Olawole et al v. Actionet, Inc.

Filing 57

MEMORANDUM OPINION in re 45 Motion to Dismiss. Signed by District Judge T. S. Ellis, III on 06/20/2017. (c/s to pro se Plaintiff)(jlan)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
CHARLES OLAWOLE et al.,
Plaintiffs,

)
)
)
)
)
)
)

v.
ACTIONET, INC.,
Defendant.

Case No. 1:17-cv-408

MEMORANDUM OPINION
At issue in this this removed and transferred breach-of-contract and employment
discrimination case is defendant’s motion to dismiss the Amended Complaint (“AC”) pursuant to
Rule 12(b)(6), Fed. R. Civ. P. The AC alleges three Counts: (1) Breach of contract (on behalf of
one plaintiff), (2) National origin discrimination, in violation of Montgomery Cnty. Code § 2719(a)(1) (on behalf of both plaintiffs) and (3) Race discrimination, in violation of 42 U.S.C. §
1981 (on behalf of both plaintiffs). For the reasons that follow, the motion to dismiss must be
granted in part and denied in part.
I.1
Plaintiffs are (1) Charles Olawole (“Olawole”), a Maryland resident and network
engineer of Nigerian national origin, and (2) his closely-held family corporation, Graffiti
Consulting, Inc. (“Graffiti Consulting”), an IT2 consulting company incorporated and
headquartered in Maryland. Defendant is ActioNet, Inc. (“ActioNet”), an IT security and

1

The facts recited here are derived from the AC’s allegations and are accepted as true solely for
the purpose of resolving the motion to dismiss. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).

2

“IT” stands for “information technology.”

software development company that previously employed Olawole. Although both plaintiffs
were formerly represented by counsel, they are currently proceeding pro se because their counsel
withdrew on the ground that he is not licensed to practice in Virginia or in this district.
The AC alleges that on January 6, 2014, ActioNet hired Olawole as an atwill employee and Senior Network Engineer to work in Silver Spring, Maryland on
ActioNet’s contract with the National Weather Service. AC ¶ 4-6. Olawole’s offer letter fixed
his salary at $127,500 per year. Id. ¶ 6. The AC further alleges that his supervisor, William
Hall, frequently praised Olawole’s work. Id. ¶ 7. Yet, the AC also alleges that despite this
praise, and although Olawole speaks English fluently, Hall mocked Olawole’s noticeable foreign
accent. Id. ¶ 8.
In the Spring of 2014, ActioNet and Graffiti Consulting agreed on a new contract,
the “Consultant Agreement,” which gave Olawole a $40,000 raise and contemplated
(1) that both companies would jointly employ Olawole and (2) that ActioNet could terminate
Olawole’s employment, without cause, provided that ActioNet gave Olawole 10 days’ written
notice. Id. ¶¶ 10, 12 & 13. Importantly, the Consultant Agreement included a choice-of-law
provision designating Virginia as the source of law governing the contract, and an exclusive
forum-selection clause identifying state and federal courts in Virginia. See Consultant Agreement
(Doc. 11-2) ¶¶ 18-19.3 The Consultant Agreement further provided that ActioNet could
terminate its contract with Graffiti Consulting without notice, but only “for cause or for the

3

The Consultant Agreement is in the record and was the subject of a motion to transfer pursuant
to 28 U.S.C. § 1404(a). Thus, although the Consultant Agreement is not attached to the AC, it is
appropriate to consider that document because the AC relies on the Consultant Agreement’s
terms and there is no dispute regarding the document’s authenticity. See Goines v. Valley Cmty.
Servs. Bd., 822 F.3d 159, 166 (4th Cir. 2016) (holding that a document may be considered on a
motion to dismiss if, among other things, “the document was integral to the complaint and there
is no dispute about the document’s authenticity”); Am. Chiropractic Ass’n v. Trigon Healthcare,
Inc., 367 F.3d 212, 234 (4th Cir. 2004) (noting that a document is “integral” to the complaint if
the complaint “relied on” it).
2

