United States District Court, D. Maryland
RUDOLPH J. GEIST, et al., Plaintiffs,
HISPANIC INFORMATION & TELECOMMUNICATIONS NETWORK, INC., Defendant.
Xinis, United States District Judge.
in this action is a motion to dismiss Counts III, IV, V, and
VI of Plaintiffs' Second Amended Complaint, filed by
Defendant, Hispanic Information and Telecommunications
Network, Inc. (“HITN”), ECF No. 43. The issues
are fully briefed, and the Court now rules pursuant to Local
Rule 105.6 because no hearing is necessary. For the following
reasons, HITN's motion to dismiss is GRANTED in part and
DENIED in part.
Rudolph Geist is the sole member and Managing Partner of
Plaintiff RJGLaw LLC,  a limited liability company formed under
the laws of the State of Maryland from July 2001 through
February 2-15, now organized under the laws of the District
of Columbia. ECF No. 41 at ¶¶ 3-5. Defendant
Hispanic Information and Telecommunications Network, Inc.
(HITN) is a non-profit media corporation that is incorporated
and principally conducts business in New York. Id.
at ¶ 6.
United States, radio frequencies are regulated by the Federal
Communications Commission through the issuance of
“spectrum licenses, ” which authorize a licensee
to use a specific portion of the electromagnetic spectrum.
ECF No. 1-1 at ¶ 7. Spectrum licensees often enter into
“Individual Use Agreements” (IUAs) with third
parties to authorize the third party's use of all or a
portion of the holder's radio spectrum for commercial
purposes. See ECF No. 41 at ¶¶ 7-8, 12;
see also Service Agreement, ECF No. 1-1. Defendant
HITN holds 90 Educational Broadband Service
(“EBS”) spectrum licenses, and leases these
licenses through IUAs to third parties, including Clearwire
Corporation and its affiliates (collectively,
“Clearwire”). ECF No. 41 at ¶¶ 13 &
April 24, 2012, Plaintiffs, acting in the corporate capacity
of RJGLaw, agreed to provide to HITN auditing, consulting,
and spectrum acquisition services regarding HITN's
relationship with Clearwire. Id. at ¶¶
23-28. The terms of this agreement were memorialized in a
written contract and signed by both parties (“Service
Agreement”). See Service Agreement, ECF No.
1-1; see also ECF No. 41 at ¶ 25. The Service
Agreement establishes the scope of Plaintiffs' work and
compensation. Some terms of payment and service length differ
depending on whether Plaintiffs' work is classified as
auditing, consulting, or spectrum acquisition. See
generally ECF No. 1-1.
Second Amended Complaint alleges that around the time RJGLaw
contracted with HITN in April 2012, HITN was negotiating with
Clearwire to lease a spectrum license portfolio (“T2
Transaction”). ECF No. 41 at ¶ 18. As part of
RJGLaw's contract with HITN, RJGLaw reviewed the terms of
HITN's proposed agreement with Clearwire and advised them
that Clearwire's present offer of $84, 787, 500
“vastly undervalued HITN's spectrum rights at issue
in the transaction.” Id. at ¶ 43-44.
Nonetheless, Plaintiffs allege that HITN was prepared to
accept the offer because HITN “viewed closing of the T2
transaction as essential for the survival of the
company” due to HITN's “dire financial
condition at the time.” Id. at ¶¶
45. HITN's situation changed when RJGLaw discovered that
Clearwire owed approximately $3 million to HITN for existing
spectrum license leases. Id. at ¶¶ 65-68.
Plaintiff further alleges that as a result of RJGLaw's
advice regarding the true value of HITN's spectrum
portfolio and audit discoveries, HITN paused the T2
Transaction negotiation “to hold out for a better deal
in the future, ” and did not resume negotiation until
2014. Id. at ¶¶ 46, 47, 82.
worked for HITN under the Services Agreement through
“at least October 2013, ” although there was a
series of disagreements regarding outstanding payment to
Plaintiffs for services rendered to HITN. ECF No. 41 at
¶ ¶50-51. At or around March 2014, HITN
“demanded that [Plaintiffs] agree to an amended
Services Agreement to reduce the compensation HITN would owe,
” and when Plaintiffs refused, HITN terminated the
Services Agreement. Id. at ¶ 54.
