UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1166
1899 HOLDINGS, LLC; STANLEY KEYSER; KEYSER DEVELOPMENT
CORPORATION; KEYSCO REALTY CORPORATION; QUEEN ANNE
BELVEDERE REVITALIZATION LIMITED PARTNERSHIP;
NINETEEN/TWENTY−ONE WEST PRESTON, LLC; IMDBOSS, LLC,
Plaintiffs – Appellants,
v.
1899 LIMITED LIABILITY COMPANY; SMALL DEAL FUND, LP; 1899
SPECIAL MEMBER, LLC; RALEIGH CONSULTANTS, LLC,
Defendants – Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Catherine C. Blake, District Judge.
(1:12-cv-00297-CCB)
Argued: January 28, 2014 Decided: April 24, 2014
Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.
Affirmed by unpublished opinion. Judge Diaz wrote the opinion,
in which Judge Wilkinson and Judge Keenan joined.
ARGUED: Meighan Griffin Burton, WRIGHT, CONSTABLE & SKEEN, LLP,
Baltimore, Maryland, for Appellants. Paul S. Caiola, GALLAGHER
EVELIUS & JONES LLP, Baltimore, Maryland, for Appellees. ON
BRIEF: Michael I. Gordon, Robert Hesselbacher, WRIGHT, CONSTABLE
& SKEEN, LLP, Baltimore, Maryland, for Appellants. Brian T.
Tucker, Steven G. Metzger, GALLAGHER EVELIUS & JONES LLP,
Baltimore, Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
DIAZ, Circuit Judge:
In this case, we consider whether Appellants, Plaintiffs
below, have adequately alleged claims for breach of contract and
other state-law causes of action against several of their co-
participants in a project to restore and redevelop Baltimore’s
Northern District Police Station. Finding that Plaintiffs had
failed to state any viable claims, the district court dismissed
their complaint. For the reasons that follow, we affirm.
I.
A.
In 2001, Stanley Keyser and Wendy Blair formed a Maryland
limited liability company called 1899 LLC (the “Company”).
Initially, 1899 LLC had two members: Keyser Development Corp.,
controlled by Keyser, and W.L. Blair Development LLC, controlled
by Blair. Through the Company, Keyser and Blair planned to
purchase Baltimore’s Northern District Police Station and
convert it into a commercial development. In doing so, they
sought to obtain certain state and federal tax credits available
for projects involving the restoration of historic buildings.
The project quickly ran into obstacles. Environmental
hazards, among other difficulties, increased development costs
beyond what Keyser and Blair had anticipated. To ensure
adequate financing in the face of these problems, Keyser, along
3
with several entities controlled by or affiliated with him
(collectively, the “Keyser entities”), 1 began contributing funds
to 1899 LLC. These investments continued for several years, and
by 2008, Keyser and the Keyser entities had contributed at least
$3 million.
In 2005, to secure still additional financing for the
project, Keyser negotiated an agreement with John Bowman, Jr.,
the president of an investment firm called Tax Credit Capital,
LLC. Keyser and Bowman eventually agreed that Small Deal Fund
L.P.--an entity affiliated with Bowman--would invest $1.9
million in the project in exchange for 99.9% of the operating
profits, as well as the tax credits the project would generate.
To facilitate this investment, Small Deal and 1899 Holdings, LLC
(one of the Keyser entities) executed an Operating Agreement,
dated January 31, 2006, through which the two firms became the
sole members of 1899 LLC. The two previous members withdrew.
A number of the Operating Agreement’s provisions are
relevant to this appeal. First, it designated Holdings as
“Managing Member” and Small Deal as “Investor Member.” In
essence, Holdings was responsible for day-to-day management of
1
These entities included Plaintiffs-Appellants 1899
Holdings, LLC; Keyser Development Corp.; Keysco Realty Corp.;
Queen Anne Belvedere Revitalization L.P.; and Nineteen/Twenty-
One West Preston, LLC.
4
the project while Small Deal agreed to provide capital. Per the
agreement, however, “[i]f the available debt, equity, rental
income or other proceeds [were] insufficient” to complete the
project, Holdings agreed to “pay such deficiencies.” J.A. 152.
Relatedly, Holdings warranted that it would “cause the
completion of the . . . Project substantially in accordance with
the plans and specifications . . . free and clear of all
mechanics’, materialmen’s or similar liens.” Id.
