Robinson v. Geo Licensing Co., L.L.C., No. JFM-98-4168.

• Decision Date: 14 November 2001
• Docket Number: No. JFM-98-4168.,No. JFM-99-1956.
• Citation: 173 F.Supp.2d 419
• Parties: James G. ROBINSON, et al., Plaintiffs, v. GEO LICENSING COMPANY, L.L.C., et al., Defendants. Thomas W. Glynn, et al., Consolidated Plaintiffs, v. Geophone Company, L.L.C., Consolidated Defendant.
• Court: U.S. District Court — District of Maryland

173 F.Supp.2d 419

James G. ROBINSON, et al., Plaintiffs, v. GEO LICENSING COMPANY, L.L.C., et al., Defendants.

Thomas W. Glynn, et al., Consolidated Plaintiffs, v. Geophone Company, L.L.C., Consolidated Defendant.

No. JFM-98-4168.

No. JFM-99-1956.

United States District Court, D. Maryland.

November 14, 2001.

COPYRIGHT MATERIAL OMITTED

Charles S. Fax, Shapiro, Sher and Guinot, Baltimore, MD, for James G. Robinson.

Richard L. Brusca, Skadden, Arps, Slate, Meagher and Flom, LLP, Washington, DC, Dana M.S. Wilson, Shapiro, Sher and Guinot, Baltimore, MD, Rignal W. Baldwin, Jr., Brassel and Balwin, Annapolis, MD, for Geophone Co.

Alfred L. Scanlan, Jr., Law Offices of Alfred L. Scanlan, Jr., PA, Baltimore, MD, Timothy C. Lynch, Shar, Rosen and Warshaw, LLC, Baltimore, MD, for GEO Licensing Co., L.L.C.

MEMORANDUM

MOTZ, District Judge.

Plaintiff, James G. Robinson, has moved for leave to file a second amended complaint against Defendant Thomas W. Glynn, Consolidated Plaintiff Glynn Scientific, Inc. ("GSI") and Consolidated Defendant Geophone Company L.L.C. ("Geophone"). Robinson seeks to add facts to support his previous allegations against Glynn of fraud¹ and violations of 15 U.S.C. § 78(j)(b), 17 C.F.R. § 240.10b-5 and Md. Code Ann., Corps. & Ass'ns §§ 11-301, 11-703. Robinson also seeks to add a Count IV that alleges a state law breach of contract claim against Glynn, GSI and Geophone.² Robinson's motion for leave to file a second amended complaint will be granted.

I.

In the early 1990's, Glynn invented a signal processing technology called Convolutional Ambiguity Multiple Access ("CAMA").³ In or near the beginning of 1995, he organized what is now Geophone to build and market a satellite telecommunications system based upon CAMA. Also in 1995, Glynn was first introduced to Robinson by Harvey Lamm, whom Glynn had hired to help find investors for Geophone. According to Robinson, Glynn told him that Geophone would use CAMA to gain an advantage over its competitors. Robinson also claims that Glynn told him that as "Chairman of Geophone and founder and President of GSI, which would perform network, systems, and design engineering services for Geophone, [Glynn] had extensive engineering expertise and would be a key participant in Geophone's operational success." Pl.'s Sec. Am. Compl. ¶ 13.

In July 1995, Robinson loaned Geophone $1 million to finance a program to develop and test two demonstration terminals that would utilize CAMA (the "field test"). On August 15, 1995, Robinson and Geophone signed a letter of intent setting out the terms of this loan and of a subsequent investment in Geophone by Robinson of up to $24 million. Although the letter of intent was primarily between Geophone and Robinson, Glynn signed the contract on his own behalf and on behalf of GSI with regard to paragraph 1(j). This paragraph states:

Thomas W. Glynn hereby agrees that he will cause Glynn Scientific, Inc. to provide R & D support (1) for the Development and Field Testing Program on a contract basis on terms and conditions which conform to the budget and chronological activity schedule for all phases of the Development and Field Testing program, and (2) for subsequent development programs of GEO.

In October 1995, the field test occurred. Robinson claims that Glynn told him that the test was successful in that it verified the Geophone demonstration terminals actually transmitted, received and processed CAMA. In fact, the demonstration terminals did not use CAMA. However, Robinson relied on Glynn's representation and loaned Geophone an additional $14 million pursuant to the letter of intent.

In April 1996, Robinson filed suit against Glynn in Maryland state court, alleging breach of fiduciary duty, fraud and conversion, all arising out of Glynn's alleged mismanagement of Geophone funds. In November 1997, the Maryland state court action was settled. Under the settlement agreement, Robinson purchased Glynn's majority interest in Geophone. He invested an additional $3 million in Geophone and agreed to pay Glynn approximately $1 million if and when certain operating milestones were met. Robinson alleges that he entered into this agreement in reliance on "Glynn's repeated and continuing representations that the Geophone System used CAMA." Pl.'s Sec. Am. Compl. ¶ 46. It was not until sometime in 1998 that Robinson had actual notice that the Geophone system did not use CAMA.

