Filed: July 31, 2017
Opinion: Judge McDonald
Holding: A declaratory judgment action should be stayed or dismissed while a separate action is pending in another state that involves the same parties and that raises essentially the same issues presented in the declaratory judgment action in Maryland. The fact that the Maryland court had previously dismissed an earlier related action did not create “unusual and compelling circumstances” that would justify an exception to the principle that a court should not entertain a declaratory judgment action when there is a pending lawsuit in another state involving the same issues.
Facts: Volkman was subject to two agreements with Hanover, a Maryland corporation [or related companies], an employment agreement dated January 1, 1993, and a separate shareholder agreement entered into in 2007. The genesis of the lawsuit was Ms. Volkman’s termination in 2010. The legal proceedings related to the matter can be divided into four actions: (i) an employment agreement action; (ii) an arbitration proceeding; (iii) a shareholders' agreement action; and (iv) a declaratory judgment action (which is the subject of this opinion).
The employment agreement action - More than two years after her termination, on April 17, 2012, Volkman filed a lawsuit based on the employment agreement. On March 22, 2013, after the court dismissed several of her tort claims, Volkman voluntarily dismissed the employment agreement action with prejudice by stipulation of counsel pursuant to Maryland Rule 2- 506(a).
The arbitration proceeding - On October 10, 2012, while the employment agreement action was pending, Hanover invoked the arbitration provision in the shareholders’ agreement to determine what it was required to pay Volkman when it redeemed her stock. On August 1, 2014, Hanover successfully obtained a default judgment in Montgomery County Circut Court confirming the award. Ms. Volkman did not appeal that judgment.
The shareholders' agreement action - On December 17, 2012, Volkman served Hanover with a complaint that she filed in a state trial court in Minnesota which named Hanover as the lone defendant, alleging that it had violated its contract with her and sought specific performance – the return of her Hanover stock – a remedy explicitly provided for in the shareholders’ agreement. Hanover moved to dismiss the complaint, asserting that the Minnesota court lacked
in personam jurisdiction of Hanover, but the Minnesota Court of Appeals affirmed the trial court decision. Contemporaneously with its defense in the shareholders' agreement action, Hanover filed a declaratory judgment action in Maryland (discussed below) involving the same issues and Hanover prevailed in the Circuit Court with Volkman appealing that decision. As a result, on January 19, 2015, the Minnesota trial court dismissed Volkman's shareholders’ agreement action, but explicitly reserved
jurisdiction to reopen the case depending on the resolution of the Maryland appeal.
The declaratory judgment action - On June 26, 2013 – two months after the Minnesota trial court denied Hanover’s motion to dismiss, and while that decision was on appeal – Hanover filed a declaratory judgment action against Volkman in the Circuit Court for Montgomery County. Volkman noted the pendency of the shareholders’ agreement action in Minnesota and asked the Circuit Court to either decline jurisdiction or stay the proceedings in the declaratory judgment action pending a final judgment in the shareholders' agreement action. The Circuit Court declined to do so, citing Marriott Corp. v. Village Realty & Inv. Corp., 58 Md. App. 145 (1984), for the proposition that a declaratory judgment action could be filed “defensively” even if there was similar litigation “pending or impending” in another court and rendered a decision in favor of Hanover. Volkman appealed to the Court of Special Appeals arguing that the Circuit Court should not have heard the case while the shareholders’ agreement action involving the same issues was pending and the Court of Special Appeals held that the Circuit Court erred in issuing a declaratory judgment while the shareholders’ agreement action was pending. 225 Md. App. 602 (2015). Hanover petitioned the Court of Appeals for a writ of certiorari, which it granted.
Analysis: Pertinent to this case, a court should not entertain a declaratory judgment action when there is already a pending action “involving the same parties and in which the identical issues that are involved in the declaratory action may be adjudicated.” Sprenger v. Public Service Comm’n, 400 Md. 1, at 27-28 (2007). The court reasoned that in this case, the shareholders’ agreement action qualifies as an earlier-filed, pending action that would, under customary analysis, operate as a bar to the later-filed declaratory judgment action. The court further reasoned that the two actions involve essentially the same parties and both actions concern the identical issue – the propriety of Hanover’s redemption of Volkman’s Hanover stock under the shareholders’ agreement.
