UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-1520
FINAL ANALYSIS COMMUNICATION SERVICES,
INCORPORATED,
Plaintiff - Appellant,
versus
GENERAL DYNAMICS CORPORATION; GENERAL DYNAMICS
INFORMATION SERVICES, INCORPORATED,
Defendants - Appellees,
versus
MARCUS & BONSIB; BRUCE MARCUS; ORBCOMM, LLC;
MICHAEL H. AHAN,
Parties-in-interest.
----------------
ALVIN FREDERICK,
Movant.
No. 06-1553
FINAL ANALYSIS COMMUNICATION SERVICES,
INCORPORATED,
Plaintiff - Appellee,
versus
GENERAL DYNAMICS CORPORATION; GENERAL DYNAMICS
INFORMATION SERVICES, INCORPORATED,
Defendants - Appellants,
versus
MARCUS & BONSIB; BRUCE MARCUS; ORBCOMM, LLC;
MICHAEL H. AHAN,
Parties-in-interest.
----------------
ALVIN FREDERICK,
Movant.
Appeals from the United States District Court for the District of
Maryland, at Greenbelt. Peter J. Messitte, District Judge.
(8:03-cv-00307-PJM)
Argued: September 26, 2007 Decided: November 1, 2007
Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and Joseph F.
ANDERSON, Jr., United States District Judge for the District of
South Carolina, sitting by designation.
Affirmed in part; reversed in part by unpublished per curiam
opinion.
ARGUED: James J. McGuire, Mark Arthur Berube, SHEPPARD, MULLIN,
RICHTER & HAMPTON, L.L.P., New York, New York, for Appellant/Cross-
Appellee. Donald Beaton Verrilli, Jr., JENNER & BLOCK, L.L.P.,
Washington, D.C., for Appellees/Cross-Appellants. ON BRIEF: John
M. Quinn, ETHRIDGE, QUINN, MCAULIFFE, ROWAN & HARTINGER, Frederick,
Maryland; Elaine J. Goldenberg, Iris E. Bennett, Brian Hauck,
JENNER & BLOCK, L.L.P., Washington, D.C.; Linda L. Listrom, Michael
A. Doornweerd, Matthew J. Thomas, JENNER & BLOCK, L.L.P., Chicago,
Illinois, for Appellees/Cross-Appellants.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Final Analysis Communication Services, Inc. (“FACS”), a
company established to own and operate satellite communication and
data services, brought this action against General Dynamics
Corporation and General Dynamics Information Services, Inc.
(collectively “General Dynamics”), alleging breach of contract,
fraud, and related causes of action. General Dynamics
counterclaimed for breach of contract. The district court granted
summary judgment in favor of General Dynamics on FACS’ fraud and
related claims, and the remaining claims proceeded to trial. A
jury returned a mixed verdict, finding partially in favor of FACS
and partially in favor of General Dynamics, and awarding damages to
each party on the claims on which it prevailed. The district court
then granted in part and denied in part General Dynamics’ motion
for judgment as a matter of law and denied FACS’ motion for
judgment as a matter of law in its entirety. Each party now
appeals from the district court’s post-trial rulings; additionally,
FACS appeals from the grant of General Dynamics’ motion for summary
judgment. We affirm in part and reverse in part.
I
As noted, FACS was a company which planned to operate
satellites that would provide data and communication services.
From the time of its inception, FACS sought funding from four
3
sources. First, FACS planned to raise $40 million from general
investors; second, FACS sought $50 million in equity from strategic
partners; third, FACS intended to raise money in the high-yield
bond market; and fourth, FACS planned to reinvest revenue from its
operations in order to finance expansion.
