Wednesday, October 28, 2009

Ali v. CIT Technology Financing Services, Inc. (Ct. of Special Appeals)

Filed: October 5, 2009
Opinion by Judge James R. Eyler

Held: Section 5-202 of Maryland's Courts and Judicial Proceedings Article tolls the three year statute of limitations of Section 5-101 during the pendency of a bankruptcy proceeding. The case was remanded to the lower court to apply Section 11 U.S.C 349(b) and determine whether the damages to be awarded should be calculated based on the consent order issued by the bankruptcy court in a case that was later dismissed or the original contract executed between the parties prior to the bankruptcy filing.

Facts: The parties entered into a five year equipment lease in June of 1997 with monthly payments for an aggregate amount of $196,536. In May of 1999, the Lessee defaulted under the lease agreement and the outstanding payment sum of $158,760,86 became immediately due.

On June 11, 2001, the Lessee filed a chapter 11 petition in bankruptcy and in August of 2004, the parties entered into a stipulation and proposed consent order that was executed by the court which allowed the Lessor a general unsecured claim in the amount of $190,725.86, and an administrative claim in the amount of $53,200.

The Lessor received some portion of the payment towards the administrative claim but did not receive any payment towards its general unsecured claim by way of a distribution in the bankruptcy proceeding. On on July 12, 2006, the bankruptcy court dismissed the Lessee’s bankruptcy case without discharge of its debts. In January, 2007, the Lessor filed suit against the Lessee for breach of the lease and, alternatively, by amended complaint filed in March, 2008, to enforce the stipulation and consent order.

The Lessee's principal defense was that Lessor's claims was barred by limitation because the tolling of Maryland's three year statute of limitations was only suspended from the date on which the bankruptcy proceeding commenced until the date on which the bankruptcy court lifted the automatic stay as to the equipment lease at issue.

The Lessor argued that Section 5-202 of the Courts and Judicial Proceedings Article tolled the running of the statute of limitations during the entire bankruptcy proceeding.

The Lessee also contended that the Lessor was seeking more than what it was entitled to receive under the lease.

The Court of Special Appeals discussed, in a fair amount of detail, the history of bankruptcy law and its inter-relationship with state insolvency laws. Ultimately, it concluded that, under §5-202, the running of the statute of limitations was tolled during the entire period that the bankruptcy proceeding was pending. However, the Court vacated the judgment and remanded the matter for to the Circuit Court for a proper assessment of damages as determined by either the stipulation and consent order or the original lease. The Court also vacated the portion of the judgment awarding pre-judgment interest because it could not determine how the Circuit Court had determined the amount of pre-judgment interest that it had awarded.

The entire opinion is available in PDF.

Thursday, October 22, 2009

McDonald v. Metropolitan Life Insurance, Co. (Maryland U.S.D.C.)

Filed October 20, 2009
Opinion by Judge J. Frederick Motz

Held: Summary judgment granted to defendant insurance company, MetLife, because it did not abuse its discretion under ERISA in terminating plaintiff's long term disability ("LTD") benefits based on the reports of independent consultant physicians who reviewed plaintiff's medical records and did not do their own vocational review or actual physical examination of the plaintiff.

Facts: In March 2007, the plaintiff submitted a claim for LTD benefits under his employer's LTD plan, governed by ERISA, after experiencing a tremor in his arm while driving. MetLife (the Plan's claim administrator) approved the claim after evaluating plaintiff's medical records from his physician and neurologists. MetLife determined that plaintiff met the Plan's definition of "disabled" and informed the plaintiff that he had a continuing obligation to provide proof of his disability as defined by the Plan to continue receiving benefits.

In October 2007, MetLife referred plaintiff's claim file, including his medical records, to an independent physician consultant. The consultant expressed the opinion that the medical records did not manifest incapacity to the extent of being disabled. Accordingly, MetLife decided to terminate the plaintiff's LTD benefits.

Plaintiff submitted an appeal that included additional medical documentation and other materials in support of his claim. MetLife referred the claim to two additional independent physician consultants who concluded that the plaintiff was not unable to perform to his job and his mental status results were essentially normal. MetLife submitted the consultant reports to plaintiff's treating physicians for review and comment. Only one physician responded, stating that the plaintiff was physically incapacitated by his disorder and emotionally disabled. Finding this response incomplete and failing to provide objective evidence in support of disagreement with the independent consultants, MetLife issued a letter upholding its decision to terminate the plaintiff's benefits. Plaintiff filed suit thereafter.

Analysis: The parties agreed that the Court could only find in favor of the plaintiff if MetLife abused its discretion in terminating the plaintiff's LTD benefits. The Court held that MetLife did not abuse its discretion because it conducted a full and fair review of the claim.

MetLife collected numerous medical records from the plaintiff's various health professionals and therefore, according to the Court, MetLife's decision resulted from a "principled decision-making process." In addition to reviewing the plaintiff's medical records from its physicians, MetLife also requested reviews from three independent consultants and requested responses from the plaintiff's doctors. The Court noted that the fact that MetLife initially awarded LTD benefits to the plaintiff did not weigh in favor of the plaintiff's position because MetLife was entitled to continue to evaluate the plaintiff's condition even after initially awarding benefits.

The Court also ruled that it was not an abuse of discretion for MetLife to rely more heavily on the consultants' determinations than those of the plaintiff's doctor since an administrator, such as MetLife, can adopt the position of one doctor over another.

Finally, the Court held MetLife's decision not to secure an additional vocational assessment to the plaintiff's vocational assessment was not an abuse of discretion because the Fourth Circuit does not require a vocational assessment in the course of a full and fair review. Moreover, MetLife had nevertheless reviewed the report submitted by the plaintiff's vocational consultant.

The full opinion is available in PDF.