Accordingly, the Court of Appeals affirmed the Court of Special Appeals' decision.
The full opinion is available in pdf.
Opinion: Judge McDonald
Holding: A declaratory judgment action should be stayed or dismissed while a separate action is pending in another state that involves the same parties and that raises essentially the same issues presented in the declaratory judgment action in Maryland. The fact that the Maryland court had previously dismissed an earlier related action did not create “unusual and compelling circumstances” that would justify an exception to the principle that a court should not entertain a declaratory judgment action when there is a pending lawsuit in another state involving the same issues.
Facts: Volkman was subject to two agreements with Hanover, a Maryland corporation [or related companies], an employment agreement dated January 1, 1993, and a separate shareholder agreement entered into in 2007. The genesis of the lawsuit was Ms. Volkman’s termination in 2010. The legal proceedings related to the matter can be divided into four actions: (i) an employment agreement action; (ii) an arbitration proceeding; (iii) a shareholders' agreement action; and (iv) a declaratory judgment action (which is the subject of this opinion).
The employment agreement action - More than two years after her termination, on April 17, 2012, Volkman filed a lawsuit based on the employment agreement. On March 22, 2013, after the court dismissed several of her tort claims, Volkman voluntarily dismissed the employment agreement action with prejudice by stipulation of counsel pursuant to Maryland Rule 2- 506(a).
The arbitration proceeding - On October 10, 2012, while the employment agreement action was pending, Hanover invoked the arbitration provision in the shareholders’ agreement to determine what it was required to pay Volkman when it redeemed her stock. On August 1, 2014, Hanover successfully obtained a default judgment in Montgomery County Circut Court confirming the award. Ms. Volkman did not appeal that judgment.
The shareholders' agreement action - On December 17, 2012, Volkman served Hanover with a complaint that she filed in a state trial court in Minnesota which named Hanover as the lone defendant, alleging that it had violated its contract with her and sought specific performance – the return of her Hanover stock – a remedy explicitly provided for in the shareholders’ agreement. Hanover moved to dismiss the complaint, asserting that the Minnesota court lacked
in personam jurisdiction of Hanover, but the Minnesota Court of Appeals affirmed the trial court decision. Contemporaneously with its defense in the shareholders' agreement action, Hanover filed a declaratory judgment action in Maryland (discussed below) involving the same issues and Hanover prevailed in the Circuit Court with Volkman appealing that decision. As a result, on January 19, 2015, the Minnesota trial court dismissed Volkman's shareholders’ agreement action, but explicitly reserved
jurisdiction to reopen the case depending on the resolution of the Maryland appeal.
The declaratory judgment action - On June 26, 2013 – two months after the Minnesota trial court denied Hanover’s motion to dismiss, and while that decision was on appeal – Hanover filed a declaratory judgment action against Volkman in the Circuit Court for Montgomery County. Volkman noted the pendency of the shareholders’ agreement action in Minnesota and asked the Circuit Court to either decline jurisdiction or stay the proceedings in the declaratory judgment action pending a final judgment in the shareholders' agreement action. The Circuit Court declined to do so, citing Marriott Corp. v. Village Realty & Inv. Corp., 58 Md. App. 145 (1984), for the proposition that a declaratory judgment action could be filed “defensively” even if there was similar litigation “pending or impending” in another court and rendered a decision in favor of Hanover. Volkman appealed to the Court of Special Appeals arguing that the Circuit Court should not have heard the case while the shareholders’ agreement action involving the same issues was pending and the Court of Special Appeals held that the Circuit Court erred in issuing a declaratory judgment while the shareholders’ agreement action was pending. 225 Md. App. 602 (2015). Hanover petitioned the Court of Appeals for a writ of certiorari, which it granted.
Accordingly, the Court of Appeals affirmed the Court of Special Appeals' decision.
The full opinion is available in pdf.
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