convenience of the government[.]” AC ¶ 14. According to the AC, ActioNet dictated the terms
and conditions of Olawole’s employment and job duties, supervised Olawole, had authority to
hire and fire him, provided the tools and equipment for Olawole’s employment, and “maintained
exclusivity of [his] employment.” Id. ¶ 10.
According to the AC, on May 9, 2014—just one week after the parties signed the
Consultant Agreement—ActioNet terminated the contract without just cause or prior notice. Id.
¶¶ 14, 21. The AC alleges that AcioNet instead provided a pretextual ground for termination,
namely that Olawole had failed to “take ownership of projects and to work independently with
minimal supervision.” Id. ¶ 20 (quotation marks omitted). That same day, May 9,
2014, Olawole’s supervisor, Mr. Hall, informed Olawole that Olawole had been fired,
demanded Olawole’s badge and laptop, and escorted him out of the building in view of several
coworkers. Id. ¶ 15.
Thereafter, on May 5, 2015, Olawole filed a charge with the Montgomery County Office
of Human Rights, alleging that ActioNet had discriminated against him on the basis of national
origin, in violation of the Montgomery County Human Rights Act. See id. ¶ 16; see also
Montgomery Cnty. Code § 27-19(a)(1) (prohibiting employers from discriminating “because
of … ancestry [or] national origin”). A little more than a year later, on June 23, 2016, the
Montgomery County Office of Human Rights issued a letter notifying Olawole that the
county agency had terminated administrative proceedings. AC ¶ 17. Four days later, on June 27,
2016, plaintiffs filed suit in Maryland state court. Subsequently, on March 24, 2017, plaintiffs
were granted leave to file the AC.
The AC alleges the following Counts:

3

(1) Breach of contract (on behalf of Graffiti Consulting), for terminating the
Consulting Agreement without cause and without providing 10-days’ notice,
id. ¶¶ 20-22;
(2) National origin discrimination, in violation of Montgomery Cnty. Code §
27-19(a)(1) (on behalf of both plaintiffs), id. ¶¶ 24-26; and
(3) Race discrimination, in violation of 42 U.S.C. § 1981 (on behalf of both
plaintiffs), id. ¶¶ 28-30.
Graffiti Consulting is a plaintiff on all three Counts, while Olawole is a plaintiff only on Counts
II and III. The AC seeks compensatory and punitive damages, back pay owing to Olawole, and
Olawole’s reinstatement to a previous or a substantially equivalent position.
ActioNet successfully removed the action from state court to the United States District
Court for the District of Maryland. Thereafter, the District of Maryland granted a motion
to transfer pursuant to 28 U.S.C. § 1404(a) and a forum selection clause. See Olawole v.
ActioNet, Inc., No. 1:17-cv-408 (D. Md. Apr. 4, 2017). After the matter was transferred
from the District of Maryland to the Eastern District of Virginia, counsel for plaintiffs
withdrew, noting that he is licensed to practice only in Maryland, and that he is not admitted to
practice in this district.4 In response, Olawole represented that he will proceed pro se.5 Thus,
on June 5, 2017, an Order issued, warning Olawole that Graffiti Consulting’s claims would
be dismissed if the corporation did not obtain counsel by the June 16, 2017 hearing on the
motion to dismiss. Despite that Order, Graffiti Consulting remains unrepresented.
Now, ActioNet has moved to dismiss with prejudice each Count, arguing:
(1) that Graffiti Consulting’s claims must be dismissed because the corporation lacks
counsel and permitted its corporate charter to lapse,

4

It does not appear that plaintiffs’ counsel made any attempt to appear pro hac vice or to retain
local counsel. See Rule 83.1(D), E.D. Va. Local Civ. R.

5

Olawole has been urged repeatedly to retain new counsel.
4

(2) that both plaintiffs’ claims for breach of contract (Count I) and national origin
discrimination (Count II) are time-barred under Maryland law, and
(3) that the AC lacks sufficient factual allegations to state a § 1981 claim.
Each argument is separately addressed below.
II.
To survive a Rule 12(b)(6) motion, a complaint must contain “sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). And
although courts must “construe allegations in a pro se complaint liberally, a complaint must still
contain enough facts to state a claim for relief that is plausible on its face.” Thomas v. Salvation
Army S. Territory, 841 F.3d 632, 637 (4th Cir. 2016) (quotation marks omitted). In this respect,
the factual allegations must be more than mere speculation, and must amount to more than “a
sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678. Neither a
formulaic recitation of the elements of a cause of action nor unadorned conclusory allegations
are sufficient to survive a Rule 12(b)(6) motion to dismiss. Twombly, 550 U.S. at 555; Iqbal, 556
U.S. at 678-79. Instead, the complaint must allege facts sufficient to “nudge claims across the
line from conceivable to plausible.” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591
F.3d 250, 255-56 (4th Cir. 2009) (quotation marks omitted).
III.
To begin with, all three of Graffiti Consulting’s claims are nonstarters because (1) the
company does not have counsel and (2) the company filed this action while it had a legally
inoperative corporate charter.
First, to permit Graffiti Consulting to appear pro se in this action would violate the
centuries-old rule “that a corporation may appear in the federal courts only through licensed
5