Between December 1998 and June 2000, FACS and General Dynamics
entered into several principal contracts providing for design,
construction, and financing of FACS’ systems. Of these, the
Strategic Equity Partner Agreement (“SEPA”) served as the
overarching contract governing the relationship between the parties
and detailing the financing and construction which General Dynamics
would perform. The Command and Data Handling Subsystem Contract
(“C&DH Contract”) and the Overall System Engineering, Integration
and Test and Ground Segment Prime Contract (“SEI/GS Contract”) were
construction contracts which specified the systems and products
which General Dynamics would construct for FACS. The Stock
Purchase Agreement (“SPA”) was executed to carry out General
Dynamics’ financing obligations under the SEPA. Finally, the First
Amendment to the SEPA (“First Amended SEPA”) and the First
Amendment to the SPA (“First Amended SPA”) were signed to amend the
original SEPA and SPA to provide for additional construction and
financing obligations. The majority of these contracts were
executed on General Dynamics’ behalf by James Finley, General
Dynamics Information Services’ President.
4
In September 2000, General Dynamics suspended performance
under all of its contracts with FACS, alleging that FACS had failed
to pay prior amounts due General Dynamics under invoices issued for
work performed under the construction contracts. General Dynamics
also based its suspension of performance on the unavailability of
planned financing for FACS, due to a severe downturn in the high-
yield bond market. FACS, on the other hand, contends that General
Dynamics breached its obligations under its contracts with FACS
after discovering that Finley had entered into those contracts
without authority and without the approval of his superiors. FACS
also alleges that General Dynamics sought to escape its contractual
obligations to FACS after realizing how open-ended those
obligations were. Whatever the reason for General Dynamics’
suspension of performance, it is undisputed that FACS collapsed
after the suspension.
FACS filed this suit, seeking recovery for General Dynamics’
breach of each of the contracts and for fraud and related torts.
FACS also sought consequential damages for its collapse, which it
alleges General Dynamics caused. General Dynamics counterclaimed
for the unpaid invoice amounts and for an unpaid indemnity
obligation allegedly owed it by FACS. For clarity, we discuss each
of the causes of action separately.
5
II
We first turn to the claims on which the district court
granted summary judgment. “We review the district court’s order
granting summary judgment de novo, viewing the facts in the light
most favorable to, and drawing all reasonable inferences in favor
of, the nonmoving party.” Garofolo v. Donald B. Heslep Assocs.,
Inc., 405 F.3d 194, 198 (4th Cir. 2005). Summary judgment is
appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law.” Fed. R. Civ. P. 56(c). The relevant inquiry
in a summary judgment analysis is “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether
it is so one-sided that one party must prevail as a matter of law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).
In Counts III-V of its Complaint, FACS alleged that General
Dynamics committed fraud and tortious interference by deciding to
suspend work permanently on its contracts with FACS while falsely
informing FACS that its suspension was merely temporary. Acting on
this representation, FACS maintains that it passed up opportunities
to work with other companies from September 2000 to April 2001.
FACS contends that the district court erred in granting summary
judgment in favor of General Dynamics on this claim.
6
Under Maryland law, “fraud and injury must be connected and
must bear to each other the relation of cause and effect.” Empire
Realty Co., Inc. v. Fleisher, 305 A.2d 144, 148 (Md. 1973).1 In
other words, FACS must demonstrate that it “sustained damage by
reason of the fraud, and that [its] injury was the natural and
proximate consequence of [its] reliance on the fraudulent act.”
Id. at 147. We conclude that FACS failed to meet this standard.
Specifically, FACS failed to adduce any evidence indicating that
there were other business opportunities available to it which it
declined based on General Dynamics’ allegedly false
representations. While FACS opined that Raytheon was interested in
a strategic partnership, a Raytheon executive testified that
Raytheon itself decided not to invest in FACS and that General
Dynamics’ actions had no bearing on its decision. Because FACS
failed to offer evidence in support of this essential element of
its fraud and tortious interference claims, the district court
properly granted summary judgment in favor of General Dynamics.2
1
Maryland law governs in this diversity action.
2
FACS additionally claims that General Dynamics issued false
invoices demanding payment of large sums and that these invoices
helped force FACS’ parent corporation into bankruptcy while warding
off other potential strategic partners. However, the evidence
overwhelmingly establishes that the invoices played no role in
forcing FACS’ parent into bankruptcy. Furthermore, FACS has
presented no credible evidence of potential strategic partners who
were deterred due to the invoices.
