MHD-Rockland Inc. v. Aerospace Distributions Inc. (Maryland U.S.D.C.)

Filed:  January 3, 2014

Opinion by Catherine C. Blake

Holdings:  (1) In a transaction between merchants, an acceptance that contains the words “subject to” along with additional terms does not render the acceptance “expressly made conditional on assent to the additional terms” for purposes of Section 2-207(1) of the Commercial Law Article.

(2) In a transaction between merchants, objection to the condition of goods and the return of such goods is not a timely objection of additional terms in an acceptance for purposes of Section 2-207(2) of the Commercial Law Article. 

Facts:  Plaintiff, through use of a purchase order, ordered four airplane wheel assemblies in “overhauled” condition from defendant.  Defendant sent the assemblies and an acknowledgment form representing that the assemblies were in overhauled condition.  The acknowledgment form further stated it was “subject to” the Conditions of Sale printed on the reverse side of the form, which purported to limit liability for consequential damages and disclaim any express or implied warranties.  Plaintiff returned two assemblies allegedly not in overhauled condition, which were therefore defective.  Disagreements arose whether the two returned assemblies were defective. 

Plaintiff alleged, among other claims, breach of contract.  Defendant argued plaintiff should not be allowed to seek lost profits because the contract expressly foreclosed any warranty, including liability for consequential damages.  Plaintiff claimed it rejected the conditions upon return of the assemblies. 

Analysis:  The Court applied Section 2-207 of the Commercial Law Article as the case involved a sale of goods between merchants.  Section 2-207 provides an acceptance containing additional terms is still an acceptance that forms a contract unless the “acceptance is expressly made conditional on assent to the additional or different terms.”  The Court noted that Maryland courts have not decided whether an acceptance “subject to” additional terms amounts to an acceptance “expressly made conditional.”  The Court agreed with cited precedent that concluded the “subject to” language does not make the acceptance expressly conditional on the buyer’s assent to the additional terms.  Accordingly, the Court held that defendant’s acceptance of the purchase order was not expressly made conditional on plaintiff’s assent to the additional terms in the Conditions of Sale.

Section 2-207 further provides that if there is an acceptance, the additional terms become part of the contract between merchants unless: “(a) [t]he offer limits acceptance to the terms of the offer; (b) [t]hey materially alter it; or (c) [n]otification of objection to them has already been given or is given within a reasonable time after notice of them is received.”  The Court noted that the plaintiff did not allege how and when it rejected the additional terms.  The Court stated that plaintiff’s objection to the condition of the assemblies does not amount to a timely objection to the additional terms in the defendant’s acceptance.  The Court dismissed the claim for lost profits from the alleged breach of contract. 

In a lengthy footnote, the Court also discussed an argument that the terms should be excluded from the contract because they materially alter the agreement.  The Court stated that such argument, if raised, would have failed under the applicable Maryland test. 

The full opinion is available in PDF.

Lomax v. Weinstock, Friedman & Friedman, P.A. (Maryland U.S.D.C.)

Filed January 15, 2013

Opinion by Judge Catherine C. Blake

Holding: Under the doctrine of equitable estoppel, a party to a contract containing a mandatory arbitration provision cannot avoid arbitration of a claim against a nonsignatory to the subject contract when the basis for the claim is that contract.
 
Facts: Plaintiff Lomax financed the purchase of a car with a loan obtained through a retail installment contract (the “RISC”) with Credit Acceptance Corporation (“CAC”).  After CAC repossessed and sold the car it retained Weinstock to obtain a deficiency judgment against Lomax.  Lomax filed suit against Weinstock alleging the firm violated the Fair Debt Collection Practices Act, the Maryland Consumer Debt Collection Act and the Maryland Consumer Protection Act. Weinstock filed a motion to dismiss or, in the alternative, to stay the action and compel arbitration based on the RISC’s mandatory arbitration provision.
 
Analysis: It is settled that parties must submit claims to arbitration where they have a valid arbitration agreement and it covers the issues in dispute.  Lomax did not dispute the validity of the RISC or the arbitration agreement within it, but argued that Weinstock, as a nonsignatory to the RISC, could not invoke the arbitration clause.  The Court held, however, that when each of a signatory's claims against a nonsignatory makes reference to or presumes the existence of the written agreement, the signatory is equitably estopped from refusing to submit such claims to arbitration if the arbitration provision is sufficiently broad to encompass the claims.  Because Lomax relied on the RISC as the basis for her attempt to collect damages from Weinstock and the arbitration provision in the RISC was broadly worded so as to include claims against the seller’s attorneys, Lomax was estopped from disclaiming the mandatory arbitration provision contained in the RISC.
 
The Court granted the motion to dismiss.

The opinion is available in PDF. 

Doris Mitchell v. WSG Bay Hills IV, LLC (Maryland U.S.D.C.)

Filed December 11, 2013

Opinion by Judge Richard D. Bennett

Holding: A business operator does not have implied duty to protect the public from lawful actions of third parties partaking in the business’ activities.

Facts: Plaintiff was struck in the leg by a golf ball while living in a condominium adjacent to a golf course owned by the Defendant. Prior to this incident, occupants of the condominium complained to the Defendant after errant shots damaged the building. The Defendant elected not to alter the course because of costs. The Defendant moved for summary judgment arguing  it did not have a duty to protect the condominium residents.