counsel.” Rowland v. Cal. Men’s Colony, Unit II Men’s Advisory Council, 506 U.S. 194, 202
(1993). Indeed, a company’s failure to comply with this rule despite fair warning constitutes
grounds to dismiss that company’s case. See, e.g., Barr v. Prince George’s Cnty., Md., 115 F.
App’x 609, 610 (4th Cir. 2004) (dismissing a corporation’s appeal for failure to obtain counsel
despite the court’s admonition). Nor is there any doubt plaintiffs received such a warning; on
June 5, 2017, an Order issued, notifying plaintiffs that Graffiti Consulting “may not pursue any
claims unless the corporation is represented by a duly licensed attorney,” and that “failure to
obtain counsel for Graffiti Consulting … by the June 16, 2017 hearing in this matter will result in
the dismissal of the corporation’s claims.” Olawole, No.1:17-cv-408 (E.D. Va. June 5, 2017)
(Order). Because Olawole and Graffiti Consulting received fair and adequate warning, and
because Graffiti Consulting is still unrepresented, the company’s claims must dismissed on this
ground without prejudice.
Second, because Graffiti Consulting filed this action while its corporate charter was
invalid,6 its claims in the complaint and AC are null and void under Maryland law.7 Indeed,
without a valid charter, a corporation loses standing to sue. Cf. Md. Code, Corps.
& Ass’ns § 2-103(b) (providing the right to sue); id. § 3-503(d) (providing that failure to maintain

6

It is appropriate to take judicial notice of this fact, which is memorialized in a public record
available from Maryland’s registry of corporations. See Rule 201, Fed. R. Evid. (governing
judicial notice); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (holding that
courts may consider “matters of which a court may take judicial notice” when evaluating a Rule
12(b)(6) motion to dismiss); Hanks v. Wavy Broad., LLC, No. 2:11CV439, 2012 WL 405065, at
*4 (E.D. Va. Feb. 8, 2012) (“Information that is readily accessible through the State Corporation
Commission’s website is a matter of public record, of which the Court may take judicial notice.”
(collecting cases)).
7

Maryland law applies to the question whether Graffiti Consulting may sue because the AC
alleges that the company is a Maryland corporation. See AC ¶ 4; Rule 17(b)(2), Fed. R. Civ. P.
(providing that the capacity for a corporation to sue “is determined … by the law under which
[the corporation] was organized”).
6

an appropriate charter renders “the powers conferred by law on the corporation[] inoperative,
null, and void”). Put differently, a corporation that permits its charter to lapse “is a legal nonentity” and “all powers granted to [the corporation] by law, including the power to sue or be sued,
[a]re extinguished generally as of and during the forfeiture period.” Dual v. Lockheed Martin
Corp., 383 Md. 151, 162-63 (2004). Thus, “[A]n act by a corporation while its charter is forfeited
is null and void”; for example, if a company “file[s] suit when its charter [i]s forfeited … the
complaint is null and void.” Tri-Cnty. Unlimited, Inc. v. Kids First Swim Sch. Inc., 191 Md. App.
613, 624 (2010); see also Auto USA, Inc. v. DHL Express (USA), Inc., No. ELH-16-3580,
2017 WL 839525, at *5 (D. Md. Mar. 3, 2017) (relying on Tri-Cnty. Unlimited to dismiss a
corporation’s complaint “because, when [the corporation] filed the Complaint, its corporate
charter had been forfeited [and] the Complaint was a legal nullity”).
The same result obtains even where, as here, the corporation renews its charter after filing
the complaint.8 Maryland courts are clear that even though “a corporation’s right to sue is
restored upon revival of its charter,” the company cannot “validate a lawsuit that it initiated when
its charter was forfeited … by reviving its charter[.]” A Guy Named Moe, LLC v. Chipotle Mex.
Grill of Colo., LLC, 223 Md. App. 240, 252 (2015) (quoting Tri-Cnty. Unlimited, 191 Md. App.
at 621). Maryland law instead instructs such corporations to refile their claims. Tri-Cnty.
Unlimited, 191 Md. App. at 621. To be sure, this approach may put form over substance
because with its renewed charter, Graffiti Consulting, through duly-licensed counsel, would now
be able to file a viable breach-of-contract claim. But the Federal Rules of Civil Procedure dictate

