Court Opinion

ID: 1009499
Source: CourtListenerOpinion
Date Created: 2013-07-04 19:57:07.030687+00
Date Added: 2024-06-11T09:32:11.041053
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                 FOR THE FOURTH CIRCUIT

GARY MARLAND, Trustee of Marland          
Enterprises, Incorporated,
                  Plaintiff-Appellant,
                 and
MARLAND ENTERPRISES,
INCORPORATED,                                     No. 02-1457
                             Plaintiff,
                  v.
SAFEWAY, INCORPORATED,
               Defendant-Appellee.
                                          
            Appeal from the United States District Court
             for the District of Maryland, at Greenbelt.
                  Peter J. Messitte, District Judge.
                            (CA-00-2773)

                       Argued: December 5, 2002

                       Decided: January 17, 2003

                   Before KING, Circuit Judge,
  Henry M. HERLONG, Jr., United States District Judge for the
      District of South Carolina, sitting by designation, and
      James P. JONES, United States District Judge for the
       Western District of Virginia, sitting by designation.

Affirmed by unpublished opinion. Judge Jones wrote the opinion, in
which Judge King and Judge Herlong joined.
2                MARLAND v. SAFEWAY, INCORPORATED
                             COUNSEL

ARGUED: Tracey E. Mulligan, Jr., Rockville, Maryland, for Appel-
lant. Laurie A. Erdman, DILLINGHAM & MURPHY, L.L.P., Wash-
ington, D.C., for Appellee. ON BRIEF: Tracey E. Mulligan, Jr.,
Rockville, Maryland, for Appellant. Laurie A. Erdman & Albert A.
Foster, Jr., DILLINGHAM & MURPHY, L.L.P., Washington, D.C.,
for Appellee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

JONES, District Judge:

   Gary Marland, Trustee of Marland Enterprises, Incorporated,
appeals the district court’s order awarding summary judgment to
Safeway, Incorporated, the Appellee, on Marland’s claims for breach
of contract and deceit. Finding no reversible error, we affirm.

                                  I.

   Marland Enterprises, Incorporated filed suit against Safeway,
Incorporated ("Safeway") in the Circuit Court for Montgomery
County, Maryland, for claims arising out of a contractual relationship
between the parties. Gary Marland, a former director and president of
the corporation, was substituted as plaintiff when it was determined
that Marland Enterprises, Incorporated had forfeited its charter.1
Safeway then removed the case to the United States District Court for
the District of Maryland.

    1
  We will hereafter refer to both Marland Enterprises, Incorporated and
Gary Marland, Trustee, the Appellant, as "Marland."
                 MARLAND v. SAFEWAY, INCORPORATED                     3
  Prior to trial, both Safeway and Marland filed motions for sum-
mary judgment. The district court granted summary judgment for
Safeway on all eight counts of the Amended Complaint except for a
portion of the claims under Count IV.2

   Marland was a Maryland corporation in the business of selling jani-
torial and cleaning products and providing repair and maintenance
service on these products. Marland first began to provide services and
products to Safeway for use in its grocery stores pursuant to a contract
in 1989. Marland sued Safeway in 1993 alleging breach of contract,
civil conspiracy, and fraud. The parties were able to settle the case
prior to trial and under the Settlement Agreement, Safeway paid Mar-
land $50,000 and agreed to execute a new three-year contract with
Marland.

   The new contract, which incorporated by reference the terms of the
Settlement Agreement, was signed on October 5, 1994, and ran from
November 1, 1994, to October 31, 1997. The contract set forth certain
products and services that were to be provided by Marland to
Safeway. First, Marland was to provide Safeway with floor care prod-
ucts at set prices. A variety of qualifying products were listed in
Schedule 2 of the contract, or Safeway had the option to "change the
floor care chemicals used or . . . purchase name brand products at a
national volume discount." In the event that Safeway purchased its
own products, the products were to be delivered to Marland and
Safeway would pay Marland a twenty percent markup for "handling,
storing and service to Safeway stores."

   The contract further provided that Marland was to perform mainte-
nance on Safeway’s floor buffers and floor scrubbers with the under-
standing that Safeway planned to "phase out" use of the floor buffers
and therefore, maintenance would no longer be required.

