Weaver v. Zenimax

• Decision Date: 25 May 2007
• Docket Number: No. 2368 Sept. Term, 2005.,2368 Sept. Term, 2005.
• Parties: Christopher S. WEAVER v. ZENIMAX MEDIA, INC.
• Court: Court of Special Appeals of Maryland

923 A.2d 1032

175 Md. App. 16

Christopher S. WEAVER v. ZENIMAX MEDIA, INC.

No. 2368 Sept. Term, 2005.

Court of Special Appeals of Maryland.

May 25, 2007.

Andrew J. Graham, Baltimore, MD, Ronald L. Early, J. Bradford McCullough, on the brief, Bethesda, MD, for Appellant.

Howard H. Stahl (Morgan D. Hodgson, Bruce C. Bishop, Andrew J. Hefty, Steptoe & Johnson, LLP, on the brief), Washington, DC, for Appellee.

Panel: SALMON, KENNEY^*, and DEBORAH S. EYLER, JJ.

Opinion by KENNEY, Judge.

Christopher S. Weaver appeals the judgment of the Circuit Court for Montgomery County dismissing his action for declaratory relief and breach of contract against ZeniMax Media, Inc. ("ZeniMax"), the award of attorney's fees and costs to ZeniMax, and the grant of summary judgment in favor of ZeniMax on its counterclaim for breach of contract. He presents three questions, which we have reordered:

I. Did The Trial Court Commit Reversible Error In Dismissing Mr. Weaver's First Amended Complaint Based On His Pre-Litigation Acts?

[II.] Did The Trial Court Commit Reversible Error In Awarding ZeniMax Fees And Costs Pursuant to Rule 1-341?

[III.] Did The Trial Court Commit Reversible Error In Finding That Mr. Weaver's Pre-Litigation Acts While Employed by ZeniMax Were a Substantial And Material Breach Of His 1999 Agreement Barring Any Recovery By Him of His $1,200,000 Severance Payment?

ZeniMax filed a cross-appeal challenging the circuit court's award of attorney's fees and grant of summary judgment in favor of Weaver on ZeniMax's counterclaim for breach of duty of loyalty. It presents the following two questions, which we have reordered:

[1.] Did the trial court abuse its discretion by substantially reducing ZeniMax's attorneys' fees award:

a. based on the dismissal of Weaver's claim, where the claim was meritless or at least highly speculative since it had not been tried?

b. on the basis that Weaver's misconduct somehow benefitted ZeniMax, by saving ZeniMax from having to continue to defend Weaver's baseless lawsuit?

c. by eschewing examination of counsel's hours and rates, instead imposing an admittedly somewhat arbitrary estimate of a reasonable fee?

[2.] Did the trial court err by granting Weaver summary judgment on breach of fiduciary duty, solely for "lack of remedy," where Weaver's disloyal actions were clear and undisputed, and where ZeniMax was entitled to several remedies, including damages incurred in defending this action, disgorgement of Weaver's salary and benefits, and a declaration that Weaver could not recover contractual severance benefits?

For the following reasons, we shall vacate the judgment of the circuit court.

FACTUAL AND PROCEDURAL HISTORY

Weaver's Employment Dispute with ZeniMax

Weaver is the founder of Bethesda Softworks, which has developed numerous successful computer games. Weaver and Robert Altman founded ZeniMax, which acquired Bethesda Softworks in 1999. At the founding of ZeniMax, Altman was Chief Executive Officer and Chairman of the Board of Directors; Weaver was Chief Technology Officer and a member of the Board. Altman and Weaver each owned approximately thirty percent of the ZeniMax stock. ZeniMax is a Delaware corporation.

Weaver entered into an executive employment agreement with ZeniMax on July 1, 1999. With respect to Weaver's period of employment, termination, and renewal, the contract provided:

1. Full-time Employment of Executive.

1.1 Duties and Status.

(a) The Company hereby engages the Executive as CHIEF TECHNOLOGY OFFICER for the period (the "Employment Period") specified in Section 4, and the Executive accepts such employment on the terms and conditions set forth in this Agreement. During the Employment Period, the Executive will exercise such duties as are commensurate with the duties of Chief Technology Officer of the Company and shall report directly to the Chief Executive Officer of the Company or his designee.