The Operating Agreement also specified that any financing
Holdings provided to 1899 LLC would “be treated as a Capital
Contribution,” rather than as a loan. See id. This policy had
one exception: Holdings was permitted “to make short term loans
to the Company prior to Construction Completion and such loans
[would] not be treated as a Capital Contribution” as long as
they were repaid within 120 days (or 180 days upon substantial
completion of the project). Id. at 152-53. At the time they
executed the Operating Agreement, Holdings and Small Deal
warranted that there were no “loans or advances . . . from the
Managing Member or its Affiliates to the Company . . .
outstanding for more than 120 days” (the “Warranty Clause”).
Id. at 149.
The Operating Agreement gave Small Deal the power to remove
Holdings as Managing Member under certain circumstances.
Specifically, as relevant here, Small Deal could remove Holdings
5
if it violated (and failed to cure within thirty days) any
provision of the Operating Agreement, provided that its conduct
had a “material adverse effect on the Company or any of its
Members.” Id. at 162. An “uncured violation” of Holdings’ duty
to “provide funds” would be “deemed to have a material adverse
effect.” Id. (emphasis added).
In addition to a standard merger clause, the Operating
Agreement included one other relevant provision. “For services
rendered in connection with the Company’s development,” a
developer, IMDBOSS, LLC, would receive a “Developer Fee . . . in
an amount equal to 20% of appropriate development costs.” Id.
at 101, 160. This fee, estimated to be $500,000, would be
“deemed earned in its entirety as of the date of Construction
Completion.” Id. at 160. The fee was to be paid “from
available debt and equity proceeds of the Company, to the extent
such proceeds [were] not required for other Company purposes.”
Id. The Operating Agreement provided that the “remainder” of
the fee could be “deferred” at 6% interest, but it was “in all
events” to “be [paid] by December 31, 2014.” 2 Id.
After Holdings and Small Deal executed the Operating
Agreement, Holdings and the other Keyser entities contributed
2
The Amendment to the Operating Agreement, discussed below,
would later change this date to December 31, 2017.
6
additional funding to the project, consistent with Holdings’
duty to cover any shortfalls. Nevertheless, the project
continued to struggle financially.
On August 12, 2008, allegedly “[a]t the insistence of Small
Deal,” Holdings executed an agreement on behalf of 1899 LLC with
Raleigh Consultants, LLC. Id. at 30. Raleigh agreed to serve
as the “day-to-day construction manager” of the project and to
“perform cost data processing.” Id. According to Holdings,
after this agreement, it was “effectively removed” from managing
the project. Id. Specifically, Holdings alleges that it
repeatedly requested access to financial records and other
information, but Small Deal and Raleigh “refused to respond to
those requests.” Id.
In September 2008, to address the project’s ongoing
financial difficulties, Holdings and Small Deal executed an
Amendment to the Operating Agreement. Among other changes, the
Amendment provided that Small Deal and another entity, the
Maryland Historic Tax Credit Fund, L.P., would contribute
additional capital to the project. Other than with respect to
the enumerated changes, however, the Amendment stated that “the
Operating Agreement is ratified and confirmed in all respects”
(the “Ratification Clause”). Id. at 203.
Shortly after Holdings and Small Deal executed the
Amendment, Small Deal accused Holdings of breaching its funding
7
obligation under the Operating Agreement. In a letter to
Holdings, dated November 13, 2008, Small Deal threatened to
remove Holdings as Managing Member, noting the existence of “no
fewer than 17 liens and lawsuits directly affecting the
Company.” Id. at 206. In response, Holdings acknowledged that
it was “unable to cause the Company to timely pay operating
expenses, or payments on the Company’s loans.” Id. at 55. But,
citing various forms of alleged misconduct by Small Deal and
Raleigh, Holdings denied that Small Deal had authority to remove
it as Managing Member. Undeterred, Small Deal formally removed
Holdings on December 15.
As provided by the Operating Agreement, 1899 Special Member
LLC--an entity appointed by Small Deal--automatically replaced
Holdings. Special Member acquired Holdings’ interest “for an
amount equal to the greater of (i) $100 or (ii) [Holdings’]
Capital Account balance . . . on the date of removal.” Id. at
163. The Agreement made this sum payable to Holdings “upon the
earlier of fifteen years from the date of removal or the sale of
all . . . of the Company’s assets.” Id.
