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Client Network Services, Inc. v. Smith

United States District Court, D. Maryland, Southern Division

September 8, 2017

STEPHEN A. SMITH, Defendant.



         This is a dispute between Plaintiff Client Network Services, Inc. (“CNSI”) and its former employee, Defendant Stephen A. Smith, stemming from the termination of CNSI's agreement with the State of Louisiana for CNSI to provide Medicaid Management Information System (“MMIS”) services for the state (“LMMIS Agreement”). Pending are CNSI's Motion for Partial Summary Judgment as to Counts I and II of the Complaint, ECF No. 45, and Smith's Cross-Motion for Summary Judgment, ECF No. 46.[1] I find that neither Smith's whistleblower argument nor his statute of limitations argument bars CNSI's claims on the record before me. Additionally, I find genuine disputes of material facts exist as to all of CNSI's claims. Accordingly, I will deny both parties' motions and this case shall proceed to a bench trial as scheduled.

         Standard of Review

         Summary judgment is proper when the moving party demonstrates, through “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials, ” that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c)(1)(A); see Baldwin v. City of Greensboro, 714 F.3d 828, 833 (4th Cir. 2013). If the party seeking summary judgment demonstrates that there is no evidence to support the nonmoving party's case, the burden shifts to the nonmoving party to identify evidence that shows that a genuine dispute exists as to material facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 & n.10 (1986). The existence of only a “scintilla of evidence” is not enough to defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). Instead, the evidentiary materials submitted must show facts from which the finder of fact reasonably could find for the party opposing summary judgment. Id.

         When a court is presented with cross-motions for summary judgment, it must “rule on each party's motion on an individual and separate basis, determining, in each case, whether a judgment may be entered in accordance with the Rule 56 standard.” Towne Mgmt. Corp. v. Hartford Acc. & Indem. Co., 627 F.Supp. 170, 172 (D. Md. 1985). “[T]he facts relevant to each [are] viewed in the light most favorable to the non-movant.” Lynn v. Monarch Recovery Mgmt., Inc., No. WDQ-11-2824, 2013 WL 1247815, at *1 n.5 (D. Md. Mar. 25, 2013) (quoting Mellen v. Bunting, 327 F.3d 355, 363 (4th Cir. 2003)).


         CNSI argues that it is entitled to summary judgment on its Breach of Contract (Count I) and Breach of the Duty of Loyalty (Count II) claims because the relevant material facts are undisputed. Pl.'s Mot. 22, 28. Smith contends that there is no genuine dispute of material facts with regard to CNSI's other two claims, Tortious Interference with Contractual Relations (Count III) and Civil Conspiracy (Count IV), and therefore he is entitled to summary judgment on those claims. Def.'s Mem. 27, 30. Additionally, Smith insists that CNSI's entire action is barred for two reasons: (1) CNSI's claims are barred due to the modified statute of limitations found in Smith's At Will Employment Agreement (“Agreement”); and, (2) whistleblower protections and public policy require summary judgment to be entered in favor of Smith. Id. at 14, 17. I will address Smith's claims first.

         Statute of Limitations

         Smith argues that a clause in his employment agreement with CNSI shortens “the statute of limitations to one year for any claim arising out of [Smith's] employment, ” and that CNSI learned of Smith's alleged wrongdoing more than a year before it filed suit. Id. at 14. CNSI counters that this clause applies only to claims brought by Smith and not those brought by CNSI. Pl.'s Opp'n 13-14. There is no genuine dispute of material fact regarding this issue - only contractual interpretation[2] - and as such, I will resolve this issue as a matter of law.

The clause states, in full:
Waiver of Jury Trial and Statute Limitations. The parties hereby expressly waive any right to a trial by jury for any disputes arising out of Employee's employment with CNSI and/or the termination thereof, regardless of whether or not such disputes specifically arise under this Agreement. Employee hereby agrees that any claim or lawsuit arising out of the Employee's employment with CNSI and/or the termination thereof, regardless of whether or not such dispute specifically arises under this Agreement, must be filed within one year after the date of the employment action that is the subject of such claim or lawsuit and Employee hereby waives any statute of limitations to the contrary.

Agr. ¶ 14, ECF No. 1-1 (emphasis added and capitalization removed). This clause is unambiguous. Quite clearly, while referring to time limits and to the modified statute of limitations, the Agreement only references the responsibilities of the Employee. Id. (“Employee hereby agrees that any claim . . . must be filed within one year . . . . Employee hereby waives any statute of limitations to the contrary.”) (emphasis added). I find that that the statute of limitations provisions were intended to apply unilaterally to Smith. Unilateral statute of limitations provisions in a contract are permissible under Maryland law when “supported by a ‘valid justification.'” See Storto Enters., Inc. v. Exxonmobil, Oil Corp., No. WDQ-10-1630, 2011 WL 231877, at *5 (D. Md. Jan. 24, 2011) (quoting Walther v. Sovereign Bank, 872 A.2d 735 (Md. 2005) (finding that a unilateral arbitration clause is enforceable when “supported by a ‘valid justification'”)); see also Ceccone v. Carroll Home Servs., LLC, No. 85, Sept. Term, 2016, 2017 WL 3205290, at *6 (Md. July 28, 2017) (“[T]he validity of a contractual provision that purports to shorten a statutory limitations period is measured by its reasonableness and by whether certain defenses to contract formation can be established. . . . Among the factors to be considered in assessing reasonableness are the subject matter of the contract, the duration of the shortened limitations period compared to the period that would otherwise govern, the relative bargaining power of the parties to the contract, and whether the shortened limitations period is a one-sided provision that applies to one party but not the other.”). CNSI does not, however, provide any justification for the unilateral term.

         Without any justification, a one-sided term such as this may be substantively unconscionable and, if also procedurally unconscionable, void. See Freedman v. Comcast Corp., 988 A.2d 68, 85 (Md. Ct. Spec. App. 2010) (quoting Walther v. Sovereign Bank, 872 A.2d 735 (Md. 2005)). Relevantly, the Agreement provides

If any term or provision of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Agreement, but shall be confined in its operation to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered. Notwithstanding the above, it is the intent and desire of the parties that this Agreement and all of its terms be enforceable and in the event any provision as presently set forth is determined to be invalid by a court of competent jurisdiction, the parties ...

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