Court Opinion

ID: 182668
Source: CourtListenerOpinion
Date Created: 2011-01-12 19:49:21+00
Date Added: 2024-06-11T17:26:00.616881
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 09-2097

PETROLEUM TRADERS CORPORATION, An Indiana Corporation,

                 Plaintiff - Appellee,

           v.

BALTIMORE COUNTY, MARYLAND,

                 Defendant – Appellant,

           and

JOHN E. BEVERUNGEN, Individually and in his Official
Capacity; FRED HOMAN, Individually and in his Official
Capacity; DEBORAH MEEHAN, Individually and in her Official
Capacity; JOYCE A. STROUPE, Individually and in her Official
Capacity; DAVID W. WOLFE, Individually and in his Official
Capacity;   HARFORD   COUNTY,  MARYLAND;   CARROLL   COUNTY,
MARYLAND; COMMUNITY COLLEGE OF BALTIMORE COUNTY; ANNE
ARUNDEL COUNTY, MARYLAND,

                 Defendants.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.    Benson Everett Legg, Chief District
Judge. (1:06-cv-00444-BEL)

Argued:   October 28, 2010                   Decided:   January 12, 2011

Before TRAXLER, Chief Judge, WILKINSON, Circuit Judge, and Bobby
R. BALDOCK, Senior Circuit Judge of the United States Court of
Appeals for the Tenth Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion.

ARGUED: John Edward Beverungen, Paul M. Mayhew, BALTIMORE COUNTY
OFFICE OF LAW, Towson, Maryland, for Appellant.    Michael Scott
Elvin, CHICO & NUNES, PC, Chicago, Illinois, for Appellee.    ON
BRIEF: Adam M. Rosenblatt, Assistant County Attorney, BALTIMORE
COUNTY OFFICE OF LAW, Towson, Maryland, for Appellant.    Joshua
A. Glikin, BOWIE & JENSEN, LLC, Towson, Maryland; Andrew M.
Spangler, Jr., Sandy L. Morris, CHICO & NUNES, PC, Chicago,
Illinois, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

     Petroleum Traders Corporation (“PTC”) prevailed below in a

breach of contract action it brought against Baltimore County.

The district court estopped Baltimore County from denying the

existence of the contract, and we now affirm the judgment.

                                           I.

     Baltimore     County     is   a    member     of    the    Baltimore       Regional

Cooperative Purchasing Committee (“BRCPC”), a group formed by

the counties of the Baltimore metropolitan area for the purpose

of jointly purchasing various commodities, including fuel. *                          In

February 2004, the BRCPC issued an “Invitation to Bid” on the

provision     of   gasoline    and       diesel     fuel       to     its    constituent

counties for a time period running from April 1, 2004 through

June 30, 2007.       The Invitation set out the terms of the fuel

purchasing     agreement    the        BRCPC     would    enter       into    with   the

successful bidder.      It explained that the contract would require

the participating counties to purchase all of their fuel from

the winning bidder.         Additionally, the Invitation to Bid gave

the counties the option to lock-in a fixed price for fuel over a

set period of time instead of purchasing it at the prevailing

     *
       The court grants            PTC’s       motion    to    file    a    supplemental
appendix in this action.

                                           3
market price.         Under the lock-in option, the winning bidder was

to purchase futures contracts to ensure an adequate supply at a

fixed price.

      PTC submitted a bid on March 11, 2004.                    And on March 15,

2004, David Wolfe, a staff buyer for Baltimore County, informed

PTC that it had won the bid and been awarded the contract.

Approximately a month later, on April 11, 2004, Baltimore County

issued a “Term Contract Award” to PTC signed by Deborah Herbold,

a   deputy    purchasing     agent    for       Baltimore   County.         It   stated,

“This is notice that the contract . . . has been awarded to you

. . . .”          Baltimore County purchased fuel under this agreement

for approximately a year and half.                  On behalf of the BRCPC, it

elected      to    lock-in   prices   for        three   periods:     May    17,   2004

through September 30, 2004; October 1, 2004 through January 31,

2005; and March 7, 2005 through June 30, 2005.                      During each of

these periods, the market price for fuel rose above the locked-

in price, yielding considerable savings for Baltimore County.