Sometime after Holdings’ removal, 1899 LLC completed the
project.
B.
In December 2011, Holdings, Keyser, the Keyser entities,
and IMDBOSS sued 1899 LLC, Small Deal, Special Member, and
8
Raleigh in Maryland state court, asserting a variety of state-
law claims. Defendants removed the action to the U.S. District
Court for the District of Maryland, invoking diversity
jurisdiction.
In their amended complaint, Plaintiffs first alleged that,
prior to Holdings’ removal as Managing Member, Bowman--on behalf
of Small Deal--orally “agreed with Stanley Keyser that the
outlays that had been made and would be made by [Keyser and the
Keyser entities] . . . would be considered loans to 1899 LLC and
not capital contributions.” J.A. 32-33. As loans, the
complaint explained, the funds were due immediately upon
completion of the project. The complaint alleged that, by
failing to repay the loans, 1899 LLC breached the terms of the
oral agreement. In the alternative, the complaint sought return
of the funds via claims for unjust enrichment.
The amended complaint also alleged that 1899 LLC, Small
Deal, and Special Member breached the terms of the Operating
Agreement by wrongfully removing Holdings as Managing Member.
According to Holding, the removal was not authorized by the
Agreement and violated Defendants’ fiduciary duties and duty of
good faith. Additionally, the complaint alleged that Defendants
breached the Operating Agreement by wrongfully withholding
IMDBOSS’s developer fee. Finally, it requested that Defendants
9
provide “a full accounting of the Project’s capital accounts,
income, disbursements, distributions and finances.” Id. at 39.
Defendants filed a motion to dismiss, which the district
court granted. See 1899 Holdings, LLC v. 1889 Ltd. Liab. Co.,
No. CCB-12-297, 2013 WL 142303 (D. Md. Jan. 8, 2013). The court
first held that the parol evidence rule barred Plaintiffs’ loan
claims. According to the court, Plaintiffs’ counsel had
conceded that the alleged oral agreement to treat the
contributions as loans took place prior to execution of the
Amendment. Moreover, the court determined that the existence of
the loans was inconsistent with the terms of the Operating
Agreement, as ratified by the Amendment. Because the parol
evidence rule bars evidence of a prior agreement that conflicts
with the terms of a written instrument, the court held that the
loan-related contract allegations failed to state a plausible
claim. Relatedly, the court dismissed the alternative unjust
enrichment claims. It explained that such claims cannot lie
where an express contract--here, the Operating Agreement and
Amendment--“covers the subject matter of the claim.” Id. at *4.
Second, with respect to Plaintiffs’ claim for an
accounting, the district court noted that “a demand for an
accounting is generally not an independent cause of action in
Maryland, but rather a remedy to another cause of action.” Id.
Having already concluded that the loan claims were not viable,
10
the court determined that the claim for an accounting also
failed.
Third, the court held that Holdings had failed to plausibly
allege a breach of contract based on its removal as Managing
Member. Taking judicial notice of state court documents
indicating the entry of judgments on liens against the project,
the court determined that Holdings had violated its duty “to
cause completion of the project free from liens.” Id. at *5.
Accordingly, the court held that “removal of Holdings as
Managing Member complied with . . . the Operating Agreement.”
Id.
Finally, the court dismissed IMDBOSS’s claim for the
developer fee without prejudice. The court read the relevant
provisions as establishing that the fee was not due until 2017,
and thus determined that IMDBOSS’s claim for payment was
premature.
Plaintiffs timely noted this appeal.
II.
Plaintiffs argue that the district court erred in
dismissing each of the claims in their amended complaint, an
issue that we review de novo. See Cioca v. Rumsfeld, 720 F.3d
505, 508 (4th Cir. 2013). “‘To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as
11
true, to state a claim to relief that is plausible on its
face.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). In assessing the sufficiency of a plaintiff’s
allegations, the court may “consider documents attached to the
complaint, as well as those attached to the motion to dismiss,
so long as they are integral to the complaint and authentic.”
Philips v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir.
2009) (internal citation omitted). Additionally, the court “may
consider matters of public record such as documents from prior
state court proceedings.” Walker v. Kelly, 589 F.3d 127, 139
(4th Cir. 2009).
