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Summit Dna, LLC v. Proove Biosciences, Inc.

United States District Court, D. Maryland, Northern Division

June 23, 2015

SUMMIT DNA, L.L.C., Plaintiff,
v.
PROOVE BIOSCIENCES, INC., et al., Defendants.

MEMORANDUM OPINION

WILLIAM D. QUARLES, Jr., District Judge.

Summit DNA, L.L.C. ("Summit") sued Proove Biosciences, Inc. ("Proove") and Proove's president, Brian Meshkin, for breach of contract and other claims. Pending is the Defendants' motion to dismiss the amended complaint. No hearing is necessary. See Local Rule 105.6 (D. Md. 2011). For the following reasons, the motion to dismiss will be granted in part and denied in part.

I. Background[1]

On March 8, 2013, Summit and Proove entered into a "Non-Exclusive Independent Sales Organization Agreement, " which was prepared by Proove. ECF No. 24 (hereinafter, "Am. Compl.") at ¶¶ 7-9. Under the agreement, "Summit was contractually engaged on a non-exclusive basis' to generate potential accounts through qualified sales leads for Proove's services." Id. at ¶ 10. In exchange, Summit would receive a commission for each account generated. Id. at ¶ 11. "Proove did not pay Summit commissions as required by the Agreement."[2] Id. at ¶ 14.

On March 24, 2014, Proove terminated the Agreement, alleging that Summit had violated the Agreement's conflict of interest provision. Id. at ¶¶ 18-20. On March 26, 2014, Summit provided notice of cure asserting that it had not breached the provision, and "then terminated the Agreement itself." Id. at ¶ 23. After the termination of the Agreement, on March 28, 2014, Meshkin, "contact[ed] business relations of Summit and ma[de] damaging false statements as to Summit." Id. at ¶ 24.

On April 18, 2014, Summit sued Proove for breach of contract and declaratory judgment, and Brian Meshkin for defamation and tortious interference with business relationships. ECF No. 1. On May 15, 2014, Proove answered the complaint, counterclaimed, and filed a third party complaint against Summit's president. ECF No. 13. On June 9, 2014, Summit filed an amended complaint alleging nine causes of action: breach of contract against Proove (Count I), declaratory judgment against Proove (Count II), defamation against Proove and Meshkin (Count III), tortious interference with business relationships against Proove and Meshkin (Count IV), fraudulent misrepresentation against Proove and Meshkin (Count V), negligent misrepresentation against Proove and Meshkin (Count VI), tortious interference with prospective economic advantage against Proove and Meshkin (Count VII), unjust enrichment against Proove and Meshkin (Count VIII), and conversion against Proove and Meshkin (Count IX). ECF No. 24.

On January 16, 2015, the Defendants moved to dismiss the amended complaint for failure to state a claim. ECF No. 36. On February 2, 2015, Summit opposed the motion. ECF No. 39. On February 20, 2015, the Defendants replied. ECF No. 40.

II. Analysis

A. Legal Standard

Under Fed.R.Civ.P. 12(b)(6), an action may be dismissed for failure to state a claim upon which relief may be granted. Rule 12(b)(6) tests the legal sufficiency of a complaint, but does not "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).

The Court bears in mind that Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Migdal v. Rowe Price-Fleming Int'l Inc., 248 F.3d 321, 325-26 (4th Cir. 2001). Although Rule 8's notice-pleading requirements are "not onerous, " the plaintiff must allege facts that support each element of the claim advanced. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 764-65 (4th Cir. 2003). These facts must be sufficient to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

This requires that the plaintiff do more than "plead[] facts that are merely consistent with a defendant's liability'"; the facts pled must "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ( quoting Twombly, 550 U.S. at 557). The complaint must not only allege but also "show" that the plaintiff is entitled to relief. Id. at 679 (internal quotation marks omitted). "Whe[n] the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief." Id. (internal quotation marks and alteration omitted).

B. Breach of Contract

Summit alleges that Proove breached the contract "by failing to pay Summit commissions pursuant to the Agreement." Am. Compl. at ¶ 29. To survive a motion to dismiss, "a complaint for breach of contract must allege facts showing a contractual obligation owed by the defendant to the plaintiff and a breach of that obligation." See Swedish Civil Aviation Admin. v. Project Mgmt. Enter., Inc., 190 F.Supp.2d 785, 791 (D. Md.2002) ( citing Cont'l Masonry Co., Inc. v. Verdel Constr. Co., Inc., 279 Md. 476, 480 (Md. 1977)). Summit provided the contract between the parties[3] and alleged in the amended complaint that Proove breached the provision requiring Proove to pay Summit commissions for generated leads. See Am. Compl. at 8; ECF No. 1, Ex. A at 2-3. This is sufficient to state a claim for breach of contract.

Proove, however, asserts that Summit cannot bring suit for breach of contract because Summit did not satisfy a condition precedent to Proove's performance. ECF No. 37 at 7-8. Under Maryland law, [4] a condition precedent "a fact, other than mere lapse of time, which, unless excused, must exist or occur before a duty of immediate performance of a promise arises." Chirichella v. Erwin, 310 A.2d 555, 557 (Md. 1973); see also Aronson & Co. v. Fetridge, 957 A.2d 125, 144 (Md. Ct. Spec. App. 2008). "Generally, when a condition precedent is unsatisfied, the corresponding contractual duty of the party whose performance was conditioned on it does not arise." B & P Enters. v. Overland Equip. Co., 758 A.2d 1026, 1038 (Md. Ct. Spec. App. 2000)), cert. denied, 392 Md. 726, 898 A.2d 1005 (2006). "[H]owever, because of the potentially severe implications of the imposition of a condition precedent, courts have been careful to distinguish a condition precedent from a covenant, which ordinarily requires only substantial compliance.'" Gebhardt & Smith LLP v. Md. Port Admin., 982 A.2d 876, 896 (Md. Ct. Spec. App. 2009) (quoting B & P Enters., 758 A.2d at 1038).

"Maryland adheres to the principle of the objective interpretation of contracts." Cochran v. Norkunas, 919 A.2d 700, 709 (Md. 2007). "If a contract is unambiguous, the court must give effect to its plain meaning and not contemplate what the parties may have subjectively intended by certain terms at the time of formation." Nova Research, Inc. v. Penske Truck Leasing Co., L.P., 952 A.2d 275, 283 (Md. 2008). "It is a fundamental principle of contract law that it is improper for the court to rewrite the terms of a contract, or draw a new contract for the parties, when the terms thereof are clear and unambiguous, simply to avoid hardships.'" Calomiris v. Woods, 727 A.2d 358, 368 (Md. 1999) (quoting Canaras v. Lift Truck Services, 322 A.2d 866, 873 (Md. 1974)).

"The question whether a stipulation in a contract constitutes a condition precedent is one of construction dependent on the intent of the parties to be gathered from the words they have employed and, in case of ambiguity, after resort to the other permissible aids to interpretation..." Aronson & Co., 957 A.2d at 144-45 (internal quotations omitted). "Although no particular form of words is necessary in order to create an express condition, such words and phrases as if' and provided that, ' are commonly used to indicate that performance has expressly been made conditional, as have the words when, ' after, ' as soon as, ' or subject to...." Chirichella, 310 A.2d at 557 (internal citations omitted).

Proove alleges that Summit violated the Conflict of Interest provision of the contract. ECF No. 37 at 8. The Conflict of Interest provision states:

[Summit] shall not represent any individual or company directly or indirectly competing with [Proove] by offering same or similar Services(s) during the term of this Agreement and in accordance with Confidential Information, ...

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