UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JONATHAN F. SCHUPP,
Plaintiff-Appellant,
v.
No. 02-1157
JUMP! INFORMATION TECHNOLOGIES,
INCORPORATED,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
William M. Nickerson, Senior District Judge.
(CA-00-2822-WMN)
Argued: December 4, 2002
Decided: February 7, 2003
Before MICHAEL, TRAXLER, and KING, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Jason Maxey Schupp, Ellicott City, Maryland, for Appel-
lant. Guy Sterling Neal, SIDLEY, AUSTIN, BROWN & WOOD,
L.L.P., Washington, D.C., for Appellee. ON BRIEF: Andrew W.
Stern, SIDLEY, AUSTIN, BROWN & WOOD, L.L.P., New York,
New York, for Appellee.
2 SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Appellant Jonathan Schupp filed an action against Appellee Jump!
Information Technologies, Inc. ("Jump!") asserting several claims
arising from the acquisition of Jump! by Logistical Design Solutions,
Inc. ("LDS").1 The parties filed cross-motions for summary judgment
on all of Schupp’s claims. The district court granted Jump!’s motion,
denied Schupp’s motion, and entered an order awarding judgment to
Jump! on all of Schupp’s claims. Schupp appeals that order. We
affirm based substantially on the reasons set forth in the opinion of
the district court.
I.
In June 1999, Schupp accepted an employment offer to serve as
Vice President of Sales for Jump!, a closely held Virginia corporation.
In addition to a base salary plus sales commissions, Schupp’s com-
pensation package included options to purchase up to 78,000 shares
of Jump! series A, class B non-voting stock at 25 cents per share.
Schupp’s stock purchase options were scheduled to vest in three
stages: an option to purchase 50 percent of the 78,000 shares was to
vest in Schupp’s first year of employment, and 25 percent was to vest
in each of his second and third years of employment.
In September 1999, Schupp exercised his option to purchase 50
percent of the shares, i.e., 39,000 shares of Jump! stock. At 25 cents
1
Schupp named Jump! as the defendant in the action. Because Jump!
no longer exists in the wake of the acquisition, LDS stepped in to litigate
as successor-in-interest. Depending on whether the claim at issue
involves conduct occurring before or after the acquisition, we will refer
to the defendant-appellee as either Jump! or LDS, respectively. Techni-
cally, however, Jump! and LDS are one and the same.
SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC. 3
per share, the purchase price was $9,750. At the time Schupp exer-
cised his first option, the only other Jump! shareholders were William
Engle, Jump!’s chief executive officer, Allan Von Dette, the chief
financial officer, and Jeffrey Beardsley, the chief technical officer,
each of whom owned 700,000 series A, class A voting shares.
Before Schupp’s remaining options vested, LDS entered into nego-
tiations with Engle and Von Dette to acquire Jump!. Schupp learned
of the proposed acquisition in October 1999 and met with Engle and
Von Dette to discuss his options regarding his shares of Jump! and
his unvested options to purchase additional shares. First, Engle and
Von Dette offered to buy back the 39,000 shares owned by Schupp
at 39 cents per share (for a total of $15,210), which, according to
Engle and Von Dette, was a premium given that Schupp exercised his
option to purchase the shares at a price of 25 cents per share only a
few months earlier. Second, Engle and Von Dette told Schupp that he
could convert his unvested options to purchase an additional 39,000
shares of Jump! stock into options for 4,286 LDS shares, which was
an equivalent exchange based upon a value of $2.28 per share of LDS
stock. Finally, LDS offered Schupp employment as an account execu-
tive at the same salary and commission rate he received in his position
with Jump!. Schupp agreed to these terms and executed agreements
to sell his shares back to Jump! and to exchange his unvested Jump!
stock purchase options for LDS stock purchase options. Schupp also
decided to accept the job offered to him by LDS. The fourth and final
Jump! shareholder, Beardsley, declined to join LDS and sold his
interest — 700,000 shares of Jump! voting stock — back to Jump! for
only 25 cents per share.
Having obtained all of the outstanding Jump! shares, Engle and
Von Dette then transferred all of these shares to LDS for $525,000 in
cash and 109,500 shares of LDS stock, which had by then increased
in value to $2.60. During their discussions with Schupp about his
options, Engle and Von Dette did not reveal to Schupp the fact that
they had been offered employment contracts as regional managers for
LDS or provide any of the details of that arrangement.
Schupp did not remain at LDS very long, voluntarily leaving his
employment on January 21, 2000. At the time of his resignation,
Schupp received a letter from LDS indicating that LDS owed Schupp
4 SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC.
$6,250 in unpaid commissions. However, LDS retained $4,500 of the
unpaid commissions, which was the amount LDS paid Schupp as a
"retention bonus" to induce him to remain with LDS after the acquisi-
tion.
