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Prudential Securities Inc. v. E-Net9/5/2001
Appellant, Prudential Securities, Inc. ("Prudential"), appeals the entry of judgment by the Circuit Court for Montgomery County granting motions to strike the Amended Complaint and motions for summary judgment filed by appellees, e-Net, Inc. ("e-Net") and American Stock Transfer and Trust Co ("AST"). It presents six issues on appeal, which we have rephrased and reordered as follows:
I. Did the trial court err when it granted summary judgment in favor of appellees on Count I of the Complaint because both ยง8-204 of the Uniform Commercial Code and Maryland common law recognize a cause of action for appellees' negligence?
II. Did the trial court err when it found there were no genuine issues of material fact as to whether appellees' failure to enforce the lockup was the proximate cause of appellant's loss?
III. Did the trial court err in granting summary judgment on the grounds of assumption of the risk because there were issues of material fact as to whether appellant assumed or appreciated the risk that the collateral shares would not bear their required restrictive legends, or would not be subject to a stop transfer order?
IV. Did the trial court err because there were genuine issues of material fact as to whether PSI was contributorily negligent?
V. Did the trial court err in dismissing PSI's claim for negligent misrepresentation because PSI proved all the essential elements of such a cause of action, including misrepresentation by e-Net and AST?
VI. Did the trial court abuse its discretion in granting appellees' motion to strike the Amended Complaint where there was no pending trial date, where appellant diligently amended the Complaint to conform to the facts of the case, and where appellees suffered no prejudice from the amendment?
For the reasons set forth below, we reverse the trial court's ruling striking the amended complaint but affirm its decision granting summary judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Appellee e-Net, Inc. is a Delaware corporation with its principal place of business in Germantown, Maryland. It provides a service whereby customers can make telephone calls over the internet. Thomas Prousalis, Jr. acquired 450,000 shares of e-Net stock in January 1995, apparently in exchange for acting as counsel to e-Net in connection with its formation and initial capitalization. In 1997, e-Net sought to initiate an Initial Public Offering ("IPO") and again enlisted Prousalis's legal services. In connection with the IPO, Prousalis agreed not to sell, transfer, or otherwise dispose of his shares for two years after e-Net's IPO, which was scheduled for April 1997 (the "lockup agreement"). e-Net also engaged AST as its transfer agent to implement any applicable restrictions and to maintain stop transfer orders on restricted e-Net shares.
From April 1997 to March 1998, Prousalis's shares were evidenced by a single certificate on which AST had affixed two restrictive legends. The first legend reflected a restriction imposed by securities law ("1993 Securities Act" restriction), while the second restriction reflected Prousalis's lockup agreement. This certificate was held in account with Dean Witter Reynolds, Inc. ("Dean Witter"). Prousalis's broker was Mark A. Rodgers, and the account was maintained in Clearwater, Florida.
In March 1998, e-Net authorized AST to remove the 1933 Securities Act restriction from Prousalis's certificate. e-Net also instructed AST to maintain stop transfer orders on all restricted shares, including those of Prousalis. AST thereafter reissued Prousalis's certificates in new demoninations, giving him four stock certificates repr
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