there is no “bar to
ACRA Ireland and ACRA USA relying upon that fact in defence of a claim which has been
brought against them by the Plaintiff.”
McDonald Supp. Rpt. ¶ 5.
He “conclude[s] to a
reasonable degree of certainty that an Irish court would reject the Plaintiff’s assertion that privity
of contract precludes ACRA Ireland and ACRA USA from raising waiver and release as
defences to his claims,” and also that “an Irish court would not permit the Plaintiff to prosecute
claims against the Defendants under the PICP.” Id.
As Mr. McDonald sees it, Mr. Kirrane’s conclusion that “Plaintiff is still free to pursue a
claim which he had previously agreed to waive and release . . . is a startling and very disturbing
proposition.” Id. ¶ 6. He explains:
It would wholly undermine the efficacy of agreements under which, for example,
a patient in proceedings against a hospital agrees to a settlement of a medical
malpractice suit on the basis that the patient would release all claims not only as
against the hospital but as against the surgeon, the anaesthetist and the other
professionals involved notwithstanding that those persons are not parties to the
proceedings taken by the patient against the hospital. In short, general releases
and waivers, like the one given here by the Plaintiff are of common practice in
28
Ireland and the proposition asserted here by Mr. Kirrane would entirely
undermine their application.
Id. Mr. McDonald further opines, id. ¶ 7:
In my experience as a trial lawyer, courts in Ireland are astute to ensure that
technical rules of law are not invoked in order to defeat the ends of justice or in
order to pursue claims which are not properly maintainable. . . . If, in truth, a
plaintiff has given up a claim under the terms of a previous agreement, the court is
likely to take the view that it would be an abuse of process for the plaintiff to
pursue the very claim which he has waived or released.
In support, Mr. McDonald cites one century-old case from the Court of Appeal in
England, Hirachand Punamchand v. Temple, [1911] 2 KB 330. Mr. McDonald acknowledges
that “[t]he facts of that case were quite different to the facts here,” and that “[t]he case was not
concerned with privity of contract as such,” but he relies on it nonetheless because, “in [his]
view, the underlying rationale of the decision would apply here.” McDonald Supp. Rpt. ¶ 8. I
agree.
In Hirachand Punamchand, the plaintiffs lent money to the defendant in exchange for a
promissory note and a bond. When the defendant failed to repay the loans, the plaintiffs sought
payment from the defendant’s father. Following correspondence between the plaintiffs and the
father, in which the plaintiffs asked what amount the father would pay to “‘settle this debt due
from his son,’” the father sent two bank drafts to settle the debts, and the plaintiffs cashed the
checks. Thereafter, the plaintiffs sought additional payment from the father and, when he
refused, sued the defendant for payment on the bond. The trial court entered judgment for the
plaintiffs, holding that the father’s payment was not a defense for the defendant.
On appeal, Lord Justice Moulton, speaking for the majority, observed that “there must be
taken to have been an agreement between the plaintiffs and [the father], by which the plaintiffs
agreed to accept the money sent by him in satisfaction of the note.” Id. at 338. He concluded
29
that, “by that transaction between the plaintiffs and [the father,] the debt on the promissory note
became extinct.” Id. at 339. The court held, id.:
The effect of such an agreement between a creditor and a third party with regard
to the debt is to render it impossible for the creditor afterwards to sue the debtor
for it. They way in which this is worked out in law may be that it would under an
abuse of the process of the Court to allow the creditor under such circumstances
to sue, or it may be, and I prefer that view, that there is an extinction of the debt.
On those grounds, the court concluded that the defendant had a valid defense and allowed the
defendant’s appeal. Id. at 339–42.
