Thursday, April 23, 2015

Peckey v. Bank of America, N.A. (Maryland U.S.D.C.)

Filed: April 10, 2015

Opinion by: Richard D. Bennett

Holdings:  The Court denied Defendant Loan Servicer’s motion to dismiss Plaintiff’s claims for violations of three statutes: 1) the Fair Debt Collection Practices Act (“FDCPA”); 2) the Maryland Consumer Debt Collection Act (“MCDCA”); 3) and the Maryland Consumer Protection Act (“MCPA”).

While Defendant Loan Servicer’s communication to collect Plaintiff’s non-existent mortgage debt was time barred under the FDCPA, the Defendant’s more recent false representation regarding the non-existent debt was not time barred.  The Court held Plaintiff sufficiently pled that Defendant Loan Servicer possessed the requisite knowledge to violate the MCDCA.  The Court also held Defendant Loan Servicer’s alleged false reporting of delinquencies plausibly harmed Plaintiff’s credit score and caused him stress and anxiety.  Further, the Court held that Plaintiff sufficiently pled a violation of the MCPA. 

Facts:  Plaintiff defaulted on a loan from Defendant Bank to purchase property (the “Loan”).  To avoid foreclosure, Plaintiff agreed to a Deed in Lieu of Foreclosure transaction (“DIL”) conveying the property to Defendant Bank.  Plaintiff fulfilled all of the requisite steps to complete the DIL.  Shortly thereafter, however, Defendant Bank sent Plaintiff a letter stating his loan would be serviced by Defendant Loan Servicer and Defendant Bank sent Plaintiff another letter stating it was unable to offer Plaintiff a DIL. 

Then, Defendant Loan Servicer sent Plaintiff a letter stating it had taken over loan servicing for Plaintiff’s property and sent Plaintiff a monthly payment notice demanding $55,190.29 for the current payment, past due payment, and late charges/fees.  In response, Plaintiff sent a letter to Defendant Loan Servicer stating that he successfully completed a DIL with Defendant Bank and requested that it cease and desist making debt collection phone calls to him. Defendant Loan Servicer nevertheless continued to demand payment.  Plaintiff’s credit reports showed the DIL terminated the Loan, but that Plaintiff had a deficiency with Defendant Loan Servicer.

Defendant Loan Servicer filed a Motion to Dismiss in response to Plaintiff’s claims under the FDCPA, MCDCA, and MCPA.

Analysis:  FDCPA:  The FDCPA requires that a plaintiff bring a claim within one year from the date on which a violation occurs (15 U.S.C.A. 1692k(d)).  Defendant Loan Servicer’s communication to collect Plaintiff’s non-existent debt occurred more than one year before suit was filed.  However, Defendant Loan Servicer’s false delinquency report to the credit bureaus and Plaintiff’s accessing of his credit reports occurred within one year before filing suit.  Thus, the Court determined that Plaintiff’s FDCPA claim was not barred by the FDCPA’s one-year statute of limitations.       

MCDCA:  Liability arises under Md. Code Ann., Com. Law § 14-202(8) when a defendant acted “with actual knowledge or reckless disregard as to the falsity of the information . . .”  Plaintiff’s allegation that he provided the DIL and other documentation to Defendant Loan Servicer was sufficient to plead that Defendant had “actual knowledge.”  Plaintiff alleged he sent a message to Defendant Loan Servicer indicating the Loan had been satisfied with title transferring by the DIL, that it failed to investigate Plaintiff’s response, and it failed to consider information readily available in Plaintiff’s credit history.  The Court ruled that this was sufficient to plead Defendant Loan Servicer acted with “reckless disregard.”  The Court further stated that, although Plaintiff bears the burden to prove Defendant Loan Servicer’s actions proximately caused his damages, it is plausible its action caused the harm to Plaintiff’s credit score as well as stress and anxiety.  