In a contract dispute, “the construction of ambiguous
contract provisions is a factual determination that precludes
dismissal on a motion for failure to state a claim.” Martin
Marietta Corp. v. Int’l Telecomms. Satellite Org., 991 F.2d 94,
97 (4th Cir. 1992). Under Maryland law, “a written contract is
ambiguous if, when read by a reasonably prudent person, it is
susceptible of more than one meaning.” Calomiris v. Woods, 727
A.2d 358, 363 (Md. 1999).
A.
We first consider whether the district court erred in
dismissing Plaintiffs’ loan claims pursuant to the parol
evidence rule. Because we have diversity jurisdiction over this
12
case, we apply Maryland’s substantive contract law. See Francis
v. Allstate Ins. Co., 709 F.3d 362, 369 (4th Cir. 2013), cert.
denied, 134 S. Ct. 986 (2014) (“A federal court sitting in
diversity is required to apply the substantive law of the forum
state, including its choice-of-law rules.”); Lab. Corp. of Am.
v. Hood, 911 A.2d 841, 848 (Md. 2006) (noting that Maryland
courts “generally apply the law of the place where the contract
was made”).
Under Maryland law, the parol evidence rule “bars the
admission of prior or contemporaneous agreements or negotiations
to vary or contradict a written contractual term.” Calomiris,
727 A.2d at 361. Because “a written agreement discharges prior
agreements,” it “render[s] legally inoperative communications
and negotiations leading up to the written contract.” Id. at
361-62 (internal quotation marks omitted). Plaintiffs argue
that the rule does not apply to their loan claims because: (1)
the alleged oral agreement to treat their contributions as loans
occurred after execution of the written Amendment; and (2) the
oral agreement is not inconsistent with the terms of either the
Operating Agreement or the Amendment. We reject both
contentions.
1.
With respect to the timing issue, Plaintiffs point to
language in their amended complaint stating that Small Deal, “on
13
numerous occasions until the end of 2008, . . . acknowledged,
agreed to, and acquiesced in the treatment of the advances as
loans.” J.A. 33 (emphasis added). Because the Amendment was
executed in September 2008, they argue, the loan agreement is
not a “prior” or “contemporaneous” agreement susceptible to the
parol evidence rule. See Calomiris, 727 A.2d at 361.
At the hearing on Defendants’ motion to dismiss, however,
the district court remarked that the conversations relating to
the alleged loan agreement took place “sometime in the spring
and summer of 2008, after the [Operating Agreement], but prior
to the [Amendment].” J.A. 279. In response to this
observation, Plaintiffs’ counsel stated that the conversations
“were certainly after [the Operating Agreement], yes, and before
the [Amendment].” Id. In its order dismissing Plaintiffs’
claims, the district court treated this statement as an
admission. In the court’s view, Plaintiffs had “concede[d] that
the alleged agreement . . . preceded the written Amendment.”
1899 Holdings, 2013 WL 142303, at *4.
“[A] lawyer’s statements may constitute a binding admission
of a party” if the statements are “‘deliberate, clear, and
unambiguous.’” Fraternal Order of Police Lodge No. 89 v. Prince
George’s Cnty., 608 F.3d 183, 190 (4th Cir. 2010) (quoting Meyer
v. Berkshire Life Ins. Co., 372 F.3d 261, 265 n.2 (4th Cir.
2004)). When the district court treats a statement as an
14
admission, we review that determination only for abuse of
discretion. See Meyer, 372 F.3d at 264.
On appeal, Plaintiffs contend that their counsel’s
statement did not carry the significance the district court
attributed to it. They argue that “counsel was referring [only]
to the initial agreement to treat the advances as loans,” not
any further conversation confirming that agreement. Reply Br.
at 26. We find this distinction unpersuasive.
In the colloquy, the court referred to “conversations,” in
the plural form, indicating it had in mind all of the
discussions regarding the loans, not just the initial agreement.
In response, counsel neither disputed the court’s
characterization of the conversations, nor made the distinction
on which Plaintiffs now rely. That counsel did not do so is
telling: as the court’s observation was clearly directed to the
issue of whether the parol evidence rule barred Plaintiffs’
claims, counsel’s failure to mention the distinction likely
indicates he had no such distinction in mind. Moreover, counsel
himself employed a plural pronoun, and he phrased his statement
in definitive terms. See J.A. 279 (“They [the conversations]
were certainly . . . before the [Amendment].” (emphasis added)).
