UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2001
MEDICINE SHOPPE INTERNATIONAL, INCORPORATED,
Plaintiff - Appellant,
v.
MOHAMMED A. SIDDIQUI; LOCH RAVEN PHARMACY INCORPORATED;
BELVEDERE ENTERPRISES INCORPORATED,
Defendants - Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. James K. Bredar, District Judge.
(1:10-cv-01023-JKB)
Argued: September 19, 2013 Decided: November 5, 2013
Before DUNCAN and THACKER, Circuit Judges, and Gina M. GROH,
United States District Judge for the Northern District of West
Virginia, sitting by designation.
Vacated and remanded by unpublished per curiam opinion.
ARGUED: Stephen Jerome O'Brien, DENTONS US LLP, St. Louis,
Missouri, for Appellant. David Michael Silbiger, SILBIGER &
SILBIGER, Baltimore, Maryland, for Appellees. ON BRIEF: David
I. Ackerman, DENTONS US LLP, Washington, D.C., for Appellant.
Mark R. Millstein, Baltimore, Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Medicine Shoppe International, Inc. (“MSI”) appeals the
district court’s order granting summary judgment in favor of
Appellees finding that the parties entered into a binding and
effective settlement agreement that disposed of the case. For
the following reasons, we vacate and remand.
I.
MSI is a national franchisor that grants licenses to
franchisees to operate prescription pharmacies known as the
“Medicine Shoppe System.” In exchange for the franchise, MSI
receives license fees from its licensees based on a percentage
of each pharmacy’s monthly gross receipts. Appellees, Mohammed
A. Siddiqui, Loch Raven Pharmacy Inc., and Belvedere Enterprises
Inc., purchased two Medicine Shoppe Pharmacies from a former
franchisee, Anwar Yousuf and his corporations, Drugsmart, Inc.
(“Drugsmart”) and Drugsmart Enterprises, Inc. (“Drugsmart
Enterprises”). Yousuf and Noreen Anwar were the only
shareholders of Drugsmart and Drugsmart Enterprises.
On February 25, 2001, Drugsmart and MSI entered into a
licensing agreement. Drugsmart agreed to operate a Medicine
Shoppe Pharmacy located at 6307 York Road in Baltimore,
Maryland. On May 20, 2003, Drugsmart and MSI entered into a
second licensing agreement, and Drugsmart agreed to operate a
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second Medicine Shoppe Pharmacy located at 1724 E. Northern
Parkway in Baltimore, Maryland. In exchange for the licenses to
operate the pharmacies, MSI obtained a security interest in
Drugsmart’s prescription files.
On or about May 2004, Yousuf incorporated Drugsmart
Enterprises. Drugsmart Enterprises began operating the Parkway
Medicine Shoppe, and on October 14, 2004, MSI entered into a
security agreement with Drugsmart Enterprises. Under the
security agreement, MSI extended Drugsmart Enterprises a
$160,000 line of credit. In exchange, MSI received a security
interest in the Parkway Medicine Shoppe’s equipment, fixtures,
inventory, accounts receivable, prescription files, customer
lists, and goodwill.
By March 1, 2010, the two pharmacies owed a substantial sum
of money to MSI. MSI terminated the franchise agreements and
gave the franchisees until March 31, 2010 to satisfy their
outstanding obligations, de-identify, and close the stores. On
March 30, 2010, Yousuf notified MSI that he intended to transfer
the pharmacies to Siddiqui. Then, Yousuf transferred the
pharmacies to Siddiqui without MSI’s permission, and Siddiqui
and his two corporations, Loch Raven Pharmacy and Belvedere
Enterprises, began operating the pharmacies. Despite the
transfer of the pharmacies, Yousuf continued to work as
Siddiqui’s employee.
3
In April 2010, as a result of these events, MSI filed this
lawsuit against Siddiqui. In November 2010, MSI filed an
amended complaint adding as defendants the corporations
controlled by Siddiqui, Loch Raven Pharmacy and Belvedere
Enterprises. In an effort to resolve the litigation, the
parties drafted a Settlement and Release Agreement (“Settlement
Agreement”). The Settlement Agreement provided, in part, that
Siddiqui and the corporations agreed “to convert the Pharmacies
to Medicap Pharmacies, Inc. (“MPI”) franchises and to execute a
Medicap Pharmacy Franchise Agreement for each of the
Pharmacies,” with each agreement lasting for three years. J.A.