During Schupp’s time at LDS, the company offered incentives to
Schupp and the other employees for recruiting quality employees. To
that end, LDS sent an e-mail to its employees stating that "[n]ext
week, LDS will sponsor two special internal job fairs . . . designed
to ‘Build the Team with Friends and Family.’ This is a great opportu-
nity to introduce your qualified non-LDS colleagues and family mem-
bers to one of the hottest . . . companies around . . . . If LDS hires
your referral, you will receive a $3,000 bonus. . . . We will extend
offers or declinations within 48 hours of the two fairs. . . . Stay tuned
for more details." J.A. 165. Schupp invited Brian Cassidy to the job
fair in December 1999.2 LDS subsequently hired Cassidy in March
2000; LDS refused to pay the $3,000 bonus because Schupp was no
longer working for LDS.
Believing that he was still owed money for commissions and
bonuses and that Engle and Von Dette had not dealt fairly with him
in connection with the stock transaction, Schupp filed an action
against Jump! in Maryland state court. He asserted five claims against
Jump!: (count 1) Jump! breached its contract to pay Schupp the
bonuses and commissions he earned; (count 2) Jump! misrepresented
and concealed information relating to the value of Schupp’s shares
and the terms of the acquisition of Jump! by LDS; (count 3) a con-
structive trust should be imposed upon the 78,000 shares that Schupp
owned or had an option to purchase; (count 4) Jump! was unjustly
enriched when it acquired Schupp’s shares because of the misconduct
of corporate officers acting on behalf of Jump!; and (count 5) Engle
and Von Dette, as directors acting on behalf of Jump!, breached fidu-
ciary duties owed to Schupp and caused him to suffer damages
"through the sale and forfeiture of [Schupp’s] rights in Jump! for an
amount far less than any fair value of those rights." J.A. 11. Jump!
removed the case to district court. The district court was presented
2
Schupp invited two other candidates who were later hired by LDS. On
appeal, Schupp is only pursuing his claim for a referral bonus based upon
the employment of Cassidy.
SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC. 5
with cross motions for summary judgment on each of Schupp’s five
causes of action. The court denied Schupp’s motions, granted Jump!’s
cross-motions, and entered an order awarding summary judgment to
Jump!.
II.
A. Count I
Schupp alleged in his complaint that LDS "breached its contract to
pay bonuses and commissions to Mr. Schupp despite his fulfillment
of all conditions under the bonus and referral programs." J.A. 10.
Moreover, Schupp contended that LDS’s failure to pay him these
amounts allegedly due violated the Maryland Wage Payment and Col-
lection Law. See Md. Code Ann., Lab. & Empl. § 3-501-509 (1991).
Following his resignation from LDS, Schupp received a post-
termination letter indicating that LDS owed him $6,250 in sales com-
missions. This letter noted, however, that under terms agreed to by
Schupp, he was required, "as a result of [his] resignation," to refund
to LDS a $4,500 retention bonus he received when he agreed to
remain with LDS after the acquisition. J.A. 182. LDS subtracted the
retention bonus from the $6,250 in commissions and concluded that
"in light of our offer with the stock options, . . . these two items
[should be considered] a wash." J.A. 161. During the course of this
litigation, LDS paid Schupp $1,750 — the difference between the
commissions due and the retention bonus.3 On appeal, Schupp raises
the same arguments he made below: that he was not required to
refund the retention bonus but that, even if he was, LDS violated the
Maryland wage payment law by offsetting this amount against com-
missions Schupp had earned.
Schupp was paid a retention bonus pursuant to a letter, dated
November 10, 1999, that Schupp received when he agreed to remain
3
As this action proceeded through discovery, LDS took the position
that it was mistaken in its initial assessment of the amount of sales com-
missions owed to Schupp, and that he was entitled to less. The district
court, however, concluded that Schupp was owed $6,275.88 at the time
of his termination. LDS has not challenged this conclusion on appeal.
6 SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC.
with LDS after the acquisition. As incentive for Schupp to remain
with LDS after the acquisition, the letter offered a retention bonus of
$4,500:
The retention program will have two payments. The first
will occur upon completion of the acquisition when each eli-
gible employee will receive (30% of retention bonus/indiv).
All eligible employees will receive the first payment. The
second payment of (70% of the retention bonus/indiv) will
occur on Nov 30, 1999. To receive the second payment the
eligible employee must be continuously employed, on a full-
time basis, by [LDS] through Nov 30, 1999. If an eligible
employee chooses to leave [LDS]’s employment before
May 1, 2000, he/she will be required to refund the full pay-
ment amount to [LDS] at the time their employment ends.
J.A. 199. The district court rejected Schupp’s argument, concluding
that "full payment amount" referred to the full retention bonus, not
merely the second, partial installment of the retention bonus as
Schupp contended.
