The opinion of the court was delivered by: JOSEPH RODRIGUEZ, Senior District Judge
[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] OPINION
This matter has come before the Court on Defendant Ocean City
Home Savings Bank's ("Ocean City Bank" or the "Bank") Motion for
Summary Judgment, and Plaintiff John M. Floyd & Associates'
("Floyd") Cross Motion for Summary Judgment. Also before the
Court is a Motion in Limine filed by Floyd, with his cross motion
for summary judgment, to preclude the testimony of the Bank's
expert, Nicholas Ketcha ("Ketcha"). For the reasons discussed
herein, the Bank's motion for summary judgment is granted as to
Floyd's breach of contract and implied warranty of good faith and
fair dealing claims. Floyd's cross motion for summary judgment is
granted in-part and denied in-part; it is granted as to the
Bank's counterclaim for refund of its $25,000 retainer, but
denied in all other aspects. Additionally, Floyd's motion in
limine is denied as moot because no aspect of Ketcha's testimony
was relied upon by the Court in reaching this decision.
This litigation concerns a contract that was entered into
between Floyd and the Ocean City Bank, and allegedly breached
when the Bank rejected Floyd's recommendations and hired a different consulting firm. On May 16,
2001, a teleconference took place between Paul Esposito
("Esposito"), Regional Sales Director of the Bank, and Mark Roe,
Executive Sales Director for Floyd, whereby Roe proposed
consulting services for an overdraft privilege program. (Roe Dep.
at 9.) On June 27, 2001, Roe presented a written proposal (the
"Contract") to Esposito, in which Floyd sought to provide certain
computer consulting services to the bank in exchange for a
$25,000 retainer, out of pocket expenses, and a percentage of
future savings as a result of the program. (See Def.'s Exh. C.)
The Contract called for Floyd to analyze the Bank's current
computer systems, make recommendations, create and instal an
overdraft privilege program, and train the Bank's employees.
Esposito signed the Contract on August 21, 2001 and Floyd's
president, John Floyd, signed the agreement on August 27, 2001.
(Id. at 6.) It is undisputed that a contract was formed;
however, the parties dispute whether the Bank's actions
constitute a breach of that agreement.
The parties dispute the overall goals of the overdraft
privilege program. Esposito testified that one of the Bank's main
objectives in the program's implementation was to insure it was
fully-automated. (See Esposito Dep. at 47.) Further, Esposito
states that he had conversations in the summer of 2001 with Rick
Wade ("Wade") of Bisys Corporation, the company that provided
core processing services to the Bank, concerning compatibility
issues with the Bank's existing hardware and the overdraft
privilege program. (Id. at 182.) In August 2001, Roe testified
that he had two phone conversations with Esposito and Wade in which they discussed compatibility
issues. (Roe Dep. at 20.) In the first conversation, Roe
testified that he assured Wade and Esposito that Floyd had never
encountered a core processing system in which it could not
implement the overdraft program. (Id. at 20.) On October 2,
2001, at the request of Esposito, Roe and Floyd technician Eric
Hudgins, called Wade to talk about the compatibility problems.
Roe's notes from that conversation state:
After much discussion, thought I had him convinced to
let us make our recommendations to the bank, let the
bank approve or not approve them, and then Bisys
would be contacted to inform them of any
programming/modifications that would have to be made.
(Id. at 56.)
Another, and less significant dispute concerned a free checking
option, which, Esposito testified, was allegedly communicated to
Roe that the Bank was not interested in this feature in the
overdraft program. (Esposito Dep. at 20.) Roe admitted that one
of the concerns of the Bank was whether this aspect of the
program could be modified to have a no free checking program.
(Id. at 31-32.) Nevertheless, Roe stated that once the free
checking program was presented, the Bank would have the option to
approve or disapprove the recommendation. (Id. at 32.) The
full-automation and the no free checking options in the overdraft
program were not expressly mentioned in the Contract drafted by
The Contract called for a four phase implementation. First, was
the Analysis Phase where Floyd would identify existing account
structures and procedures through interviews, observation, and review of historical data. (Id. at
3.) Second, was the Presentation Phase, where Floyd would propose
recommended changes to the Bank's management, and identify those
recommendations that are approved by the Bank. (Id.) These were
followed by the Implementation Phase and the Follow-up Phase.