7
In Counts VI-VIII, FACS alleged that James Finley represented
that he had authority to execute certain contracts with FACS and
that it relied on his representations in signing the contracts.
Because Finley actually lacked authority to bind General Dynamics
to these contracts, FACS alleged that it had relied on Finley’s
misrepresentations to its detriment.
Once again, FACS’ argument founders because it cannot show
that it suffered any harm as a result of Finley’s false
representations. While General Dynamics notes that Finley lacked
actual authority to enter into the cost incentives provisions of
several of the contracts, it admits that Finley had apparent
authority to execute the contracts. Therefore, General Dynamics
was bound by the contracts pursuant to Finley’s apparent authority
to act as its agent. Because General Dynamics was bound by the
contracts, FACS suffered no harm as a result of Finley’s false
representations. The district court properly granted General
Dynamics’ motion for summary judgment on these claims.3
III
We next turn to the crux of this litigation: FACS’ claims that
General Dynamics breached the SEPA, the C&DH Contract, the First
Amended SEPA, the First Amended SPA, and the SEI/GS Contract. The
3
We have examined the additional arguments which FACS makes,
and we reject them.
8
jury found that General Dynamics had, indeed, breached the SEPA and
the C&DH Contract but that these breaches were “excused by [FACS’]
alleged nonperformance, or that the breach[es] [were] otherwise
justified[.]” J.A. 1102.4 Next, the jury found that General
Dynamics committed an unjustified breach of the First Amended SEPA
and First Amended SPA and awarded $21.87 million in compensatory
damages for each breach and a total of $92.75 million in
consequential damages. The district court upheld the verdict as to
compensatory damages but reduced the amount of those damages to
$19.87 million and struck one compensatory award as duplicative.
The district court overturned the jury’s verdict on consequential
damages, striking that award in its entirety. Finally, the jury
found General Dynamics liable for an unjustified breach of the
SEI/GS Contract and awarded $23.28 million in compensatory damages.
The district court subsequently granted General Dynamics’ motion
for judgment as a matter of law as to this claim. Both parties now
appeal.
We review de novo the grant or denial of a motion for judgment
as a matter of law. Anderson v. Russell, 247 F.3d 125, 129 (4th
Cir. 2001). Judgment as a matter of law is proper when the court
determines that there is no “legally sufficient evidentiary basis”
for a reasonable jury to find for the non-moving party. Fed. R.
4
FACS does not contest the jury’s findings with regard to the
SEPA and C&DH Contract.
9
Civ. P. 50(a). When a jury verdict has been returned, judgment as
a matter of law may be granted only if, viewing the evidence in a
light most favorable to the non-moving party (and in support of the
jury’s verdict) and drawing every legitimate inference in that
party’s favor, the only conclusion a reasonable jury could have
reached is one in favor of the moving party. Figg v. Schroeder,
312 F.3d 625, 635 (4th Cir. 2002).
A.
We first address FACS’ claims for breach of the First Amended
SEPA and First Amended SPA. FACS contends that the district court
erred by (1) overturning the jury’s consequential damage award (2)
requiring the jury to choose between consequential and reliance
damages instead of giving FACS the option of electing a remedy
after verdict.5 General Dynamics cross-appeals, asserting that the
district court should have granted its motion for judgment as a
matter of law as to the First Amended SEPA and First Amended SPA
claims in its entirety.
In support of its cross-appeal, General Dynamics argues that
the First Amended SEPA and First Amended SPA are interdependent
with the SEPA, the SPA, and, indeed, the construction contracts.
Thus, according to General Dynamics, FACS’ prior breach of its
obligations under the SEPA and the C&DH Contract excused General
5
FACS does not appeal from the reduction of its compensatory
award to $19.87 million or from the striking of one award as
duplicative.
10
Dynamics from performance of its obligations under the remaining
contracts.
