Laios et al v. MTM Builder/Developer, Inc. et al

Filing 92

MEMORANDUM OPINION. Signed by Judge George Jarrod Hazel on 6/19/2015. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SOllthem Division

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EDWARD T. LAIOS, et al.
Plaintiffs,

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v.
MTM BUILDER/DEVELOPER
INC., et al.

Case No.: G.JH-13-2953

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Defendants.

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MEMORANDUM
Edward Laios brought this action personally
Associates,
("MTM")

LLC ("Brightseat")
and the manager's

Second Amended

Complaint:

against Brightseat's

and on behalf of Brightseat
manager,

Defendants

fraud, conversion,

have filed counterclaims

duty of good faith:'
that Defendants

breached

Brightseat's

for declaratory

Operating

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Development
Inc.

Laiosl includes several counts in the

breach of the fiduciary duty of loyalty, breach

and fraudulent

See ECF No. 14. Contending

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MTM Builder/Developer.

of the fiduciary duty of care, breach of the fiduciary duty of obedience,
duty of information,

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OPINION

owner, Dean Morehouse.
breach of contract,

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inducement.

judgment

breach of the fiduciary

See ECF No. 45-1.

and for "breach of contract and of

that there is no genuine dispute of material
Agreement2

that he did not, Laios now moves for partial summary judgment

(the "Operating

Agreement")

fact
and

on both his breach of contract

I While Brightseat
is also a Plaintiff in this action, Laios has filed suit personally and on
behalf of Brightseat and the Court will refer simply to Laios when speaking of Plaintiffs.
2 The entire name of the agreement
is the Operating Agreement of Brightseat
Development Associates, LLC A Maryland Limited Liability Company. See ECF No. 76-3.

claim and Defendants'
The Court disagrees

breach of contract and duty of good faith counterclaim.
with Laios on both issues. For the reasons explained

See ECF No. 76.

below, Laios' motion is

DENIED.

I.

BACKGROUND
Brightseat,

a Maryland

parcel of real property

limited liability company,

in Prince George's

members

are Laios (47.5 percent interest),

affiliated

with Dean Morehouse

was established

County, Maryland.
Morehouse

in 2003 to develop a

See ECF No. 45 at

Real Estate Investments,

4. The LLC
LLC, which is

(47.5 percent interest), and Gary Laios (5 percent interest).3 See

id. at ~ 14; ECF No. 14 at 13. MTM is Brightseat's

manager and is owned and controlled

by

ECF No. 45 at ~ 9-11.

Morehouse.

The Operating

Agreement

contains two sections controlling

the payment of the manager,

MTM. See ECF No. 76-3. Section 5.11 provides that "the salaries and other compensation
Managers

shall be fixed from time to time by an affirmative

vote of Members

Majority

Interest, and no Manager shall be prevented

Manager

is also a Member of the Company."

Manager

and provides that "the Manager shall be entitled to development

development

and are negotiated

contractor

or construction

that salary because the

fees for managing

Road real property, provided

in good faith. If the Manager performs

manager,

holding at least a

ld. at 9.4 Section 5.13 relates to fees paid to the

in whole or in part of the Brightseat

excessive

from receiving

of the

such fees are not

services ofa general

the Manager shall be entitled to the usual and customary

fees." ld. at 9.

Gary Laios is Plaintiff Edward Laios' nephew. See ECF No. 76-1 at 4.
A majority interest is "one or more Interest of Members which taken together exceed
Seventy-Five Percent (75%) of the aggregate of all Member Interests'" ECF No. 76-3 at 3.
3

4

2

the

Laios and Morehouse
to compensation

appear to have long held disagreements

or fees. These disagreements,

Agreement

Brightseat

funds. See id. at ~ 26. Defendants

Laios breached

alleging, in part, that MTM breached

by secretly paying itself management

his duty under the Operating

manager and not to block MTM's
asked for summary judgment

entitlement

and many others, came to a head in October 2013

when Laios filed suit against MTM and Morehouse,
Operating

about MTM's

fees of $5,000 per month from

have tiled a counterclaim
Agreement

the

to compensate

asserting,

in part. that

MTM as Brightseat's

right to fees. See ECF No. 14 at 14, ~ 15-16.

on both his breach of contract claim and Defendants'

Laios has now
breach of

contract and duty of good faith counterclaim.

II.

STANDARD OF REVIEW
"Under

Rule 56(c), summary judgment

to interrogatories,

and admissions

is proper 'if the pleadings,

on file, together with the affidavits,

depositions.

answers

if any, show that there is

no genuine issue as to any material fact and that the moving party is entitled to a judgment
matter of law.'"