      In September 2005, oil prices began to rise in the wake of

Hurricanes Katrina and Rita.           Baltimore County feared they would

continue to rise and, accordingly, locked-in fuel prices for two

additional periods, September 5, 2005 to December 5, 2005 and

December 6, 2005 to April 2, 2006.                 But oil prices soon began to

fall.     And by November 2005, the price for fuel on the open

market had fallen below the locked-in price.                    This development

                                            4
displeased the BRCPC member counties, and they demanded that PTC

renegotiate the locked-in price.                PTC, having already purchased

the futures contracts, refused to do so.

        Despite this friction, Baltimore County continued to follow

its usual practice of locking-in fixed prices in advance, opting

for a stable cost structure over the unpredictable swings of the

market.       In December 2005, on behalf of the BRCPC, it requested

that PTC lock-in prices for an additional period, from April 3,

2006    through    December     31,   2006.          Before   purchasing       futures

contracts,       PTC    first    asked        for    estimates      of     the    fuel

requirements      of    the   counties    during       this   period     and     sought

assurances that the BRCPC counties would honor the contract.

Baltimore      County    construed    this     delay    as    a   breach   of     their

contract.         Baltimore     County        then    formally     terminated      the

contract on December 7, 2005.             PTC informed Baltimore County of

the losses it would incur if the contract were terminated, but

Baltimore County was unmoved.             As a result, PTC was forced to

liquidate its futures contracts for a considerable loss.

       PTC brought suit against Baltimore County and the other

BRCPC     counties      for   breaching        the    fuel    purchase     contract.

Whereas prior to suit Baltimore County had cited PTC’s breach as

the    sole    justification    for   its      termination,       Baltimore      County

added a new argument during litigation, contending that there

was never a valid contract in the first place.                       The Baltimore

                                          5
County Charter and Code required that the County Executive or

his   designee      sign      commodities         contracts        and   that        the    County

Attorney     approve         contracts      for       legal     form     and    sufficiency.

Baltimore County argued that the contract was not valid because

these two contractual formalities had not been observed.

      Baltimore County sought summary judgment on this basis, but

the   district      court     denied       its       motion   on    September         11,   2008.

Although the court found the Charter and Code sections governing

contracting       to    be     confusing         and    ambiguous,        it    agreed       with

Baltimore County that the Charter and Code required the County

Executive or his designee to sign the contract and the County

Attorney to approve it for legal sufficiency.                                  But the court

went on to hold that Baltimore County could be estopped from

denying the existence of the contract if PTC proved the elements

of equitable estoppel at trial, which in this case primarily

meant showing that it reasonably relied on Baltimore County’s

interpretation of its ambiguous Charter and Code provisions.

      The    case       proceeded         to     trial.            During      the     charging

conference, the court noted that Baltimore County was arguing

there was no contract while simultaneously arguing that there

was   a   valid     contract        that       PTC     breached.         Baltimore          County

recognized     that      a        jury   might         not    be    receptive         to    these

conflicting arguments and agreed that the court should decide

whether     there      was    a    de    facto       contract      because      of    equitable

                                                 6
estoppel.    The court decided that there was.             Accordingly, the

court instructed the jury that it was to assume that there was

an enforceable contract between Baltimore County and PTC.

     Thus,   the   only   substantive     question    for    the    jury   was

whether   Baltimore    County   justifiably   terminated      the    contract

because of PTC’s material breach.          The jury found in favor of

PTC and awarded it $590,397 in damages.              Baltimore County now

appeals, arguing that the application of equitable estoppel was

improper.

                                   II.

     Baltimore County contends that the district court erred in

estopping it from denying the existence of a contract.                 First,

Baltimore    County    argues   that     Maryland    law    prohibits      the

application of equitable estoppel against a governmental entity

to cure a defective contract.       Second, it claims that PTC failed

to prove the elements of equitable estoppel as a matter of law.

We will consider these contentions in turn.

                                    A.

