Nelson-Salabes v. Morningside Development
| Decision Date | 19 March 2002 |
| Docket Number | No. 01-1369.,01-1369. |
| Parties | NELSON-SALABES, INCORPORATED, Plaintiff-Appellee, v. MORNINGSIDE DEVELOPMENT, LLC; G. Neville Turner, Defendants-Appellants, Morningside Holdings of Satyr Hill, LLC, Defendant & Third Party Plaintiff-Appellant, and The Strutt Group, Incorporated; George Salabes, Third Party Defendants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Joshua Jacob Kaufman, Venable, Baetjer, Howard & Civiletti, L.L.P., Washington, D.C., for Appellants. Howard Gary Goldberg, Goldberg, Pike & Besche, P.C., Baltimore, Maryland, for Appellee.
ON BRIEF:
Roger W. Titus, Kathleen E. Wherthey, Venable, Baetjer & Howard, L.L.P., Rockville, Maryland, for Appellants. Robin G. Banks, Goldberg, Pike & Besche, P.C., Baltimore, Maryland, for Appellee.
Before MOTZ, KING, and GREGORY, Circuit Judges.
Affirmed in part and vacated and remanded in part by published opinion. Judge KING wrote the opinion, in which Judge MOTZ and Judge GREGORY joined.
Appellants Morningside Development, LLC; Morningside Holdings of Satyr Hill, LLC; and G. Neville Turner (collectively, the "Defendants") appeal a judgment of more than $736,000 entered against them, jointly and severally, following an October 2000 bench trial in the District of Maryland. The Defendants assert multiple contentions of error; however, only their challenge to joint and several liability has merit. As explained below, we otherwise affirm the judgment in favor of Nelson Salabes, Incorporated ("NSI"), but we vacate and remand the district court's imposition of joint and several liability against Morningside Holdings and Turner.
In the Spring of 1996, the Strutt Group, Incorporated ("Strutt"), a real estate development company operating in Maryland, sought planning assistance from NSI, an architectural firm, for a proposed assisted living facility in Baltimore County, called Satyr Hill Catered Living ("Satyr Hill" or the "Project"). On June 5, 1996, NSI delivered to Strutt a proposed letter agreement under which NSI agreed to develop a schematic building footprint for Satyr Hill.1 Although Strutt failed to execute this proposed agreement, both NSI and Strutt, as the proposed parties thereto, fully performed according to its terms.
During July 1996, Strutt and NSI continued to engage in discussions concerning the planning and design of Satyr Hill. On July 24, 1996, NSI delivered to Strutt a second proposed letter agreement outlining architectural services it would perform for Strutt in the next phase of development of Satyr Hill. This proposed letter agreement provided that NSI would render additional architectural services to Strutt, that it would develop exterior elevations for the Project, and that it would attend a zoning exception hearing before the Baltimore County Department of Permits and Development Management (the "Zoning Board").2 Strutt again failed to execute the proposed agreement, but, as with the first proposed agreement, both NSI and Strutt performed according to its terms.
NSI thereafter created four architectural drawings depicting the building footprint, the floor plans, and the exterior elevations of Satyr Hill (the "NSI Drawings"). Strutt's civil engineer then incorporated the NSI Drawings into the development plan for Satyr Hill (the "Development Plan"), which Strutt submitted to the Zoning Board as part of its application for the special zoning exception (the "Zoning Exception"). On April 7, 1997, the Zoning Board granted Strutt's request for the Zoning Exception.
On February 14, 1997, while the Zoning Exception application was pending before the Zoning Board, NSI delivered a third proposed letter agreement to Strutt, by which it offered, inter alia, to create for Strutt the design and working drawings for the remaining development of the Project. This third proposed agreement, which Strutt did not execute, outlined the additional architectural services to be performed by NSI on the Project, and it stated that: "If the above is acceptable, we will prepare a Standard AIA Agreement."3 Thereafter, on September 29, 1997, NSI sent Strutt a revised third letter agreement along with a "revised AIA Contract for Satyr Hill Catered Living per our recent discussions." The AIA Contract that NSI, as the architect, delivered to Strutt, as the owner, provided in relevant part that:
[t]he Architect's Drawings, Specifications or other documents shall not be used by the Owner or others on other projects, for additions to this Project, or for completion of this Project by others unless the Architect is adjudged to be in default under this Agreement, except by agreement in writing and with appropriate compensation to the Architect
(emphasis added). As with the earlier proposed agreements, Strutt did not execute either the revised third letter agreement or the revised AIA Contract.
