WEGCO, Incorporated v. Griffin Services Inc
Concurring in Part
I concur in parts I and II of the majority opinion and the decision that the district court’s award of damages in addition to those awarded by the jury violated Griffin’s Seventh Amendment right to a jury trial. I join its decision to vacate the supplemental award. However, I disagree with part III of the opinion, except the first paragraph thereof, as it affirms the district court’s declaratory judgment. To that I respectfully dissent. The district court’s declaratory judgment should be vacated essentially because it grants to WEGCO the remedy of specific performance of a contract for personal services, a remedy long repugnant to Maryland law, and, as well, it splits a cause of action.
Maryland Courts have followed a functional approach when deciding whether to award a remedy that, while nominally different, has the same effect as specific performance. In M. Leo Storch Ltd. Partnership v. Erol’s, Inc., 95 Md.App. 253, 620 A.2d 408, 414 (1993), the Maryland Court of Special Appeals treated a request for an injunction to prevent the defendant from breaching a continuous operations clause of a lease as a request for specific performance. The plaintiff asked that the court “enter a simple order that says, you may not continue to breach the continuous operations clause.” 620 A.2d at 412. The court refused to do so stating that “Maryland Courts have allowed injunctive relief ... as the functional equivalent of specific performance. However, a suit for an injunction which seeks to accomplish all the purposes of a decree for specific performance is subject to the principles which apply to an application for the latter remedy.” 620 A.2d at 411 (internal quotation marks and alterations omitted). The District court’s order in the instant case declared that the services agreements remained in effect and ordered that the parties “shall comply with the compensation provisions of the two Services Agreements and perform as required in the future.” (italics supplied). It is evident that the district court’s declaratory judgment here is nearly identical to the relief that the M. Leo Storch court denied because it was the functional analogue of specific performance. Because
Maryland will not “ordinarily enforce a contract for personal service,” the reason being that “the mischief likely to result from the enforced continuance of the relationship incident to the service when it has become personally obnoxious to one of the parties is so great that the best interests of society require that the remedy be refused.” See Fitzpatrick v. Michael, 177 Md. 248, 9 A.2d 639, 641 (1939). Fitzpatrick refused to enforce a contract in which an elderly man whimsically, arbitrarily and unjustly refused to honor a contract to provide a home in return for the personal services of a long time nurse and companion. The court reasoned that specific performance of the personal services contract should be denied because “it would compel him to accept the personal service of an employee against his wish and his will,” Fitzpatrick, 9 A.2d at 643, exactly the situation which pertained here. Under the terms of the services agreements, WEGCO is to provide business advice and services to Griffin. It is clear that Griffin no longer wants the advice and services and it has formally severed the contractual relation for which breach of contract WEGCO has sued. The declaratory judgment awarded by the district court would require Griffin to continue to receive unwanted advice and services and to maintain a relationship that would be obnoxious to him, especially considering the present hostility. A contract for providing advice, whether it be for personal or business purposes, will abide only so long as confidence and trust remain. When these aspects vanish, the possibility for successful enforcement of a relationship based on them also vanishes and specific performance is therefore inappropriate. “ ‘It is not for the interest of society that persons who are not desirous of maintaining continuous personal relations with one another should be compelled so to do.’”
Aside from the difficulties peculiar to personal service contracts, specific performance and its equivalents are inappropriate because judicial supervision of the performance required under these services agreements would be of long duration and has the potential of becoming quite diffi
Perhaps recognizing its mistake in failing to prove, or even argue for future damages, WEGCO seeks to preserve its position although it has split its cause of action as prohibited under Maryland law. In In re Carlin’s Estate, 212 Md. 526, 129 A.2d 827, 831 (1957), the Maryland Court of Appeals stated that “[i]t is well established that a single cause of action or an entire claim cannot be split up or divided and separate suits maintained for the various parts thereof.” See also Levin v. Friedman, 271 Md. 438, 317 A.2d 831, 835 (1974). The policy behind this rule is the prevention of a multiplicity of litigation and avoidance of the vexation, costs and expenses incident to more than one suit on the same cause of action. Jones v. Speed, 320 Md. 249, 577 A.2d 64, 68 (1990). Yet, this is exactly what will occur here. Any extension or modification of the government contracts, for example, will entitle Griffin to services from WEGCO and WEGCO to payment from Griffin. It may not even be doubted, that under the declaratory judgment WEGCO has received, Griffin will receive advice and services it no longer wants, that sufficiency of performance on the part of both parties will arise in the future, and the court will become entangled in this dispute once again.