Robinson filed his initial complaint in this case on December 22, 1998 and then filed an amended complaint on April 20, 1999. On November 1, 2000, Judge Young stayed all proceedings for a period of 120 days because Glynn had filed a state court action against Geophone's attorney that could have caused a conflict of interest. On March 5, 2001, Judge Young continued the stay for an additional 90 days. On June 11, 2001, I continued the stay of all proceedings until June 30, 2001 after the parties advised me that Geophone was retaining new counsel. On July 9, 2001, Rignal W. Baldwin, Jr. was substituted for Charles S. Fax and Dana M.S. Wilson as Geophone's counsel. On July 12, 2001, Robinson filed this motion for leave to file a second amended complaint.

II.

Rule 15(a) of the Federal Rules of Civil Procedure requires that leave to amend a pleading "be freely given when justice so requires." Upholding the letter and the spirit of this rule, "leave to amend a pleading should be denied only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile." Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir.1999) (quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)) (emphasis in original). A delay in bringing a proposed amendment is insufficient reason to deny leave to amend. Id.

Glynn and GSI argue that Robinson's motion should be denied because it is futile. They contend that Count IV would not survive a motion to dismiss for failure to state a claim or a motion for summary judgment on the grounds that the claim is time barred. Glynn and GSI also argue that granting the motion would prejudice them because they did not have notice of the new claim and because it is a collusive suit.

A.

Count IV of Robinson's second amended complaint would survive a motion to dismiss for failure to state a claim upon which relief could be granted. Under Maryland law, "a complaint for breach of contract must `allege with certainty and definiteness facts showing a contractual obligation owed by the defendant to the plaintiff and a breach of that obligation by the defendant.'" Yousef v. Trustbank Sav., F.S.B., 81 Md.App. 527, 568 A.2d 1134, 1137 (Spec.App.1990) (quoting Cont. Masonry v. Verdel Constr. Co., 279 Md. 476, 369 A.2d 566 (Md.1977)). Robinson's second amended complaint alleges with sufficient detail that Glynn, GSI and Geophone all owed Robinson a contractual duty pursuant to the letter of intent dated August 15, 1995 and that all three parties breached their duty to Robinson. The letter of intent is attached as an exhibit to the new complaint.

Glynn and GSI argue that their only obligation pursuant to paragraph 1(j) of the letter of intent was to provide R & D support for Geophone's Development and Field Testing program. They further argue that they provided such support and that it complied with the contract, leaving Robinson with no viable claim. Glynn and GSI's argument relies on a particular interpretation of the letter of intent. However, Robinson has stated a claim if a different, plausible interpretation of the letter of intent is considered. Robinson has alleged that the letter of intent required Glynn and GSI to provide R & D support for a field test of a system based on CAMA. Pl.'s Sec. Am. Compl. ¶ 74. Robinson further alleges that Glynn did not cause GSI to provide and GSI did not provide R & D support for such a system. Id. ¶ 79, 80. Viewing the facts in the light most favorable to Robinson, these allegations are sufficient to state a claim upon which relief could be granted and do not require me to deny Robinson leave to amend on the grounds of futility.

B.

On the present record Count IV of Robinson's new complaint would also survive a motion for summary judgment on statute of limitations grounds. Under Maryland law, "a cause of action for breach of contract accrues, and the statute of limitations begins to run, when the plaintiff knows or should have known of the breach." Vigilant Ins. Co. v. Luppino, 352 Md. 481, 723 A.2d 14, 17 (1999) (citing Poffenberger v. Risser, 290 Md. 631, 431 A.2d 677 (1981)). Glynn and GSI argue that Robinson had constructive notice that the field test did not use CAMA in November 1997, when he gained a controlling interest in Geophone. Glynn and GSI contend that Geophone's engineers knew that the field test had not used CAMA and they had become Robinson's agents at that point. In addition, Glynn and GSI argue that Robinson had actual notice that the field test did not use CAMA by May 1998. They contend that Robinson's CPA and confidante, Charles Bauermann, and Geophone's chief engineer, Steve Chen, both told Robinson that the field test did not use CAMA by that time. Under either of their theories, Count IV of the Second Amended Complaint, filed on July 12, 2001, would be time barred under Maryland's three-year statute of limitations. Md.Code Ann., Cts. & Jud. Proc. § 5-101.

1.

There is no doubt that in some instances the knowledge of Geophone's engineers, who had become Robinson's agents, could be imputed to Robinson's their principal even though these engineers acquired the knowledge prior to the commencement of the principal agent relationship. This does not mean that all of the knowledge of Geophone's engineers must be imputed. See Martin Marietta Corp. v. Gould Inc., 70 F.3d 768, 775 (4th Cir.1995). Under Maryland law, if the interests of Geophone's engineers were adverse to the interests of Robinson at the...