SEMTEK INTERNATIONAL	*	IN THE

INCORPORATED

Plaintiff	*	CIRCUIT COURT

v.	*	FOR

LOCKHEED MARTIN	*	BALTIMORE CITY, Part 20

CORPORATION, et al.

Defendants.	*	Case No. 97183023/CC3762

[2003 MDBT 4]

*	*	*	*	*	*	*	*	*	*	*	*

MEMORANDUM AND OPINION

PROCEDURAL HISTORY

This case arises out of an unconsummated commercial enterprise between Semtek International Incorporated (hereinafter ASemtek@) and Merkuriy, Ltd. (a Russian entity) involving the commercialization of a former Soviet military satellite and the launch of additional satellites as part of an international communications system.

Plaintiff Semtek filed suit against Merkuriy, Ltd. and Pyotr Sivirin in the United States District Court for the District of Massachusetts in August 1995 for fraud, R.I.C.O. violations, breach of contract, breach of a written agency contract and breach of fiduciary duties. A default judgment was entered on April 24, 1996 in the amount of $381,396,000. That judgment was vacated on August 13, 1996 so that defendants could be properly served. On April 12, 2000 a default judgment was re-entered against defendants in the same amount. Plaintiff has never collected any portion of its judgment from defendants.

After the first default judgment was entered, plaintiff served a subpoena duces tecum on Lockheed Martin Corporation (hereinafter ALockheed@) at its corporate office in Johnson City, New York. Lockheed failed to produce the requested documents and plaintiff then sought an order in the United States District Court for the Northern District of New York compelling Lockheed to comply. A show cause order was issued on March 11, 1996 by the federal court in New York. On May 1, 1996, the court denied without prejudice the plaintiff=s request to compel compliance. Additionally, plaintiff filed a motion to compel compliance with the subpoena on March 30, 1999 in the United States District Court for the District of Massachusetts, and the docket entries indicate that a renewed motion to compel was filed on April 21, 1999, but was denied on June 30, 1999 without prejudice.

On February 26, 1997, plaintiff filed suit against Lockheed Martin Corporation and Samuel Ursini, et al. in the Superior Court of the State of California for the County of Los Angeles. Defendant Lockheed removed the case to the United States District Court for the Central District of California on March 11, 1997. Because the two year statute of limitations barred the suit, the court granted defendant=s motion to dismiss and the suit was dismissed with prejudice on May 5, 1997. The United States Court of Appeals for the Ninth Circuit affirmed the judgment of the District Court on February 25, 1999.

Then, on July 2, 1997 plaintiff filed suit solely against Lockheed Martin Corporation in the Circuit Court for Baltimore City for inducing a breach of contract (Count I), intentional interference with prospective economic advantage (Count II), negligent interference with prospective economic advantage (Count III), and conspiracy to interfere with prospective economic advantage (Count IV). After an unsuccessful attempt to remove the case to federal court, defendant=s motion to dismiss on the ground of res judicata was granted by Judge Joseph H.H. Kaplan on April 30, 1998. The Maryland Court of Special Appeals affirmed Judge Kaplan=s dismissal on September 7, 1999, stating that the Aearlier dismissal of the suit by the United States District Court for the Central District of California was a judgment on the merits and was entitled to the preclusive effect that Judge Kaplan gave it.@ Semtek Int=l Inc. v. Lockheed Martin Corp., 128 Md. App. 39, 70 (1999). The Court of Appeals denied a petition for writ of certiorari on December 21, 1999, but the United States Supreme Court granted certiorari and on February 27, 2001, held

[b]ecause the claim-preclusive effect of the California federal court=s dismissal Aupon the merits@ of petitioner=s action on statute-of-limitations grounds is governed by a federal rule that in turn incorporates California=s law of claim preclusion (the content of which we do not pass upon today), the Maryland Court of Special Appeals erred in holding that the dismissal necessarily precluded the bringing of this action in the Maryland courts. The judgment is reversed, and the case remanded for further proceedings not inconsistent with this opinion.