     Baltimore County argues that under Maryland law equitable

estoppel can never be applied against a governmental entity to

cure a defective contract.        It grounds this rule in a trio of

Maryland cases.       See ARA Health Servs., Inc. v. Dep’t of Pub.

Safety & Corr. Servs., 685 A.2d 435 (Md. 1996); Inlet Assocs. v.

                                    7
Assateague House Condominium Ass’n, 545 A.2d 1296 (Md. 1988);

Alternatives Unlimited, Inc. v. New Baltimore City Bd. Of School

Comm’rs, 843 A.2d 252 (Md. Ct. Spec. App. 2004).

     Baltimore County contends that these cases establish that

equitable estoppel is applied against governmental entities only

in the rarest of circumstances.               See ARA Health Servs., 685 A.2d

at 440; Inlet Assocs., 545 A.2d at 1308; Alternatives Unlimited,

Inc., 843 A.2d at 258.           The County argues that representations

of a government official can estop the governmental entity from

contesting the validity of a contract only when the official has

actual authority to enter into the contract; apparent authority

alone is not sufficient for an equitable estoppel claim against

a governmental entity.       See ARA Health Servs., 685 A.2d at 440.

Therefore, Baltimore County reasons, equitable estoppel is not

available to PTC because Herbold, the only signatory to the Term

Contract Award, had no actual authority to enter into a contract

without the signature of the County Executive or his designee

and the approval of the County Attorney as to legal form and

sufficiency.

                                         B.

     Baltimore     County   is    correct       that   equitable   estoppel     is

applied     narrowly   against     governmental        entities    and   that    a

government official’s representations outside the scope of his

authority    are   insufficient     to    estop    the   governmental    entity.

                                         8
But    these       two     propositions       of    law       do    not   end        the    matter.

Maryland law is not as clear as Baltimore County would have us

believe, and another line of Maryland cases carve out a limited

place       for    equitable       estoppel        in    the       context      of    government

contracting.

       For        over     a   hundred     years,        Maryland         law    has        allowed

equitable estoppel to be asserted against governmental entities

when “both parties to the transaction have acted and proceeded

as    if    all     preliminary         formalities       and       regulations            had    been

complied with, and rights have attached.”                           Rose v. Baltimore, 51

Md. 256, 271-72 (1879).                 And Maryland’s highest court has since

reaffirmed          this       rule,    tracing         the    contours         of     equitable

estoppel’s role in government contracting: “[T]he doctrine of

[equitable estoppel] is applied to municipal . . . corporations

. . . at least where the acts of its officers are within the

scope of their authority and justice and right require that the

public be estopped.”               Berwyn Heights v. Rogers, 179 A.2d 712,

716 (Md. 1962).

       Other cases have fleshed out the exact parameters of the

rule.       Permanent Financial Corp. v. Montgomery County, 518 A.2d

123     (Md.       1986),       makes    clear      that       equitable         estoppel             is

appropriate when a government official, acting within the scope

of    his    authority,         offers    a   reasonable            interpretation               of   an

ambiguous law.             Id. at 129.        The case involved a developer who

                                               9
began construction pursuant to a permit issued by the county.

Id.   at   124.    But   the   county    later    changed    its   longstanding

interpretation of an ambiguous zoning ordinance.                   Id. at 129.

Under the new interpretation, the developer had violated the

ordinance.     Id. at 124.     The Maryland Court of Appeals estopped

the county from changing its interpretation of the ordinance

because      the   developer      had        reasonably     relied    on    its

interpretation of the ambiguous provision.            Id. at 129-30.

      Heartwood 88, Inc. v. Montgomery County, 846 A.2d 1096 (Md.

Ct. Spec. App. 2004), was similarly decided.                The case concerned

an advertisement for a tax sale promising that in the event a

sale was invalidated, the county would refund any payments along

with eight percent interest.        Id. at 1101.          After providing one

such refund, the county modified its interpretation of the law

and claimed that it did not have legal authority to pay the

eight percent interest.         Id. at 1102.         The Maryland Court of

Special Appeals found estoppel to be appropriate because the

representations in the advertisement were made within the scope

of the official’s authority and embodied the county’s reasonable

interpretation of an ambiguous law.            Id. at 1119-20.

