Court Opinion

ID: 2641177
Source: CourtListenerOpinion
Date Created: 2013-11-06 01:00:55.681827+00
Date Added: 2024-06-11T13:06:46.693405
License: Public Domain

UNPUBLISHED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Vacated and remanded by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.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

                                            2
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

                                           6
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.

                                              9
                                        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)).

                                          11
      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

                                             14