Wednesday, October 21, 2009

Mervis Diamond Corp. v. Congressional Hotel Corp. (Cir. Ct. Mont. County)

Filed October 1, 2009
Opinion by Judge Ronald B. Rubin

Held: When there is a remand after an appeal, the prevailing party is not automatically barred from recovering fair, reasonable, and necessary contract-based attorneys' fees incurred as a consequence of the second trial.

Facts: Mervis Diamond Corporation entered into a 10 year commercial lease with Congressional Hotel Corporation ("CHC") for retail space. Under the terms of the lease, CHC was to complete certain construction work prior to providing the premises to Mervis ("Landlord's Work"). When CHC did not respond to Mervis's inquiries regarding CHC's commencement of the Landlord's Work on the premises, Mervis filed suit on March 16, 2005 in Circuit Court for Montgomery County for (1) breach of contract; (2) specific performance; and (3) a temporary restraining order to prevent CHC from demolishing the premises.

The Circuit Court ruled that CHC had breached the lease and entered judgment ordering CHC to specifically perform its obligations under the lease. The Circuit Court also enjoined CHC from performing any work on the premises other than the Landlord's Work and awarded Mervis damages for lost profits. In addition to lost profits, the Circuit Court also awarded Mervis attorneys' fees in accordance with Section 25.01 of the lease (a fee shifting provision that provided for the prevailing party to receive reasonable attorneys' fees).

On appeal, the Court of Special Appeals reversed the Circuit Court's ruling on lost profits because it concluded that the correct date to be used for calculating lost profits was the date CHC should have completed the Landlord's Work and not the date used by the Circuit Court, namely the date that CHC was to commence the Landlord's Work.

Analysis: On remand, CHC argued that Mervis was barred from recovering any amount of attorneys' fees from the second trial because Mervis's incorrect argument regarding lost profits necessitated the second trial. The Circuit Court found that the argument asserted by Mervis during the first trial, although incorrect, was not unreasonable and awarded attorneys' fees to Mervis for the second trial. Moreover, CHC, after remand, pursued an aggressive defense, raising many issues and arguments not pursued during the first trial. Thus, the Court found that the second trial bore little resemblance to the first trial.

The full opinion is available in PDF.

Moffit v. Baltimore American Mortgage; Ruble v. The Mortgage Consultants, Inc.; and Fulmore v. Premier Financial Corp. (Maryland U.S.D.C.)

Filed October 9, 2009
Opinion by Judge J. Frederick Motz

Held: Plaintiffs waived their right to seek a remand when they filed a Second Amended and Class Action Complaint in federal court following the removal from state court by the defendants.

Facts: Plaintiffs filed individual complaints in the Circuit Court of Maryland alleging violations of Maryland law. These complaints did not contain allegations with respect to any proposed class action. The Plaintiffs' claims were dismissed by the Circuit Court. The Maryland Court of Appeals reversed.

After remand, plaintiffs' counsel sent a draft amended complaint to defendants' counsel. This complaint contained class action allegations. Plaintiffs' counsel stated in the letter to defendants' counsel that the draft amended complaint containing the class action allegations would be filed unless a settlement were reached.

Defendants believed the draft complaint sent to their counsel met the requirements for the exercise of federal jurisdiction under the Class Action Fairness Act ("CAFA") and filed notices of removal. Thereafter, plaintiffs filed their amended complaint with the class action allegations in the United States District Court for the District of Maryland. Plaintiffs then filed motions to remand on the basis that the complaint that they had filed did not constitute "other papers" under the meaning of 28 U.S.C. §1446(b) (the federal class action removal statute).

Analysis: The Court relied on the proposition in Koehnen v. Herald Fire Ins. Co. 89 F.3d 525 (8th Cir. 1996) that "[a] party that engages in affirmative activity in federal court typically waives the right to seek a remand." Following this principle, the court held that the filing of a complaint setting forth class action claims in the District Court clearly constituted "affirmative activity" in federal court. The Court also relied on the interest of policy in preventing the plaintiffs from "manipulat[ing] the litigation process to deprive this court of jurisdiction it would otherwise have." The Court reasoned that had it ruled on and granted the plaintiffs' motion to remand and then the plaintiffs filed the class action complaint in state court the defendants would have an opportunity to file new notices of removal because the "other papers" issue on which the plaintiffs had based their current motions to remand would be eliminated.

The full opinion is available in PDF.

Saturday, October 17, 2009

McDevitt v. Reliance Standard Life Insurance Co. (Maryland U.S.D.C.)

Filed October 13, 2009
Opinion by Judge J. Frederick Motz

Held: Medical condition caused by inhalation of toxic fumes was an "illness" under the terms of a worker's disability insurance policy. It was not an "injury" which would be excluded from coverage.

Facts: The plaintiff suffered a harm when he inhaled toxic fumes in the course of his employment. This manifested in the form of pneumonia. He claimed disability insurance benefits, and his carrier denied the claim, asserting that the condition was excluded pursuant to the terms of the policy. The policy excluded coverage for "injury" occurring in the course of employment.

Analysis: Relying in part on the dictionary, the court held that the condition was an "illness", not an "injury". The court stated that "insurance policies must be construed not in the context of academic discourse but in the context of the language used by ordinary persons whose contractual relationships the policies are intended to govern."

The court also opined that “the ultimate purpose of insurance is to provide coverage to those who have contracted for it (or who are beneficiaries of a contract made on their behalf by an employer or other third party). It is not to erect administrative barriers, increase transaction costs, or delay the payment of legitimate claims. Whenever a non-governmental insurer becomes blind or indifferent to this simple proposition, public confidence in the integrity and efficacy of the system of private insurance inevitably is eroded.”

The full opinion is available in PDF.