MCPA: The Court determined that because Plaintiff sufficiently alleged a violation of the MCDCA and a violation of the MCDCA is a per se violation of the MCPA, Plaintiff sufficiently pled a violation of the MCPA.

The full opinion is available in PDF.

Tuesday, April 14, 2015

Payne v. Erie Insurance Exchange (Md. Ct. of Appeals)

Filed:  March 30, 2015

Opinion by:  Robert N. McDonald

Holding:  Where the first permittee is not present in the vehicle, omnibus coverage does not extend to a second permittee if that driver deviates from an authorized purpose.

Facts:  The named insured owned the vehicle, which was covered by Defendant’s insurance policy.  Defendant’s policy contained an omnibus clause which provided coverage to (1) relatives by blood, marriage, or adoption, and (2) drivers given permission by the named insured. 

Named insured had granted the first permittee unrestricted use of the car, but had forbidden the second permittee from driving the car for any reason.  Despite the named insured’s wishes, first permittee directed the second permittee to use the car to pick up the first permittee's children from school.  Instead of taking a direct route to the school, the second permittee first drove to a nearby gas station and subsequently collided with a car driven by Plaintiffs.

Plaintiffs filed a tort action against the second permittee, the named insured, Plaintiff’s insurer and Defendant insurer.  Writ of certiorari was granted to reconsider whether omnibus coverage extended to second permittee’s use of the car without the presence of the first permittee and outside the scope of authorized use.

Analysis:  Because the first permittee was undisputedly not present in the car when the accident occurred, the court’s analysis turned on the circumstances under which the second permittee operated the vehicle.  The court highlighted jurisprudence showing the disjunctive nature of the test for second permittees as illustrated by Kornke, Federal Insurance Co., and Bond:
“The general rule that a permittee may not allow a third party to use the named insured’s car has generally been held not to preclude recovery under an omnibus clause where (1) the original permittee is riding in the car with the second permittee at the time of the accident, or (2) the second permittee, in using the vehicle, is serving some purpose of the original permittee.”
The court noted the existence of two alternative situations.  In one, where the first permittee was a passenger of the vehicle, authorization of the driver’s actions could be presumed.  Even if the first permittee was not actively directing the car’s operation, mere presence of the first permittee indicated operation for his benefit.  But in the second situation, where the first permittee was absent, the court required clear evidence that the driver operated the vehicle for the benefit of the first permittee in order for the second permittee to retain omnibus coverage.

The court determined that the first permittee became entitled to omnibus coverage as a blood relative regardless of any implied or express consent.  Accordingly, the first permittee possessed unrestricted authority to delegate permission to the second permittee.  But because the second permittee lacked the discretion to use the vehicle as he pleased, his departure from the assigned task excluded him from omnibus coverage.

The full opinion is available in PDF.

In Re: MTBE Products Liability Litigation (New York U.S.D.C.)

Filed: March 30, 2015

Opinion by: Shira A. Scheindlin

Summary:  In a case involving multiple jurisdictions, a federal court held that in the absence of a federal question, the laws of the forum state should control, in this case Pennsylvania. The court then applied Pennsylvania’s choice-of-law rules to hold that the laws of the jurisdiction where the “targeted entity” is incorporated should determine whether to piece the corporate veil. The defendant’s parent company was incorporated in Delaware, but its Maryland subsidiary—the target of the lawsuit—was formed in Maryland. Thus, under the court’s ruling, Maryland’s veil-piercing laws should govern.

The full opinion is available in PDF.

Monday, April 6, 2015

Cunney v. Patrick Communications LLC (Maryland U.S.D.C.)

Filed: April 3, 2015

Opinion by: James K. Bredar

Holding:  Confidential communications between a husband and wife are privileged, regardless of whether the subject matter relates solely to ordinary business matters.

Facts:  Defendant managing members of defendant LLC were also husband and wife.  In connection with discovery, husband and wife asserted marital privilege to bar production of 58 documents involving communications between husband and wife.