8

In opposition to the motion to dismiss, Olawole filed an exhibit representing that Graffiti
Consulting recently renewed its charter. Even assuming without deciding that this exhibit is
properly considered at this stage, a renewed charter, as noted infra, does not rescue the
company’s claims in this action.
7

that Maryland law controls whether Graffiti Consulting has standing to sue, and Maryland law
requires Graffiti Consulting to refile. See Rule 17(b)(2), Fed. R. Civ. P.
Accordingly, Graffiti Consulting’s claims must be dismissed on these two grounds—its
lack of counsel and its lapsed corporate charter—without prejudice.
IV.
The
Olawole

non-prejudicial

dismissal

does

not

end

the

analysis,

however,

for

has asserted claims and ActioNet argues that Counts I and II must be

dismissed as time-barred.9 Although the motion to dismiss invoked two Maryland statutes
of limitations, the parties overlooked and did not address critical choice-of-law questions that
must be answered here. Indeed, simply because the AC purports to allege counts pursuant to
Maryland law does not necessarily mean that Maryland law supplies the governing limitations
periods.
To be sure, it is apparent that state law, as opposed to federal law, provides the
appropriate limitations periods for Counts I and II, as those counts assert state-law claims. This
conclusion follows from the well-settled Erie10 doctrine requiring federal courts to “apply state
substantive law and federal procedural law when reviewing state-law claims.” Kerr v. Marshall
Univ. Bd. of Governors, 824 F.3d 62, 74 (4th Cir. 2016). In this respect, a state’s statute of
limitations is “considered substantive law” pursuant to Erie; thus, if the state’s “statute of
limitations would bar recovery in a State court, a federal court ought not to afford recovery.”
9

Typically, a claim should not be dismissed at the Rule 12(b)(6) stage based on an affirmative
defense, such as a statute of limitations. But where, as here, the facts necessary to support the
defense appear on the face of the complaint, dismissal is appropriate. Goodman v. Praxair, Inc.,
494 F.3d 458, 464 (4th Cir. 2007) (en banc) (“[W]here facts sufficient to rule on an affirmative
defense are alleged in the complaint, the defense may be reached by a motion to dismiss filed
under Rule 12(b)(6).”).
10

Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
8

Bonham v. Weinraub, 413 F. App’x 615, 616 (4th Cir. 2011) (quoting Guaranty Trust Co. v.
York, 326 U.S. 99, 110 (1945)).
But this conclusion—that state law, as opposed to federal law, supplies the
limitations periods for Counts I and II—does not end the inquiry. Rather, it is necessary to
determine which state supplies the relevant statutes of limitations. To do so, it is imperative
to ascertain the appropriate choice-of-law rules. Next, the choice-of-law rules must be
applied to identify the governing statutes of limitations. Analysis therefore turns to
the

following

determining

tasks: (1)

which

identifying

the

governing

choice-of-law

rules,

(2)

state’s limitations period applies to Count I, and (3) determining

which state’s limitations period governs Count II.
A.
The first analytical step is to identify the correct choice-of-law rules. Here,
Virginia’s rules apply because a federal court sitting in diversity applies the choiceof-law rules of the forum state. See, e.g., Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
487, 496 (1941). This is so despite the fact that this case originated in Maryland and
was transferred here pursuant to 28 U.S.C. § 1404(a). To be sure, the standard “Van Dusen”
rule provides that a § 1404(a) transfer carries with it the transferor court’s choice-of-law
rules. See Van Dusen v. Barrack, 376 U.S. 612 (1964). But as Supreme Court precedent
teaches, the Van Dusen rule does not apply where, as here, “a party bound by a forumselection clause flouts its contractual obligation and files suit in a different forum[.]” Atl.
Marine Constr. Co. v. U.S. Dist. Ct. for the W. Dist. of Tex., 134 S. Ct. 568, 582 (2013). Rather,
in such a scenario, a “[Section] 1404(a) transfer of venue will not carry with it the original
venue’s choice-of-law rules.” Id.11 Virginia’s choice-of-law rules therefore apply.

11

This is so because it would be “inequitable” and encourage “gamesmanship” to permit a
plaintiff “to fasten its choice of substantive law to the venue transfer” when the parties had
agreed to a forum-selection clause designating a different forum. Atl. Marine, 134 S. Ct. at 583.
9