Thus, although the case concerned a debtor–creditor relationship, it, like the case before
me, involved two contractual relationships. In the first relationship in each case, the plaintiff(s)
entered into an agreement with the defendant(s). In the second contractual relationship, the
plaintiff(s) entered into an agreement with a third party, in which the plaintiff(s) may have
relinquished their rights under the first agreement. In Hirachand Punamchand, as in the case
before me, the plaintiffs sought to exercise their rights under the first agreement, and the
defendant raised the plaintiffs’ alleged waiver of those rights as a defense. The English Court of
Appeal concluded that the plaintiffs’ rights under the first agreement were extinguished by the
second agreement, and on that basis ruled that the plaintiffs’ waiver was available to the
defendant as a defense. Id. at 339–42. This sound reasoning applies in the case before me also.
Here, in 1999, Plaintiff entered into an agreement, the PICP, in which he was entitled to
purchase shares in ACRA Ireland “when the average turnover (ATO) of the company due to US
sales, as defined, exceeds one million ($1,000,000) dollars.” PICP 1. Then, on July 28, 2011,
Plaintiff, as a shareholder of ACRA Ireland, entered into to the 2011 Share Purchase Agreement
(“SPA”) between Curtiss-Wright UK and ACRA Ireland’s shareholders. As noted, the SPA
provides that each Seller, including Plaintiff, “irrevocably waive[s] any claims against [inter
30
alios, ACRA Ireland and ACRA U.S.A] which he/she may have outstanding at Completion.”
SPA cl. 5.6. He also signed two related documents that day, the Notice of Option Exercise and
the Letter. The Notice of Option Exercise states that Plaintiff has “no other rights or entitlements
in respect of Shares,” other than “the Option and the 100 Shares of which [he is] the legal and
beneficial owner.” Notice of Option Exercise ¶ 6. The Letter states that Plaintiff has “no claim
or right of action of any kind outstanding against [inter alios, ACRA Ireland and ACRA
U.S.A],” and that, “[t]o the extent that any such claim exists or may exist, [he] irrevocably
waive[s] such claim and release[s] [inter alios, ACRA Ireland and ACRA U.S.A] from any
liability in respect thereof.” Ltr. ¶ 1. Notwithstanding the fact that the SPA is between Plaintiff
and a third party, the waiver provisions in the Purchase Documents are available to ACRA
Ireland and ACRA U.S.A. as a defense.12 See Hirachand Punamchand v. Temple, [1911] 2 KB
330, 339.
2. Informed Consent
In Plaintiff’s view, the SPA waiver provision is “unenforceable under Irish law since Mr.
Kolb did not receive independent legal advice,” as “any advice Plaintiff may have received from
the Sellers’ counsel likely would not suffice because of the parties[’] inherent conflict of
interest.” Pl.’s Summ. J. Opp’n 19–20. Plaintiff insists that, as a result, “Mr. Kolb did not
provide his informed consent as required under Irish law.” Id. at 19. Defendants contend that
the independent legal advice requirement is of no moment because “Plaintiff had independent
legal advice”; the firm of William Fry represented him in connection with the SPA. Defs.’ Reply
14; see McDonald Supp. Rpt. ¶ 30.
12
Plaintiff also argues that the July 28, 2011 Letter is unenforceable. Pl.’s Summ. J. Opp’n 18.
Because I find that Plaintiff waived his claims through Clause 5.6 of the SPA, and that the
waiver is available to ACRA Ireland and ACRA U.S.A. as a defense, I need not determine the
enforceability of the Letter.
31
The law firm of William Fry represented Plaintiff with regard to entering into the SPA.
See Kolb Dep. 167:20 – 168:22. Plaintiff summarizes the legal representation he received as
follows:
Negotiations for the sale of ACRA Ireland concluded on July 28, 2011,
with the execution of the SPA. No final draft of the SPA, which was one hundred
and three (103) pages long, was provided to Plaintiff until the morning of the day
that all documents relating to the transaction were scheduled to be signed. Ex. 7,
Banim E-mail, July 28, 2011. In this connection, in an e-mail from Sellers’
attorney, Ivor Banim of the firm of William Fry, forwarding the final draft of the
SPA, Mr. Banim stated that aside from the attached documents “[t]here are some
other ancillary documents also regarding waiver of claims, a stock transfer form
and share cert indemnities which you are to sign.” Id. “These are standard as you
are aware so I will not trouble you with them unless you need to see them.” Id.