The district court also rejected Schupp’s position that LDS acted
in contravention of the Maryland wage payment law by unilaterally
withholding this amount from the commissions owed to Schupp.
Although the district court noted its view that the wage payment stat-
ute did not apply, it assumed for analytical purposes that the statute
did apply, and the court held that Schupp gave his written consent to
the withholding when he signed the letter explaining the retention
bonus. See Md. Code Ann., Lab. & Empl. § 3-503.
According to Schupp, LDS also owed him a $3000 bonus for
recruiting Brian Cassidy as a new employee. Schupp’s contention is
based on the e-mail sent by LDS notifying its employees of an oppor-
tunity to earn a referral bonus through two "internal job fairs." J.A.
165. Schupp invited Brian Cassidy to the job fair in December 1999.
LDS later hired Cassidy in March 2000, after Schupp was no longer
employed by LDS.
LDS indeed had a referral program in place in 2000, pursuant to
which employees could earn a total of $3000 for recommending a
SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC. 7
candidate who was "subsequently hired as a full-time employee." J.A.
188. This amount accrued in three installments paid "through payroll
in $1000 increments at three, six and nine months from the candi-
date’s date of hire provid[ed] both the candidate and the referring
employee are still [on] staff at LDS." J.A. 188. LDS presented affida-
vit testimony that the offer set forth in the e-mail was made under the
terms of the 2000 referral program. Although Schupp argues that the
e-mail offer stood alone, he points to nothing in the record — other
than the e-mail itself — to contradict this evidence. The e-mail, how-
ever, was not inconsistent with the referral program. The district court
concluded that Schupp was not entitled to any referral bonus for Cas-
sidy because Schupp was no longer employed at LDS when Cassidy
was hired.
Having conducted a de novo review of Schupp’s claims regarding
the referral and retention bonuses, we affirm for the reasons stated in
the opinion of the district court. We also agree with the district court’s
observation that the Maryland wage payment law does not apply and
conclude that count one of the complaint fails for that reason as well.
Accordingly, we affirm the district court’s award of summary judg-
ment to LDS on Schupp’s contract and wage payment claims.
B. Counts II-V
The remaining claims can be considered together as essentially a
single claim. Schupp alleges that Jump!, as a corporate entity, is liable
to him for breach of fiduciary duty as a result of the actions of Von
Dette and Engle, who were directors, officers, and majority share-
holders. Specifically, Schupp contends that Von Dette and Engle
owed him a fiduciary duty which they breached by misrepresenting
or failing to disclose material facts about the acquisition of Jump! by
LDS. According to Schupp, he was not fully informed of all of the
relevant information when he agreed to cash out his equity interest in
Jump!. The parties agree that Virginia law applies to this claim.
The district court assumed for the sake of analysis that, under Vir-
ginia law, a closely held corporation itself, as opposed to its officers
or directors, owes a fiduciary duty to an individual minority share-
holder. Although we need not decide here whether Virginia law so
provides, we note our doubts that a shareholder can maintain an
8 SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC.
action for breach of fiduciary duty directly against the corporation
itself. See Radol v. Thomas, 772 F.2d 244, 258-59 (6th Cir. 1985);
Jordan v. Global Natural Res., Inc., 564 F. Supp. 59, 68 (S.D. Ohio
1983). Virginia law may permit an individual shareholder to bring an
action for breach of fiduciary duty against the directors or officers of
a closely held corporation, see Byelick v. Vivadelli, 79 F.Supp.2d 610,
625 (E.D. Va. 1999), but we see no indication Virginia courts would
permit such an action directly against the corporation.4
The district court concluded that Schupp’s claims failed as a matter
of law for two reasons: (1) Schupp failed to demonstrate that material
facts were misrepresented to or concealed from Schupp; and (2)
Schupp did not suffer financial loss as a result of any alleged breach
of fiduciary duty.
First, Schupp contends that he was induced to cash out his equity
interest in Jump! by Von Dette’s and Engel’s representation that
Jump!’s bid to repurchase Schupp’s 39,000 shares at 39 cents per
share ($15,210) offered him a premium since Schupp had paid only
25 cents per share ($9,750) a few months earlier. Schupp complains
that since Von Dette and Engle received almost 39 cents per share for
their own shares, Schupp really received no premium at all. Schupp’s
position largely ignores the fact that Beardsley, Jump!’s chief techni-
cal officer, cashed his shares out at only 25 cents per share, and that
the other three shareholders, including Beardsley, held voting shares
while Schupp held nonvoting shares. In view of these facts, the dis-
trict court rejected Schupp’s contention that Von Dette’s and Engle’s
statement that Jump!’s offer was at a premium constituted a material
misrepresentation. On appeal, Schupp points to nothing in the record
suggesting that he was promised more per share than the other three
shareholders. Accordingly, we agree with the district court for the rea-
sons stated in its opinion.