August 2016, HITN completed a spectrum lease agreement with
Clearwire valued at approximately $267, 000, 000.
Id. at ¶¶ 60-61. Plaintiffs allege that
with the “exception of the price paid for the spectrum,
the structure of the T2 Transaction was substantially
identical to the T2 Transaction proposed in 2012.”
Id. at ¶ 61. The difference paid between the
proposed 2012 transaction and final 2016 transaction is
approximately $182, 812, 500. Id. at ¶ 62.
Plaintiffs claim they have yet to be paid pursuant to the
filed suit on November 4, 2016. See ECF No. 1. On
April 5, 2017, with the leave of the Court, Plaintiffs filed
a Second Amended Complaint, asserting seven claims premised
on breach of contract (Counts I & III), breach of duty of
good faith and fair dealing (Count IV), declaratory judgment
(Count V), and unjust enrichment (Count VI). ECF No. 41.
Defendant then moved to dismiss all claims related to the T2
Transaction (Counts III, IV, V, and VI) under Federal Rule of
Civil Procedure 12(b)(6). ECF No. 43.
Standard of Review
ruling on a motion under Rule 12(b)(6), the court must
“accept the well-pled allegations of the complaint as
true” and “construe the facts and reasonable
inferences derived therefrom in the light most favorable to
the plaintiff.” Ibarra v. United States, 120
F.3d 472, 474 (4th Cir. 1997). In addition to the complaint,
the court “may consider any written instrument attached
to the complaint as an exhibit or incorporated in the
complaint by reference, as well as documents upon which the
complaint relies and which are integral to the
complaint.” Subaru Distribs. Corp. v. Subaru of
Am., Inc., 425 F.3d 119, 122 (2d Cir. 2005); see
also Philips v. Pitt County Memorial Hosp., 572 F.3d
176, 180 (4th Cir. 2009). Here, Plaintiffs' Complaint
attaches and incorporates the Service Agreement; because the
agreement aids in resolving the motion, the Court will
consider it. See ECF No. 1-1.
Choice of Law
this case is brought pursuant to this Court's diversity
jurisdiction, Maryland's choice of law rules apply.
See Wells v. Liddy, 186 F.3d 505, 521 (4th Cir.
1999) (“A federal court sitting in diversity must apply
the choice-of-law rules from the forum state.”). In
Maryland, it is “generally accepted that the parties to
a contract may agree as to the law which will govern their
transaction.” Kronovet v. Lipchin, 288 Md. 30,
43 (1994). The parties' choice of law is to be honored
unless, “1) the state whose law is chosen has no
substantial relationship to the parties or the transaction;
or 2) the strong fundamental public policy of the forum state
precludes the application of the choice of law
provision.” American Motorists Ins. Co. v. ARTA
Group, Inc., 338 Md. 560, 572 (1995). These principles
also generally apply to contract-related tort claims,
including unjust enrichment and breach of the implied
covenant of good faith and fair dealing. See View Point
Medical Systems, LLC v. Athena Health, Inc., 9 F.Supp.3d
588, 599, 606-07 (D. Md. 2014); Ademiluyi v. Pennymac
Mortgage Investment Trust Holdings, et al., 929
F.Supp.2d 502, 513 (D. Md. 2013) (“Maryland's
choice of law for an unjust enrichment claim follows the
choice of law for a contract claim.”).
Services Agreement provides that it “shall be construed
in accordance with the substantive law of New York.”
ECF No. 1-1 at § 7(d). Because the parties agree that
the Services Agreement governs the parties' dispute, and
do not argue that its choice of law provision is