For the foregoing reasons I would vacate the district court’s grant of declaratory judgment that the services agreements are still in force.
. This contract does not fall under the exception allowing specific performance of some personal service contracts where the party rendering the service has substantially or fully performed. See Ledingham v. Bay less, 218 Md. 108, 145 A.2d 434, 440 (1958) (enforcing contract to make will to devise one half interest in land where plaintiff had fully rendered personal services in accordance with agreement); Snodgrass v. Stubbs, 189 Md. 28, 48, 54 A.2d 338, 347 (Md. 1947). See also Stamatiades v. Merit Music Service, 210 Md. 597, 610, 124 A.2d 829 (1956) (granting injunction to prevent restaurant owner from removing or disconnecting service provider's vending machines). The contracts at issue in the instant case contemplate continuing performance on the part of WEGCO; it must render business advice and other services to Griffin for the life of the underlying government contracts. For example, the New Alexandria Agreement states that “this Agreement shall remain in effect for the duration of any government contract, including any and all extensions, options, modifications, extra change orders, novations, or follow-on con-tracts.” For example, should Griffin seek an extension or renewal of the government contract, WEGCO would be required under the Agreement to “assist in negotiating renewal options.” Under these circumstances, Maryland follows the Illinois rule that " '[cjontracts which by their terms stipulate for a succession of acts, whose performance cannot be consummated by one transaction, but will be continuous, and require protracted supervision and direction, with the exercise of special knowledge, skill, or judgment in such oversight, are not, as a rule, specifically enforced.’ ” M. Leo Storch, 620 A.2d at 413.
. Instructions number B-15 and B-16 which were given to the jury, without objection, under any ordinary reading of Maryland law contemplate the award of future damages. See National Micrographics Systems, Inc. v. OCE-Industries, Inc., 55 Md.App. 526, 465 A.2d 862 (1983). The fact that the special verdict form, which also was not objected to, was treated by the district court as excluding future damages is proof certain that if WEGCO had any future damages it has either waived them or received them. WEGCO should not be allowed to blow hot and cold at the same time, indeed it offered instructions B-15 and B-16.
Opinion of the Court
OPINION
Griffin Services, Incorporated appeals the judgment in this contract action brought by WEGCO, Incorporated. Griffin argues primarily that its Seventh Amendment right to a jury trial was violated when the district court awarded damages in addition to those awarded by the jury and granted a declaratory judgment to WEGCO. We vacate the supplemental damage award and affirm the declaratory judgment.
I.
WEGCO is a Maryland corporation that assists its clients in obtaining and executing government contracts. Griffin is a Georgia corporation that provides the federal government with commercial facilities management and mechanical maintenance services.
In late 1994, WEGCO approached Griffin and offered to identify federal government contract opportunities, assist Griffin in obtaining the contracts, and provide support services after the contracts were awarded. Griffin and WEGCO subsequently executed two contracts, the “Kansas City Agreement” and the “New Alexandria Agreement.”
WEGCO’s compensation under each agreement was composed primarily of a percentage of Griffin’s “Net Profit,” which the agreements defined as “all job site revenues minus all job site costs with respect to this work.” J.A. 34, 40. The percentage increased on a sliding scale as the amount of profit increased. Both agreements provided that interest would accrue on late payments at an annual rate of 15 percent.
Griffin was awarded the government contracts that were the subject of the two agreements. In calculating its “Net Profit” for the purpose of making its payments to WEGCO, Griffin identified all revenues from the government contracts and then
WEGCO challenged the termination and, in March 1998, filed this diversity action in the United States District Court for the Eastern District of Virginia. As is relevant here, WEGCO alleged that Griffin breached the agreements by failing to pay all of the fees due. WEGCO sought money damages and a judgment declaring, inter alia, that (a) Griffin’s failure to pay monies due under the agreements constituted a breach of contract; (b) Griffin was obligated to pay monies then owing under the agreements as well as monies that would be due in the future; and (c) the agreements continued to be valid and binding and could not be terminated. WEGCO also requested an accounting of the agreements. In its answer, Griffin’s allegations included a claim that WEGCO had breached the agreements. Griffin also demanded a jury trial on all issues.
During discovery, WEGCO sought information that would assist it in determining the amount due under the agreements. Prior to the close of discovery on October 30, 1998, Griffin produced the requested information for the period ending July 31, 1998. Griffin never supplemented its discovery responses after close of discovery and WEGCO never moved to compel.