  The contract also provided that Marland was to be paid for any
product or service within thirty days after receipt of an invoice by
Safeway. In the event of a breach of the contract, the parties were to
  2
   The parties later settled the remaining claims in Count IV. A final
judgment was entered in the case and Marland noted this appeal.
4                  MARLAND v. SAFEWAY, INCORPORATED
attempt to resolve the breach in good faith, and if unable to do so, to
engage in mediation according to certain terms and conditions.

   Prior to or just after commencement of the contract, Safeway noti-
fied Marland that Safeway would be phasing out the use of floor buff-
ers and going to a "non-buff" floor care system. Thus, there was no
maintenance or repair of the floor buffers under the agreement. Mar-
land did provide maintenance services on the floor scrubbers, but
Safeway did not order any such services until April of 1995.

   Between October 5 and November 1, 1994, Marland began to
stockpile various floor cleaning products listed in Schedule 2 of the
contract. However, just prior to or just after commencement of the
contract, Marland was notified that Safeway would use only the John-
son Wax products listed in Schedule 2 of the contract.

   Count I of Marland’s Amended Complaint alleged that Safeway
had breached the contract by not allowing Marland to provide repair
and maintenance services on both the floor buffers and floor scrub-
bers. However, as to the floor buffers, the district court held that the
statute of limitations began to run in November of 1994, when Mar-
land was notified that the floor buffers were being phased out. Simi-
larly, as to the floor scrubbers, while there may have been a breach,
the statute of limitations began to run at the latest in April of 1995,
when Safeway began to order maintenance on the floor scrubbers.
The present suit was not filed until September 9, 2000,3 well after the
four-year statute of limitations had run on both parts of the count.
Thus, the district court granted summary judgment for Safeway on
Count I without addressing the merits of Marland’s claims.

   Marland asserted in Count II that Safeway had breached the con-
tract by refusing to accept agreed upon floor cleaning products and
demanding only Johnson Wax products. Again, the district court
found that Marland had knowledge of the alleged breach in November
of 1994 when Safeway required Marland to supply only Johnson Wax
    3
    The suit was initially filed in state court on July 28, 2000, but the par-
ties are agreed that the effective filing date was when Gary Marland was
substituted as plaintiff.
                  MARLAND v. SAFEWAY, INCORPORATED                      5
products. Thus, the district court held that the four-year statute of lim-
itations had run on this count as well.

   In Count III, Marland alleged that Safeway had breached the con-
tract by delaying payment to Marland for goods and services pro-
vided. As a result of the delayed payments, Marland alleged
consequential damages, including lost profits. The district court, in
granting summary judgment for Safeway on this count, found that
Safeway, at the time of the contract, could not have reasonably fore-
seen these losses.

   Count IV asserted that Safeway had breached the contract by fail-
ing to pay certain invoices. Here, the district court granted summary
judgment for Safeway only for those invoices that were due prior to
September 8, 1996, four years before the suit. Summary judgment
was denied for failure to pay invoices due after September 8, 1996,
and those claims were later settled.

   In Count V, Marland alleged that Safeway had breached the con-
tract by failing to pay interest on delayed payments. The district court
held that while there may have been some interest due for invoices
dating after September 8, 1996, there is "no separate cause of action
for this." The district court noted that any interest owed is "purely dis-
cretionary when the Court hears the case." Thus, summary judgment
was granted for Safeway on Count V.

   Marland asserted in Count VI that Safeway had breached the con-
tract by refusing to mediate the other disputes. The district court
granted summary judgment for Safeway on this count on several
grounds. First, the district court held that there is no cause of action
for refusal to mediate. Second, it held that even if there was a cause
of action, there were no cognizable damages. Finally, even if there
were damages, the court found that the statute of limitations had run
because the contract breaches had occurred more than four years
before suit was filed.

