Advance Telecom Process LLC v. DSFederal, Inc.

• Decision Date: 30 July 2015
• Docket Number: No. 1371, Sept. Term, 2014.,1371, Sept. Term, 2014.
• Parties: ADVANCE TELECOM PROCESS LLC v. DSFEDERAL, INC.
• Court: Court of Special Appeals of Maryland

224 Md.App. 164

119 A.3d 175

ADVANCE TELECOM PROCESS LLC

v.DSFEDERAL, INC.

No. 1371, Sept. Term, 2014.

Court of Special Appeals of Maryland.

July 30, 2015.

Tilman Dunbar, Jr., Silver Spring, MD, for Appellant.

Alexander C. Vincent (Shulman, Rogers, Gandal, Pordy & Ecker PA, on the brief), Potomac, MD, for Appellee.

Panel: KRAUSER, C.J., GRAEFF, KEHOE, JJ.

Opinion

GRAEFF, J.

Advance Telecom Process, LLC (“Advance”), appellant, appeals from the order of the Circuit Court for Montgomery County granting the motion filed by DSFederal, Inc. (“DSFederal”), appellee, to dismiss Advance's complaint for failure to state a claim upon which relief could be granted. Advance raises three questions for our review, which we have rephrased slightly, as follows:

1. Did the circuit court apply the proper standard in granting DSFederal's motion to dismiss?

2. Did the circuit court correctly determine that the Teaming Agreement was not an enforceable contract, and therefore, that Count I of the complaint failed to state a cause of action for breach of contract?

3. Should this Court allow Advance leave to amend its circuit court complaint?

For the reasons that follow, we shall affirm the judgment of the circuit court.

FACTUAL AND PROCEDURAL BACKGROUND

On June 3, 2014, Advance filed an eight-count complaint against DSFederal, alleging that DSFederal unlawfully terminated a Teaming Agreement between the parties and committed a variety of other torts.¹ Because this appeal involves the propriety of the circuit court's ruling granting a motion to dismiss for failure to state a claim upon which relief could be granted, the relevant facts are those alleged in the complaint, set forth as follows.

Advance is a Virginia limited liability company and a certified Small Disadvantaged Business 8(a) Contractor, as defined by the U.S. Small Business Administration (“SBA”).² DSFederal is a Maryland corporation and a woman-owned SBA 8(a) Contractor. DSFederal also is certified by the U.S. General Services Administration as an 8(a) STARS Contractor.³

The Complaint alleged that, over a twelve-month period, Advance created and developed two projects: (1) Enterprise Applications Security, Identity Management & Access Management, and (2) Rapid Development of “Proof Concept” Application. Advance then submitted a White Paper to U.S. Citizenship & Immigration Services, U.S. Department of Homeland Security (“USCIS–DHS”), proposing the projects. The White Paper was formatted in a way that “it could be submitted to other federal agencies for implementation into their systems once it had been fully approved, implemented and deemed a success by USCIS–DHS, thereby increasing its value as a selling point of” Advance.

After Advance presented the White Paper, USCIS–DHS notified Advance that it would accept the proposal under a sole-source contract, based upon Federal Acquisition Regulations (“FAR”) 6.3. USCIS–DHS also informed Advance that the sole-source contract would be subject to the 8(a) STARS II GWAC program. Advance then began researching the available certified 8(a) STARS contractors, and it was referred to DSFederal.

Advance contacted DSFederal and disclosed “all the relevant facts and details involving” the proposal. DSFederal then entered into a contractual relationship with Advance. The Complaint characterized this relationship as including “the parties' execution of any and all Teaming Agreement(s), subcontract(s), and/or any and all required necessary documentation for the purpose of obtaining and working on the sole-source contract of the proposed project that [Advance] had submitted to USCIS–DHS.” DSFederal agreed and contracted with Advance to “jointly develop and submit a bid to USCIS–DHS for said project.” Based on the contractual relationship between the parties, Advance submitted DSFederal's name to USCIS–DHS as the 8(a) STARS contractor for the project.

Thereafter, Advance and DSFederal “actively pursued, developed and created a proposal and bid to submit to USCIS–DHS,” which offer and proposal included “the relationship between” Advance and DSFederal. Advance and DSFederal also entered into a Teaming Agreement, which the complaint alleged incorporated the scope of work to be performed by each party. According to the complaint, the Teaming Agreement provided that, within ten days of receipt of the contract from USCIS–DHS, DSFederal was to provide a copy of the contract to Advance, DSFederal was required to issue a subcontract to Advance “for consulting support to meet the overall solicitation requirement of the USCIS–DHS contract,” and DSFederal was to “use its best efforts to award [Advance] a target work share of fifty-eight (58%) percent of effort based on labor costs awarded under the contract or the valuable consideration of the Teaming Agreement and expected and required Subcontract.” Advance was required to provide DSFederal with “proprietary information and industry expertise.”