Given this conclusion, analysis next turns to identifying the governing limitations
periods. Importantly, Virginia’s choice-of-law rules occasionally require the application of a
Virginia statute of limitations to a cause of action arising under a foreign state’s law. In this
respect, Virginia’s choice-of-law rules draw a distinction between “substantive’ and
“procedural” limitations periods. For instance, if Maryland’s statute of limitations on a Maryland
cause of action is “substantive,” then Maryland’s limitations period applies to that claim; but if
Maryland’s limitations period on a Maryland claim is “procedural,” then Virginia’s statute of
limitations will generally govern that claim. See Jones v. R.S. Jones & Assocs., Inc., 246 Va. 3
(1993).
The distinction between “substantive” and “procedural” limitations periods can be
nebulous in some cases. Statutes of limitations often straddle the line between substance and
procedure. In fact, Virginia’s choice-of-law rules recognize three limitations statutes: (1)
“statutes of repose,” (2) “procedural” or “pure” statutes of limitations, and (3) “substantive” or
“special” statutes of limitations. See Commonwealth v. Owens-Corning Fiberglas, Corp., 238
Va. 595, 598-99 (1989). First, a “statute of repose” “run[s] from some legislatively selected point
in time which is unrelated to the accrual of any cause of action” and “reflect[s] a legislative
policy determination that a time should come beyond which a potential defendant will be
immune from liability for his past acts and omissions.” Id. Second, a “procedural” statute of
limitations “merely … time-restrict[s] the assertion of a remedy” and “furnish[es] an affirmative
defense [that is] waived if not pleaded.” Id. at 598. Last, a “substantive” statute of limitations is
“ordinarily contained in statutes [that] create a new right,” and thus “become[s] [an] element[] of
that newly-created right, restricting its availability.” Id. at 599. Indeed, “Compliance with a …
[substantive] statute is a condition precedent to maintenance of a claim.” Id.

10

In other words, a statute of limitations is substantive under Virginia’s choice-of-law rules
if the statute “is directed so specifically to the right of action … as to warrant saying that the
limitation qualifies the right.” Jones, 246 Va. at 7 (holding that a statute of limitations on a
wrongful death action was substantive for choice-of-law purposes). This is especially so if the
legislature created a right of action that did not exist at common law. See id. at 5 (“Because no
right of action for wrongful death existed at common law, statutes that created the right usually
contained a ‘built in’ limitation prescribing the time within which the action must be brought.”);
see also Overstreet v. Ky. Cent. Life Ins. Co., 950 F.2d 931, 935 (4th Cir. 1991) (“When the
legislature creates a right of action that did not exist at common law, the limitations specified in
the statute operate as a substantive limit on the right to recover.” (citing Dowell v. Cox, 108 Va.
460 (1908)). Thus, the Jones court held that a Florida statute of limitations requiring that “[a]n
action for wrongful death … be commenced … [w]ithin two years” was substantive because the
limitations period was directed specifically to the right to bring a wrongful death action. Jones,
246 Va. at 7.
These principles, applied to the AC’s state-law claims, point persuasively to the
conclusion that the limitations period on Count I, the breach-of-contract claim, is procedural and
thus governed by Virginia law. The limitations period for Count II, the state-law national origin
discrimination claim, requires a different conclusion; it is substantive and thus governed by
Maryland law. As explained below, the limitations period has not yet expired on the breach-ofcontract claim, but the claim of national origin discrimination is time-barred. Thus, Count I must
be dismissed without prejudice, whereas Count II must be dismissed with prejudice.

11

B.
Virginia law provides the limitations period on the breach-of-contract claim in Count I.
Indeed, when a party sues for breach-of contract the “limitations period is treated as a procedural
issue governed by Virginia law.” Hunter Innovations, 753 F. Supp. 2d at 602 (citing Hansen v.
Stanley Martin Cos., 266 Va. 345 (2003); Hospelhorn v. Corbin, 179 Va. 348 (1942)). Virginia
provides two statutes governing the limitations period for claims alleging breach of a written
contract. The first, Va. Code § 8.01-246(2), provides a five-year window. The second, Va. Code
§ 8.01-247, is a “borrowing statute,” which “limits actions on contracts governed by the law of
another state to the limitations period of that state if its time limit is more restrictive than
Virginia’s.” Hansen, 266 Va. at 352 (applying Maryland’s shorter statute of limitations to a
breach-of-contract claim).12 Pursuant to the borrowing statute, “The law governing a contract is
the law relating to the validity and interpretation of the contract itself, rather than the law
regarding performance and breach.” Fiberlink Commc’ns Corp. v. Magarity, 24 F. App’x 178,
2001 WL 1658914, at *3 (4th Cir. Oct. 16, 2001); see also Hunter Innovations, 753 F. Supp. 2d
at 602 (same); Johnson v. Brown, 372 F. Supp. 2d 501, 508 (E.D. Va. 2005) (same). Thus,
whether Virginia’s five-year limitations period applies, or whether another jurisdiction’s shorter
period governs pursuant to the borrowing statute, turns on which law governs the contract.
Here, Virginia law governs the allegedly breached contract, the Consultant Agreement,
because that contract includes a choice-of-law provision identifying Virginia as the source of
governing law. See Consulting Agreement ¶ 18. Virginia’s five-year period therefore controls.
To be sure, the AC intimates that the parties executed the Consultant Agreement in Maryland,