      Additional cases set forth two further factors.                The first

is whether the governmental entity behaves as if there were a

contract.     The second is that the analysis should not become

bogged down in determining whether mere contracting formalities

                                        10
were observed.            For example, in Hagerstown v. Hagerstown Railway

Co. of Washington County, 91 A. 170 (Md. 1914), the Maryland

Court of Appeals estopped a city from denying the existence of a

contract.          The case involved a city that had contracted with a

power company for electricity.                    Id. at 171-72.             But after many

years of proceeding under this agreement, the city decided to

build    its       own    power     plant   and     sought    to      void    the   contract,

claiming       that       certain     contractual         formalities        had    not    been

observed.       Id. at 172.           The Maryland Court of Appeals found two

aspects of the case to be dispositive: the city had the power to

enter       into     the     contract,       regardless          of     whether      all   the

formalities were observed, and the city had behaved as if there

were    a    contract        in    place    for     all    the     years     prior    to    the

litigation.          Id. at 174-75.

        Similarly, in Baltimore v. Crown Cork & Seal Co., 122 F.2d

385 (4th Cir. 1941), this court estopped a city from denying its

division of riparian rights among itself and several landowners.

Seeking to void the arrangement, the city argued that it had not

followed       the       proper    legal    procedures       when      it    instituted    the

division plan.             Id. at 388.         Specifically, the city had never

adopted the plan by a formal ordinance.                               Id.    But the court

refused to be distracted by the absence of formalities: “[T]he

City    cannot       avoid        [estoppel]      by   the   plea       that   it    did   not

                                               11
exercise the powers conferred upon it in the proper fashion.”

Id. at 390.

     To sum up, Maryland law allows a governmental entity to be

equitably estopped when: (1) a government official acting within

the scope of his authority (2) makes a reasonable interpretation

of   an   ambiguous   law;   and   (3)    the   governmental   entity   has

proceeded in accordance with the representation.

                                   III.

     Baltimore County contends that PTC cannot meet the first

and second elements of the test derived above.           Specifically it

claims that Herbold, the deputy purchasing agent, did not have

actual authority to enter into the contract on behalf of the

county and that the Baltimore County Charter and Code provisions

are unambiguous.

                                    A.

     Baltimore County may be correct that Herbold alone did not

have authority to contract on behalf of the county, but that is

not the relevant issue.        The dispositive question, rather, is

whether Baltimore County officials acted within the scope of

their authority when they entered into the contract with PTC.

And Baltimore County’s narrow focus on Herbold neglects this

broader picture.

                                    12
       The    Baltimore         County       Charter      and    Code          vest     considerable

authority with the County Purchasing Agent, Fred Homan.                                         Section

902    of    the       Baltimore       County        Charter         authorizes          the    County

Purchasing Agent to “[make] all purchases and [contract] for all

public work and services, and for all supplies, material and

equipment [for the county],” a power “which he may delegate” to

any of his deputies, including both Herbold and Wolfe.                                         Section

904 grants the County Purchasing Agent further power regarding

soliciting bids and awarding contracts.                               And § 10-2-310 of the

Baltimore County Code empowers the County Purchasing Agent to

make purchases under cooperative purchase agreements, such as

those used by the BRCPC.

       As these provisions indicate, Homan had the authority to

enter into contracts on behalf of the county.                                    In the agreement

with   PTC,       he    delegated       this    authority            to    Wolfe      and      Herbold.

This   delegation             was    proper.         It    in    no        way    undermines          the

critical      fact       that       when   Wolfe      and   Herbold              awarded       PTC    the

contract, their actions were backed by the full authority of

Homan,      who    was    expressly          authorized         by    the        Baltimore       County

Charter      and       Code    to    contract      on     behalf          of    the   county         in   a

cooperative purchasing situation such as this.