Analysis: A business is not required to control the actions of third-parties lawfully partaking in business, unless a “special relationship” exists between the business and the injured party. In most instances a special relationship is created by either statute or contract. However, the Court acknowledged that a special relationship may be implied by either “(1) the inherent nature of the relationship between the parties; or (2) by one party undertaking to protect or assist the other party, and thus often inducing reliance upon the conduct of the acting party.” The Defendant did not have a direct relationship with the Plaintiff and the Defendants never offered to protect the condominium residents.

The Court granted the motion for summary judgment.

 

The full opinion is available in PDF.

Bhari Information Technology System Private Limited v. Sriram (Maryland U.S.D.C.)

Filed December 2, 2013
Opinion by Judge Paul W. Grimm

Holding:  A court should grant a motion to dismiss on arbitration agreement grounds only if the terms of the agreement are free from ambiguity. 

Facts:  Defendant was the sole stockholder of a consulting company, incorporated in Maryland, which he sold to Plaintiff, a Dubai corporation.  Defendant moved to dismiss on several grounds, one of which included to dismiss the proceedings pending arbitration, pursuant to an arbitration clause in the contract for sale of the consulting company. The arbitration clause provided, in its entirety: "Arbitration.  Any arbitration shall be in accordance with ICC rules."

Analysis:  "In determining whether parties have agreed to arbitrate the dispute in question, the Court should consider (1) whether a valid agreement to arbitrate between the parties exists and (2) whether the dispute in question falls within the scope of that arbitration agreement."  The Court further noted that if the terms are free from ambiguity the Court should grant the motion to dismiss on arbitration agreement grounds.  The Court found the agreement to be ambiguous and not appropriate for resolution on a motion to dismiss.  

The Court granted the motion to dismiss on other grounds.  Please note that it is not clear from the case whether the contract was governed by Maryland law.

The full opinion is available in PDF. 

Kimberly Pinsky v. Pikesville Recreation Council (Ct. of Special Appeals)

Filed: October 30, 2013
Opinion by Judge Robert A. Zarnoch

Held:

Directors and officers of an unincorporated nonprofit association may be held liable for contracts entered into by the association if they authorized, assented to or ratified the contract in question.

Facts:

Defendant, an unincorporated nonprofit association, hired plaintiffs to work in a pre-school. Before the end of their respective contract terms, defendant terminated plaintiffs pursuant to letters of termination. Plaintiffs sued defendant and its individual officers and directors to recover payments still owed to them, plus treble damages, attorney's fees, and costs. After a three-day bench trial, the circuit court entered judgment for plaintiffs, but rejected the claims against the individual directors and officers. The court also declined to grant appellants' motions for sanctions and for attorney's fees and costs. Plaintiffs appealed  the adverse judgment with respect to the individual directors and officers and the court's rulings on sanctions, attorney's fees, and costs.

Analysis:

The Court of Special Appeals noted that as an unincorporated association, defendant had at least some formal organization, as it operated under a constitution, bylaws and policy manual. Citing Littleton v. Wells & McComas Council, 98 Md. 453, 455 (1904) and Restatement (Second) of Judgements Sec. 61 cmt. a (1982) the Court found that unincorporated associations had the right to sue and be sued and that a judgement against the association alone does not reach the assets of its members.  Further, although no law explicitly permits unincorporated associations to enter into contracts, the Court indicated that this is a long-recognized and uncontroversial power (see Miller v. Loyal Order of Moose Lodge No. 358, 179 Md. 350, 356).

At common law, officers of an unincorporated association were personally liable for the debts of the association. Since the Court of Appeals= decision in Littleton, 98 Md. at 456, and the Legislature's subsequent enactment of the legislative predecessors to CJP  Sec. 11-105, a judgment rendered solely against an association does not, on its own, expose the association's officers to liability. Yet CJP Sec. 11-105 does not address whether the officers, if named personally, can be held liable in actions also brought against the association. The Court quoted Littleton, which observed that "[t]he statute does not take away the right existing at common law to sue the members of an unincorporated association, but the creditor has the option to sue either the association or the members; and, when the suit is against the former, a judgment obtained can only affect its joint property." The Court noted that it does not read Littleton as positing an either/or system of recovery.

Officers and other agents of associations, such as the defendant, are statutorily protected from personal liability for damages in any suit if the association maintains insurance coverage. CJP Sec. 5-406(b). The Court noted that, absent such insurance coverage, personal liability could attach.  The Court then turned to the case law of other states for a better understanding of when officers are personally liable, and since the majority of states have not enacted comprehensive statutes on unincorporated associations, the common law still generally covers the principles of liability.  The Court found a distinction in the case law between for-profit and nonprofit associations.  Individual liability of a for-profit organization is analyzed under partnership principles; individual liability of a nonprofit association is analyzed under agency principles. Therefore, in nonprofit associations, "a member is personally responsible for a contract entered into by the nonprofit association only - if viewing him as though he were a principal and the association were his agent - that member authorized, assented to, or ratified the contract in question." (See Karl Rove & Co. v. Thornburgh, 39 F. 3d 1273, 1284).  The Court went on to discuss ratification, authorization and assent to a contract.

The full opinion is available in PDF.