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Trial Court Correctly Granted Summary Judgment and JNOV in Dispute between Military Contractors

Command Technology Inc. v. Lockheed Martin Corporation
(October 27, 2015) Court of Special Appeals of Maryland

by By Matthew J. McCloskey, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdcourts.gov/appellate/unreportedopinions/2015/0469s14.pdf

In a recent opinion, the Court of Special Appeals of Maryland held that the Plaintiff military contractor, Command Technology Inc., failed to establish any of its claims against the Defendant, Lockheed Martin Corporation, related to actions by Lockheed which resulted in Plaintiff’s bid for a contract with the Air Force being denied and Plaintiff’s proprietary software code being disclosed to its competitors.

Command is a software company that developed a program called C2Web, which presents technical data concerning a military aircraft in a user-friendly format. The Air Force awarded Command a contract to provide C2Web as a part of a modernization plan to upgrade its aircrafts’ computer systems. The Air Force selected the F-16 aircraft, manufactured by Lockheed, as the subject of a pilot program, and directed Command to deploy its software in an F-16. The Air Force reasoned that, if C2Web could be deployed in an F-16, it could potentially be purchased for other aircraft as well. It subsequently directed Lockheed to enter into an “Integration Contract” with Command to purchase C2Web and test all aspects of the software using technical data supplied by Lockheed itself. This collaboration required Lockheed to have access to Command’s proprietary software code. Command was to be paid certain sums under the Integration Contract, but was required to sign a release prior to receiving those sums.

To function properly, C2Web relies on the interplay between three (3) components: (1) the aircraft’s technical data (supplied by the aircraft manufacturer); (2) document-type definitions (DTDs), which are obtained from the Technical Manual Specifications and Standards Office of Air Force Material Command (TMSS office); and (3) style sheets, which are created by Command. The technical data is inputted into Command’s software, the DTDs interpret the technical data, and then the style sheets display the interpreted data in electronic format. C2Web will only display properly if all three (3) of these components are compatible and functioning together. Lockheed, however, supplied technical data that did not comply with TMSS’s DTD standards. As a result, C2Web did not function properly, Command’s pilot program was unsuccessful, and it was not awarded a further contract with the Air Force. Furthermore, Command alleged that, during the course of the pilot program, Lockheed disclosed proprietary information regarding C2Web without Command’s approval on several occasions.

As a result of the failed pilot program, Command sued Lockheed for tortious interference with business relations, unfair competition, misappropriation of trade secrets, and breach of contract. With regard to its tortious interference and unfair competition claims, Command alleged that Lockheed was obligated to supply TMSS-compliant technical data, and also noted that Lockheed had been developing rival software to C2Web, which gave Lockheed motivation to prevent a successful trial of C2Web. With regard to its misappropriation and breach of contract claims, Command alleged that Lockheed had sent its proprietary software code to several of Command’s competitors. Prior to trial, the Court granted Lockheed’s motion for summary judgment as to Command’s misappropriation and breach of contract claims, finding that the misappropriation claims were time barred and that all of the alleged breaches of contract were subject to the release signed in Lockheed’s favor. At trial, the jury returned a verdict in favor of Command on its tortious interference and unfair competition claims, but the trial court subsequently granted Lockheed’s motion for judgment notwithstanding the verdict (JNOV), reasoning that no reasonable juror could have found sufficient wrongful conduct to support either claim. Command appealed.

The Court of Special Appeals affirmed. Beginning with Command’s claim for tortious interference, the Court agreed with the trial court that Lockheed’s conduct in failing to supply TMSS-compliant data was not “wrongful.” As Lockheed’s alleged interference was only relevant to prospective, and not existing, business relations, Lockheed had a wider allowance to pursue aggressive business tactics. Here, there was no evidence that Lockheed had acted wrongfully because Lockheed did not breach any actual legal or contractual obligation. Although the Air Force had issued direction requesting that new contractors provide only TMSS-compliant data, it only instructed existing contractors to analyze the costs and benefits of modifying their existing data provision technology. Because Lockheed had a previously existing data provision system, it was not necessarily obligated to comply with the Air Force’s direction prior to conducting such a review and being informed by the Air Force to redesign its system. Similarly, the direction from the Air Force that software contractors, like Command, create their programs to function with TMSS-compliant data also did not obligate Lockheed to supply such data, as this direction did not apply to Lockheed under these circumstances. Consequently, the trial court did not err in concluding there was no evidence of “wrongful” conduct by Lockheed.

As to Command’s unfair competition claim, the Court noted that Command alleged the same wrongful conduct supported this claim as supported its claim for tortious interference. Having already explained that such conduct was not actually wrongful, the Court concluded that the trial court did not err in granting Lockheed’s motion for JNOV. Furthermore, it opined that “courts must not extend the meaning of unfair competition to cover conduct that may be unethical but not illegal.” Thus, even if Lockheed’s actions in supplying non-TMSS-compliant data was intended to cause the Air Force to form false impressions about the efficacy of C2Web, the Court was not persuaded that such an action would support a claim for unfair competition.

Turning then to Command’s claims for misappropriation, the Court found that Command was put on notice of these claims with an email dated March 26, 2009 in which a competitor of Command requested assistance from Command in operating C2Web. Because Command did not file this lawsuit until May 21, 2012, the Court agreed with the trial court that Command’s claim was time-barred.

Finally, as to Command’s claims for breach of contract, the Court held that the release in the Integration Contract barred Command’s claims. The Court was not persuaded that Command was induced fraudulently into signing the release. Furthermore, because the Integration Contract required a release to be signed in order for Command to receive payments from Lockheed, it did not need to be supported by independent consideration, and was not merely a receipt for payment from Lockheed. In any event, because Command was placed on notice of the alleged breaches of contract with the March 26, 2009 email, Command’s breach of contract claims were also time-barred. Consequently, the Court affirmed the trial court’s grant of summary judgment.


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