Volkman v. Hanover Invs., Inc.

• Decision Date: 25 November 2015
• Docket Number: No. 1595, Sept. Term, 2014.,1595, Sept. Term, 2014.
• Parties: Susan VOLKMAN v. HANOVER INVESTMENTS, INC., et al.
• Court: Court of Special Appeals of Maryland

225 Md.App. 602

126 A.3d 208

Susan VOLKMAN

v.HANOVER INVESTMENTS, INC., et al.

No. 1595, Sept. Term, 2014.

Court of Special Appeals of Maryland.

Nov. 25, 2015.

William J. Egan (Oppenheimer, Wolff & Donnelly, LLP, Minneapolis, MI, Richard M. Barnes, Malcolm S. Brisker, Goodell, DeVries, Leech & Dann, LLP, Baltimore, MD), on the brief, for appellant.

Thomas W. Repczynski (Gregory P. Johnson, Offit, Kurman PA, on the brief), Tysons Corner, VA, for appellee.

Panel: BERGER, ARTHUR and REED, JJ.

BERGER, J.

This appeal arises out of two orders of the Circuit Court for Montgomery County.

The first denied Susan Volkman's ("Volkman's"), appellant's, motion for summary judgment against Hanover Investments, Inc.; Hanover's shareholders; and Hanover's wholly owned subsidiary, One Call Concepts, Inc. ("OCC") (collectively, "Hanover"), appellees. Secondly, Volkman appeals the trial court's order granting a declaratory judgment in favor of Hanover. Volkman contends the circuit court erred in denying her motion for summary judgment and rendering a declaratory judgment while another matter involving the same issues was pending in the court of another state. Additionally, Volkman avers that the circuit court erred in interpreting and applying the contractual agreement between Volkman and Hanover.

On appeal, Volkman presents three issues for our review.¹ We rephrase the first issue as follows:

Whether the circuit court erred in rendering a declaratory judgment while an action involving the same parties and same issues was pending before a court in Minnesota.

For the reasons set forth below, we shall reverse the judgment of the Circuit Court for Montgomery County. As a result, we need not address the issues presented in Volkman's latter two questions due to our determination on the first issue.

FACTUAL AND PROCEDURAL BACKGROUND

OCC is a Maryland corporation that exists to serve utility companies and process telephone calls from individuals who intend to undertake excavation projects. OCC maintains contracts for its services in a number of states across the county. At the time OCC was incorporated, it was owned by Thomas Hoff ("Hoff"). Volkman was hired by OCC in 1984. When Volkman was hired, she held the title of Director of Operations. In 1993, Volkman entered into an employment agreement whereby Volkman would serve as vice president of OCC in its corporate office in Minnesota. Under this agreement, Volkman could only be terminated for "Good Cause," or upon fifteen days' prior notice.

Volkman's responsibilities as vice president of OCC included, but were not limited to, facilitating acquisitions, making hiring decisions, and establishing policies and procedures. Additionally, Volkman was tasked with maintaining a contract in Minnesota with Gopher State One Call ("GSOC"). Volkman was a longtime employee of OCC who had worked her way up through the organization. She was highly compensated, earning in excess of $400,000 per year.

In or around 2007, Hoff expressed an intent to divest himself of his interest in OCC and retire. In recognition that much of OCC's value is derived from Hoff's association with the company, Hoff created Hanover Investments, Inc., as a holding company that existed for the sole purpose of owning shares of OCC. Under this arrangement, Hoff personally secured financing for Hanover to acquire OCC. OCC shares served as collateral for the debt. As OCC and Hanover paid down the debt, the liens on the shares were released, and the purchase price was disbursed to Hoff. As a result, Hoff was able to gradually back away from the company.

In pursuit of Hoff's objective to maintain the successive management of OCC, Hoff sold shares of Hanover to certain longtime OCC employees, including Volkman, at nominal prices. Hoff sold a 19% interest, the single largest interest, to Volkman. In consideration for her shares in Hanover, Volkman entered into a shareholders' agreement and paid $190 for her interest in Hanover.² Under the terms of the shareholders' agreement, shareholders subscribed to a voting trust agreement whereby the shareholders could not vote their shares until Hoff's financial interest in Hanover was terminated. Additionally, Hoff encouraged successive management by requiring Hanover to redeem the shares of any OCC employee who is terminated for good cause at a 90% discount. The shareholders' agreement provides, "[i]f a Shareholder's employment with OCC is terminated for Good Cause and the Board of Directors of the Company agrees that OCC terminated the Shareholder for Good Cause, the Company shall redeem ... [the] Shareholder's Common Stock."

