Hanover Investments, Inc. et al.
Susan J. Volkman
Argued: September 7, 2016
Court for Montgomery County Case No. 335496V
Barbera, C.J., Greene, Adkins, McDonald, Watts, Getty,
Harrell, Jr., Glenn Judge, Specially Assigned) JJ.
declaratory judgment action has been lauded as a "simple
judicial device for speedy adjudication of legal
differences" that serves "the important social
function of deciding controversies at their
inception." The fact that there may be other causes of
action available to resolve the same issues in a particular
case does not preclude a party from pursuing declaratory
relief. However, this Court has consistently held that a
trial court should not entertain a declaratory judgment
action when there is already pending another action between
the same parties concerning substantially the same issues
unless there are "unusual and compelling
Susan J. Volkman was a managerial employee of Petitioner One
Call Concepts, Inc. ("OCC"), and, as a result of
that employment, a shareholder of OCC's parent,
Petitioner Hanover Investments, Inc. ("Hanover").
Both OCC and Hanover are controlled by Petitioner R. Thomas
Hoff, the founder of the two companies. When Mr. Hoff decided
that it was necessary to terminate Ms. Volkman's
employment with OCC and to redeem her shares of Hanover,
litigation ensued on several fronts. This case is a
declaratory judgment action brought by Hanover, Mr. Hoff, and
others against Ms. Volkman in the Circuit Court for
Montgomery County to vindicate the procedures it followed to
redeem her stock. However, at the time it was filed, there
was already pending, in a Minnesota state court, a breach of
contract action by Ms. Volkman against Hanover concerning the
Circuit Court declined to dismiss or stay this action in
deference to the pending Minnesota action, proceeded to
trial, and issued a declaratory judgment in favor of Hanover.
Ms. Volkman appealed. In a thorough and scholarly opinion,
the Court of Special Appeals concluded that there were not
"unusual and compelling" circumstances that
justified the issuance of a declaratory judgment by the
Circuit Court to resolve the same question at issue in the
pending litigation in Minnesota. We agree.
recount some of the underlying facts to provide context for
the legal issue before us. While the Circuit Court did not
make detailed factfindings in its oral opinion and written
order in this case, the basic facts are largely
Maryland corporation known locally by its trade name
"Miss Utility, " was founded by Mr. Hoff, a
Maryland resident. OCC operates call centers that function as
one-call clearinghouses for excavators for information on the
location of underground utility lines. It has operations in
many states, including Maryland and Minnesota.
of Susan Volkman
1984, OCC hired Ms. Volkman, who had previously worked for a
similar one-call notification center in Wisconsin. Ms.
Volkman worked her way up through the ranks of the company,
relocated to Minnesota, and by early 2010 was serving as the
manager of several locations, including OCC's Minnesota
one-call center. She reported directly to Mr. Hoff.
Volkman eventually entered into an employment agreement with
OCC dated January 1, 1993 ("Employment Agreement").
Under that agreement, OCC retained the option to terminate
Ms. Volkman's employment with or without "good
cause." In particular, she could be terminated
immediately for "good cause"; otherwise, OCC was
required to provide Ms. Volkman 15 days' notice, during
which time she would continue to be paid. The Employment
Agreement listed several examples of what might constitute
good cause (including use of illegal drugs, certain felony
convictions, and neglect of duties), but stated that these
examples were not exhaustive. The Employment Agreement
provided that it was to be construed in accordance with the
law of Maryland and included a forum selection clause
requiring any action to enforce the agreement to be filed
"in a courthouse located in Montgomery County,
of Hanover, Distribution of Shares, and the Shareholders'
2007, as Mr. Hoff contemplated retirement, he decided to sell
OCC to several of its longtime employees, including Ms.
Volkman. For that purpose, he created Hanover, a Maryland
corporation, whose sole purpose is to hold stock in OCC. Mr.
