Advance Telecom Process LLC v. DSFederal, Inc.
119 A.3d 175
Md. Ct. Spec. App.2015Background
- Advance (an SBA 8(a) small disadvantaged business) developed two projects and submitted a white paper to USCIS-DHS; USCIS-DHS indicated it would accept a sole-source award under the 8(a) STARS II GWAC.
- Advance partnered with DSFederal (an 8(a) STARS contractor) and they executed a Teaming Agreement for proposal development and contemplated subcontracting if DSFederal won the prime contract.
- The Teaming Agreement referenced a Statement of Work and included provisions: negotiate and execute a subcontract in good faith if DSFederal is awarded the prime, DSFederal would issue a subcontract within 10 days of award, and DSFederal would use best efforts to award Advance ~58% of work.
- DSFederal was awarded the prime contract; Advance alleged DSFederal constructively terminated the Teaming Agreement, failed to issue the subcontract, withheld the prime contract, and prevented Advance from performing.
- Advance sued for breach of contract (Count I) among other claims; the circuit court granted DSFederal’s motion to dismiss Count I for failure to state a claim, concluding the Teaming Agreement was an unenforceable agreement to agree. Advance appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether consideration of the Teaming Agreement converted the motion to dismiss into summary judgment | Advance: Court improperly treated the motion as summary judgment by considering the Agreement and should have allowed discovery | DSFederal: Agreement was referenced in the complaint and uncontroverted; court properly considered it at dismissal stage | Court: Considering the uncontroverted Teaming Agreement that supplemented the complaint did not convert the motion into summary judgment; dismissal standard applied correctly |
| Whether the Teaming Agreement was an enforceable contract or an unenforceable agreement to agree | Advance: Terms or framework are sufficiently definite; parties intended to be bound to issue a subcontract and allocate ~58% work | DSFederal: Agreement merely commits to negotiate a future subcontract; essential terms (scope, timing, price) left for future negotiation so unenforceable | Court: Teaming Agreement obligated good-faith negotiation (enforceable) but did not require issuance of a subcontract; overall it left material terms for future negotiation and was an unenforceable agreement to agree |
| Whether the complaint sufficiently pleaded breach of contract based on the Teaming Agreement | Advance: Complaint and incorporated Agreement show breach (failure to issue subcontract and to allow work) | DSFederal: No enforceable duty to issue subcontract; complaint fails to state claim | Court: Complaint failed to state a breach-of-contract claim because the Agreement did not create a binding obligation to execute the subcontract |
| Whether appellant should be allowed to amend the complaint on appeal | Advance: Requests leave to amend in the interest of justice | DSFederal: Request is untimely; appellate court lacks authority post-judgment | Court: Denied — leave to amend cannot be granted on appeal after final judgment; request comes too late |
Key Cases Cited
- RRC Northeast, LLC v. BAA Md., Inc., 413 Md. 638 (legal sufficiency standard for motion to dismiss)
- Cochran v. Norkunas, 398 Md. 1 (formation requires mutual assent: intent to be bound and definiteness of terms)
- ATACS Corp. v. Trans World Commc’ns, Inc., 155 F.3d 659 (3d Cir.) (teaming agreements enforceable only where they establish definite, mutually agreed obligations rather than mere promises to subcontract)
- Cyberlock Consulting, Inc. v. Info. Experts, Inc., 939 F. Supp. 2d 572 (E.D. Va.) (teaming agreement construed as agreement to negotiate a future subcontract when material terms and client approval were left for future negotiation)
- Horsey v. Horsey, 329 Md. 392 (agreement to negotiate future terms is not enforceable)
- Beazer Homes Corp. v. VMIF/Anden Southbridge Venture, 235 F. Supp. 2d 485 (E.D. Va.) (an agreement to negotiate within an agreed framework is an agreement to agree and unenforceable)