12

The statute reads in full: “No action shall be maintained on any contract which is governed by
the law of another state or country if the right of action thereon is barred either by the laws of
such state or country or of this Commonwealth.” Va. Code. § 8.01-247.
12

and Virginia’s choice-of-law rules provide that “[g]enerally, the nature, validity, and
interpretation of … contracts[] are governed by the law of the place where made.” Lexie v. State
Farm Mut. Auto. Ins. Co., 251 Va. 390, 395 (1996). But Virginia law also provides that where, as
here, “a contract specifies that the substantive law of another jurisdiction governs its
interpretation or application, the parties’ choice of substantive law should be applied.” Settlement
Funding, LLC v. Von Neumann-Lillie, 274 Va. 76, 81 (2007); see also Hitachi Credit Am. Corp.
v. Signet Bank, 166 F.3d 614, 624 (4th Cir. 1999) (“Virginia law looks favorably upon choice of
law clauses in a contract, giving them full effect except in unusual circumstances.”).13 Because
the Consultant Agreement at issue has a choice-of-law provision designating Virginia as the
source of governing law, Virginia’s borrowing statute is therefore inapplicable. Rather,
Virginia’s five-year limitation period governs.
Thus, ActioNet’s argument that Count I is time-barred and must be dismissed with
prejudice is incorrect. Rather, if Graffiti Consulting obtains counsel and files within five years of
May 9, 2014—the date the contract was terminated and thus the date a breach-of-contract claim
accrued—the claim would be timely.
C.
By contrast, Maryland’s statute of limitations governs Count II, plaintiffs’ national origin
discrimination claim pursuant to the Montgomery County Code. This is so because the
limitations period on this claim is substantive, as it “is directed so specifically to the right of
action … as to warrant saying that the limitation qualifies the right.” Jones, 246 Va. at 7. In this
regard, Maryland law provides that a person “subjected to a discriminatory act prohibited by the
[Montgomery] county code may bring and maintain a civil action against the person that
This might mean that Virginia law governs any breach-of-contract claims in this case. See,
e.g., Settlement Funding, 274 Va. at 81. But that issue need not be reached.

13

13

committed the alleged discriminatory act[.]” Md. Code, State Gov’t § 20-1202(b). The very next
section in that very statute includes a limitations period specific to the right of action: “An action
under subsection (b) of this section shall be commenced … within 2 years after the occurrence of
the alleged discriminatory act.” Id. § 20-1202(c)(1) (emphasis added). Thus, like the Florida
statute at issue in Jones, the limitations period on plaintiffs’ state-law claim is directed so
specifically to the cause of action—here, a discrimination claim under the Montgomery County
Code—that the limitations period qualifies the right to sue and is therefore substantive. See
Jones, 246 Va. at 7 (holding that the requirement that “[a]n action for wrongful death … be
commenced … [w]ithin two years” was a substantive limitations period); Owens-Corning
Fiberglas, 236 Va. at 598-99 (noting that a “substantive” statutes of limitations often appear “in
statutes [that] create a new right and become elements of that newly-created right, restricting its
availability). Accordingly, the two-year statute of limitations in § 20-1202(c)(1) applies to Count
II.
Given the applicability of Maryland’s two-year statute of limitations, Count II must be
dismissed with prejudice as time-barred. Indeed, Maryland law provides that a claim pursuant to
§ 20-1202(b) must be filed within two years of “the alleged discriminatory act[.]” Md. Code,
State Gov’t § 20-1202(b). In this respect, the AC alleges that the discriminatory act occurred on
May 9, 2014, which gave plaintiffs until May 9, 2016 to file their claim. Plaintiffs, however,
did not file their complaint until June 27, 2016. Count II must be dismissed with prejudice
as time-barred.
It is important to note that § 20-1202(b) does not include any tolling provisions that could
rescue Count II. To be sure, § 20-1202 includes a partial exhaustion requirement, providing that
a lawsuit alleging employment discrimination “may not be commenced sooner than 45 days after