   Count VII alleged that Safeway had breached the implied covenant
of good faith and fair dealing. However, the district court held that no
such independent cause of action exists under Maryland law. Thus,
summary judgment was granted for Safeway on Count VII.
6                MARLAND v. SAFEWAY, INCORPORATED
   Finally, Count VIII alleged deceit, specifically claiming that
Safeway induced Marland to enter into the Settlement Agreement by
making false promises about certain provisions in the new contract.
Marland argued that Safeway falsely represented that it would accept
floor care products other than Johnson Wax products but instead
accepted only Johnson Wax products. Marland presented evidence
that at least one Safeway employee had stated that "Safeway would
never go to Johnson products." The district court held that even if the
Safeway employee had made a false representation, Marland
presented no evidence that the Safeway employee had known the
statement was false, as required to establish a claim for deceit.
Finally, the district court held that even if the Safeway employee had
known that his statement was false, the tort statute of limitations in
Maryland (three years) had run on that claim.

   Marland also claimed that it did not know until discovery in the
case that Safeway had no national discount contract with Johnson
Wax, which contract was allegedly the justification for designating
those products. The district court held that there was no competent
evidence that there was no such contract, even if its absence was rele-
vant to any deceit claim.

                                   II.

   We review the district court’s summary judgment decision de
novo. See Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc.,
43 F.3d 922, 928 (4th Cir. 1995). However, the court may affirm on
any ground presented in the record, even if it was not the basis on
which the district court relied in granting summary judgment. See
Bryant v. Bell Atlantic Md., Inc., 288 F.3d 124, 132 (4th Cir. 2002).
Because this is a diversity case, Maryland law provides the substan-
tive rules of decision. See Erie R.R. v. Tompkins, 304 U.S. 64, 78-79
(1938).

                                   A.

   Marland first contends that the district court erred in finding that
Counts I, II, and part of Count IV were time barred because the four-
year statute of limitations had run. Neither party disputes that the dis-
trict court correctly determined this to be a sales contract and accord-
                  MARLAND v. SAFEWAY, INCORPORATED                       7
ingly applied the four-year statute of limitations found in Maryland’s
version of the Uniform Commercial Code. See Md. Code Ann., Com.
Law I § 2-725 (2002). Importantly, this statute begins to run "when
the breach occurs, regardless of the aggrieved party’s lack of knowl-
edge of the breach." Id. However, noting that section 2-725 "does not
alter the Maryland law of tolling," Marland asserts on appeal that the
statute of limitations should have been tolled under the "continuation
of events" theory.

   It is settled that "issues raised for the first time on appeal generally
will not be considered." Muth v. United States, 1 F.3d 246, 250 (4th
Cir. 1993). There are exceptions to this rule, such as when refusal to
consider the new issue would be plain error or would result in a fun-
damental miscarriage of justice, but those exceptions are applied only
in limited circumstances. See id. Marland admits that the tolling the-
ory presented on appeal was not directly asserted to the district court.

   Nevertheless, even if Muth did not bar consideration of the tolling
issue, we find that it has no merit. The continuation of events theory
provides that "in cases where there is an undertaking which requires
a continuation of services, or the party’s right depends upon the hap-
pening of an event in the future, the statute begins to run only from
the time the services can be completed or from the time the event hap-
pens." Washington, B. & A. Elec. R.R. v. Moss, 100 A. 86, 89 (Md.
1917). Marland asserts that because the contract required continuing
services, the statute of limitations did not begin to run until the con-
tract completion date, October 31, 1997. However, the continuation
of events theory has never been applied in any Maryland sale of
goods case. Instead, the theory has been reserved for professional
malpractice suits and other situations involving confidential relation-
ships:

     [T]he continuation of events theory is premised on the
     notion "that a relationship which is built on trust and confi-
     dence generally gives the confiding party the right to relax
     his or her guard and rely on the good faith of the other party
     so long as the relationship continues to exist." Conse-
     quently, the confiding party is not under a "duty to make
     inquiries about the quality or bona fides of the services
8                 MARLAND v. SAFEWAY, INCORPORATED
     received unless and until something occurs to make him or
     her suspicious."

Berringer v. Steele, 758 A.2d 574, 603 (Md. Ct. Spec. App. 2000)
(quoting Frederick Rd. Ltd. P’ship v. Brown & Sturm, 756 A.2d 963,
975 (Md. 2000)). Here, there was no confidential relationship. The
contract between Marland and Safeway was simply a routine business
arrangement.