On October 7, 1997, Strutt advised NSI to cease its architectural work on Satyr Hill, stating that Strutt's potential business partner had backed out of the Project and that Strutt lacked sufficient expertise to go forward with it. Strutt then inquired as to whether NSI knew of potential purchasers for the Project, and NSI began to solicit potential buyers on behalf of Strutt. One such potential buyer was G. Neville Turner, the President of an entity known as The Morningside Group, and the managing agent of both Morningside Development, LLC ("Morningside Development") and Morningside Holdings of Satyr Hill, LLC ("Morningside Holdings").4
Turner was interested in being involved in the completion of Satyr Hill for multiple reasons, including: (1) the Zoning Board had already granted the Zoning Exception, and (2) the Zoning Board had already approved the Development Plan. On November 18, 1997, Turner provided Strutt with a letter of intent by Morningside Holdings in connection with its proposed purchase of Satyr Hill. At that time, Turner was aware (1) that the NSI Drawings had been incorporated into the Development Plan, and (2) that NSI asserted that any future use of the NSI Drawings required its express consent. Morningside Holdings subsequently agreed to purchase Satyr Hill from Strutt for the sum of $900,000, and the transaction was closed on December 22, 1997.
Thereafter, in January 1998, Turner and NSI met to discuss NSI's future involvement in Satyr Hill. On that occasion, Turner advised NSI that the design of Satyr Hill needed to conform with a prototype established by Morningside Development at other assisted living facilities (the "Prototype"). Turner then informed NSI that it would need to revise the NSI Drawings in order to conform to the Prototype, and NSI indicated that it was willing to make such revisions. After this January 1998 meeting with Turner, NSI became concerned that the Defendants did not intend to continue to utilize it as the architect for Satyr Hill. When Turner confirmed in a later telephone conversation that he was considering other architects, NSI informed Turner that while he could retain and utilize a different architect on the Project, he had no authority to utilize the NSI Drawings, including the building footprint and exterior elevations which had been incorporated into the Development Plan. On January 26, 1998, in order to confirm its position, NSI's attorney wrote to Turner, as "President [of] The Morningside Group," and advised that the NSI Drawings were not to be utilized without NSI's express written consent.
Turner then decided not to retain NSI for any further architectural services with regard to Satyr Hill. Instead, Morningside Development entered into what was called a "design build" contract with Hamil Commercial, Incorporated ("Hamil") for the construction of Satyr Hill, and Hamil retained a different architectural firm, EDG Architects ("EDG").5 Thereafter, Turner provided Hamil with a copy of the NSI Drawings, as well as with the Development Plan approved by the Zoning Board. In turn, Hamil gave these materials to EDG.
Subsequently, Turner met with EDG and requested that it re-design Satyr Hill to conform to the Prototype. However, he specifically instructed EDG to avoid any modifications to the Development Plan that would necessitate obtaining a new Zoning Exception, because doing so would be both time-consuming and costly. EDG then re-designed Satyr Hill according to Turner's instructions, and EDG's architectural drawings were incorporated into amended development plans for Satyr Hill. The Defendants submitted these amended development plans to the Zoning Board, advising the Board that the amendments were being made, inter alia, for "minor footprint revisions" and "minor changes to architectural elevations of buildings." The Zoning Board approved the amended development plans, and Morningside Development then completed the construction of Satyr Hill.
In July 1998, NSI filed its complaint against the Defendants in the District of Maryland. In an amended complaint filed in March 1999, NSI alleged that the Defendants had infringed upon NSI's copyright6 in the construction of Satyr Hill by copying the footprint and exterior elevations from the NSI Drawings, in contravention of federal copyright law, i.e., 17 U.S.C. § 501(a).7 After extensive discovery, this case proceeded to trial before the court in October 2000. After receipt of post-trial briefs, the court, by Opinion filed on February 16, 2001, ruled in favor of NSI and against the Defendants. Nelson-Salabes, Inc. v. Morningside Holdings of Satyr Hill, L.L.C., Opinion, No. B-98-2226, 2001 WL 419002 (D.Md. Feb. 16, 2001) (the "Opinion"). Having found the Defendants liable for copyright infringement, the court then analyzed the question of an appropriate damage award, utilizing the provisions of 17 U.S.C. § 504(b).8
In so doing, the court first denied NSI's claim for actual damages because it was speculative. Opinion at...
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