Hoff sold OCC to Hanover, and allowed selected employees,
including Ms. Volkman, to purchase shares in Hanover for a
nominal price. The shares purchased by Ms. Volkman amounted
to 19% of Hanover's stock. Under a financing arrangement,
Mr. Hoff would receive the purchase price for OCC - $26
million - over time, out of OCC's income. In the
meantime, the new shareholders of Hanover agreed to assign
the voting rights of their stock to a voting trust, for which
Mr. Hoff's counsel was trustee. At all relevant times,
Mr. Hoff has remained a board member and CEO of Hanover.
of the arrangement, the new Hanover shareholders were also
required to enter into a Shareholders' Agreement. Under
that agreement, Hanover had the right to repurchase an
employee/shareholder's shares if and when that individual
stopped working for Hanover's subsidiary, OCC. The price
to be paid for the shares in that repurchase transaction
would depend on the circumstances of the
employee/shareholder's departure from OCC. The most
pertinent provisions, for purposes of this case, deal with a
share repurchase when an employee/shareholder has been
involuntarily terminated from OCC. If OCC were to terminate
the employment of an employee/shareholder without good
cause - and Hanover's board of directors agreed that
the termination was without good cause - Hanover was
obligated to redeem the shares for their full "Fair
Market Value." If OCC were to terminate the employment of
an employee/shareholder with good cause - and
Hanover's board of directors agreed that the termination
was with good cause - Hanover would pay only 10% of the
"Fair Market Value" of the shareholder's
shares. The Shareholders' Agreement defined "good
cause" in terms similar to Ms. Volkman's Employment
the Employment Agreement, the Shareholders' Agreement
provided that it was to be construed according to Maryland
law. However, unlike the Employment Agreement, the
Shareholders' Agreement did not include a forum selection
clause. The Shareholders' Agreement provided for
arbitration of disputes concerning "the value of, or
payment for, Common Stock, " but not for any other
Volkman's Dismissal from OCC and Hanover's Redemption
of Her Stock
genesis of this lawsuit (and, as will be discussed below,
several other lawsuits as well) was Ms. Volkman's
termination by OCC.
early January 2010, Mr. Hoff called Ms. Volkman and told her
she was not to return to work. According to Ms. Volkman, Mr.
Hoff gave her no reason for her termination. In February
2010, an attorney for Mr. Hoff, OCC, and Hanover sent her
counsel a letter formally notifying Ms. Volkman that OCC had
terminated her for good cause, which would result in the
redemption of her Hanover shares. OCC eventually gave several
reasons for dismissing Ms. Volkman that it contended were
good cause under the Employment Agreement. It blamed her for
the very difficult relationship it had with a Minnesota
client, Gopher State One Call, a relationship that had been
under Ms. Volkman's purview as manager of Minnesota
operations. It noted complaints about her leadership received
from employees under her supervision. And it noted that the
Minnesota call center had lost call recordings that OCC was
contractually and legally required to retain. For her part,
Ms. Volkman contends that she was terminated not due to her
own job performance, but as a result of a vendetta against
her by the general counsel of one of OCC's Minnesota
purposes of this appeal, we need not resolve whether or not
OCC had "good cause" to terminate Ms. Volkman.
However, it is significant for understanding some of the
later court proceedings that OCC continued to pay Ms.
Volkman's salary for 15 days after she received written
notice of her termination, although this was not required by
the Employment Agreement if she had in fact been terminated
for good cause.
forth in the Shareholders' Agreement, Hanover redeemed
Ms. Volkman's stock and, on February 3, 2010, sent her a
"purchase note" for $1, 900 with a maturity date
seven years later on January 31, 2017. The cover letter
explained that Hanover's board of directors had set its
Fair Market Value at $100, 000, that Ms. Volkman's 19%
interest was therefore valued at $19, 000, and that the
payment was discounted 90% to $1, 900 under the provision of
the Shareholders' Agreement relating to terminations for
explained below, the redemption of Ms. Volkman's shares
of Hanover, as well as the underlying termination of her
employment by OCC, set off a series of legal encounters
between Hanover, its other shareholders, and OCC, on the one
hand, and Ms. Volkman on the other.