   We thus find that the district court correctly decided that Counts I,
II, and part of IV are time barred. Marland did not file suit in the pres-
ent case until September 9, 2000, and the contract breaches relevant
to Counts I, II, and part of IV occurred prior to September 9, 1996.
Accordingly, the district court appropriately granted summary judg-
ment for Safeway on these counts.

                                   B.

   The next issue presented on appeal is whether the district court
erred in granting summary judgment for Safeway on Marland’s deceit
claim, Count VIII. This count alleged that Safeway induced Marland
to enter into the Settlement Agreement by making false representa-
tions.

   To prove deceit under Maryland law, a plaintiff must show the fol-
lowing elements: 1) the defendant made a false representation to the
plaintiff; 2) the falsity was either known to the defendant or the repre-
sentation was made with reckless indifference as to its truth; 3) the
misrepresentation was made for the purpose of defrauding the plain-
tiff; 4) the plaintiff relied on the misrepresentation and had the right
to rely on it; and 5) the plaintiff suffered compensable injury resulting
from the misrepresentation. See Nails v. S & R, Inc., 639 A.2d 660,
668 (Md. 1994). For such a tort claim, there is a three-year statute of
limitations. See Md. Code Ann., Cts. & Jud. Proc. § 5-101 (2002).

   The district court found that Marland had not established the neces-
sary elements for deceit because it had not presented evidence that
when the alleged misrepresentations were made, the Safeway employ-
ees making the misrepresentations knew them to be false. The district
                 MARLAND v. SAFEWAY, INCORPORATED                      9
court further found that even if the elements were established, the
statute of limitations had run.

   Marland argues for the first time on appeal that the statute of limi-
tations for this claim did not begin to run until Safeway’s deceit was
discovered, under Maryland’s discovery rule. See Hecht v. Resolution
Trust Corp., 635 A.2d 394, 399 (Md. 1994). Again, this argument was
not presented to the district court and thus cannot be considered by
this court on appeal. See Muth, 1 F.3d at 250. In any event, regardless
of the statute of limitations issue, the district court correctly deter-
mined that Marland had not established the necessary elements for a
claim of deceit under Maryland law and thus summary judgment was
proper.

                                   C.

   Marland further asserts that the district court erred in granting sum-
mary judgment for Safeway on Marland’s claim for consequential
damages, Count III. Marland specifically claimed that Safeway’s fail-
ure to timely pay invoices resulted in "delayed payments to [Mar-
land’s] suppliers [which] resulted in loss of credit, loss of product
distributorships and loss of customers that were an essential part of
Marland’s on-going business." Even though we find that any breach
of contract claim for unpaid invoices that arose prior to September 9,
1996, is time barred, we must address the viability of a consequential
damages claim for those unpaid invoices arising after September 8,
1996.

   In order to recover consequential damages under Maryland law,
such damages must have been foreseeable to the breaching party at
the time the contract was entered into. See Stone v. Chicago Title Ins.
Co. of Md., 624 A.2d 496, 501 (Md. 1993). The district court, in
granting summary judgment for Safeway, held that any damages
resulting from delayed invoice payments were not reasonably foresee-
able by Safeway at the time of the contract.

   Marland did submit evidence that in March of 1995 and February
of 1997, Marland had notified Safeway that its delay in paying
invoices was causing harm to Marland’s business. However, Marland
submitted no evidence that Safeway had knowledge of the likelihood
10               MARLAND v. SAFEWAY, INCORPORATED
of such damage at the time the contract was entered into. While Mar-
land asserts that a question of fact remains on the issue of foreseea-
bility based on its prior dealings with Safeway and Safeway’s
understanding that delayed invoice payments caused harm to Mar-
land’s business, Marland has presented no evidence supporting its
claim beyond mere speculation.