Analysis:  Plaintiff argued the documents should be produced in discovery because the communications related to pure business matters unrelated to the spousal relationship.  Plaintiff’s argument relied on a comparison to New York law, which has statutory text similar to Maryland.  The court agreed New York law excludes from the martial privilege conversations related solely to “ordinary business matters.”  However, the court looked to the Maryland Court of Appeals decision in Coleman v. State, which “refused to read exceptions into the marital privilege where the text [(Section 9-105 of the Courts and Judicial Proceedings Article)] itself had ‘no express exceptions.’”  The court found the communications between the husband and wife privileged. 

The court went on to state that the parties must still determine whether the communications were confidential because the privilege does not apply if the communications were “made with the contemplation or expectation that a third party would learn” of the communications.

The opinion is available in PDF.

Friday, April 3, 2015

Allstate Lien & Recovery Corp. v. Stansbury (Ct. of Spec.Appeals)

Filed: October 7, 2014

Opinion by: Kathryn Grill Graeff

Holdings: A fee charged for processing a garageman’s lien is not part of the garageman’s lien per Md. Code, Comm. Law § 16-202 and cannot be included in the amount necessary to redeem a vehicle.

As a result, the jury properly found that including the processing fee in the amount needed to redeem a vehicle violates the Maryland Debt Collection Act (Md. Code, Comm. Law §§ 14-201, et seq.) and the Maryland Consumer Protection Act (Md. Code, Comm. Law §§ 13-301, et seq.).

Facts: Plaintiff authorized in writing some needed repairs to his vehicle by the defendant garage, which charged Plaintiff $6,330.37 for the repairs. After Plaintiff failed to timely pay, the Defendant garage and its manager engaged the Defendant lien and recovery company to begin the process of selling Plaintiff’s vehicle in execution of the Defendant garage’s repair lien.

Plaintiff was sent a lien notice which provided that Plaintiff’s vehicle would be sold at public auction to satisfy the garage’s lien unless Plaintiff paid the $6,330.37 costs of repair, plus a storage fee of $300, plus a processing fee of $1,000, for a total of $7,630.37. Plaintiff had not agreed to any storage fees in his written repair authorization. The Defendant lien and recovery company asserted that although the actual costs incurred may vary from lien to lien, the $1,000 fee was its standard charge for collecting debts and was “front-loaded” to become part of the lien. Plaintiff failed to pay the full lien amount claimed, including the $1,000, and Plaintiff’s vehicle was sold at auction for $7,730.

Analysis: The Court determined that the plain language of the garageman’s lien statute, Md. Code, Comm. Law § 16-202, clearly and unambiguously states that a person who provides a service to, or materials for, a vehicle has a “motor vehicle lien” only for those charges incurred for repair or rebuilding, storage, or tires or other parts or accessories. As a result, a processing fee is not included as part of the lien. The Court reviewed the statutory scheme as a whole and held that, although processing fees may be recovered if the vehicle is sold or if judicial proceedings are instituted, the statutory scheme does not suggest that processing fees are part of the lien that may be included as part of the amount the consumer must pay to redeem the vehicle.

The Maryland Consumer Debt Collection Act, specifically Md. Code, Comm. Law § 14-202, provides that a debt collector may not “[c]laim, attempt, or threaten to enforce a right with knowledge that the right does not exist.” The Court held that Defendants attempted to enforce a right that did not exist by requiring Plaintiff to pay the $1,000.00 processing fee to redeem the vehicle. Defendants had no right to front-load the processing fee and include those fees as part of the lien. Consequently, the Court held the jury properly found that Defendants violated the Maryland Consumer Debt Collection Act and, because such a violation constitutes an unfair or deceptive trade practice, Defendants also violated the Maryland Consumer Protection Act.

The full opinion is available in PDF.  