410.
The Settlement Agreement contained two provisions with
certain condition precedent language. First, Paragraph 4.C of
the Settlement Agreement provided:
[u]pon execution of this Agreement and all necessary
documents to effectuate conversion of the Pharmacies
to MPI franchisees, MSI, its affiliates, successors
and/or assigns will release, discharge and hold
Siddiqui and the Companies, their affiliates,
successors and/or assigns, harmless from each and
every claim relating to the Dispute, whether known or
unknown, that MSI may have against Siddiqui and the
Companies as of the Effective Date.
J.A. 411. Second, Paragraph 4.E stated, “[u]pon receipt of the
executed franchise documents discussed above, MSI agrees to
cause its claims within the Litigation to be dismissed with
prejudice[.]” Id.
4
On or about June 17, 2011, Siddiqui signed the Settlement
Agreement for himself and the corporations. On July 5, 2011,
MSI signed the Settlement Agreement. However, after the
execution of the Settlement Agreement, Siddiqui failed to sign
the franchise documents, personal guaranties, documents relating
to purchasing inventory from Cardinal Health, Inc., and other
related documents.
On July 7, 2011, Siddiqui and Yousuf entered into two bills
of sale purportedly transferring Siddiqui’s one hundred percent
interest in the two corporations to Yousuf. Each bill of sale
provided that:
[t]he Buyer expressly understands and acknowledges
that the liabilities associated with the said
corporation[s] . . . including the personal
guarantees provided by the Seller on such liabilities
shall be discharged fully and completely by the buyer
prior to the execution of this Bill of Sale.
J.A. 414-421. Yousuf did not discharge all liabilities fully
and completely prior to the execution of each bill of sale.
Additionally, MSI had no knowledge of these transactions.
On July 21, 2011, Appellees’ counsel informed MSI’s counsel
that Siddiqui had died. On July 26, 2011, Appellees’ counsel e-
mailed and faxed to MSI the signature pages of some of the
franchise documents and personal guaranties. Yousuf had
executed the documents on behalf of Loch Raven Pharmacy and
Belvedere Enterprises as “President” of the corporations.
5
On July 27, 2011, the parties filed a Joint Status Report
with the district court. The parties reported that Siddiqui
“died sometime after signing a settlement agreement but before
executing other documents necessary to carry out the terms of
the settlement. The parties now disagree over the status of
this matter.” J.A. 389. In light of the joint status report,
the district court ordered the parties to conduct discovery
regarding two issues: (1) the ownership of the corporations and
the assets of Siddiqui’s estate and (2) the enforceability of
the Settlement Agreement signed by Siddiqui shortly before his
death.
On October 13, 2011, the district court held a status
hearing and subsequently referred the matter to a United States
Magistrate Judge to conduct a settlement conference. The
parties’ negotiations with the magistrate judge were
unsuccessful in resolving the case. Therefore, on April 18,
2012, the district court ordered the parties to submit briefs on
whether or not the executed Settlement Agreement resolved the
case and set a hearing in the matter.
On May 29, 2012, the district court held a hearing
addressing the question of whether a settlement existed in the
case. At this hearing, the court held the Settlement Agreement
resulted in a full and effective settlement that resolved the
dispute. Subsequently, in a two-page order, the district court
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found the Settlement Agreement to be valid and enforceable.
Specifically, the district court found that the Settlement
Agreement was binding and effective because it was duly
executed, “evince[d] a meeting of the minds and mutual consent
among parties with capacity,” and had consideration on both
sides. J.A. 674. Then, the district court ordered the parties
to submit simultaneous briefs in ten days on whether judgment
should be entered dismissing the litigation.
After reviewing the briefs, the district court entered a
one-page order dismissing Appellant’s claims in favor of the
Appellees’ Motion for Summary Judgment. J.A. 676. In its
memorandum, the court concluded “the settlement agreement
end[ed] the reason for this litigation.” J.A. 672.
MSI now appeals, arguing that the district court erred by
granting summary judgment because material issues of fact exist.
II.
We review a district court’s order granting summary
judgment de novo. Washington Metro. Area. Transit Auth. v.
Potomac Inv. Props., Inc., 476 F.3d 231, 234 (4th Cir. 2007).