   Further, even if such damages were foreseeable by Safeway, other
elements of the claim were not satisfied. Marland’s Amended Com-
plaint asserts a "loss of customers," which is essentially a claim for
lost profits. To recover lost profits under Maryland law, Marland
would have to prove, in addition to foreseeability, that Safeway’s
breach caused Marland to lose customers. See Impala Platinum Ltd.
v. Impala Sales (U.S.A.), Inc., 389 A.2d 887, 907 (Md. 1978). Evi-
dence in the record indicates that Marland was losing customers prior
to the time of the new contract with Safeway and prior to any late
payment by Safeway, thus negating any showing of causation.
Accordingly, the district court appropriately granted summary judg-
ment for Safeway on Marland’s consequential damages claim.

                                 D.

   The next issue presented by Marland on appeal is whether the dis-
trict court erred in granting summary judgment for Safeway on Mar-
land’s claim for failure to mediate, Count VI. The contract does
contain a clause which compels the parties to resolve any dispute
through mediation. While Marland may at one time have had an
action for specific performance to compel mediation, it sought only
damages resulting from failure to mediate. We do not find any evi-
dence in the record supporting such a damage claim.

   Further, even if such evidence had been submitted, Marland would
be required to prove that such damages were foreseeable to Safeway
at the time the contract was entered into. Because no such evidence
was submitted, we hold that the district court appropriately granted
summary judgment for Safeway on this count.

                                 E.

  Finally, Marland asserts that the district court erred in granting
summary judgment for Safeway on Count VII, breach of the implied
                   MARLAND v. SAFEWAY, INCORPORATED                       11
covenant of good faith and fair dealing. The district court held that
there is no such cause of action under Maryland law.

   Maryland law recognizes an implied duty of good faith and fair
dealing in sales contracts. See Md. Code Ann., Com. Law I § 1-203
(2002). There is one decision from the District of Maryland that rec-
ognizes a separate cause of action for breach of this implied duty. See
Quality Auto. Co. v. Signet Bank/Md., 775 F. Supp. 849, 851 (D. Md.
1991). However, a subsequent case from a Maryland court called that
decision into question, see Parker v. Columbia Bank, 604 A.2d 521,
531 (Md. Ct. Spec. App. 1992), and a more recent case from the Dis-
trict of Maryland held that under Maryland law, there is no separate
cause of action for breach of the duty of good faith and fair dealing.
See Howard Oaks, Inc. v. Md. Nat’l Bank, 810 F. Supp. 674, 677 (D.
Md. 1993). Four subsequent cases have upheld Howard Oaks.4 See
Swedish Civil Aviation Admin. v. Project Mgmt. Enters., Inc., 190 F.
Supp. 2d 785, 794 (D. Md. 2002); Paramount Brokers, Inc. v. Digital
River, Inc., 126 F. Supp. 2d 939, 945 (D. Md. 2000); Abt Assoc., Inc.
v. JHPIEGO Corp., 104 F. Supp. 2d 523, 534 (D. Md. 2000); Baker
v. Sun Co. (R&M), 985 F. Supp. 609, 610 (D. Md. 1997). We agree
  4
   The decision in Howard Oaks is further supported by the comments
to Maryland’s Uniform Commercial Code section 1-203, which were
drafted in 1994, after Howard Oaks was handed down:
      This section does not support an independent cause of action for
      failure to perform or enforce in good faith. Rather, this section
      means that a failure to perform or enforce, in good faith, a spe-
      cific duty or obligation under the contract, constitutes a breach
      of that contract or makes unavailable, under the particular cir-
      cumstances, a remedial right or power. This distinction makes it
      clear that the doctrine of good faith merely directs a court
      towards interpreting contracts within the commercial context in
      which they are created, performed, and enforced, and does not
      create a separate duty of fairness and reasonableness which can
      be independently breached.
Md. Code Ann., Com. Law I § 1-203 cmt. (2002).
  Although these comments are not controlling, they are a "useful aid for
determining the purpose of [the U.C.C.]." Jefferson v. Jones, 408 A.2d
1036, 1039 (Md. 1979).
12              MARLAND v. SAFEWAY, INCORPORATED
with the weight of this authority that no independent cause of action
of this type is recognized in Maryland.

   Accordingly, the district court appropriately granted summary
judgment for Safeway on this count.

                                III.

   For the reasons stated, the judgment of the district court is
affirmed.

                                                        AFFIRMED