Wednesday, April 1, 2015

Falls Garden Condominium Ass’n, Inc. v. Falls Homeowners Ass’n, Inc. (Md. Court of Appeals)

Filed: January 27, 2015

Opinion by: Lynne A. Battaglia

Holding:  A letter of intent may be an enforceable contract where definite terms are included, signaling intent of the parties to be bound, and the material terms of a contract are included.  Further, where the letter of intent is unambiguous and constitutes an enforceable contract, it is unnecessary to have a plenary hearing on the merits of a motion to enforce a settlement agreement

Facts: The appeal arose out of the execution of a letter of intent which was the result of the settlement of litigation over the contested ownership of parking spaces.

Analysis:  Distinguishing Cochran v Norkunas, which held that the parties did not intend to be bound by a letter of intent and it was therefore unenforceable, the Court noted that in the present case the parties expressed their intent to be bound to the letter of intent through the definiteness of terms included therein.

In discerning the enforceability of the letter of intent the Court relied upon the often cited and influential treatise Corbin on Contracts, which divides cases where letters of intent have been an issue into a spectrum with four categories: (i) where the parties specifically say that they intend not to be bound until the formal writing is executed; (ii) cases where the parties clearly point out one or more specific matters on which they must yet agree before negotiations are concluded; (iii) cases where the parties express definite agreement on all necessary terms, and say nothing as to other relevant matters not essential, but that are often included in similar contracts; and (iv) cases like those of the third class, with the addition that the parties expressly state that they intend their present expressions to be a binding agreement or contract, and are thus conclusive as to the parties intent.  The Court indicated that the essential distinction between the indefinite middle two categories centers on the question as to whether the terms included in the document are definite or indefinite, which then informs the central question as to whether the parties intended to be bound and, thus, their mutual assent.  Under this framework of analysis, the Court finds the letter of intent to be enforcable due to the mutual assent of the parties, and the lease is not enforceable.

Following this line of reasoning, the Court noted that due to the absence of ambiguous terms in the letter of intent the trial judge need not entertain extrinsic evidence, especially if the evidence were to be of a self-serving nature, as in the present case.

The full opinion is available in PDF.

Monday, March 30, 2015

Walton v. Network Solutions (Ct. of Special Appeals)

Filed: February 26, 2015

Opinion By: Michael W. Reed

Holding: Appellant, Jeffrey Walton, failed to allege facts sufficiently specific to substantiate his claims against Appellee, Network Solutions, for violating either the Maryland Commercial Electronic Mail Act (“MCEMA”) or the Maryland Consumer Protection Act (“MCPA”), and his claims were timed barred under the applicable three year statute of limitations.

Facts: Appellant was the recipient of certain unsolicited commercial email (“spam”) from Appellee starting in 2009.  Appellant complained twice to Appellee, but continued to receive spam, which he alleged in his complaint was false or misleading as to where the spam came from and the information provided in the subject line of each email message.

Analysis: The Court began with the language of MCEMA, which specifically bars sending commercial emails that contain unauthorized, false or misleading information under section 14-3002.  Md. Com. Law Code Ann. § 14-3002 (2014).  Section 14-3002(b)(2)(ii) specifically bars “sending a message that contains false or misleading information about the origin or the transmission path of the commercial electronic mail.”  Appellant had asserted that Appellee had violated this provision because when Appellant sent a message to the reply-to address of Appellee, the message was returned indicating that the destination mailbox was full.  The Court concluded that this was not prohibited conduct under the statute because the statute did not require the mailbox to accept messages, only that it be a misrepresentation of where the spam originated from.  Moreover, the Appellant was able to determine from the sending email address to contact Appellee

Section 14-3002(b)(2)(iii) prohibits sending a message that contains false or misleading information in the subject line of the message.  The Court examined the subject lines of the emails attached to Appellant’s complaint, and concluded that because the subject lines of each such message were related to Appellee’s business of selling domain names, the subject lines did not, as a matter of law, have “the capacity, tendency, or effect of deceiving” the Appellant.  Instead, the case before the Court was factually distinguishable from a California case, Hypertouch, Inc. v. ValueClick, Inc., 123 Cal. Rptr. 3d 8 (Ct. App. 2011), because the subject lines in Hypertouch offered free gifts without any limitation when the offer was actually far more limited.