Employment Agreement Action
than two years after her termination, on April 17, 2012, Ms.
Volkman filed a lawsuit against OCC and Mr. Hoff based on the
Employment Agreement (the "Employment Agreement
Action"). As required by the forum selection clause in
that agreement, she filed her complaint in the Circuit Court
for Montgomery County. As later amended, the complaint
included a breach of contract claim against OCC based on the
Employment Agreement, along with various tort claims against
OCC and Mr. Hoff concerning her termination, some of which
referenced the interaction of the Employment Agreement with
the Shareholders' Agreement. The complaint alleged that
OCC had violated the Employment Agreement by purporting to
terminate her for good cause (1) when there was no factual
basis to support a good cause termination and (2) when OCC
knew of the "substantial ramifications" such a
termination would have on her ownership of Hanover
August 31, 2012, OCC and Mr. Hoff moved to dismiss the
amended complaint. In that motion they argued, among other
things, that Ms. Volkman would not be able to prove any
damages under the Employment Agreement because OCC had paid
Ms. Volkman "everything to which she was entitled under
the Employment Agreement, " and that any
"damages" stemming from the alleged breach of the
Employment Agreement would relate to the redemption of her
Hanover stock under the provisions of the Shareholders'
Agreement - an agreement to which OCC was not a party.
months later, the Circuit Court held a hearing on this motion
on November 2, 2012, and - on the same day - issued an order
dismissing the tort claims. With respect to the breach of
contract claim against OCC, the court ruled that Ms. Volkman
would be permitted "to prove a defective 'for
cause' termination and nominal damages, if any." The
order did not elaborate the reasons for the court's
rulings. Hanover maintains that the court's decision to
limit any award to nominal damages was based on the fact
that, even if Ms. Volkman's termination was without
cause, the Employment Agreement entitled her to only 15
days' pay from the date of termination - which she had,
in fact, already received.
March 22, 2013, Ms. Volkman voluntarily dismissed the
Employment Agreement Action with prejudice by stipulation of
counsel pursuant to Maryland Rule 2-506(a).
October 10, 2012, while the Employment Agreement Action was
pending, Hanover invoked the arbitration provision in the
Shareholders' Agreement to determine what it was required
to pay Ms. Volkman when it redeemed her stock under the
Shareholders' Agreement. The arbitrator, as designated in
the Shareholders' Agreement, was the Voting Trustee under
the voting trust, an attorney who had worked for Mr. Hoff and
his companies since the 1980s and who was a member of the
Hanover board of directors.
written decision dated October 17, 2013, the arbitrator
specifically noted that he was not deciding any issues
related to OCC's termination of Ms. Volkman
(i.e., whether or not there was "good
cause"). He calculated the amount Hanover would owe for
termination with good cause ($1, 900) and without good cause
($19, 000). However, he concluded that, regardless of whether
there was good cause or not, Hanover in fact owed her only
$10 for her Hanover shares. He reached that conclusion on the
basis of his additional finding that Ms. Volkman had violated
a separate Restriction Agreement by revealing the
relationship of OCC to Hanover when she filed her complaint
in the Employment Agreement Action. The arbitrator also
awarded the costs of the arbitration proceeding to Hanover
and against Ms. Volkman, which he computed to be $12, 740,
after subtracting the $10 awarded to Ms. Volkman for her
stock. The arbitrator acknowledged in a footnote that Ms.
Volkman had disputed the authority of the arbitrator and had
not participated in the proceeding.
