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Singhal & Co., Inc. v. Versatech, Inc.

United States District Court, D. Maryland

August 27, 2019

SINGHAL & COMPANY, INC., Plaintiff
v.
VERSATECH, INC., Defendant

          MEMORANDUM

          James K. Bredar, Chief Judge.

         Singhal & Company, Inc. ("SCI") filed suit against Defendant VersaTech, Inc. alleging breaches of contract and promissory estoppel. SCI seeks actual damages, disgorgement of all profits received by VersaTech as a result of deliberate breaches, prejudgment interest on all amounts, and costs and reasonable attorneys' fees. Versatech filed a motion to dismiss, and the matter is fully briefed. No. hearing is required. See Local Rule 105.6 (D. Md. 2018). For the reasons set forth below, VersaTech's motion to dismiss will be granted in part and denied in part.

         I. Background[1]

         >SCI is a company which provides a variety of technology services to government and private clients. (Compl. ¶ 6, ECF No. 1.) SCI entered into a contract to perform work on the United States Food and Drug Administration's White Oak Campus to provide "audio/visual and information technology support services." (Id. ¶ 9.) When SCI entered into the contract, it qualified as a small disadvantaged business under the government's 8(a) Business Development program, 13 C.F.R. § 124.1 et seq. (Id.) When it was time for the FDA to re-bid the contract, SCI no longer qualified under the 8(a) program. (Id. ¶ 11.) SCI partnered with another 8(a) business, VersaTech, to help it prepare its proposal for the White Oak project "on the understanding that if VersaTech was awarded the contract, SCI would bring its experience and employees to bear on the project and would receive a commensurate workshare." (Id.)

         VersaTech was awarded the contract and subsequently entered into a subcontractor agreement (the "subcontract") with SCI on January 20, 2017. (Id. ¶ 12.) Under the subcontract, VersaTech issued task orders to SCI with statements of work to be done, and SCI was paid pursuant to rates established in the subcontract. (Id. ¶¶ 13-14.)

         In July 2017, Jason Peay, the CEO of VersaTech, contacted SCI to ask if SCI could reduce its labor rates by 7%. (Id. ¶ 18.) Vineet Singhal, the CEO and Principal of SCI, wrote back that he would agree to reduce the labor rates by 7% if VersaTech would 1) give SCI 49% of the workshare, and 2) source all project materials through SCI. (Id. ¶ 19.) In his email, Mr. Singhal also wrote, "[w]e will do a contract mod with revised labor pricing and this work share for our managers to implement." (Id. Exh. B at 5.) Mr. Peay responded, "I've spoken to my team and we are good with moving forward with the plan below. Vivian will begin the process of setting up new subK's." (Id. Exh. B at 2.) Hernan Rodas, an SCI employee, then forwarded the email exchange to VersaTech employee Omar Silver. (Id. Exh. B at 2.) In his email, Mr. Rohas wrote:

Vineet and Jason have discussed and have agreed on a 51/49 set up with 7% VT mark up on the IDIQ LCAT rates and 10% mark up on implementation materials for the life of the contract. This is what was finalized per Jason's confirmation and we will begin to implement this new set up to all task orders. We will use this for requirements moving forward and will start re-balancing exercise for all task orders.

(Id. Exh. B at 1.) Mr. Silver responded, "I confirmed the assumption of the agreement yesterday. I hope you are comfortable with the assumptions as well. I have added Lee to this email because it will be Lee that implements, tracks and monitors this new agreement." (Id. Exh. B at 1.) Following this email exchange, SCI "signed task order modifications that reduced SCI's rates by the agreed upon 7%," and all subsequent work done for VersaTech reflected that rate reduction. (Id. ¶ 25.) SCI alleges that while it reduced its rates by the agreed 7%, VersaTech did not allocate 49% of the workshare to SCI or source all its materials through SCI. (Id. ¶¶ 37-38.)

         In addition, SCI alleges VersaTech breached the subcontract by unreasonably withholding consent to SCI's use of a subcontractor, Vision Technologies ("Vision"). (Id. ¶¶ 28, 58.) Pursuant to § 22.2 of the subcontract, SCI "shall not subcontract or assign this Agreement, or otherwise dispose of any of its right, title, or interest herein to any third-party, without obtaining the prior written consent of VersaTech, which will not be unreasonably withheld . . ." (Id. Exh. A.) SCI admits it did not seek prior written consent to use Vision, but states that VersaTech was aware SCI was using Vision as a subcontractor and withheld its consent unreasonably and in bad faith. (Id. ¶¶ 29, 58.)

         Finally, SCI claims that VersaTech breached the subcontract by failing to pay SCI's invoices on time. (Id. ¶ 39.) The subcontract requires that VersaTech pay SCI "within seven (7) days after VersaTech receives payment for such services performed by [SCI] from the Customer pursuant to the Contract or within sixty (60) days after submission of a valid invoice, whichever is earlier." (Id. Exh. A § 2.3.) SCI states that at least $90, 850.83 is overdue and claims that VersaTech began paying SCI's invoices late after SCI rejected an offer from VersaTech to buy SCI's assets. (Id. ¶¶ 39-40.)

         II. Legal Standard

         VersaTech filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (Mot Dismiss, at 1, ECF No. 12.) A complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell All Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. An inference of "the mere possibility of misconduct" is not sufficient to support a plausible claim. Id. at 679. Courts must "accept the well-pled allegations of the complaint as true, . . . constru[ing] the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff." Ibarra, 120 F.3d at 474. "A pleading that offers 'labels and conclusions' or . . . 'naked assertion[s]' devoid of 'further factual enhancement'" will not suffice. Iqbal, 556 U.S. at 678 (alteration in original) (citation omitted) (quoting Twombly, 550 U.S. at 555, 557). Courts need not accept legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.

         III. Analysis

         A. Breach of Contract (Count I, III, IV)

         A breach of contract claim requires 1) a "contractual obligation," 2) "breach," and 3) "damages." Kumar v. Dhanda,17 A.3d 744, 749 (Md. Ct. Spec. App. 2011), aff'd, 43 A.3d 1029 (Md. 2012). Under Maryland law, the duty of good faith and fair dealing is implied in every contract, but violation of this duty does not constitute a separate cause of action. Swedish Civil Aviation Admin, v. Project Mgmt. Enters.,190 F.Supp.2d 785, 793-94 (D. Md. 2002) (finding that a claim for breach of the duty of good faith and fair dealing is no different than a contract claim), Maryland law requires courts to interpret contracts objectively. Cochran v. Norkunas,919 A.2d 700, 709 (Md. 2007). "A court must 'give effect to the contract's plain meaning, without regard to what the parties to the contract thought it meant or intended it to mean.'" Gresham v. Lumbermen's Mut. Cas. Co.,404 F.3d 253, 260 (4th Cir. 2005) (quoting Turner v. Turner,809 A.2d 18, 49 (Md. Ct. Spec. App. 2002)). "A contract is ambiguous if, 'when read by a reasonably prudent person, it is susceptible of more than one meaning.'" Diamond Point Plaza Ltd. P'ship v. Wells Fargo Bank,929 A.2d 932, 951 (Md. 2007) (quoting United Servs. v. Riley,899 A.2d 819, 833 (Md. 2006)). If the court determines that the terms of a contract are ambiguous, '"the court must consider any extrinsic evidence which sheds light on the intentions of the parties at the time. of the execution of the contract."' Sy-Lene of Washington, Inc. v. Starwood Urban Retail II, LLC,829 A.2d 540, 547 (Md. 2003) (quoting County Commissioners v. St. Charles,784 A.2d 545, 556 (Md. 2001). "If an ...


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