Accordingly, we find both that the statement was
sufficiently clear and that the district court correctly
interpreted it. We thus hold that the court’s treatment of
15
counsel’s statement as an admission was not an abuse of
discretion. Because Plaintiffs are bound by the admission on
appeal, see, e.g., In re McNallen, 62 F.3d 619, 625 (4th Cir.
1995), we reject their argument that the loan agreement
postdated the written Amendment.
2.
Plaintiffs also contend that the alleged loan agreement is
consistent with the Operating Agreement and Amendment. Because
it does not “vary” or “contradict” the terms of the written
instruments, they argue, the parol evidence rule does not apply.
See Calomiris, 727 A.2d at 361.
The district court found that the oral loan agreement was
inconsistent with the terms of the writings based on the
interaction between two clauses therein: the Warranty Clause in
the Operating Agreement and the Ratification Clause in the
Amendment. According to the district court, by ratifying the
Operating Agreement in the Amendment, Holdings effectively
agreed--as of the date of the Amendment--that there were no
“outstanding loans or advances” from Holdings to 1899 LLC. See
1899 Holdings, 2013 WL 142303, at *3. Holdings’ allegation
regarding the oral loan agreement, the court held, thus
“directly contradicts the plain language of the later written
Operating Agreement and its Amendment.” Id.
16
Plaintiffs assert that the district court erred by
selectively quoting the language of the Warranty Clause. As
they point out, the full clause states that “[t]here are no
outstanding loans or advances (excluding, for this purpose, any
loans pursuant to Section 6.11 and development advances with
respect to the Project) . . . which are outstanding for more
than 120 days.” See J.A. 149 (emphasis added). Based on this
language, Plaintiffs contend that the existence of the loans is
in fact consistent with the Warranty Clause in two potential
ways: first, if the loans constitute “development advances” (a
term that neither the Amendment nor the Operating Agreement
defines); and second, if they were outstanding for fewer than
120 days at the time the parties executed the Amendment. 3
Even if the alleged loans are potentially consistent with
the Warranty Clause, however, they are nevertheless inconsistent
with other provisions of the Operating Agreement. The Operating
Agreement explicitly provides that any payments made by Holdings
to “acquire and complete . . . the project” will “be treated as
a Capital Contribution to the Company.” 4 Id. at 152. The only
3
Plaintiffs do not argue that the alleged loans were “loans
pursuant to Section 6.11.”
4
Plaintiffs concede that “the amounts advanced by Keyser
and his entities were, in substance, monies paid into the
Project by Holdings.” See Appellants’ Br. at 38.
17
exception to this rule is for “short-term loans,” which avoid
classification as capital contributions only if they are repaid
“within 120 days of being made (or, within 180 days of being
made upon substantial completion of construction of the
Project).” See id. at 152-53. Plaintiffs do not dispute that
the contributions in question were for the purpose of funding
and completing the project. Nor do they dispute that the
contributions were not in fact repaid within even 180 days.
Consequently, the Operating Agreement (which the Amendment
ratified) unambiguously renders the payments capital
contributions. 5
In any event, the Operating Agreement also contains a
merger clause. That clause provides that the “written
agreements . . . constitute the entire agreement among the
parties and supersede any prior agreements or understandings
among them.” Id. at 176. Because the Amendment ratified this
provision after the date of the alleged oral agreement, it
leaves no room for treating the payments as loans.
5
This is no less true of the so-called “Orlo loan,” which
the amended complaint describes as “a $500,000 loan that Stanley
Keyser personally obtained from Orlo Holding NY, LLC.” J.A. 33
(emphasis added). Although the Amendment notes the existence of
the loan, it imposes no express duty on 1899 LLC to repay it.
If, as the complaint alleges, Keyser paid the proceeds of the
Orlo loan into the project, the Operating Agreement renders that
payment a capital contribution.
18
In sum, the oral communications on which Plaintiffs rely
contradict the parties’ subsequent written agreement. As the
parol evidence rule thus bars introduction of those
communications as evidence, the district court did not err in
dismissing Plaintiffs’ loan-related contract claims.
3.