Semtek Int=l Inc. v. Lockheed Martin Corp., 121 S. Ct. 1021, 1029 (2001).

When the motion was renewed in this court, it was denied on November 20, 2001. The present motion to dismiss on grounds of judicial estoppel and/or failure state a claim was then filed on December 7, 2001, along with a motion for costs and legal expenses pursuant to Maryland Rule 1-341. After reviewing the motions, the oppositions of plaintiff, the reply memoranda and the exhibits attached to the respective memoranda, the Court conducted a hearing on February 22, 2002. This Memorandum and Opinion addresses the merits of the defendant=s motions.

II.	THE SECOND MOTION TO DISMISS

Semtek contends that the motion to dismiss now before the Court must be denied because Lockheed has waived its right to raise the defenses contained therein by failing to join those defenses in its first preliminary motion under Maryland Rule 2-322. The Court disagrees.

Because the defense of judicial estoppel may be raised at any stage of litigation, Gordon v. Posner, 2002 Md. App. LEXIS 18, *34-35 (2002), citing Eagan v. Calhoun, 347 Md. 72, 88 (1997), and because the defense of failure to state a claim upon which relief can be granted is specifically preserved pursuant to Maryland Rule 2-324, defendant is not precluded from raising these defenses in a second motion to dismiss. Moreover, because the motion necessarily requires consideration of matters outside the complaint, and because both plaintiff and defendant have presented to the Court pertinent material going beyond the allegations contained in the complaint, the Court shall treat the present motion as one for summary judgment, to be governed by Maryland Rule 2-501. The Court will, therefore, address the contentions raised by the papers and presented by counsel at oral argument.

III.	THE JUDICIAL ESTOPPEL DOCTRINE

Judicial estoppel, which prohibits litigants from taking advantage of inconsistent positions in different cases to the detriment of opposing parties, thereby creating the perception that either the first or the second court was misled, has long been recognized in the Maryland courts. See Stone v. Stone, 230 Md. 248, 253 (1962); Eagan v. Calhoun, 347 Md. 72, 87-88 (1997); Gordon v. Posner, 2002 Md. App. LEXIS 18, *35 (2002); Roane v. Washington County Hosp., 137 Md. App. 582, 592, cert. denied, 364 Md. 463 (2001); United Book Press, Inc. v. Maryland Composition Co., Inc., 141 Md. App. 460, 469 (2001).

Recently, the doctrine has been applied by the United States Supreme Court to preclude the State of New Hampshire from assuming an inconsistent position against the State of Maine, with respect to the boundary of the Piscataqua River. In that case, which invoked the original jurisdiction of the Supreme Court, Justice Ginsburg noted that the judicial estoppel doctrine has long been recognized by American courts A>to protect the integrity of the judicial process,=@ by A>prohibiting parties from deliberately changing positions according to the exigencies of the moment.=@ New Hampshire v. Maine, 121 S. Ct. 1808, 1814 (2001) (citations omitted). Further, Justice Ginsburg identified several factors generally present in cases where courts have invoked the doctrine. These include: (1) a party=s later position must be Aclearly inconsistent@ with its earlier position; (2) the party has Asucceeded in persuading a court to accept that party=s earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create >the perception that either the first or the second court was misled;=@ and (3) the party Aseeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.@ 121 S. Ct. at 1815 (citations omitted).

In the Fourth Circuit, the Adeterminative factor@ appears to be whether the party who is alleged to be estopped Aintentionally misled the court to gain unfair advantage.@ Tenneco Chems., Inc., v. William T. Burnette & Co., Inc., 691 F.2d 658, 665 (4th Cir. 1982); John S. Clark Co. v. Faggert & Frieden, P.C., 65 F.3d 26 (4th Cir. 1995); Lowery v. Stovall, et al., 92 F.3d 219, 225 (4th Cir. 1996).

