Medicine Shoppe International, Incorporated v. Mohammed Siddiqui , 549 F. App'x 131 ( 2013 )


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  •                                UNPUBLISHED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    Vacated and remanded by unpublished per curiam opinion.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    Unpublished opinions are not binding precedent in this circuit.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