From this conclusion, it follows that the district court
also correctly dismissed Plaintiffs’ unjust enrichment claims.
As the district court recognized, Maryland law does not permit a
claim for unjust enrichment where an express contract governs.
See Cnty. Comm’rs v. J. Roland Dashiell & Sons, Inc., 747 A.2d
600, 607-08 (Md. 2000). “This rule,” the Maryland Court of
Appeals has explained, “holds the contract parties to their
agreement and prevents a party who made a bad business decision
from asking the court to restore his expectations.” Id. at 610
(internal quotation marks omitted).
Here, the parties agreed--by way of the Operating Agreement
and Amendment--that Plaintiffs’ payments to 1899 LLC would be
capital contributions rather than loans. That agreement, as the
only one that is both “valid and enforceable,” thus “precludes
recovery in quasi contract [i.e., unjust enrichment] for events
arising out of the same subject matter.” See MacDraw, Inc. v.
CIT Group Equip. Fin., Inc., 157 F.3d 956, 964 (2d Cir. 1998)
(per curiam) (alteration in original) (internal quotation marks
19
omitted) (quoted in Cnty. Comm’rs, 747 A.2d at 607). For this
reason, Plaintiffs’ unjust enrichment claims fail. 6
B.
Next, we address Holdings’ claim for breach of contract
based on its removal as Managing Member of 1899 LLC. Holdings
makes two arguments for why its removal was not authorized by
the Operating Agreement. First, it argues that the Operating
Agreement required it only to complete the project “free and
clear” of liens, such that the existence of liens prior to
completion did not violate its obligations. See J.A. 152.
Second, Holdings argues that even if it did violate the
Operating Agreement, that violation might not have had a
“material adverse effect on the Company.” See id. at 162.
Holdings’ arguments misapprehend the contractual hook on
which its removal was justified. Under the Agreement, it was
not the existence of the liens themselves that justified
Holdings’ removal, but rather what the liens signified: that
Holdings was not meeting its contractual obligation to cover
shortfalls in funding. See id. at 152 (“If the available . . .
6
In County Commissioners, the Maryland Court of Appeals
recognized a variety of exceptions to the general rule. These
include situations involving “evidence of fraud or bad faith,”
where “there has been a breach . . . or a mutual re[s]cission of
the contract, when re[s]cission is warranted, or when the
express contract does not fully address a subject matter.” 747
A.2d at 609. None of the exceptions apply here.
20
proceeds are insufficient to . . . acquire and complete the
rehabilitation of the Project and satisfy all other obligations
. . . the Managing Member shall be responsible for and obligated
to pay such deficiencies . . . .”). To this point, we note that
the state court documents in the record (of which we take
judicial notice) reveal not merely liens against the project,
but actual judgments on those liens. Simply put, the existence
of such judgments is inconsistent with Holdings having fulfilled
its contractual duty. 7 In turn, the Operating Agreement provides
that Holdings’ failure to fulfill its funding obligation is
“deemed to have a material adverse effect.” Id. at 162
(emphasis added).
We perceive no ambiguity in the contract language and
conclude that Holdings’ removal by Small Deal was authorized by
the terms of the Operating Agreement. See id. (permitting
removal of Holdings as Managing Member based on an uncured
violation of the Operating Agreement with a material adverse
effect on 1899 LLC). Holdings has not pleaded a plausible claim
for breach. 8
7
Holdings’ December 11, 2008, letter to Small Deal
essentially admitted as much. In the letter, Holdings stated
that it was “unable to cause the Company to timely pay operating
expenses, or [make] payments on the Company’s loans.” J.A. 55.
8
Holdings’ vague and conclusory allegations regarding bad
faith and violations of fiduciary duties do not alter our
(Continued)
21
C.
We next consider IMDBOSS’s claim for breach of contract
based on Defendants’ failure to pay it the development fee. We
agree with the district court that this claim is premature.
Under the terms of the Operating Agreement and Amendment,
1899 LLC is to pay IMDBOSS a “developer fee” in an “amount equal
to 20% of appropriate development costs.” J.A. 200. The terms
of the fee’s payment are as follows:
The Developer Fee shall be deemed earned in its
entirety as of the date of Construction Completion and
otherwise in accordance with the terms of the
Development Agreement. The Developer shall be paid
such portion of the Developer Fee from available debt
and equity proceeds of the Company, to the extent such
proceeds are not required for other Company purposes.
