Cas Severn, Inc. v. Awalt

75 A.3d 382, 213 Md. App. 683, 2013 WL 4778100, 2013 Md. App. LEXIS 115
CourtCourt of Special Appeals of Maryland
DecidedSeptember 6, 2013
DocketNo. 0431
StatusPublished
Cited by4 cases

This text of 75 A.3d 382 (Cas Severn, Inc. v. Awalt) is published on Counsel Stack Legal Research, covering Court of Special Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cas Severn, Inc. v. Awalt, 75 A.3d 382, 213 Md. App. 683, 2013 WL 4778100, 2013 Md. App. LEXIS 115 (Md. Ct. App. 2013).

Opinion

HOTTEN, J.

This appeal arises out of a breach of contract claim brought by appellant, CAS Severn, Inc. (hereinafter referred to as either “CAS” or “the company”), against the appellee, Andrew [687]*687Await (“Await”), for failure to abide by a professional service agreement’s covenant not to compete.

As discussed in more detail infra, CAS contends that Await breached his contractual obligation by violating Section 9 of the Professional Service Agreement (“PSA”), prohibiting Await from soliciting the services of any employee or contractor of CAS for a period of one year following the termination of Awalt’s business relationship with CAS. As a consequence, CAS filed a complaint against Await in the Circuit Court for Prince George’s County and sought, among other things, a judgment in the amount of $313,999.50, attorney’s fees, court costs, and a preliminary and permanent injunction prohibiting Await from further solicitation. After three months of discovery, the parties commenced trial on December 5, 2011.

On the last business day before trial, however, Await moved in limine and asked the court to find the liquidated damages clause of the contract void and unenforceable. Following argument of counsel, the court reserved its ruling on the matter, permitting trial to proceed. After a two-day jury trial and five hours of deliberations, the jury was unable to unanimously reach a verdict regarding whether Await had breached the terms of his agreement with CAS, and a mistrial was declared. Thereafter, the court entertained post-trial supplemental briefing on the validity of the liquidated damages clause. On February 6, 2012, the circuit court granted Awalt’s motion by written order and declared the liquidated damages clause void and unenforceable because the provision was punitive and not compensatory in nature. Judgment was entered and the case was closed statistically.

Following the circuit court’s denial of CAS’s motion to reopen its case or, in the alternative, alter or amend judgment, CAS noted a timely appeal to this Court and has presented two questions for our review:

1. Did the [cjircuit [cjourt err in voiding the PSA’s liquidated damages clause when its determination disregarded binding Maryland authority?
[688]*6882. Did the [c]ircuit [c]ourt err in denying CAS a re-trial on the merits of its breach of contract claim?

For the reasons outlined below, we shall answer, “yes” to CAS’s first question, reverse the judgment of the circuit court, and remand the ease for further proceedings. Because we conclude that the court’s judgment contravened settled precedent regarding the validity of liquidated damages provisions, we need not reach the other issue raised.

I.

FACTUAL AND PROCEDURAL BACKGROUND

CAS first became acquainted with Await as a result of its business relationship with Landrover of North America (“Landrover”) in the late 1990’s. At the time, Await was a computer engineer working for Landrover doing “everything an IT individual could do.” As CAS began building its engineering department, CAS offered Await an employment opportunity in October of 2002. Thereafter, Await worked for CAS as a systems engineer, spending the majority of his time working with the company’s customers to implement solutions to CAS’s computer-based technological services.

After four years of employment with CAS, Await resigned as a full-time employee in October of 2006, but continued working as an independent contractor for the company. On November 1, 2006, Await entered into a four-page Professional Service Agreement (“PSA”) with CAS, which governed his retention with the company. Pursuant to the PSA, Await agreed to provide technical services on a continuous basis until either of the parties terminated the PSA on fourteen days’ notice. In addition, Section 9 of the PSA contained a covenant not to compete, and provided in pertinent part:

No solicitation. During the Term and for a period of one (1) year thereafter, Contractor [Await] agrees not to hire, solicit, nor attempt to solicit, the services of an employee or contractor of CAS nor shall the Contractor seek or accept employment from Client without the prior written consent [689]*689of CAS. Violation of this provision shall entitle CAS to assert liquidated damages against the Contractor equal to one hundred fifty (150) percent of the solicited person’s annual compensation.

In 2007, Await began his employment as a sales engineer with Qwest Communications (“Qwest”),1 a telecommunications provider of data and voice communications. During this time, however, Await continued his independent contractor relationship with CAS under the terms of the PSA. Following his first three years of employment with Qwest, Await was promoted to sales engineer manager in the spring of 2010. As an engineering manager, Await became “part of a process for on-boarding individuals.” As a consequence, Await assumed the responsibility of hiring other sales engineers. Await was required to fill two sales engineer positions with individuals that would work directly under him at Qwest. Shortly thereafter, two of CAS’s engineers, Jeff Jeglinski (“Jeglinski”) and Mohammed Naji (“Naji”), were hired to fill these two positions at Qwest. Await had forwarded a job posting to Jeglinski in 2008 and sent additional employment postings to both Jeglinski and Naji.

Jeglinski had worked as a systems engineer for CAS since 2002. According to John Blanchette (“Mr. Blanchette”), Vice President of CAS’s operations, Jeglinski was a “very bright engineer” able to handle almost any task assigned to him. Indeed, Jeglinski’s skill set was highly sophisticated and there were “very few people ... [who] were able to do some of the things he was doing.” When Jeglinski submitted his letter of resignation to CAS on June 23, 2010, he was a senior engineer with an annual salary of $104,333. Unlike Jeglinski, Naji had been working as a waiter attending Capitol College when CAS hired him as a technician in 1997. CAS sponsored Naji’s employment visa, provided him engineering opportunities, and trained him from “the ground up.” As one of the company’s [690]*690system engineers, Naji was rarely in the office, primarily spending his time addressing the concerns and needs of CAS’ clientele. When Naji resigned from his employment with CAS in June 2010, he was earning an annual salary of $103,000.

Believing that Await had violated Section 9 of the PSA, CAS instituted a breach of contract claim against him on September 14, 2010 in the Circuit Court for Prince George’s County, seeking, among other things, a judgment in the amount of $313,999.50, attorney’s fees and court costs, and injunctive relief designed to prohibit Await from further solicitation.

CAS presented two witnesses at trial to explain the rationale behind Section 9’s liquidated damages provision: Mr. Blanchette and Douglas Gerstmyer (“Mr. Gerstmyer”), one of CAS’s founding members. During Mr. Blanchette’s direct examination, he described the substantial money and effort CAS expended in order to replace one of the company’s employees. Specifically, Mr. Blanchette noted that

... to bring an engineer into our line of work, to train [him or her] in how we do things and how our clients like to see it, certifications that we work closely with IBM and other vendors that we have to be certified in their product to sell or to maintain.

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Bluebook (online)
75 A.3d 382, 213 Md. App. 683, 2013 WL 4778100, 2013 Md. App. LEXIS 115, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cas-severn-inc-v-awalt-mdctspecapp-2013.