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Geist v. Hispanic Information & Telecommunications Network, Inc.

United States District Court, D. Maryland

March 6, 2018

RUDOLPH J. GEIST, et al., Plaintiffs,


          Paula Xinis, United States District Judge.

         Pending 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.

         I. Background

         Plaintiff Rudolph Geist is the sole member and Managing Partner of Plaintiff RJGLaw LLC, [1] 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.

         In the 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 & 15.

         On 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.

         Plaintiffs' 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.

         RJGLaw 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.

         In 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 Services Agreement.

         Plaintiffs 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.

         II. Standard of Review

         When 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.

         III. Analysis

         a. Choice of Law

         Because 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.”).

         The 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 ...

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