“Summary judgment is appropriate only if taking the evidence and
all reasonable inferences drawn therefrom in the light most
favorable to the nonmoving party, ‘no material facts are
disputed and the moving party is entitled to judgment as a
7
matter of law.’” Henry v. Purnell, 652 F.3d 524, 531 (4th Cir.
2011) (en banc) (quoting Ausherman v. Bank of Am. Corp., 352
F.3d 896, 899 (4th Cir. 2003)). “Credibility determinations,
the weighing of the evidence, and the drawing of legitimate
inferences from the facts are jury functions, not those of a
judge.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986).
We apply the substantive law of Maryland because
jurisdiction in this case is based on diversity jurisdiction.
Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717, 722 (4th
Cir. 2000). Maryland law provides that “[s]ettlement agreements
are enforceable as independent contracts, subject to the same
general rules of construction that apply to other contracts.”
Maslow v. Vanguri, 896 A.2d 408, 419 (Md. Ct. Spec. App. 2006).
When construing a contract, Maryland courts apply the principle
of objective interpretation of contracts. Anderson Adventures,
LLC v. Sam & Murphy, Inc., 932 A.2d 1186, 1194 (Md. Ct. Spec.
App. 2007); Cochran v. Norkunas, 919 A.2d 700, 709 (Md. 2007).
“If a contract is unambiguous, the court must give effect to its
plain meaning and not contemplate what the parties may have
subjectively intended by certain terms at the time of
formation.” Nova Research, Inc. v. Penske Truck Leasing Co.,
L.P., 952 A.2d 275, 282 (Md. 2008). “[A] court must presume
that the parties meant what they expressed.” United Servs. Auto.
8
Ass’n v. Riley, 899 A.2d 819, 834 (Md. 2006)(internal quotation
marks omitted). However, Maryland courts consider contractual
language ambiguous “when [the language] read by a reasonably
prudent person, [] is susceptible of more than one meaning.”
B&P Enters. v. Overland Equip. Co., 758 A.2d 1026, 1037 (Md. Ct.
Spec. App. 2000) (quoting Calomiris v. Woods, 727 A.2d 358 (Md.
2000)). If a court finds the language is ambiguous, then a
court may permit extrinsic evidence to determine the parties’
intent. B&P Enters., 758 A.2d at 1037. (citations omitted).
Although state law governs settlement agreements, federal
courts have the “inherent equitable power summarily to enforce a
settlement agreement when the practical effect is merely to
enter a judgment by consent.” Millner v. Norfolk & W.R. Co.,
643 F.2d 1005, 1009 (4th Cir. 1981). However, if the parties
dispute the existence or validity of a settlement agreement, the
court must hold a plenary evidentiary hearing to resolve the
dispute. Id.
In MSI’s briefs and at oral argument, MSI argues that
genuine issues of material fact exist regarding the enforcement
of the Settlement Agreement and that Appellees materially
breached the terms of the Settlement Agreement. Because we
conclude that genuine issues of material fact exist, the
district court erred by granting summary judgment.
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III.
In this case, the district court held a plenary evidentiary
hearing. At the hearing, the district court found that a
settlement agreement existed, but made no factual findings
resolving the material dispute of facts between the parties.
Because we find that genuine issues of material fact exist, the
district court improperly granted summary judgment to summarily
enforce the Settlement Agreement. See Millner, 643 F.2d at
1009-10 (holding summary enforcement of the settlement agreement
was improper where an evidentiary hearing was required to
resolve factual disputes).
MSI primarily argues that Paragraph 4.C of the Settlement
Agreement constitutes a condition precedent that was not met by
Siddiqui and the corporations. Paragraph 4.C of the Settlement
Agreement provides:
[u]pon execution of this Agreement and all necessary
documents to effectuate conversion of the Pharmacies
to MPI franchisees, MSI . . . will release, discharge
and hold Siddiqui and the Companies . . . harmless
from each and every claim relating to the Dispute,
whether known or unknown, that MSI may have against
Siddiqui and the Companies as of the Effective Date.
J.A. 411 (emphasis added). Also, Paragraph 4.E states, “[u]pon
receipt of the executed franchise documents discussed above, MSI
agrees to cause its claims within the Litigation to be dismissed
with prejudice[.]” Id.
10
A condition precedent in a contract is “a fact, other than
mere lapse of time, which, unless excused, must exist or occur
before a duty of immediate performance of a promise arises.”