       Beyond       Homan,          Wolfe,     and      Herbold,           still        more    county

officials         assured      PTC    that     the      contract          was     valid.         County

Administrative           Officer      Anthony        Marchione,           who     was    the     County

                                                13
Executive’s designee, consented to the contracting protocols in

place     before     and    during      PTC’s      contract.       Assistant     County

Attorney Joyce Stroupe was more direct, sending a letter to PTC

invoking the provisions of the Invitation to Bid as if it were a

valid contract.

        It is true that Marchione and Stroupe did not observe the

requisite contractual formalities, but Hagerstown Railway makes

plain    that    a   singular      focus      on    formalities      is   not    always

conclusive in equitable estoppel cases.                      91 A. at 174-75.         What

is important is that Marchione, Stroupe, and Homan collectively

had the authority to enter into contracts on behalf of Baltimore

County,    and     all     of   them    affirmed       the    validity    of    the   PTC

contract.

        Furthermore, this is not a case where an individual or even

a small group of people were the only ones making allegedly

erroneous       representations.              The      entire      Baltimore     County

government         operated       for      years        under       its    reasonable

interpretation of the Baltimore County Charter and Code, namely

that the County Purchasing Agent could enter into commodities

contracts       without     obtaining      the        signatures     of   the    County

Executive and County Attorney.                     Indeed, Baltimore County had

even drafted its official contracting procedures manual based on

this    interpretation.           And    it     had    entered     into   over    5,000

contracts using the very same protocols that were used in the

                                           14
PTC contract.           In all that time, no Baltimore County official

even hinted that the County’s contracting protocols were faulty.

Rather,     every    indication           was    that       Baltimore    County      followed

consistent and proper contracting procedures.

      It    is     hardly      dispositive,           therefore,        whether      Herbold,

acting     alone    with    only      her       own   authority,        could    enter     into

contracts     on    behalf       of    the       county.          All   of    the    relevant

Baltimore     County       officials           gave   their       blessing      to   the    PTC

contract, and the county as a whole demonstrated its view that

the contract was valid based on its longstanding contracting

procedures.

                                                B.

      As for the second element, Baltimore County argues that the

Baltimore     County      Code      and    Charter      contracting          provisions     are

unambiguous.            According         to    Baltimore         County,     the    relevant

provisions       plainly    require         that      the    County     Executive     or    his

designee sign the contract and the County Attorney approve it

for   legal      form    and     sufficiency.               But   the   Baltimore      County

Charter and Code are not the model of clarity Baltimore County

suggests.

      As discussed above, Baltimore County Charter §§ 902 and 904

and Baltimore County Code § 10-2-310 give the County Purchasing

Agent    broad     powers      to     negotiate        and    enter     into     commodities

contracts on behalf of the county, especially in cooperative

                                                15
purchase     agreement     settings    like     the   PTC   contract.          Other

provisions, namely Baltimore County Code § 10-2-306, together

with Baltimore County Charter §§ 402 and 508, require that all

contracts be signed by the County Executive or his designee and

that the County Attorney approve all contracts for legal form

and sufficiency.

      Although the district court ultimately determined that the

formalities embodied in Baltimore County Charter §§ 402 and 508

must be observed for a commodities contract to be valid, it

first   noted   that     the   Baltimore     County   Charter    and    Code    were

ambiguous on this issue.          We agree.     As we have noted, Baltimore

County Charter §§ 902 and 904 and Baltimore County Code § 10-2-

310   vest   considerable       contracting     authority     with     the   County

Purchasing      Agent,    especially       in   the    area     of     cooperative

commodities contracts.          Based on Baltimore County’s longstanding

practice, the County Purchasing Agent was allowed to enter into

commodities contracts without observing the formalities required

by §§ 402 and 508.             And though this interpretation exempting

commodities contracts from these formalities may ultimately have

been erroneous, the district court was right to note that the

interpretation was not an unreasonable one.

                                        C.

      The final element of the estoppel test presents a powerful

rationale for affirmance.             Baltimore County behaved as though

                                        16
there were a contract throughout the course of the agreement.

Indeed,       the     County       does       not       even     dispute       this    conclusion.

Perhaps this is because Baltimore County was more than willing

to     treat    its        agreement         as     a    valid        contract       when    it   was

advantageous for it to do so.