Under Maryland law, contracts are interdependent where they
“clearly indicate[] that as between the immediate parties they were
intended to constitute an entire and not a divisible undertaking
[and where i]t was the evident purpose to make the two agreements
interdependent[.]” Guar. Sec. Co. v. Equitable Trust Co., 110 A.
860, 861 (Md. 1920). Further, one contract may be incorporated
into another by reference, making it “a part thereof, as if it were
fully set forth therein.” Goodwin & Boone v. Choice Hotels Int’l,
Inc., 695 A.2d 168, 171 (Md. 1997). Of course, our examination of
interdependency begins, as with any issue of contract
interpretation, with the language of the contracts before us, and
we must “giv[e] effect to all of their provisions, if it is
possible to do so.” Rothman v. Silver, 226 A.2d 308, 310 (Md.
1967). If our examination shows that the contracts are
“susceptible of a clear, unambiguous, and definite
understanding[,]” their construction is for us to determine as a
matter of law. Id.
We begin with the SEPA, which is the overarching contract
governing the parties’ relationship. The SEPA refers extensively
to both the C&DH Contract and the SPA, and the C&DH Contract is, in
fact, attached to the SEPA as an exhibit. In addition, the SEPA
states that it “shall remain in full force and effect until the
11
termination or expiration of the C&DH Contract.” J.A. 1414. More
importantly, the SEPA provides that “This Agreement, the C&DH
Contract, the Stock Purchase Agreement, and the Non-Disclosure
Agreement constitute the entire agreement between the Parties
concerning the subject matter hereof[.]” J.A. 1419. Thus, the
plain language of the SEPA indicates that it, the D&DH Contract,
and the SPA must be considered interdependent.
It naturally follows that the First Amended SEPA and First
Amended SPA must also be considered interdependent with the SEPA,
the SPA, and the C&DH Contract. Although executed at a later time,
these contracts simply amend the SEPA and the SPA, respectively.
Moreover, they expressly refer to the SEPA and SPA, respectively,
by stating that those original contracts remain in full force and
effect. J.A. 1412, 1428. Accordingly, we conclude that these
contracts are a part of the same interdependent transaction as the
original contracts that they modify.
Having addressed interdependency, we turn to the question of
breach. It is well established that a material breach by one party
to a contract excuses the other party from performance. Rogers
Refrigeration Co., Inc. v. Pulliam’s Garage, Inc., 505 A.2d 878,
883 (Md. App. 1986); Fromm Sales Co., Inc. v. Troy Sunshade Co.,
159 A.2d 860, 863 (Md. 1960). Here, the jury found that General
Dynamics’ non-performance under the SEPA and the C&DH Contract was
excused, a finding premised on FACS’ prior material breach of those
12
contracts.6 However, because the First Amended SEPA and the First
Amended SPA are interdependent with the SEPA and the C&DH Contract,
FACS’ prior breach also excused General Dynamics from performance
under each of these contracts. With General Dynamics’ obligations
under the First Amended SEPA and First Amended SPA excused, the
jury’s finding of an unjustified breach of these contracts, and its
damage awards therefor, cannot stand. The district court should
have granted General Dynamics’ motion for judgment as a matter of
law on this basis.
Because we conclude that General Dynamics cannot be liable for
breach of the First Amended SEPA and First Amended SPA, we
necessarily conclude that FACS cannot prevail on its claim that the
district court erred in striking the jury’s consequential damage
award. We likewise need not consider whether the district court
erred in forcing the jury to choose between consequential and
reliance damages.
B.
FACS next appeals from the district court’s entry of judgment
as a matter of law on its claim for breach of the SEI/GS Contract,
6
This premise is reenforced by the jury’s express finding
that FACS materially breached the SEPA and C&DH Contract as
expressed in its verdict in favor of General Dynamics on its
counterclaim. See infra. On that claim, General Dynamics alleged,
and the jury found, that FACS committed a breach by failing to pay
invoices issued under the C&DH Contract. A failure to make
payments due under a contract “indisputably constitutes a material
breach[.]” Fromm Sales, 159 A.2d at 863.