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P.

56(c)). The party moving for summary judgment
genuine dispute exists as to material
1286 (4th Cir. 1987).
non-moving
showing

as a

party's

bears the burden of demonstrating

that no

facts. Pulliam Inv. Co. v. Cameo Props .. 810 F.2d 1282,

I f the moving party demonstrates

that there is no evidence to support the

case, the burden shifts to the non-moving

party to identify specific facts

that there is a genuine issue for trial. When ruling on a motion for summary judgment,

"[t]he evidence

of the non-movant

is to be believed, and all justifiable

inferences

are to be drawn

in his favor." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 255 (1986). Importantly,
summary judgment

stage, it is not the Court's

decide if there is a genuine issue for trial./d.

function to weigh the evidence
at 249. A "genuine"

at the

but simply to

dispute of material fact is one

where the conflicting

evidence

295, 299 (4th Cir.2001),

creates "fair doubt," Cox v. Cnty. qlPrince

such that "a reasonable

lYillialll, 249 F.3d

jury could return a verdict for the nonmoving

party." Anderson, 477 U,S. at 248. "It is true that the issue of material fact required by Rule
56(c) to be present to entitle a party to proceed to trial is not required to be resolved conclusively
in favor of the party asserting
supporting
differing

the claimed

its existence;

factual dispute be shown to require a jury or judge to resolve the parties'

versions of the truth at trial:'

253, 288-89

III.

rather, all that is required is that sufficient evidence

First Nat '/ Bank (?/Arizona v. Cities Service Co.. 391 U.S.

(1968).

DISCUSSION
a. Laios' Breach of Contract

Count

The first issue Laios raises is whether MTM breached the Operating
at least $5,000 per month in fees from Brightseat.
ceased authorizing

the $5,000 monthly

5

fee on October

when MTM took the unauthorized

forth in his Second Amended
the Operating

Agreement

Complaint

by taking

See ECF No. 76- I at 16- 17. Laios claims he
18,20 I I, and again authorized

starting March 20 I4. See ECF No. 76- I at I3 & 76-12. Although
specific timeframe

Agreement

the fee

Laios does not identify the

fees, the facts alleged and argument

and summary judgment

motion suggest that he believes

was breached between October 20 I I and March 20 I4. See id: see also

ECF No. 45 at ~ 19-26. In support of this claim, Laios cites several pieces of evidence.
notes the corporate
"management

set

minutes from March 17,2010

First, he

where Laios objected to paying MTM

fees" of $5.000 per month and Morehouse

nonetheless

responded

that the fees

5 Although not speci fically addressed by the parties, any fees paid before October 20 I 0
would appear to be outside the statute of limitations. See Singer Co.. Link Simulation Sys. Civ. V.
Baltimore Gas and £Iec. Co., 558 A.2d 4 I 9,424 (Md. Ct. Spec. App. 1989) (common law
contract action shall be tiled within three years from the date it accrues under Md. Code, Cts. &
Jud. Proc. Article S 5- I 0 I ) (citations omitted).

4

would be paid. See ECF 76-16. Second, he cites an October 19,20 II email that notes that Laios
was "not willing to pay MTM a $5[,]000 per month fee (12 month minimum) on a going forward
basis." See ECF No. 76-19. Finally, he cites the deposition testimony of Morehouse
acknowledging

that MTM took $5,000 per month in fees after August 20 II, that he did not

always seek permission

before collecting fees for MTM, and that over a ten-year period he has

probably taken "less than $300,000" without express authorization.
13 at 3. Laios does concede that he authorized a $5,000 management
"so long as the 'Oxford contract'
terminated,

See ECF No. 76-7 at II; 76fee effective June I, 20 II

is pending." See ECF No. 76-16. The 'Oxford contract'

however, on August 20 II and Laios claims that the October 19,20 II email shows he

revoked his approval of the management

fee. See ECF No. 76-1 at 13 (citing ECF No. 76-19).

But MTM continued to take the $5,000 monthly management
stated that he did not authorized

fee. See ECF No. 76-6 at II. Laios

the $5,000 monthly fee until March 2014. See ECF No. 76-12.