Later that day, Plaintiff called Ivor Banim, to express his concern that he might
have claims, about which he was unaware, and was, therefore, hesitant to sign any
waiver. Ex. 8, Kolb Dep. 176:2-11, November 25, 2013. Plaintiff further stated
that he might need to go home and review all of his previous records and
agreements with ACRA Ireland and ACRA U.S.A., before he could sign such a
waiver. Ex. 6, Kolb Declaration. ¶ 7. Ivor Banim responded to Mr. Kolb that Mr.
Kolb was only waiving claims about which he was presently aware and would not
be waiving any claims about which he was not aware. Ex. 9, Pl’s Answers to
Def.’s Interrog. No. 1. Mr. Banim further stated that Mr. Kolb should discuss any
further concerns that he had with Mr. Bonner. Id. Immediately following his
conversation with Mr. Banim, Plaintiff attempted unsuccessfully to contact Mr.
Bonner. Ex. 8, Kolb Dep. 214:11-215:14. Plaintiff requested that Mr. Bonner
contact him; however, Mr. Bonner did not respond that day. Id.
Pl.’s Summ. J. Opp’n 6–7.
While the adequacy of this representation may be questionable, Plaintiff is mistaken in
his belief that he needed independent legal advice for an Irish court to uphold the waiver
provision. Plaintiff relies on Mr. Kirrane’s opinion that “an Irish Court would typically expect to
see informed consent on the part of Mr Kolb upon having received appropriate independent legal
advice” if “Mr Kolb waived rights under the PICP” through “a legally binding agreement
between ACRA Control Limited and Mr Kolb.” Kirrane Rpt. ¶ 53. Mr. Kirrane, in turn, bases
his assertion on “a requirement in Irish law in settlement agreements involving employment
32
rights for the party said to be waiving such rights to have received appropriate independent legal
advice.”
Kirrane Rpt. ¶ 51.
He cites various cases for the proposition that “settlement
agreements are only upheld in circumstances where the employee received independent legal
advice.” Id. ¶ 52. But here, the SPA is not a settlement agreement. Further, as Defendants
observe, the SPA does not involve employment rights; it involves ownership rights. See Defs.’
Reply 14; McDonald Supp. Rpt. ¶ 29. Therefore, Plaintiff need not have had independent legal
advice for the waiver to be enforceable.
In sum, I find that the SPA contained an enforceable waiver provision, through which
Plaintiff unilaterally waived his rights under the PICP. Moreover, I find that the waiver provision
is available to ACRA Ireland and ACRA U.S.A. as a defense. Further, I find that, in that waiver
provision, Plaintiff waived the claims he seeks to assert in this action. On that basis, I will grant
Defendants’ Motion for Summary Judgment and enter judgment in favor of ACRA Ireland and
ACRA U.S.A.13
V.
DEFENDANTS’ MOTION FOR SANCTIONS
Defendants filed a Motion for Sanctions and Memorandum in Support, ECF No. 42,
against Plaintiff and Plaintiff’s counsel, alleging that Plaintiff and his counsel “fil[ed] and
maintain[ed] the frivolous claims Kolb asserts against Defendants in this matter, which claims
Kolb has already expressly waived and/or released,” and requesting “a sanction in the amount of
all costs incurred by Defendants in pursuing this Motion for Sanctions, as well as all other costs
incurred in defending this action” since the Motion for Sanctions was served. Defs.’ Sanctions
Mem. 1. I have not directed Plaintiff to respond to this Motion for Sanctions. See Loc. R. 105.8.
13
Because I am entering judgment in Defendants’ favor on alternative grounds, I need not reach
the estoppel argument.
33
Defendants seek sanctions pursuant to Fed. R. Civ. P. 11(b), which provides:
By presenting to the court a pleading, written motion, or other paper . . . an
attorney or unrepresented party certifies that to the best of the person’s
knowledge, information, and belief, formed after an inquiry reasonable under the
circumstances: (1) it is not being presented for any improper purpose, . . . (2) the
claims, defenses, and other legal contentions are warranted by existing law, . . .