13
for which the jury awarded FACS $23.28 million in compensatory
damages. At trial, FACS contended that General Dynamics breached
both the Correction of Deficiencies and the Launch Delay provisions
of the contract. In overturning the jury’s verdict, the district
court found that these provisions “are simply inapplicable to this
case [because] . . . there simply was no fact pattern that fit
either the correction of deficiencies claim or the launch delay.”
J.A. 1116. Further, the court noted that “the plain language [of
the provisions] refers to scenarios that simply did not apply
here.” Id. The district court based these findings on the fact
that construction under the contract never progressed to the point
where the two provisions could have been triggered.
We have reviewed the record of the evidence presented at
trial, and we agree with the district court’s stated analysis.
Accordingly, we affirm the grant of General Dynamics’ motion for
judgment as a matter of law on FACS’ claim for breach of the SEI/GS
Contract.
IV
Finally, we consider FACS’ appeal from the jury’s verdict on
General Dynamics’ counterclaims.
On the first counterclaim, the jury awarded General Dynamics
$3 million for FACS’ nonpayment of an invoice issued under the C&DH
Contract. This invoice was payable on January 9, 2000. Evidence
presented at trial indicated that, around January 9, FACS informed
14
General Dynamics that it lacked money to pay the invoice but that
it would be able to do so after the high-yield bond offering
occurred in August or September of 2000. FACS now contends that
this meant that the payment of the invoice was contingent on the
bond offering occurring. We find FACS’ argument unpersuasive.
The evidence at trial established that the sole reason General
Dynamics delayed FACS’ payment of the $3 million owed it was FACS’
inability to pay. Maryland law provides that:
[W]hen a promise is such as to constitute absolute
liability, and the parties agree that the debt shall be
paid upon the happening of a future event chosen merely
as a convenient time for payment, and the event does not
happen as contemplated, the law implies a promise to pay
within a reasonable time.
Ewell v. Landing, 85 A.2d 475, 477 (Md. 1952). Thus, as the
district court noted, the jury certainly could have found “not that
the high-yield bond offering was a contingency, but [that] it was
merely the time when the money was due and payable, that it was an
accommodation to the plaintiff[.]” J.A. 1124-25. We agree, and we
affirm the denial of FACS’ motion for judgment as a matter of law
on this claim.
General Dynamics’ second counterclaim arises from a
subcontract it entered into with Raytheon. In a contract executed
in March, 2000, General Dynamics subcontracted with Raytheon to
build ground stations for the satellites it was constructing for
FACS. In this contract, Raytheon agreed to invest $5 million in
FACS and an additional $10 million after the high-yield bond
15
offering. General Dynamics guaranteed Raytheon’s $5 million
investment and, in an Agreement & Waiver (“A&W”), FACS agreed to
indemnify General Dynamics if Raytheon invoked the $5 million
guarantee.
After the bond offering failed, Raytheon insisted that General
Dynamics pay it $5 million to satisfy its guarantee, and General
Dynamics complied. General Dynamics, in turn, required FACS to
honor its obligation under the A&W, but FACS never did. The jury
found FACS liable for breach of the A&W and awarded General
Dynamics $5 million.
FACS maintains that its obligation to pay General Dynamics was
excused because of General Dynamics’ earlier breach of the Amended
SEPA and SEI/GS contract. However, as we have noted, any breach by
General Dynamics of these contracts is excused due to FACS’ prior
breach. Further, the A&W is not, as a matter of law,
interdependent with the Amended SEPA and SEI/GS contracts. Rather,
it was executed as a separate transaction when Raytheon was
subcontracted by General Dynamics. Therefore, the district court
correctly upheld the jury’s verdict of $5 million.
V
Based on the foregoing, we reverse the district court’s
partial denial of General Dynamics’ motion for judgment as a matter
of law on FACS’ claims for breach of the First Amended SEPA and
16
First Amended SPA but affirm the judgments entered below in all
other respects.
AFFIRMED IN PART;
REVERSED IN PART
17