Notably, the shareholders' agreement provides that " ‘[g]ood [c]ause’ shall be construed to mean, but not be limited to, the following:"

(a) dishonesty of a Shareholder in a material matter;

(b) the use of narcotics or alcohol by Shareholder to an extent which materially interferes with Shareholder's performance of his duties as an employee as he normally performs such duties;

(c) repeated failure by Shareholder to devote proper time and attention to his duties as an employee of OCC or the Company;

(d) material and repeated failure by Shareholder to carry out the directions, instructions, policies, rules, regulations or decisions of the Board of OCC or the Company;

(e) conviction of a crime involving moral turpitude or reflection upon the reputation of the Company, but excluding minor traffic violations and similar offenses;

(f) repeated and unexcused absenteeism after reasonable notice from the Board of OCC or the Company; or

(g) the material breach by Shareholder of any of his obligations or agreements contained in the Agreement, his or her employment agreement with the Company, the Voting Trust Agreement of the Company, the Employee Restriction Agreement or any other agreement to which the Company or OCC and the Shareholder are parties.

On January 8, 2010, OCC terminated Volkman's employment. The parties disagree as to whether the termination was for good cause. Hanover avers that Volkman's termination was warranted because she failed to properly manage the operation of OCC's call center in Minnesota, which contributed to the loss of the GSOC account. Hanover further alleges that under Volkman's leadership, the Minnesota center failed to record approximately 8,400 phone calls resulting in a breach of the GSOC contract, and Volkman's subordinates were uncomfortable with her management techniques.

Volkman, for her part, argues that she was not responsible for the lost call records, and her difficult relationship with GSOC was the result of an unreasonable personal vendetta on the part of the management at GSOC. Further, Volkman argues that her relationship with GSOC could not have been a significant contributing factor to the termination of that contract, because by the time GSOC terminated the contract, Volkman had already been removed from Minnesota operations. Finally, Volkman denied that her relationship with any of her subordinates was strained or unduly strenuous. Indeed, Volkman maintains that she was not terminated because of her job performance, but rather because her supervisors succumbed to pressure from an influential client to have her terminated.

On February 3, 2010, Hanover sent notice to Volkman that it was redeeming Volkman's stock. Thereafter, Hanover commenced an arbitration proceeding to determine the appropriate redemption price for Volkman's stock under the shareholders' agreement as a result of OCC terminating her employment. At that time, Volkman's stock was determined to be valued at $19,000. Hanover further maintained that pursuant to the shareholders' agreement it was entitled to redeem Volkman's stock at a 90% discount, or $1,900.

On April 17, 2012, Volkman filed an action (the "employment action") against OCC and Hoff in Montgomery County. The record reflects only that the parties stipulated to a dismissal with prejudice of this action on March 22, 2013. Hanover avers that Volkman was terminated for good cause and that this determination was pivotal in both the employment action and the declaratory judgment action which is the subject of this appeal. Aside from the stipulated dismissal, however, the record is silent as to the substance of the claims or any adjudications rendered in the employment action.

On January 16, 2013, while the employment action was pending, Volkman filed a breach of contract action in Minnesota alleging that Hanover violated the shareholders' agreement by redeeming her stock at a 90% discount. In the breach of contract action Volkman sought specific performance of the shareholders' agreement. In response to the Minnesota breach of contract action, Hanover filed a motion to dismiss Volkman's case in Minnesota for lack of personal jurisdiction on March 15, 2013. On April 25, 2013, the Minnesota trial court denied Hanover's motion to dismiss. Hanover filed an interlocutory appeal challenging the denial of its motion to dismiss. Thereafter, on March 3, 2014, the Minnesota Court of Appeals affirmed the trial court's denial of Hanover's motion to dismiss the Minnesota action and remanded the case back to the trial court. See Volkman v. Hanover Inv., Inc., 843 N.W.2d 789 (Minn.Ct.App.2014).

On June 26, 2013, while Hanover's Minnesota appeal was pending, Hanover filed a declaratory judgment action in the Circuit Court for Montgomery County seeking to have the circuit court declare that Hanover fulfilled its obligations with regard to the redemption of Volkman's shares under the shareholders' agreement. Volkman and Hanover filed cross-motions for summary judgment. Neither party requested a hearing on their cross-motions for summary judgment. The parties both argued that they were entitled to judgment as a matter of law, but Volkman also argued that it was improper to render a declaratory judgment while the matter in Minnesota was still pending. Both motions for summary judgment were denied. Because no hearing was requested or held, the record contains no...