       During        the    course           of   the      agreement,          Baltimore      County

locked-in prices with PTC five times, placed numerous purchase

orders for fuel from PTC, and received over $11,000,000 worth of

fuel     from        PTC.         All    of       this        took     place    in     the    manner

contemplated          by    the    Invitation            to     Bid,    and    Baltimore      County

reaped the savings of purchasing fuel for less than the market

price for the first three lock-in periods.                                Moreover, Baltimore

County    repeatedly          invoked         the       terms    of    the     agreement     in   its

dealings with PTC.                Wolfe and Stroupe both wrote letters to PTC

in     which        they     highlighted            particular           provisions          of   the

agreement.          And Baltimore County even went so far as to threaten

PTC    that     it    would       be    in    breach       if    it    failed     to   perform     in

accordance with the terms of the contract.

       Even when the market price for fuel fell below the locked-

in price and Baltimore County was losing money as a result of

the agreement, it tried to get out of the arrangement not by

denying the existence of a contract but by declaring PTC to be

in material breach.                    It was not until the instant litigation

that Baltimore County changed its interpretation of its Charter

                                                    17
and Code in a way that sought to invalidate the PTC contract.

And    even    then,    Baltimore       County    was    selective       with    its   new

interpretation,         seeking    to     invalidate      only     the   PTC     contract

while     simultaneously          performing       under       thousands        of   other

contracts that also lacked the formalities at issue here.                               In

sum, Baltimore County is continuing to act as if the contracting

procedures used for the PTC agreement are adequate to produce

valid contracts while asserting the invalidity of its contract

with PTC.

                                           IV.

       The fact that equitable estoppel is available does not end

the   analysis.         PTC   must   prove       its    elements    to     prevail,    and

Baltimore County argues that it failed to do so.                           The elements

of    equitable     estoppel      under    Maryland      law     are:    (1)    voluntary

conduct       or   representation;        (2)    reasonable      reliance;       and   (3)

detriment as a result of the reliance.                     Heartwood 88, 846 A.2d

at 1116.       Baltimore County claims that PTC has not satisfied the

reasonable reliance element because it failed to perform due

diligence      before    relying     on    the    representations          of   Baltimore

County officials and entering into the agreement.                        But the facts

do not support Baltimore County’s contention.

       PTC reasonably relied on the representations of Baltimore

County    officials      conveying       their    belief    that     its    contracting

                                           18
procedures were lawful.          The first such representation came in

the Invitation to Bid, which set out the terms of the contract

and indicated that submitting a bid constituted acceptance of

those   terms.       Wolfe’s   letter     informing      PTC   that     it   won   the

contract is another representation.              And the Term Contract Award

is yet another.        These documents made clear that there was a

contract between Baltimore County and PTC.

       Baltimore County’s course of conduct during the term of the

contract     encouraged   this       reliance.      Every      Baltimore      County

purchase order issued to PTC reaffirmed PTC’s belief that it had

a contractual relationship with Baltimore County.                        Each time

Baltimore County requested prices to be locked-in for a period,

PTC    reasonably    relied    on     Baltimore’s      County’s   representation

that    it   would   purchase       the   fuel   for    the    locked-in      price.

Baltimore County’s repeated invocations of the contractual terms

in    correspondence    with    PTC    further    reinforced      the    conclusion

that there was a contract.            PTC’s reliance was reasonable given

the numerous and consistent representations of Baltimore County

officials.

       Furthermore, if PTC had hired legal counsel to investigate

the proper contracting procedures, as Baltimore County insists

it should have, the result would have been the same.                     As long as

the market favored Baltimore County, its officials would have

assured PTC that a valid contract was in place.                         Indeed, no

                                          19
Baltimore County official questioned this fact until it sought

to   extricate   itself   from   the   PTC   contract   when   the   market

turned.     The district court and jury correctly surmised that the

entire matter turned on Baltimore County’s refusal to honor its

agreement, and nothing on appeal has drawn that conclusion into

question.

                                   V.

      For the foregoing reasons, the judgment of the district

court is

                                                                AFFIRMED.

                                   20