14

the aggrieved person files a complaint with the county unit responsible for handling violations of
the county discrimination laws.” Id. § 20-1202(c)(2)(i). Conspicuously missing from the statute
is (1) any provision that tolls the two-year limitations period while the administrative process
unfolds, or (2) any requirement that the plaintiff wait for an administrative decision. Thus, as
the District of Maryland has routinely held, failure to adhere to the state code’s two-year
limitations period bars relief—even if the two-year window closes while plaintiff awaits the
results of a state or county administrative decision. See, e.g., Ward v. STG Int’l, Inc., No. PWG14-4040, 2016 WL 3257823, at *6 n.5 (D. Md. June 14, 2016); Westmoreland v. Prince
George’s Cnty., No. TDC-14-821, 2015 WL 996752, at *13 (D. Md. Mar. 4, 2015). Here,
plaintiffs did not file this action within two years of “the occurrence of the alleged discriminatory
act.” Md. Code, State Gov’t § 20-1202(c)(1).
Nor does the doctrine of equitable tolling apply. See Ward, 2016 WL 3257823, at *6 n.5
(holding in analogous circumstances that the plaintiff could not rely on equitable tolling to
excuse a failure to comply with § 20-1202’s two-year limitations period). Indeed, plaintiffs are
“entitled to equitable tolling” only if they show “(l) that [they] ha[ve] been pursuing [their] rights
diligently, and (2) that some extraordinary circumstance stood in [their] way and prevented
timely filing.” Holland v. Florida, 560 U.S. 631, 649 (2010) (quotation marks omitted). Plaintiffs
fail to show any extraordinary circumstances that prevented them from timely filing. Rather, the
only apparent reason they failed to file a timely complaint is their prior lawyer’s negligence or
misunderstanding regarding the statute of limitations.14 But it is well-settled that mere negligence

14

The AC alleges that “[d]uring the pendency of administrative proceedings, the running of the
one year [sic] statute of limitations was tolled.” AC ¶ 18. This is doubly wrong. First, the
limitations period is two years, not one. See Md. Code. § 20-1202(c)(1) (“An action … shall be
commenced … within 2 years after the occurrence of the alleged discriminatory act.” (emphasis
added)). Second, as detailed above, the statute does not include a tolling provision. In this regard,
15

or misunderstanding is not an “extraordinary circumstance” sufficient to warrant equitable
tolling. See id. at 651-652 (“[A] simple miscalculation that leads a lawyer to miss a filing
deadline does … does not warrant equitable tolling” (quotation marks and citation omitted)); see
also Rouse v. Lee, 339 F.3d 238, 248 (4th Cir. 2003) (“[A] mistake by a party’s counsel in
interpreting a statute of limitations does not present the extraordinary circumstance beyond the
party’s control where equity should step in to give the party the benefit of his erroneous
understanding.” (quoting Harris v. Hutchinson, 209 F.3d 325, 331 (4th Cir. 2000)). Thus, Count
II is time-barred.
In sum, Count I must be dismissed without prejudice, and Count II must be dismissed
with prejudice because the limitations period has expired.
V.
ActioNet’s last argument is that Count III, which alleges a wrongful termination of
contract in violation of 42 U.S.C. § 1981, must be dismissed with prejudice for failure to state a
claim.15 For the reasons stated above, Graffiti Consulting’s failures to obtain counsel or to file

the Maryland statute differs from Title VII, which requires a complainant to wait for a “right to
sue” letter from the proper administrative agency before pursuing his or her claims in federal
court. See 42 U.S.C. § 2000e-5(f)(1).
15

Although the parties did not address the applicable statute of limitations on plaintiffs’ § 1981
claim, it is worth noting that 28 U.S.C. § 1658, which applies a four-year residual statute of
limitations, applies to that claim. Granted, courts evaluating claims under § 1981—a statute
guaranteeing to “[a]ll persons within the jurisdiction of the United States … the same right … to
make and enforce contracts … as is enjoyed by white citizens”— typically “borrow the statute of
limitations … applicable to the state cause of action that is most analogous” to a § 1981 claim.
Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 320 (4th Cir. 2006). But in 1990 Congress
enacted 28 U.S.C. § 1658, a “general, 4-year limitations period for any federal statute
subsequently enacted without one of its own.” N. Star Steel Co. v. Thomas, 515 U.S. 29, 34 n. *
(1995). A year later, in 1991, Congress amended § 1981 to provide additional protections to the
right to make and enforce contracts, including protection from the wrongful termination of
contracts. See Jones v. R.R Donnelley & Sons Co., 541 U.S. 369, 382-83 (2004). And where, as
here, a plaintiff relies on § 1981 to allege wrongful termination of a contract, that claim “ar[ises]
16