Advance and DSFederal worked together to complete all applicable requirements of the pre-bid solicitation. Sometime after submitting the bid, DSFederal was awarded a sole-source GWAC by the USCIS–DHS to develop and implement the two projects based on the “combined efforts of the parties.” Thereafter, the Complaint alleges, DSFederal “constructively terminated” Advance, despite a clause in the Teaming Agreement requiring mutual termination.

Count I of the Complaint, alleging breach of contract, stated that DSFederal had a contractual obligation to execute a subcontract with Advance “that it knows, and knew, is, and was always, required by USCIS–DHS, in order for [Advance] to work, and continue to work, to complete this project, but has failed to do so.” DSFederal also failed to present Advance with a copy of the contract with USCIS–DHS, failed to allow Advance's staff to begin work, and illegally terminated the Teaming Agreement. Advance sought damages in the amount of $2,200,000.

DSFederal filed a motion to dismiss the complaint. It attached as Exhibit 1 the Teaming Agreement, which Advance did not attach to the complaint. The Teaming Agreement was executed on September 11, 2013, by DSFederal, “ Team Leader,” and Advance, “Team Member.”

The Teaming Agreement stated that the parties had “concluded that it is to their mutual benefit to act as a team for the purpose of preparing and submitting a proposal in response to” the Request for Proposal (“RFP”) that the USCIS–DHS would be issuing for Identity, Credential, and Access Management (“ICAM”). It provided that, if USCIS–DHS awarded DSFederal a contract, DSFederal “intends to negotiate a subcontracting agreement with” Advance, and Advance “intends to perform work as set forth in” the statement of work (“SOW”) attached.

With respect to the specific obligations of the parties, section 1(e) of the Teaming Agreement provided for duties regarding submission of the proposal, and it stated that, “[i]n the event that the contract awarded by [USCIS–DHS] as a result of proposals submitted in response to the RFP (“the Prime Contract”) is awarded to [DSFederal], the parties will negotiate in good faith and execute a subcontract agreement ... subject to applicable laws and regulations, and, if required by the Prime Contract, the consent/approval of [USCIS–DHS].”

Section 1(b) provided that DSFederal “shall, with the assistance of [Advance], prepare the Proposal and submit the Proposal to [USCIS–DHS] identifying [Advance] as a subcontractor providing the services identified in Attachment A.” Attachment A identified two categories of work to be performed by the parties under the headings “Proposal Development” and “Contract Performance Work Distribution.” The work under the “Contract Performance Work Distribution” category was listed as follows:

1. Within 10 calendar days of award, [DSFederal] will issue a Subcontract to [Advance] for consulting support to meet the overall solicitation requirements.

2. [Advance] will designate a corporate executive who will attend periodic team meetings, provide status to DSFederal, and ensure that [Advance] project staff collaborate with the DSFederal Project Manager, DSFederal management, and staff as necessary to identify and mitigate risks, timely resolve issues, prepare and review deliverables specifically called out herein or in the SOW.

3. As required by the Government, [Advance] shall track and report progress and costs in a format to be specified by DSFederal.

4. [Advance] staff will fully cooperate with DSFederal's efforts to manage the DSFederal project team as an integrated whole, focused on the delivery of high-quality, compliant services to the Government, without respect to employment affiliation.

5. DSFederal will use best efforts to award [Advance] a target work share of 58% of the effort based on labor costs awarded under the contract.

6. Work Share level of work is contingent upon:

• [Advance] filling offered positions in a timely manner.

• [Advance] performing at such a level that it does not adversely impact on [DSFederal's] past performance ratings.

• [DSFederal's] performing the minimum level of work required by law or regulation.

In its motion to dismiss, DSFederal argued that the Complaint failed to state a cause of action for breach of contract, and therefore, it should be dismissed with prejudice. In support, it argued that the “Teaming Agreement is nothing more than an agreement to negotiate open issues in good faith to reach a contractual objective within an agreed framework,” i.e., it was an agreement to agree, rather than a valid and enforceable contract.

In its opposition, Advance acknowledged the cases holding that teaming agreements were unenforceable contracts. It argued, however, that the Teaming Agreement here was distinguishable because it is clear that the parties intended to negotiate a subcontract, and the essential terms of the Agreement “have been determined or have set in place an objective framework with which to ascertain that essential term.”

In reply, DSFederal again asserted that...