Finally, the Court determined that Appellant’s claims under MCPA were time barred, holding that Appellant was aware on December 1, 2009 that Appellee had failed to remove him from Appellee’s email list, but failed to file a claim against Appellee until March 7, 2013 – more than three years from when he knew or should have known of the allegedly false or misleading conduct of Appellee.  Appellant’s claim here is premised on the statements of Appellee’s employees that Appellant was removed from the mailing list, but continued to receive spam after being told he was removed.  The Court concluded that such a claim had to be filed within three years, and that the continuing harm doctrine, which if applicable, might extend the limitations period for each new spam message received, was not applicable to the present matter.  The Court held that this argument was waived by not being raised and decided by the trial court at the hearing on the motion to dismiss, but that even if not waived, the continuing harm doctrine should not be applied to alleged violations of MCEMA.

The full opinion is available in PDF.

Thursday, March 26, 2015

Bank of Commerce v. Maryland Financial Bank (Maryland U.S.D.C.)

Filed: March 2, 2015

Opinion by: Ellen Lipton Hollander

Holdings:  The meaning of a contractual provision is not discerned by reading it in isolation, but by recognizing its relation to the other terms of the complete contractual relationship.

Extrinsic evidence indicating a party is entitled to proceeds of a foreclosure on a first out basis may only be considered if the underlying contract is ambiguous.

Facts:  Nearly two years after a loan was made, defendant purchased a 25% interest in the loan pursuant to a participation agreement.  The loan went into and remained in default despite various efforts to cure the default.  Plaintiff initiated a foreclosure proceeding.  The resulting foreclosure sale resulted in a loss on the loan. 

The parties disagreed as to how the foreclosure proceeds should be disbursed under the participation agreement.  Section 9(b) of the agreement provided that plaintiff “shall promptly remit to [defendant] its percentage interest first, as hereinabove specified, of all net proceeds received by [plaintiff] as a consequence of such foreclosure proceeding.”  The agreement did not define percentage interest.  Section 1 of the agreement provided that defendant’s “interest in the loan, expressed as a percentage, is 25.00%.”

Analysis:  Instead of receiving 25% of the foreclosure proceeds, defendant argued it was entitled to “its full 25% interest in the loan first, before the remaining foreclosure proceeds are distributed” because the terms pro rata and ratable were absent from Section 9(b).  The Court viewed defendant’s interpretation as being at odds with the allocation of losses section of the agreement, which required ratable allocation of any losses on the loan.  The Court also noted that defendant, in selecting an option for priority of payments, chose “pro rata” rather than “first out” or “100%.”  Citing Atlantic Contracting & Material Co. Inc. v. Ulico Cas. Co., the Court stated “the meaning of a provision is not discerned by reading it in isolation, but by recognizing its relation to the other terms of complete contractual relationship.” 

Defendant also argued that the use of the word “first” in section 9(b) shifted a greater risk to plaintiff in the event of a default and subsequent foreclosure sale.  Plaintiff argued the word first refers to defendant receiving its 25% ratable interest, not defendant being remitted its entire investment.  The Court agreed and stated that contractual terms must be read by recognizing their relation to the other contractual terms.

The Court also stated that defendant’s interpretation would effectively convert defendant’s participating investment into a loan, which is generally inconsistent with a participation agreement.  The Court then reviewed several cases and factors to determine whether a transaction involves a participation interest or a loan. 

The Court declined to introduce extrinsic evidence, in the form of a letter attached to an e-mail, indicating defendant was entitled to proceeds on a first out basis.  The Court held that extrinsic evidence may only be considered if a contract is ambiguous and such ambiguity does not exist “simply because, in litigation, the parties offer different meanings to the language.”