Thus, Laios contends that there is no dispute that MTM breached the Operating Agreement
taking unauthorized
Defendants

fees between, at least, October 20 II and March 2014.
argue that Laios did approve the $5,000 monthly fee sometime after October

18,2011. See ECF No. 81 at 4. Specifically,

Defendants

cite Morehouse's

where he stated that Laios agreed to continue the "management
the termination

by

deposition testimony

fee of $5,000" sometime after

of the 'Oxford contract' and after October 20 II, because Laios "saw the value of

moving forward on the project." See ECF No. 81-1 at 11-12. He said that Laios' approval was
verbal and was heard by several other individuals

who were attending the LLC meeting. See id

at 12.

After careful examination

of the evidence provided, the Court finds that Defendants

shown that there is a genuine dispute over whether the $5,000 per month fee was authorized

5

have

during the relevant period. Specifically,
approve MTM's
Morehouse

$5,000 monthly

Morehouse

stated during his deposition

fee after originally

that Laios did

denying it in October 2011. To the extent

admits that MTM took fees without prior approval over a ten-year period, the record

is not clear that Morehouse

was referring to the $5,000 per month received

The fees paid without prior approval

from 2011-2014.6

could have occurred during the relevant period (Oct. 20 I 1-

Feb. 2014), they could have all occurred before that time, or they could have related to fees that
did not require specific approval,7
the summary judgment

but it is not the Court's

stage. Construing

Court is required to do, Defendants

all justifiable

inferences

to decide this dispute at

in Defendants'

favor, as the

have shown that there is a genuine dispute for trial. While

Laios believes that it is clear that he did not authorize
admitted to taking certain fees without prior approval,
the monthly fee was authorized

prerogative

the $5,000 monthly fee and Morehouse
Defendants

have presented

during the relevant period. The appropriate

evidence

that

time to resolve this

dispute is at trial, not at summary judgment.

Indeed, this appeared to be on Plaintiffs' counsel's mind during the deposition as he asked:
"[ a )re there particular fees that you typically sought permission for and other fees that you
typically would not seek permission forT See ECF No. 76-13 at 3. The answer did not implicate
any particular fees. See id.
7 Defendants also argue that, regardless of whether Laios approved the fees, the $5,000 per
month was governed by section 5.13 as "development
fees for managing the development." See
ECF No. 81 at 3. As such, Defendants argue, development fees, unlike salary or compensation
under section 5.11, do not require majority approval. For support that the fees were for managing
the development, Defendants cite to Morehouse's corporate deposition for MTM where he states
that the $5,000 was a development fee. See ECF No. 81-1 at 3. Morehouse contends that the
work MTM does relates to development of the project, including, for example, the creating the
site plans, obtaining permits, and deciding what to do with excess fill on the site. Id. at 5-7. As
explained more ful'ly below, the Court also finds this provision is ambiguous and thus not proper
as an issue for summary judgment.
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b. Defendants' Breach of Contract and of Duty of Good Faith Count
Laios also contends that he is entitled to summary judgment on count two of Defendants'
counterclaim. See ECF No. 76-1 at 17. This count, for breach of contract and of duty of good
faith, is the mirror image to Laios' breach of contract claim: Defendants allege that it was Laios
who breached the Operating Agreement by trying to stop MTM from receiving compensation.
See ECF No. 14 at 12-17. As noted above, the Operating Agreement provides for two different
avenues for the manager to be paid. Under section 5.11: '-The salaries and other compensation of
the managers shall be fixed from time to time by an affirmative vote of Members holding at least
a majority interest ... " See ECF No. 76-2. Section 5.13 states that ..the Manager shall be entitled
to development fees for managing the development in whole or in part of the Brightseat Road
real property, provided such fees are not excessive and are negotiated in good faith. If the
Manager performs services of a general contractor or construction manager, the Manager shall be
entitled to the usual and customary fees."
In requesting summary judgment on this count, Laios asserts that there is no evidence
that he did "anything to frustrate [MTM's] performance." See ECF No. 76-1 at 17-18. Laios
argues that there can be no breach in failing to approve fees to MTM because compensation for
the manager (MTM) is not required under the Operating Agreement. See ECF No. 85 at 4-5.
Defendants assert that the Operating Agreement's provisions permit MTM to receive fixed
compensation, development fees, and usual and customary fees for acting as the construction
manager. See ECF No. 81 at 7-9. MTM argues that, even if Laios had discretion under the
Operating Agreement to deny MTM compensation, his discretion had to be exercised in good
faith. See id. To establish a genuine dispute of material fact over whether Laios breached the
Operating Agreement, Defendants point to the evidence, as discussed above, showing that Laios

7

See id at 7. For example, Defendants

sought to deny MTM any form of compensation.

point to

meeting minutes and emails to show that Laios would not agree to lend funds to construct
entryway

unless MTM agreed to forgo all compensation

Maryland

follows the objective

interpretation

and fees. See id at 7-8.