(Id. at 4.) The Contract did not include an exclusivity
provision, which prohibited the Bank from negotiating and
contracting with another consulting firm for a similar program,
nor did the Contract prohibit Floyd from selling is overdraft
program to other competing banks. The following portions of the
Contract are pertinent to the parties' motions for summary
Objectives Our objective is to install our
Overdraft Privilege program in Ocean City Home Bank.
There will be an emphasis on installing a product
that will result in a significant increase in
non-interest income without a disproportionate
increase in non-interest expense. We will install
systems to monitor income and associated costs to
ensure the bank is receiving the appropriate income
for the designed product. Accomplishing these
objectives will result in an estimated increase in
first-year pre-tax earnings between $370,000 and
$510,000. Moreover, we are so confident that this
increase is achievable that we offer our service on a
contingency basis. (Emphasis added).
(Def.'s Exh. C at 1.)
Overdraft Privilege Program.
1. Perform a comprehensive profile analysis of the
banks demand deposit customer base to establish
Overdraft privilege limits.
2. Perform an analysis of the banks NSF and Overdraft
processing and assist the bank in making the
necessary changes for an effective overdraft
* * *
8. Assist the bank in the installation of an
automated collection system that interfaces with the
core application processing system. (Emphasis
added). (Id. at 1-2.)
Cost of the Assignment
The cost to your institution of the engagement will
be one-third of the first year's quantified net
increase in pre-tax earnings plus out of pocket
expenses. At the beginning of the assignment the bank
agrees to pay a $25,000 fully refundable retainer.
(Emphasis added). After the recommendations have been
installed we will quantify the increased income and
the bank agrees to pay monthly one-third of the
quantified net increase in pre-tax earnings. After
the bank has recovered the retainer the bank agrees
to make these payments by the 15th of the
following month. We will invoice semi-monthly for
(Id. at 2.)
Quantification of Earnings.
If a recommendation is not approved it will not be
included in the fee calculation (emphasis added).
However, if any recommendation, within 24 months of
the initial engagement is approved or approved as
modified, or initially declined and later approved as
recommended or as subsequently modified it will be
included in the fee calculation.
(Id. at 3.)
Performance on the Contract began on or about November 5, 2001,
when Earl Shipp ("Shipp") was assigned by Floyd to be the project
manager for the Contract. (Shipp Dep. at 11.) Shipp testified
that he was simply given a copy of the Contract and was told by
Roe that the Contract explained the assignment. (Id. at 52.)
Roe did not advise Shipp that the Bank had compatibility
concerns. (Roe Dep. at 51.) Shipp conducted interviews with the
Bank's employees, reviewed the Bank's ledger, and visited
competing institutions. (Id. at 41.) On November 27, 200, Shipp
presented the results of his work, the "Overdraft Privilege
Study," to several of the Bank's officers, including Esposito and
the Bank's president. (See Def.'s Exh. G.) The presentation
included 32 recommendations, which included a free check service application,
but did not address whether the system was to be fully-automated,
or if modifications could be made to create a fully-automated
After the presentation, Esposito testified that the Bank's
management met to discuss Shipp's proposal, and that they were
disappointed that Shipp's presentation still included
recommendations for the free checking option, and that it did not
address the automation concerns. (Esposito Dep. at 159-60.) In
sum, the Bank's management believed that Shipp presented boiler
plate recommendations, and they did not have confidence in Floyd
continuing in its implementation of the overdraft program. (Id.
at 161-62.) In a December 19, 2001 phone conversation, and
followed by a letter dated December 24, 2001, Esposito advised
John Floyd that it was not satisfied with the presentation and
that it had decided not to implement the Floyd program. (Pl.'s
Exh. G.) In a letter dated January 11, 2002, Floyd acknowledged
receipt of the Bank's termination letter.
On January 2, 2002, following a referral from another bank,
Esposito contacted Pinnacle Financial Strategies, L.L.C.
("Pinnacle") to inquire about implementing an overdraft privilege
program at Ocean City Bank. (Esposito Dep. at 193.) On April 18,
2002, the Bank and Pinnacle entered into a Professional Services
Agreement and a Software Licensing Agreement, whereby Pinnacle
would implement an overdraft privilege program at the Bank.
(See Def.'s Exh. J.) The Bank is seeking summary judgment on Floyd's claims of
breach of contract and breach of the implied warranty of good
faith and fair ...