During the ensuing jury trial, the parties introduced evidence regarding whether Griffin had breached the agreements and how damages should be calculated if Griffin had breached. Concerning damages, the parties advanced diverging theories regarding how to interpret the term “Net Profit.” WEGCO argued that only direct costs should be subtracted from revenues and noted that Griffin itself had employed this methodology before the lawsuit was commenced. Employing this methodology, WEGCO’s expert opined that WEGCO was owed “at least $144,404.97 plus interest” under the New Alexandria Agreement, J.A. 100, and “at least $84,284.34 plus interest” under the Kansas City Agreement, id. at 98. WEGCO’s evidence of Griffin’s revenues and costs and its expert’s testimony calculating “Net Profit” from that data accounted for the period ending July 31, 1998. WEGCO produced no evidence of damage calculations for any subsequent period, although it did present evidence that the agreements continued to be in effect.
Its prelitigation conduct notwithstanding, Griffin took the position at trial that all costs—both direct and indirect—should be subtracted from revenues in order to determine “Net Profit.” The methodology advanced by Griffin yielded two possible results for each agreement: WEGCO was overpaid either $15,766 or $16,124 for the New Alexandria Agreement and underpaid either $20,763.11 or $18,962.30 for the Kansas City Agreement.
At the conclusion of the trial, the jury returned a special verdict finding, as is relevant here, that WEGCO had not breached either agreement; that Griffin had breached both agreements by failing to pay sums due to WEGCO; and that “the total amount of the damage to WEGCO caused by Griffin Services’ failure to pay WEGCO what it was due” was $64,000 for the New Alexandria Agreement and $75,000 for the Kansas City Agreement. Id. at 1099,1101.
After the jury was dismissed, WEGCO moved for a declaratory judgment that the agreements continued to be in effect and requested an accounting to determine ad
The district court determined that the jury award included damages for the period ending July 31, 1998, and therefore no recalculation of damages for that period was necessary. However, the district court granted WEGCO a declaratory judgment that Griffin had not terminated the agreements and that they were still valid, binding, and in effect. The district court also ordered an accounting of net profits received by Griffin for the government contracts underlying the agreements. The district court directed that the method for calculating “Net Profit” in the accounting would be that proposed at trial by WEGCO’s expert. The district court stated that upon receiving and verifying the results of the accounting, it would order declaratory relief in the amount due. The court also ordered Griffin to allow WEGCO access to its records concerning the underlying contracts twice a year for the duration of the agreements.
The accounting ordered by the district court encompassed the period from August 1, 1998 through February 28, 1999 for the Kansas City Agreement and from August 1, 1998 through November 30, 1999 for the New Alexandria Agreement. Because the auditor could not determine how much of the damage awards the jury allocated to the period between the beginning of the respective contract years (March 1, 1998 for the Kansas City Agreement and December 1, 1997 for the New Alexandria Agreement) and July 31, 1998, the auditor could not calculate the appropriate sliding-scale percentage needed to calculate WEGCO’s compensation. Accordingly, the auditor did not calculate the compensation owed to WEGCO under the Kansas City Agreement, and it calculated the amount owed to WEGCO under the New Alexandria Agreement only for the period from December 1, 1998 through November 30, 1999. As to this period, the auditor determined that the “Net Profit” was $274,663.06 and that Griffin owed WEGCO $102,331.53 plus $4,134.34 in interest.
The district court adopted the findings in the auditor’s report and supplemented those findings with its own determinations. The court concluded that Griffin owed WEGCO $5,485.54 plus $1,371.39 in interest under the New Alexandria Agreement for the period from August 1,1998 through November 30, 1998. The district court further determined that Griffin owed WEGCO $27,775.86 plus $6,131.14 in interest under the Kansas City Agreement for the period of August 1, 1998 through February 28, 1999. A final judgment was then entered against Griffin for $286,229.80, $139,000 of which represented the jury verdict and $147,229.80 of which represented the supplemental damages awarded by the district court.
II.
Griffin first argues that the district court erred in supplementing WEGCO’s damage award on its breach of contract failure-to-pay claims. We agree.
The Seventh Amendment provides that
[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury,*73 shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.
U.S. Const, amend. VII. This protection applies to all suits in which legal, rather than equitable, rights are at issue. See Curtis v. Loether, 415 U.S. 189, 193, 94 S.Ct. 1005, 39 L.Ed.2d 260 (1974). Whether the right to a jury trial exists is a question of law that we review de novo. See Pandazides v. Va. Bd. of Educ., 13 F.3d 823, 827 (4th Cir. 1994). If a denial of the right to jury trial occurred, we must decide whether the denial constituted harmless error. See id. The error is harmless only if the district court would have granted judgment as a matter of law to the defendant, i.e., if “the evidence is such, without weighing the credibility of the witnesses, that there is only one conclusion that reasonable jurors could have reached.” Keller v. Prince George’s County, 827 F.2d 952, 955 (4th Cir. 1987).