In the present action, Lockheed seeks to estop Semtek from asserting that it intentionally interfered with any contractual relationship or economic advantage between plaintiff and Merkuriy, Ltd., since plaintiff took the position in the Massachusetts litigation that Merkuriy, Ltd. was solely responsible for perpetrating fraud upon Semtek, Lockheed being an innocent third party to Merkuriy=s fraudulent acts. Because Semtek obtained a default judgment in excess of $381,000,000 against Merkuriy, Ltd. in Massachusetts on the basis of these allegations, Lockheed contends that it should be estopped from presenting contrary allegations in a Maryland court. In essence, defendant asserts that because plaintiff was unable to collect any of its judgment in Massachusetts, it should not be permitted to alter its theory materially and proceed against another defendant in Maryland, simply because it is more likely to collect on any judgment obtained. Having made its election to proceed against Merkuriy, Ltd. first in Massachusetts, Lockheed argues that Semtek is foreclosed from changing its course now in Maryland, simply because its earlier endeavor led it to a dead end.

The Court believes that the doctrine of judicial estoppel is inapplicable under the circumstances of this case. To begin with, Lockheed concedes that Semtek never intentionally misled the Court in either the Massachusetts or Maryland proceedings. Because the primary purpose of the judicial estoppel doctrine is to protect the integrity of the judicial process and because a party is precluded from Adeliberately changing positions,@ it is reasonable to infer that the doctrine applies principally in cases where a court was intentionally misled. Maine, 121 S. Ct. at 1814. If there is no deliberate act involved, the integrity of the judicial process is less likely to be implicated. As the Court of Special Appeals noted in Posner, judicial estoppel focuses on the relationship between the litigants and the judicial system, while equitable estoppel concentrates on the relationship between the parties involved. Posner, 2002 Md. App. LEXIS 18, *37-38 (citing United Book Press, 141 Md. App. at 471-72). Since the focus of judicial estoppel is not merely on the relationship between parties, it is appropriate to require scienter before a party is deemed judicially estopped from bringing a varying claim in a subsequent action. The Court of Appeals has recognized, in fact, that a party can only be estopped if it had full knowledge of the facts and this prerequisite further supports the Court=s view that an intent to mislead is a necessary component of judicial estoppel. Stone v. Stone, 230 Md. 248, 253 (1962) (quoting 19 Am. Jur., Estoppel, ' 50).

Additionally, the parties are not identical in the proceedings sought to be compared. While this is more typically an issue which arises upon analysis of collateral estoppel or issue preclusion doctrines, it is relevant to inquire how Lockheed was actually disadvantaged by the default judgment entered against Merkuriy, Ltd. in the federal court in Massachusetts. Counsel=s response to that question during the hearing was to point to the enormous default judgment entered against Merkuriy, Ltd. and its obvious impact on the ability of the Russian enterprise to participate successfully with Lockheed in this commercial venture, involving the launching and development of a satellite communications system.

Semtek points out that by the time the final default judgment was entered by the Massachusetts court in 1997, Lockheed=s commercial venture with Merkuriy, Ltd. was long dead. Rather than focus on the specific allegations which formed the bases for the judgment in Massachusetts, Semtek would have the Court focus on the specific prejudice claimed here and whether it can be linked to the inconsistent positions said to be taken by plaintiff in the two cases. Since Merkuriy, Ltd. is not claiming that it is prejudiced here, plaintiff questions how Lockheed will be disadvantaged in defending the allegations presented by the present complaint. Under the circumstances presented here, the Court finds that defendant is unable to demonstrate direct prejudice (other than continuing the litigation).