(b) During the Employment Period, the Executive shall (i) devote his full time and efforts to the business of the Company and will not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or Company which competes or conflicts or interferes with the performance of his duties hereunder in any way and (ii) accept such additional duties as may be assigned, and such additional office or offices to which he may be appointed by the Chief Executive Officer of the Company or his designee, provided that the performance of such additional duties and such additional office or offices shall be reasonably consistent with the scope of the duties described in subparagraph 1.1(a) of this Agreement; provided, however, that Executive may engage in part-time teaching at an accredited high school, college, or university, and that Executive may continue to provide consulting services to the businesses and organizations listed on Schedule A hereto. Notwithstanding anything to the contrary in this Section 1.1(b), upon the prior written approval of the Chief Executive Officer of the Company, Executive shall have the right to engage in other activities during the Employment Period, including without limitation, teaching and consulting, provided that such activities do not conflict with any of the terms or provisions of this Agreement or the Executive's responsibilities to the Company set forth herein.

* * *

4.1 Employment Period.

The Employment Period shall commence on the date hereof and shall continue until the earliest of (i) three (3) years from the date hereof (the "Employment Term"); (ii) the Executive's death or total disability; (iii) a termination by the Company under Section 4.2 or 4.3 hereof; (iv) a resignation under Section 4.5 hereof; or (v) a termination by the Executive under Section 4.6 hereof.

4.2 Termination by the Company with Cause.

(a) In the event the Company terminates the Executive's employment under this Agreement on or before the Employment Term, with Cause, the Executive will be not be [sic] entitled to any further compensation or benefits after the date of termination other than those benefits and payments which have been earned and are payable as of the date of termination or which have been earned and will become payable without regard to future services.

(b) For purposes of this Section 4 "Cause" shall mean (i) the commission of an act involving fraud in the course of the performance of Executive's duties, (ii) intentional material damage to the property or business of the Company and (x) such damage has not immediately ceased and (y) such damage had not been cured by Executive within twenty-one (21) days following the receipt of written notice by the Executive from the Board of Directors specifying the action causing damage and demanding cessation of such action and cure of such damage, (iii) the conviction of the Executive of a crime constituting a felony, (iv) conduct that constitutes a material breach of this Agreement, subject to the Executive's right to cure such conduct within twenty-one (21) days following receipt of written notice to the Executive by the Board of Directors specifying such breach, or (v) continuance of failure by the Executive to perform his duties in accordance with this Agreement after receipt of written notice to the Executive by the Board of Directors specifying such failure and such failure has not been cured within twenty-one (21) days following the receipt of such notice by the Executive; provided, however, that in any case such "Cause" shall not be found to exist absent a unanimous vote of the non-interested members of the Board of Directors.

4.3 Termination by the Company without Cause.

(a) In the event the Company terminates the Executive's employment under this Agreement on or before the Employment Term, without Cause, then (i) the Company shall, immediately upon such event, pay to the Executive the sum equal to the greater of four times his then Annual Base Salary or $1,200,000 paid in equal installments over the twelve-month period following such termination and shall thereafter provide to the Executive a continuation of his health and welfare benefits for a period of three (3) years; and (ii) the Executive shall not be obligated to fulfill his obligations hereunder, with the exception of his obligations under Sections 5, 6, 7, 8, 9 and 10, which shall survive any termination of this Agreement. If for any reason the Company is unable to continue health and welfare benefits as required by the preceding sentence, the Company shall either provide equivalent benefits to the Executive or pay to the Executive a lump sum cash payment equal to the value of the benefits which the Company is unable to provide.

(b) Termination by the Company without cause shall include, among other reasons, a termination (i) by the Company of the employment of the Executive for any reason other than death or Total Disability of the Executive or Cause; or (ii) the breach by the Company of any other provision of this Agreement.

4.7 Non-Renewal by Company.

Upon any expiration of this Agreement as a result of the determination of the Company not to renew the Executive's Employment Agreement, upon the effective date of such expiration, the Executive shall be entitled to receive the same payments and benefits as he is entitled to receive following an involuntary termination of his employment by the Company without Cause, as specified in Section 4.3 herein.

By late 2001, Weaver's and Altman's relationship had deteriorated due to disagreements over Weaver's performance, his time away from the office teaching, his paid time off, and perquisites of his employment. Nevertheless, in Spring 2002, Weaver informed Altman that he wished to renew his employment agreement with ZeniMax, which was set to expire July 1. Altman responded with a draft employment agreement containing terms different from the 1999 contract. Dissatisfied with this offer, Weaver replied with a draft...