August 1, 2014, Hanover successfully obtained a default
judgment in the Circuit Court for Montgomery County
confirming the award. Ms. Volkman did not appeal that
Shareholders' Agreement Action
described above, on November 2, 2012, the Circuit Court had
ruled in the Employment Agreement Action that Ms. Volkman
would be entitled, at most, to nominal damages for her breach
of contract claim against OCC and Mr. Hoff. A little more
than a month after that ruling (but before she voluntarily
dismissed that action), on December 17, 2012, Ms. Volkman
served Hanover with a complaint that she filed in a state
trial court in Minnesota. That complaint named Hanover as the
lone defendant and alleged that it had violated its contract
with her - i.e., the Shareholders' Agreement
("the Shareholders' Agreement
Action"). She alleged that Hanover did so by
"declaring the existence of Good Cause to terminate
[her] employment . . . when in fact there was no factual
basis upon which either OCC or Hanover, in the exercise of
good faith, could find Good Cause as that term is defined in
either the Employment Agreement or the Hanover
Shareholders' Agreement." She sought specific
performance - the return of her Hanover stock - a remedy
explicitly provided for in the Shareholders' Agreement.
moved to dismiss the complaint, asserting that the Minnesota
court lacked in personam jurisdiction of Hanover.
The Minnesota trial court denied that motion in April 2013.
Hanover appealed that decision to the Minnesota Court of
Appeals, which affirmed the trial court decision on March 3,
2014. Volkman v. Hanover Investments, Inc., 843
N.W.2d 789 (Minn.Ct.App. 2014).
as recounted in the next section of this opinion, by the time
the case returned to the Minnesota trial court, Hanover had
filed a declaratory judgment action in Maryland involving the
same issues, Hanover had prevailed in the Circuit Court, and
Ms. Volkman had appealed that disposition. As a result, on
January 19, 2015, the Minnesota trial court dismissed the
Shareholders' Agreement Action, but explicitly reserved
jurisdiction to reopen the case depending on the resolution
of the Maryland appeal.
Declaratory Judgment Action
26, 2013 - two months after the Minnesota trial court denied
Hanover's motion to dismiss, and while that decision was
on appeal - Hanover filed a declaratory judgment action
against Ms. Volkman in the Circuit Court for Montgomery
County ("Declaratory Judgment Action"). The
complaint was brought not only on behalf of Hanover, but also
listed other Hanover shareholders and OCC as plaintiffs.
Hanover sought a declaration concerning the rights of the
parties under the Shareholders' Agreement and, more
specifically, that it had complied with its obligations under
that agreement in connection with the redemption of Ms.
Volkman's stock as a result of her termination from
employment with OCC. On the civil cover sheet submitted with
the complaint, Hanover checked a box "yes" for
"related case pending?" and entered the number of
the Employment Agreement Action that had been dismissed some
months earlier. The case was assigned to the same judge who
had earlier been assigned to the Employment Agreement Action.
thereafter, Ms. Volkman filed an answer to the complaint in
which, in addition to admitting or denying factual
allegations and asserting affirmative defenses, she noted the
pendency of "an identical case" - the
Shareholders' Agreement Action - in Minnesota and asked
the Circuit Court to either decline jurisdiction or stay the
proceedings in the Declaratory Judgment Action pending a
final judgment in the Shareholders' Agreement Action.
March 2014, the parties filed cross-motions for summary
judgment. Repeating the defense asserted in her answer to the
complaint, Ms. Volkman asked the Circuit Court to dismiss or
stay the proceedings because of the pending Shareholders'
Agreement Action in Minnesota. In its summary judgment
motion, Hanover argued that (1) the Shareholders'
Agreement imposed no duty to complete an independent
investigation into OCC's termination of Ms. Volkman, and
(2) the dismissal of the Employment Agreement Action with
prejudice entitled Hanover to judgment as a matter of law. In
April and May 2014, the Circuit Court denied the parties'
respective motions without a hearing, and did not elaborate
on the reasons for that ruling.
trial on the merits was held on June 16 and 17, 2014. At the
close of the plaintiffs' evidence, Ms. Volkman renewed
her motion to dismiss the action in light of the pending
Shareholders' Agreement Action. The Circuit Court
declined to do so, citing Marriott Corp. v. Village
Realty & Inv. Corp., 58 Md.App. 145 (1984), for the
proposition that a declaratory judgment action could be filed