The Court of Appeals of Maryland has recognized the significance of prejudice in the judicial estoppel analysis. Stone v. Stone, 230 Md. 248, 253 (1962) (quoting 19 Am. Jur., Estoppel, ' 50). The United States Supreme Court has expressly stated that prejudice to another is a major consideration when deciding whether judicial estoppel should be applied. Maine, 121 S. Ct. at 1815. Maryland case law may not always require direct prejudice against the party asserting judicial estoppel, but, in its absence, the rationale for application of the doctrine has been intentional misconduct on the part of the offending party. See, e.g., Wilson v. Stanbury, 118 Md. App. 209, 214-215 (1997). Since both of these factors are lacking, the Court is not inclined to bar plaintiff from pursuing its claims in this case.

IV.	THE FAILURE TO STATE A CLAIM UPON WHICH RELIEF MAY BE GRANTED

Count I. Intentional Interference with Contractual Relations

Lockheed contends that plaintiff=s allegations, coupled with all the relevant documents which have been attached to the various memoranda, amount to nothing more than Aan agreement to agree@ on the part of Semtek and Merkuriy, Ltd. In the absence of a legally enforceable contractual agreement between those parties, defendant contends that no cause of action will lie under Count I of the complaint.

Semtek=s response to this contention is that its course of conduct, oral agreements with Merkuriy, Ltd., the partial performance on both sides and the documentation (when all is fully developed at trial) will establish a joint venture agreement, if one cannot be discerned at this stage from the complaint and the exhibits now before the Court. At the very least, plaintiff asserts that the existence of a joint venture agreement between Semtek and Merkuriy, Ltd. poses a disputed question of material fact for which summary judgment disposition is inappropriate. With the latter statement, this Court agrees and it will deny defendant=s motion with respect to Count I.

Under Maryland law, little, if any, distinction is drawn between the formation of a partnership and a joint venture. Hobdey v. Wilkinson, 201 Md. 517, 525-527 (1953). In order to establish either, Ait is essential to show that they [the parties] have a joint proprietary interest, or that they are to share losses as well as profits, or that they have a joint control over the subject matter of the adventure or of the manner in which it is to be carried out.@ Atlas Realty Co. v. Galt, 153 Md. 586, 590 (1927). The Maryland Court of Appeals has recognized that a joint venture has been defined as Aan association of two or more persons to carry out a single business enterprise for profit,@ and as Aa partnership for a single transaction.@ Herring, et al. v. Offutt, 266 Md. 593, 596-597 (1972) (citing Joint Adventures, 8 Md. L. Rev. 22 (1943)).

In the judgment of this Court, the Business Agreement, Protocol and Letter of Intent, the agency agreement between Semtek and Merkuriy, Ltd. and the correspondence between those parties give rise to a material factual dispute as to whether or not Semtek can establish a joint venture agreement.

The Court is unpersuaded that plaintiff is barred from establishing a joint venture agreement by virtue of the Maryland Statute of Frauds, Md. Code Ann., Cts. & Jud. Proc. '5-
901 (1993). Since joint ventures and partnerships are essentially indistinguishable under Maryland law, McBriety v. Phillips, 180 Md. 569, 573-574 (1942) (citations omitted), and since a written agreement is not necessary to create a partnership, M. Lit, Inc. v. Berger, 225 Md. 241, 248 (1961) (citations omitted), the underlying test here (as in an alleged partnership relationship without a written agreement) will be Athe intention of the parties@ to create such a joint venture, Cohen v. Orlove, 190 Md. 237, 243 (1948) (citations omitted).

On the other hand, the fact that the Court is unwilling to dismiss Semtek=s complaint in its entirety should not be read as an adoption of plaintiff=s view that the record before this Court, for summary judgment purposes, establishes a joint venture agreement and/or interference with such an agreement sufficient to submit those issues to a jury. Plaintiff will, however, have an opportunity to develop its case through discovery and present additional relevant evidence at trial.

Count II. Intentional Interference with Prospective Economic Advantage

Having denied defendant=s motion with respect to Count I, the Court is not inclined to grant it with respect to Count II, at least at this point in the proceedings. If Semtek is able at trial to generate a jury issue concerning the establishment of a joint venture with Merkuriy, Ltd., then it is conceivable that certain related damage claims may go to the jury as well.