The remainder of the Developer Fee shall constitute a
deferred fee bearing interest at 6% compounded
annually, payable . . . to the Developer from Cash
Flow and/or Net Proceeds[,] . . . but in all events
the Deferred Developer Fee shall be [paid] by December
31, 2017 . . . .
Id. at 200-01.
conclusion. See J.A. 40. We fail to comprehend how Small
Deal’s decision to exercise a right expressly provided to it by
the contract could constitute either bad faith or a breach of
fiduciary duty, especially in light of Holdings’ own breach.
See, e.g., Big Yank Corp. v. Liberty Mut. Fire Ins. Co., 125
F.3d 308, 313 (6th Cir. 1997) (noting that “a party’s acting
according to the express terms of a contract cannot be
considered a breach of the duties of good faith and fair
dealing” and collecting cases to that effect).
22
Focusing on this provision’s pronouncement that the fee
“shall be deemed earned in its entirety as of the date of
Construction Completion,” IMDBOSS asserts that the fee is
currently due. See id. at 200. Defendants can avoid paying it,
IMDBOSS argues, only by demonstrating that “there are not
available debt and equity proceeds to pay the fee.” Appellants’
Br. at 36. As Defendants have not done so, IMDBOSS contends
that 1899 LLC’s failure to pay constitutes a breach of contract.
We are not persuaded by IMDBOSS’s proposed construction.
Although the fee was “earned” at the time that construction of
the project was completed, it does not follow that the fee
simultaneously became due. With respect to payment of the fee,
the Amendment states only that it “shall be [paid] by December
31, 2017.” J.A. 201. Until that date, the contract vests 1899
LLC with discretion to decide that the relevant funds are
“required for other Company purposes.” Id. at 200. While an
allegation that the company is withholding payment of the fee in
bad faith could perhaps overcome the discretion this clause
confers on 1899 LLC, IMDBOSS makes no such allegation in the
amended complaint. For that matter, the complaint does not even
assert that there are “available debt and equity proceeds” to
pay the fee. See id. Accordingly, we conclude that IMDBOSS has
not adequately alleged that it is yet entitled to the fee. The
23
district court thus did not err in dismissing IMDBOSS’s claim
without prejudice.
D.
Finally, we hold that the district court correctly
dismissed Plaintiffs’ claim for an accounting. “In Maryland, a
claim for an accounting is available when one party is under
obligation to pay money to another based on facts and records
that are known and kept exclusively by the party to whom the
obligation is owed, or where there is a fiduciary relationship
among the parties.” Polek v. J.P. Morgan Chase Bank, N.A., 36
A.3d 399, 418 (Md. 2012) (internal quotation marks omitted).
This case presents neither circumstance.
First, because Plaintiffs have otherwise failed to plead
viable claims for breach of contract or unjust enrichment, we
discern no basis for concluding that any of the defendants are
under a current “obligation to pay money” to any of the
plaintiffs. Although Plaintiffs’ capital contributions will
ultimately be subject to repayment, such repayment is not due
until “the earlier of fifteen years from the date of removal or
the sale of all or substantially all of the Company’s assets,”
neither of which has yet occurred. J.A. 163.
Second, and for similar reasons, Defendants do not owe
Plaintiffs a fiduciary duty. Regardless of whether members of a
Maryland LLC generally owe each other fiduciary duties (an issue
24
on which the parties disagree), neither Holdings nor any other
plaintiff is currently a member of 1899 LLC. Per the Operating
Agreement, Special Member simply owes Holdings a fixed sum of
money, payable upon one of the events noted above. See id.
(“[T]he Special Member or its designee shall automatically . . .
acquire the Interest of the removed Managing Member for an
amount equal to the greater of (i) $100 or (ii) the Capital
Account balance of the removed Managing Member on the date of
removal.”). In other words, the current relationship between
Holdings and Special Member is merely that of a creditor and
debtor; Holdings has no current relationship with 1899 LLC.
Plaintiffs therefore have not alleged circumstances to
support a claim for an accounting. See Polek, 36 A.3d at 418
(affirming the dismissal of accounting claims on the basis that
the contractual relationship between the parties was not
fiduciary in nature and any fiduciary relationship that
otherwise existed had “expired long ago”).
III.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.
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