The opinion is available in PDF.

Monday, March 23, 2015

Karen R. Goozh v. Howard Richmond (Cir. Ct. Mont. Cnty.)

Filed: July 8, 2014

Opinion by: Ronald B. Rubin

Holding: A stockholders’ agreement that expired upon the “dissolution” of the company was terminated when the company was administratively dissolved for failure to file a regular report, despite having its charter later reinstated when the failure was cured.

Facts: Stockholders in a Washington, D.C., company entered into a stockholders’ agreement that included a provision whereby the agreement would terminate upon the “liquidation or dissolution of the Company.” The company’s charter was then revoked twice after it failed to file a required biennial report with the District of Columbia Department of Consumer and Regulatory Affairs. In each instance, the revocation was eventually annulled, but the Plaintiffs argued that the stockholder’ agreement remained terminated after the first revocation despite such reinstatement.

Analysis: The court noted that a different District of Columbia statute applied to each administrative dissolution of the company. In the second instance, the law stated that when a company’s charter was revoked and later restored, the restoration would “relate back” to the date of the administrative dissolution. In other words, the gap in the company’s continuity would effectively be erased.

The court found two D.C. cases instructive: In Accurate Construction Co. v. Washington, a contract entered into while a company’s charter was revoked was held to be unenforceable, and in T.K., Inc. v. National Community Reinvestment Coalition, Inc., the tenant under a commercial lease was found to have remained a valid party to the lease despite the revocation and subsequent reinstatement of its charter during the lease term.

Finding neither case dispositive, the court said that because the stockholders’ agreement failed to define the term dissolution, the plain meaning of the word should apply. The court acknowledged that the drafters may not have intended a “technical” or “administrative” dissolution of the company to terminate the agreement. Nevertheless, it held that a reasonable person would understand the word dissolution to include such events.

Although the case hinges on D.C. law, the court occasionally draws comparisons with Maryland law and cites Maryland law when discussing the effects of revival.

Full opinion is available in PDF.

Saturday, March 21, 2015

Tucker v. Specialized Loan Servicing, LLC (Maryland U.S.D.C.)

Filed: February 3, 2015

Opinion by: Paul W. Grimm

Holding: A creditor waives an express condition precedent to a loan modification when it signs and accepts payments under that modification without satisfaction of the condition precedent.  

Facts: Plaintiff purchased a home through a mortgage loan and deed of trust, which she jointly executed with her husband (“Husband,” collectively “Plaintiffs”).  The deed of trust provided that Plaintiff could modify the terms of the mortgage loan without Husband’s approval.  Plaintiff later applied to her mortgage servicer for a permanent loan modification.  The servicer returned a signed copy of the modification agreement (the “Modification”), which stated that the modification was effective as of February 1, 2010.  Despite language in the Modification requiring signatures from both mortgagors, Husband never signed.  Plaintiff made payments under the Modification, which the were accepted.  The servicer later assigned the loan to Defendants.  Plaintiff continued to make payments pursuant to the Modification, which Defendants rejected, insisting that the Modification was ineffective.  Defendants reported to credit agencies that Plaintiffs were in default and appointed trustees to foreclose on the home.

Plaintiffs filed an action alleging, inter alia, violations of the Maryland Consumer Debt Collection Act and the Maryland Consumer Protection Act, defamation, injurious falsehood, and breach of contract.  Defendants moved to dismiss.

Analysis: The Court found that all of Plaintiff’s claims hinged on the validity of the Modification. Defendants contended that the Modification was ineffective because the servicer never waived, in writing, the stated requirement of both signatures. The Court rejected this argument, reasoning that statements or actions may constitute waiver of a condition precedent in a contract. Although the Modification expressly required both signatures, the servicer waived this requirement through its actions of returning the signed Modification and accepting payments without Husband’s signature. After rejecting Defendants' statute of limitations arguments, the Court denied the motion to dismiss.

The opinion is available in PDF.