Because this is a situation in which plaintiff=s case is built upon allegations that the defendant interfered in such a way as to prevent the completion of a formal joint venture agreement, plaintiff may be limited to the consequential damages incurred up to the point in time when its relationship with Merkuriy, Ltd. terminated.

In order to go beyond that point, and to establish a reasonable expectation of economic advantage for completion of the satellite communication enterprise, plaintiff will undoubtedly face significant obstacles, not the least of which will be evidence presented by Lockheed that this ARussian satellite project was an unmitigated financial disaster . . . .@ Defendant=s Memorandum in Support of Motion to Dismiss, page 2, n. 2.

Count III. Negligent Interference with Prospective Economic Advantage

Semtek concedes that Maryland does not recognize a cause of action for negligent interference with prospective economic advantage and, accordingly, defendant=s motion with respect to Count III is GRANTED.

Count IV. Conspiracy to Interfere with Prospective Economic Advantage

Semtek concedes that the allegations contained in this count are duplicative of those contained in Count II and, accordingly, defendant=s motion with respect to Count IV is GRANTED.

V.	LOCKHEED=S MOTION FOR COSTS AND LEGAL EXPENSES PURSUANT TO

MARYLAND RULE 1-341

In light of the Court=s rulings regarding Lockheed=s motion to dismiss, it cannot say that Semtek has brought this case in bad faith or without substantial justification at this time. Because the Court has concerns about plaintiff=s ability to prosecute this action successfully, however, the Court will reserve on defendant=s motion for costs and legal expenses until plaintiff has had a full and fair opportunity to present evidence in support of its claims.

ALBERT J. MATRICCIANI, JR.

Judge

cc:	Jack D. Lebowitz, Esquire

Vadim A. Mzhen, Esquire

Andrew W. Zepeda, Esquire

Leslie N. Reizes, Esquire

Francis B. Burch, Jr., Esquire

Anthony L. Meagher, Esquire

Brett Ingerman, Esquire

Robert E. Willett, Esquire

Richard W. Buckner, Esquire

Jess B. Frost, Esquire

Thomas V. Girardi, Esquire

Walter K. Lack, Esquire

Steven C. Shuman, Esquire

SEMTEK INTERNATIONAL	*	IN THE

INCORPORATED

Plaintiff	*	CIRCUIT COURT

v.	*	FOR

LOCKHEED MARTIN	*	BALTIMORE CITY, Part 20

CORPORATION, et al.

Defendants	*	Case No.: 97183023/CC3762

******************************************************************************

O R D E R

Upon consideration of defendant Lockheed Martin Corporation=s motion to dismiss and motion for costs and legal expenses, plaintiff Semtek International, Inc.=s oppositions thereto, the reply memoranda filed by defendant, the exhibits attached to the respective memoranda and the arguments of counsel heard on February 22, 2002, it is this 20th day of March, 2002, by the Circuit Court for Baltimore City, Part 20, ORDERED as follows:

1.	Defendant=s motion to dismiss is GRANTED in part and DENIED in part, as more fully set forth in the accompanying Memorandum and Opinion of this date.

2.	The Court=s ruling on defendant=s motion for costs and legal expenses pursuant to Maryland Rule 1-341 is RESERVED.

3.	Defendant is ordered to file an answer to the remaining counts of the complaint within fifteen (15) days of the date of this Order.

ALBERT J. MATRICCIANI, JR.

Judge

cc:	Jack D. Lebowitz, Esquire

Vadim A. Mzhen, Esquire

Andrew W. Zepeda, Esquire

Leslie N. Reizes, Esquire

Francis B. Burch, Jr., Esquire

Anthony L. Meagher, Esquire

Brett Ingerman, Esquire

Robert E. Willett, Esquire

Richard W. Buckner, Esquire

Jess B. Frost, Esquire

Thomas V. Girardi, Esquire

Walter K. Lack, Esquire

Steven C. Shuman, Esquire