(3) the factual contentions have [or will have] evidentiary support, . . . and (4) the
denials of factual contentions are warranted on the evidence or, if specifically so
identified, are reasonably based on belief or a lack of information.
Thus, when an attorney “‘maintain[s] a legal position to a court’” in the Fourth Circuit and,
under “‘a standard of objective reasonableness, it can be said that a reasonable attorney in like
circumstances could not have believed his actions to be legally justified,”’” the court may
impose Rule 11(b) sanctions. ATS Int’l Servs., Inc. v. Kousa Int’l, LLC, No. RDB-12-2525, 2014
WL 1407290, at *8 (D. Md. Apr. 10, 2014) (quoting Hunter v. Earthgrains Co. Bakery, 281 F.3d
144, 153 (4th Cir. 2002) (quoting In re Sargent, 136 F.3d 349, 352 (4th Cir. 1998))).
The way in which a claim is pled does not bear on Rule 11 sanctions; only the
absence of any basis, legal or factual, is sanctionable. [Hunter, 281 F.3d] at 153
(citation omitted). Nor does Rule 11 require that a claim be proven before a
complaint is filed. Id. Instead, Rule 11 attempts only to discourage wasteful filing
of “groundless lawsuits.” Id. Where a party violates Rule 11(b), Rule 11(c) allows
the court to impose sanctions which may include awarding “the prevailing party
the reasonable expenses, including attorney’s fees, incurred for the motion.” Fed.
R. Civ. Pro. 11(c)(1)-(2). Consequently, the “imposition of sanctions is
discretionary with the Court, not mandatory.” Thomas v. Treasury Mgmt. Assoc.,
158 F.R.D. 364, 369 (D. Md. 1994) (citing Knipe v. Skinner, 19 F.3d 72, 78 (2d
Cir. 1994). Moreover, it is well-established in this Court that sanctions should be
imposed sparingly. Id. at 366.
ATS Int’l Servs., 2014 WL 1407290, at *8.
Here, although Plaintiff’s claims cannot survive Defendants’ Motion for Summary
Judgment, it cannot “‘be said that a reasonable attorney in like circumstances could not have
believed his actions to be legally justified.”’” See id. Kolb and his counsel, neither of whom
appear to be trained in Irish law, reasonably could have believed that Kolb had not waived his
right to bring this suit. Indeed, the legal representation Kolb received in conjunction with
34
entering into the SPA, as described in pages 6–7 of Plaintiff’s Summary Judgment Opposition,
could lead Plaintiff to believe that none of the Purchase Documents would operate as a waiver of
his claims under the PICP. Moreover, while defending the summary judgment motion, Plaintiff
relied on an expert who provided a credible, albeit erroneous, explanation of why the language of
the Purchase Documents did not operate as a waiver. Therefore, this case is not one of the rare
instances in which Plaintiff’s or counsel’s actions warrant Rule 11 sanctions. See ATS Int’l
Servs., 2014 WL 1407290, at *8. Defendants’ Motion for Sanctions IS DENIED.
VI.
CONCLUSION
In sum, Plaintiff’s First Motion to Amend IS GRANTED IN PART and DENIED IN
PART; his Second Motion to Amend IS DENIED; Plaintiff’s Motion to Find Defendants Have
Waived the Right to Raise an Issue of Foreign Law and Expert Testimony in Summary Judgment
Proceedings IS DENIED; Defendants’ Motion for Summary Judgment IS GRANTED; and
Defendants’ Motion for Sanctions IS DENIED. ACRA U.S.A. is added as a defendant, and
judgment is entered in favor of Defendants ACRA Ireland and ACRA U.S.A. The Clerk is
directed to close this case. A separate Order will issue.
Dated: May 16, 2014
/S/
Paul W. Grimm
United States District Judge
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