Walker v. Dep'l

of contracts.

Res., 842 A.2d 53, 61 (2004). Under this interpretation,

an

(~r uman
H

the court is focused on determining

the

intent of the parties with the language of the contract being the primary source for identifying
this intent. Gresham v. Lumbermen's Mul. Cas. Co.. 404 F.3d 253, 260 (4th Cir.2005)
first step for a court asked to grant summary judgment
to determine

whether,

based on a contract's

as a matter of law, the contract is ambiguous

"The

interpretation

or unambiguous

is ...

on its face."

Wash. Melro. Area Transil Aulh. v. Polomac Inv. Props .. Inc.. 476 F.3d 231, 235 (4th Cir.2007)
(citing Goodman v. Resolulion Trusl Corp., 7 F.3d 1123, 1126 (4th Cir.1993)).
unambiguous,
ambiguous

If the contract is

the Court can interpret the contract as a matter of law. Id. 1f the contract is

and no extrinsic evidence

resolves the ambiguity,

summary judgment

should be

denied. See Sheridan v. Nalionwide ReI. Solulions. Inc.. 313 F. App'x 615, 619 (4th Cir.2009).
"[A] contract is ambiguous

ifit is susceptible

to two reasonable

In this case, on the one hand, Laios maintains
Operating
manager

Agreement

unambiguously

in his discretion.

assert that the Operating
fees and that the manager

"affirmative

that the compensation

See id.

provisions

him to vote against compensation

of the

for the

See ECF Nos. 76-1 at 6 & 85 at 4-5. On the other hand, Defendants
Agreement

contemplates

would automatically

faith. Both of these interpretations
other). The compensation

permitted

interpretations."

that the members

receive compensation

are reasonable

would approve appropriate
that was negotiated

(even iI' one may be more reasonable

in good
than the

section uses the words "shall be fixed" but also requires an

vote." Further, the development

fees section provides that the manager "shall be

8

entitled" to development fees but the fees must be "negotiated in good faith." Thus, while Laios
maintains that he was, under the Operating Agreement, permitted to simply vote against
compensation for the manager, see ECF No. 76-1 at 6, the Operating Agreement is not
unambiguously in agreement with this interpretation. However, the agreement does not
unambiguously express Defendants' interpretation that the members are always required to
approve fees. As reasonable minds could difTer, the agreement is ambiguous and the Court is left
with a dispute of fact over the intent of the parties when drafting this agreement and, depending
on how that dispute is resolved, a dispute over whether Laios was justified when he tried to deny
MTM compensation. Cf Atalla v. Abdul-Baki, 976 F.2d 189, 195 (4th Cir. 1992) ("Because the
parties assert conflicting intentions on the basis of the same language, which supports both
interpretations, it is our opinion that the contract is ambiguous and that the question of intent
raises a genuine issue of material fact, rendering summary judgment inappropriate.").
Even if the Operating Agreement was unambiguously in line with Laios' interpretation
that he had complete discretion over whether to approve compensation to MTM, Defendants'
breach of contract count is based on the implied covenant of good faith and fair dealing that is
present in every contract. The duty to act in good faith "prohibits one party to a contract from
acting in such a manner as to prevent the other party from performing its obligations under the
contract." Eastern Shore Mrkts. Inc. v. J.D. Assocs. Lts. Partnership, 213 F.3d 175, 182-83 (4th
Cir. 2000). If a party has discretion in a contract, the discretion must be exercised in good faith.
Clancy v. King, 954 A.2d 1092, 1108 (Md. 2008). While Laios asserts that he was justified in
authorizing monthly fees in some circumstances and denying authorization in others. see ECF
No. 85 at 5, Defendants argue that Laios' efforts to prevent MTM from being paid for its work as
manager were not exercised in good faith. See ECF No. 81 at 7. The existence of these

9

competing interpretations of Laios' actions creates a dispute of fact. A reasonable jury could
determine that the Operating Agreement provided that the members should approve appropriate
compensation for the manager, and if Defendants are believed that compensation was
appropriate during the relevant period, that Laios tried to unnecessarily thwart that provision and
prevent the manager from obtaining any compensation. Thus, this issue is also one for trial and
not summary judgment.
IV.

CONCLUSION
Both counts raised by Laios involve disputed issues of material fact and the motion for

partial summary judgment, ECF No. 76, is DENIED.
A separate order shall follow.

Dated: June~,

k-I£-----

2015

George J. Hazef
United States District Judge

10