In diversity cases, although the substantive rights asserted in a claim arise under state law, “the characterization of that state-created claim as legal or equitable for purposes of whether a right to jury trial is indicated must be made by recourse to federal law.” Simler v. Conner, 372 U.S. 221, 222, 83 S.Ct. 609, 9 L.Ed.2d 691 (1963) (per curiam). Ordinarily, an action on a debt alleged to be due under a contract is an action at law. See Dairy Queen, Inc. v. Wood, 369 U.S. 469, 476-77, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962); Wyler Summit P’ship v. Turner Broad. Sys., Inc., 235 F.3d 1184, 1194 (9th Cir. 2000) (“In most instances, a claim seeking money damages for breach of contract is an action at law.”). That a party requests an “accounting” to determine the amount of damages to be awarded does not by itself change the legal nature of a breach of contract claim.
We conclude that the district court violated Griffin’s constitutional right to a jury trial when it supplemented WEGCO’s damage award. WEGCO’S failure-to-pay claims were simply claims on a debt created by contract. Therefore, Griffin had a Seventh Amendment right to have these claims adjudicated by a jury, and the district court erred in making its own findings regarding what monies were owed WEGCO by Griffin and in supplementing the jury award based on those findings.
WEGCO also argues that the district court possessed inherent equitable authority to make the necessary findings and supplement the damage award with additional amounts not submitted to the jury. We know of no authority, however, allowing a district court to act as fact finder regarding a purely legal claim on which a party has demanded a jury trial.
We further conclude that the error of the district court in supplementing the damages awarded by the jury was not harmless. The evidence regarding the appropriate methodology for calculating net profits under the agreements was sharply conflicting, and reasonable juries could have reached different results. Accordingly, we vacate the supplemental damages award.
III.
Griffin next argues that the district court violated its Seventh Amendment rights by declaring that Griffin had not terminated the agreements and that they remained in effect.
IV.
For the foregoing reasons, the supplemental damage award is vacated and the declaratory judgment is affirmed.
AFFIRMED IN PART AND VACATED IN PART.
. The parties also executed a third agreement, the "Parr Agreement,” which is not relevant to the issues before us.
. A claim for damages resulting from breach of contract may be deemed equitable when the plaintiff demonstrates "that the accounts between the parties are of such a complicated nature that only a court of equity can satisfactorily unravel them.” Dairy Queen, 369 U.S. at 478 (internal quotation marks omitted). WEGCO has made no such showing.
. WEGCO argues that this suit was partly equitable because it sought the equitable remedy of specific performance. That is incorrect. Under Maryland law, specific performance is an "extraordinary equitable remedy” that may be granted only when “more traditional remedies, such as damages, are either unavailable or inadequate.” Archway Motors, Inc. v. Herman, 37 Md.App. 674, 378 A.2d 720, 724 (Md.Ct.Spec.App. 1977). Here, any non-payment by Griffin was remediable by an award of money damages, and that is the remedy WEGCO sought for its failure-to-pay claims.
Because the only remedy sought for the failure-to-pay claims was legal, WEGCO is also incorrect in its contention that Griffin waived its right to a jury trial on the failure-
. WEGCO attributes this discrepancy to "Griffin's argument that any loss under one Services Agreement during a particular month should be offset against any gain in the other one.” Br. of Appellee/Cross Appellant at 31. However, no calculations regarding offsets were ever presented to the jury.
. Because we vacate the supplemental damages award, we do not address Griffin’s arguments regarding the correctness of the findings underlying the award. We also do not reach WEGCO’s argument on cross-appeal that the final judgment did not include the exact amount of contractual prejudgment interest due on the date of the final judgment for the supplemental award.
. The partial dissent concludes that the declaratory judgment award was improper under Maryland state law for several reasons. We do not address these state-law issues because they were not raised by Griffin on its appeal to us. See Edwards v. City of Goldsboro, 178 F.3d 231, 241 n. 6 (4th Cir. 1999).
Reference
- Full Case Name
- WEGCO, INCORPORATED, Plaintiff-Appellee, v. GRIFFIN SERVICES, INCORPORATED, Defendant-Appellant; WEGCO, Incorporated, Plaintiff-Appellant, v. Griffin Services, Incorporated, Defendant-Appellee
- Cited By
- 1 case
- Status
- Unpublished