Chirichella v. Erwin, 310 A.2d 555, 557 (Md. 1973) (finding no
condition precedent created when the clause in the contract
simply stated that the real estate closing would “[c]oincide
with settlement of New Home in Kettering Approx. Oct. ‘71,’” and
“merely fixe[d] a convenient and appropriate time for
settlement”).
In reviewing a contract, if a Maryland court finds a
“‘contractual duty is subject to a condition precedent, whether
express or implied, there is no duty of performance and there
can be no breach by non-performance until the condition
precedent is either performed or excused.’” All State Home
Mortg., Inc. v. Daniel, 977 A.2d 438, 447 (Md. Ct. Spec. App.
2009) (quoting Pradham v. Maisel, 338 A.2d 905, 909 (Md. Ct.
Spec. App. 1975)). To determine whether a condition precedent
exists, Maryland courts look to the terms of the contract:
whether a stipulation in a contract constitutes a
condition precedent is [a question] of construction
dependent on the intent of the parties to be gathered
from the words they have employed and, in case of
ambiguity, after resort to the other permissible aids
to interpretation[.]
Id. at 448 (quoting Aronson & Co v. Fetridge, 957 A.2d 125, 144
(Md. Ct. Spec. App. 2008)).
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A genuine issue of material fact exists regarding whether
certain conditions precedent were satisfied. First, MSI argues
that its release and discharge of liability as to Siddiqui and
his corporations would trigger only upon execution of all
necessary documents, which Appellees never signed. However,
Appellees contend that the condition was satisfied because they
properly executed the franchise agreement, which was the only
necessary document for conversion. Appellees rely upon
Paragraph 4.E of the Settlement Agreement, which provides
“[u]pon receipt of the executed franchise documents discussed
above, MSI agrees to cause its claims within the Litigation to
be dismissed with prejudice[.]” Id. (emphasis added).
Therefore, a genuine issue of material fact exists
regarding which documents constitute “all necessary documents to
effectuate conversion of the Pharmacies to MPI Franchisees” or
“executed franchise documents” triggering MSI’s dismissal of its
claims because the parties dispute which documents must be
signed to effectuate conversion. See J.A. 411 (emphasis added).
MSI contends that “all necessary documents” includes an
amendment to the franchise agreement providing for a three-year
term, a state-specific addenda, and documents related to the
purchase of inventory from Cardinal Health, Inc. However,
Appellees argue that “all necessary documents” is simply the
12
franchise agreement. This factual dispute must be resolved
prior to summary enforcement of the Settlement Agreement.
Second, a factual dispute exists regarding whether
conditions precedent were satisfied because it is unclear
whether Yousuf had authority to sign franchise-related documents
on behalf of the corporations. MSI argues the bills of sale
between Siddiqui and Yousuf may be invalid. Each bill of sale
provides that the buyer “expressly understands and acknowledges”
that it must “fully and completely discharge the liabilities
associated with the corporations, including the seller’s
personal guarantees” prior to the execution of the bill of sale.
J.A. 414-15, 418-19. Otherwise, the bill of sale becomes null
and void.
It is uncontested that Yousuf did not fully and completely
discharge the liabilities associated with the corporations prior
to the execution of each bill of sale. Maryland law provides
that, “[i]f a contract is unambiguous, the court must give
effect to its plain meaning and not contemplate what the parties
may have subjectively intended by certain terms at the time of
formation.” Nova Research, Inc., 952 A.2d at 283. “[A] court
must presume that the parties meant what they expressed.” Riley,
899 A.2d at 833 (internal quotation marks omitted). However,
the Appellees contend that the language in each bill of sale was
a mutual mistake. Because the district court made no finding on
13
this issue, a genuine issue of material fact exists. For
example, if the bills of sale are determined null and void, all
the shares of the common stock of the corporations reverted to
Siddiqui and Yousuf had no authority to bind the corporations
when he executed the franchise agreements. Therefore, it is
unclear who owns the corporations much less who has the
authority to sign franchise and other related documents on
behalf of the corporations.
Accordingly, in light of these circumstances, there are
genuine issues of material fact that preclude summary judgment.
IV.
For the foregoing reasons, we vacate the district court’s
order granting summary judgment and remand for further
proceedings consistent with this opinion.
VACATED AND REMANDED
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