4
This case is not controlled by Simmons v. Miller, 544 S.E.2d 666, 675
(Va. 2001), which rejects the proposition that a shareholder can bring an
individual action on behalf of the corporation, rather than a derivative
suit, for breach of fiduciary duties by a director. Schupp’s claims are
based on alleged individual injuries, not injuries to Jump! as a corporate
entity.
SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC. 9
Next, Schupp contends that Von Dette and Engle breached their
fiduciary duties to Schupp by failing to disclose the terms of their
own employment agreements with LDS. Essentially, Schupp claims
that had he been aware of the generous employment terms Von Dette
and Engle stood to gain through the acquisition — or lose if it failed
— he "would likely have taken a very hard look at the sufficiency"
of the consideration he received for his interest in Jump!. Brief of
Appellant at 25. The district court rejected this contention as specula-
tive since Schupp failed to offer any evidence to support a conclusion
that he received less than fair consideration for his shares or that Von
Dette or Engle would have offered more.
We agree with the conclusion of the district court for the reasons
stated in its opinion. Moreover, it is implicit in Schupp’s argument
that, because LDS’s acquisition of Jump! was contingent upon Von
Dette and Engle acquiring all outstanding shares, including Schupp’s,
Schupp could have caused complications by refusing to sell. Thus,
Schupp suggests that Von Dette and Engle might have been willing
to pay more to ensure the success of the acquisition. However,
Schupp had the ability to disrupt the acquisition regardless of the
terms of employment between Von Dette and Engle. As the district
court noted, this fact should have been apparent to Schupp since the
stock purchase agreement he signed indicated that his sale of Jump!
stock was contingent upon the sale of Jump! to LDS and referred spe-
cifically to the stock purchase agreement between LDS and Von Dette
and Engle (which, in turn, explained that the acquisition was contin-
gent upon Schupp’s selling his shares).
Finally, Schupp contends that he was not provided sufficient infor-
mation to make a truly informed choice regarding his unvested Jump!
stock options. Essentially, Schupp asserts that Von Dette and Engle
failed to disclose that Schupp’s remaining Jump! stock options would
vest as a result of the acquisition. He suggests that if he had been ade-
quately informed, he would not have agreed to terminate his Jump!
stock options in exchange for LDS stock options. Rather, he would
have exercised his option to purchase the remaining 39,000 Jump!
shares and cashed them out immediately.
Schupp’s original stock option agreement with Jump! provided in
part as follows:
10 SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC.
If:
(A) [Jump!] should (i) merge or consolidate with another
corporation or entity under circumstances where [Jump!] is
not the surviving corporation or entity . . .
and
(B) as a result of [such a merger] . . ., [Schupp] shall fail
to receive a bona fide offer of employment with power and
authority analogous to [Schupp’s] title and/or office prior to
the merger . . .
then 100% of such [stock] Options not yet vested shall
immediately vest . . . .
J.A. 97. Thus, Schupp knew, or should have known, that if LDS did
not extend to Schupp an offer of employment for a position similar
to the one he held at Jump!, then Schupp’s stock options vested
immediately. Nevertheless, he agreed to exchange his Jump! stock
options for LDS stock options, apparently without attempting to learn
whether he would receive such an offer.
Schupp’s failure-to-disclose argument, at bottom, is based on the
fact that Von Dette and Engle knew prior to the acquisition that LDS
intended to offer Schupp a position carrying the title of "Account
Executive." According to Schupp, Von Dette and Engle also knew
that this new position would not be equivalent to his position at Jump!
and that, as a result, Schupp’s shares would vest immediately upon
the completion of the acquisition. Schupp concludes that their failure
to disclose all of this was a breach of their fiduciary duties to him.
The district court rejected this claim as well, concluding that the
two positions were analogous in terms of power and authority and
that any differences could be attributed to the much larger size of
LDS. The record contains sworn testimony from the chief financial
officer of LDS that Schupp was hired to perform the same business
development job he performed at Jump! at the same level of compen-
sation and that the two positions were roughly the same in light of the
SCHUPP v. JUMP! INFORMATION TECHNOLOGIES, INC. 11
size disparity between the two companies. Schupp points to nothing
in the record, other than unsworn discovery responses, to contradict
this. Moreover, there is nothing in the record to suggest that Von
Dette and Engle believed these positions were not roughly equivalent
— in fact, both men attested to their belief that the positions were the
same. Accordingly, we affirm the award of summary judgment to
Jump! on this basis as well.5
III.
For the reasons stated above, we affirm the decision of the district
court.
AFFIRMED
5
In light of our foregoing conclusions, we do not reach the district
court’s alternative basis for summary judgment that Schupp suffered no
financial loss.