this claim with a valid corporate charter are sufficient grounds to dismiss the corporation’s §
1981 claim without prejudice. So, too, must Olawole’s § 1981 count be dismissed
without prejudice, albeit for a different reason: he fails to state a plausible claim.
Section 1981 provides that “[a]ll persons within the jurisdiction of the United States shall
have the same right in every State … to make and enforce contracts … as is enjoyed by white
citizens[.]” 42 U.S.C. § 1981(a). The statute also guarantees equal treatment in “the enjoyment of
all benefits, privileges, terms, and conditions of the contractual relationship.” Id. § 1981(b). To
prevail on a § 1981 claim of race discrimination, Olawole must ultimately prove (1) that
ActioNet “intended to discriminate” on the basis of his race and (2) “that the discrimination
interfered with a contractual interest.” Denny v. Elizabeth Arden Salons, Inc., 456 F.3d 427, 434
(4th Cir. 2006). Notably, however, § 1981 does not recognize a claim for national origin
discrimination. St. Francis Coll. v. Al-Khazraji, 481 U.S. 604, 606 (1987) (holding that § 1981
“d[oes] not cover” claims of “discrimination on the basis of national origin”).
Here, Olawole’s § 1981 claim must be dismissed with leave to amend because the AC’s
allegations relate to national origin discrimination, not race discrimination. The only mention of
race is a conclusory allegation that the conduct giving rise to Counts I (breach of contract) and
Count II (national origin discrimination) also constitute “a violation of § 1981’s ban on race
discrimination.” AC ¶ 30. And although courts have struggled to discern the indistinct line
between national origin and race for purposes of § 1981 claims,16 this conceptual distinction is
largely academic in this case because Olawole will be afforded leave to amend.17

under the [1991] amendment to § 1981” and thus falls under the federal four-year statute of
limitations. Id. at 383. Accordingly, the § 1981 claim is not time-barred.
16

Compare Guzman v. Concavage Marine Constr. Inc., 176 F. Supp. 3d 330, 335 (S.D.N.Y.
2016) (denying a motion to dismiss a § 1981 claim because it “ma[d]e intuitive sense to think
17

VI.
In sum, the motion to dismiss must be granted in part and denied in part. Specifically, the
motion will be granted insofar as (1) Count I, brought by Graffiti Consulting, must be dismissed
without prejudice for failure to appear through counsel and as legally inoperative; (2) Count II,
brought by both plaintiffs, must be dismissed with prejudice as time-barred; and (3) Count III
must be dismissed without prejudice as to Graffiti Consulting for failure to appear through
counsel and as legally inoperative, and dismissed with leave to amend as to Olawole. The motion
to dismiss must be denied in all other respects.18

that [a defendant] meant to use ‘Mexican’ and “Spanish’ in their racial sense, … rather than their
geographic sense, when he used those terms disparagingly to a Hispanic employee ….”), and
Ihekwu v. City of Durham, N.C., 129 F. Supp. 2d 870, 887 (M.D.N.C. 2000) (denying summary
judgment because of a factual dispute whether a Nigerian-born plaintiff had been discriminated
against on the basis of race where most of the allegations related to the plaintiff’s national
origin), with Quraishi v. Kaiser Found. Health Plan of the Mid-Atl. States, Inc., No. CIV. CCB13-10, 2013 WL 2370449, at *2 (D. Md. May 30, 2013) (dismissing a § 1981 claim because the
allegations suggested that the plaintiff’s origin, not her “ethnicity,” motivated the defendant’s
adverse action), Akinjide v. Univ. of Md. E. Shore, No. DKC 09-2595, 2011 WL 4899999, at *9
(D. Md. Oct. 13, 2011) (granting defendant summary judgment on a § 1981 claim because the
complaint “never reference[d] any ethnic characteristics associated with [the plaintiff's national]
origin”), and Perkins v. Kaiser Found. Health Plan of Mid–Atl. States, Inc., No. DKC–08–3340,
2010 WL 889673, at *5 (D. Md. Mar. 5, 2010) (dismissing a § 1981 claim of “national origin”
discrimination devoid of “any allegations of racial discrimination as a ground for relief”).
17

ActioNet asserts, without citation to any authority, that Olawole’s § 1981 claim should be
dismissed with prejudice for failure to state a claim. But Rule 15(a)(2), Fed. R. Civ. P. provides
that leave to file an amended pleading should be “freely give[n] … when justice so requires.”
And ActioNet has not indicated that amendment would be unjust or futile. See GE Inv. Private
Placement Partners II v. Parker, 247 F.3d 543, 548 (4th Cir. 2001) (“Leave to amend may
properly be denied where amendment would be futile.”).
18

In addition to filing a motion to dismiss, ActioNet claims to have “prospectively move[d]” for
attorneys’ fees. Prospective or not, that motion currently lacks any arguments to support it.
Rather, ActioNet purports to “reserve[] the right to file a formal motion and memorandum in
support” of its fee request. See Doc. 46 at 9. Filing a formal motion and memorandum is the
proper—indeed, required—course of action. See, e.g., Rule 7(A), E.D. Va. Local Civ. R. (“All
motions shall state with particularity the grounds therefor and shall set forth the relief or order
sought.”).
18

An appropriate Order will issue.
Alexandri� Virginia
June 20. 2017

T. S. Ellis, m
United States n·

19