Moore v. Donegal (Ct. of Special Appeals)

Filed: September 30, 2020

Opinion by: J. Graeff

Holding: Whether a settlement offer was accepted within a reasonable period of time is a question of fact rather than law. 

Facts: In the course of litigating a negligence claim, the Appellee’s insurance adjuster offered to pay the Appellant a sum of $18,000. This offer was made prior to trial. During trial, Appellant made a $21,000 counter offer, which was declined and the original offer was reiterated. The trial continued and Appellant communicated acceptance of the $18,000 to opposing counsel during a recess. The Appellee’s insurance adjuster stated that the offer was no longer available. The jury trial ended and returned a verdict for the defendant. 

Appellant filed a suit for breach of a settlement agreement and a motion for summary judgement that it was undisputed that a contract had been formed. Appellee filed a motion for summary judgment that it was undisputed that a breach of contract did not occur. The circuit court denied Appellant’s motion and granted Appellee’s motion. The question before the Court was whether the circuit court had erred in doing so. 

Analysis:

The Court held that the circuit erred in granting Appellee’s motion based on its finding, as a matter of law, that the offer had lapsed. The circuit court had found that the offer lapsed after a reasonable amount of time, which not only considers the passing minutes or hours, but also the broader context. Here, the trial had advanced to a different procedural posture from the time of offer to the attempted acceptance. Thus, the offer had lapsed.

The Court held that this was a matter for the trier of fact to decide, as it is an issue of fact rather than an issue of law. The sole issue was whether the offer lapsed or whether Appellant accepted it within a reasonable amount of time. The Court relied on Barnes v. Euster, 240 Md. 603 (1965), which held that generally the reasonableness of delays in acceptance is a question of fact unless those facts and inferences are undisputed. In Barnes, two years after an offer for the purchase of real estate subject to an unfulfilled condition to obtain rezoning was terminated by the seller, the buyer stated it was willing to waive such condition. The Barnes court held that the delay in acceptance was unreasonable as a matter of law, given the seller’s notice of termination and the rapidly rising prices of real estate. 

Here, the delay was a matter of hours not years, and there is no case in Maryland standing for the proposition that settlement offers lapse, as a matter of law, when the procedural posture of a case changes. An offer made during trial would certainly end at the time of final judgement, but not necessarily when trial merely resumes. When an offer that does not specify a time for acceptance is pending while trial proceeds, the issue of whether the offer was accepted in a reasonable amount of time is generally an issue of fact. The Court cited persuasive authority from a Pennsylvania case regarding settlement of a negligence case that circumstances such as the nature of the contract, the relationship of the parties, their course of dealing and usages of the particular business are all relevant. 

The full opinion is available in PDF.

4900 Park Heights Avenue LLC v. Cromwell Retail 1, LLC (Ct. of Special Appeals)

Filed: April 30, 2020

Opinion by: C.J. Fader

Holding: Appellant’s attorney had the authority to enter into a settlement agreement despite the client misunderstanding the legal effects of a provision; the settlement agreement placed on the record in lieu of trial was valid and binding where there were no open terms, and the language and context indicated an intent to be bound. However, approving a written version that omitted a provision incorporated by reference when set out orally on the record was an abuse of discretion by the circuit court.

Facts: Appellant owns and operates a lot on a business park developed by the Appellee. Appellant filed suit to resolve whether it had the right to erect a sign on its premises. The parties settled the matter and counsel placed the agreement on the record the morning of trial. The parties had agreed as to the location of the sign, legal fees and court costs, a mutual release, and to modify a declaration of covenants. However, the parties were unable to agree on a final draft of the agreement, and Appellee filed a motion to enforce the settlement. The circuit court held that the terms placed on the record were binding on the parties and issued an enforcement order containing Appellant’s written version of a mutual release and Appellee’s version of a declaration of covenants. 

Analysis: Appellant argued that its attorney did not have the authority to settle on its behalf. The attorney, it argued, had mistakenly interpreted the client’s statements that it did “not care about the covenants” to mean that he should proceed with settlement; rather, Appellant meant that it was agreeable to a proposed amendment, but not insofar as it would bind its successors. The Court found that this was not a misunderstanding about the proposed amendment, but rather a misunderstanding about its legal effects. There was no genuine dispute about whether Appellant authorized the amendment. The Court also noted that Appellant and its attorney did not promptly inform the other party of the misunderstanding and proceeded with negotiations for months. 

Even if, arguendo, there was ambiguity in what the appellant authorized (as opposed to what appellant fully understood the implications of what was authorized), the attorney reasonably interpreted the client’s statement and had the authority to act in accordance with it. The Court pointed out the troubling implications of the rule Appellant would have them adopt, as it would render suspect any settlement conveyed to the court unless and until the clients independently confirmed that they authorized settlement and that they and their attorneys shared the same subjective understanding of the agreed terms. Such a rule would impede settlements and efficient operation of the courts. See Maslow v. Vanguri, 168 Md. App. 298, 317 (2006). 

Appellant also argued that the basic requirements to form a settlement agreement were not met because there was no manifestation of the parties’ intent to be bound absent their subsequent consent to the terms of the agreement. Also, certain terms were too indefinite. The Court found that there was an intent to be bound because the existence of an agreement was referenced by the trial court and not contradicted by counsel; all material terms were set out on the record; no open terms were identified; and the presentation of the agreement was made at what would have been the beginning of trial. The sole contradicting factor is the Appellant attorney’s statement regarding the open language of a mutual release; however, the Court did not need to determine whether this statement created ambiguity regarding an intent to be bound because Appellant conceded during oral argument that it did intend to be bound. 

Appellant also argued that there were two open terms: the mutual general release and a proposed amendment to a declaration of covenants and whether it would bind successors. However, the Court found that the former is clearly defined in Black’s Law Dictionary. The latter issue is resolved by the fact that the declaration expressly referenced the record owner of fee simple title, regardless of their particular identity.

Appellant also argued that the circuit court improperly modified the settlement agreement by approving language that omitted an agreed-upon phrase. The Court agreed, finding that the settlement agreement placed on the record adopted by reference the definition of future improvements in the existing declaration of covenants. The definition included the phrase “all future material revisions thereto.” By omitting the phrase, the Court went beyond the terms of the parties’ agreement, constituting an abuse of discretion. 

The full opinion is available in PDF.

Gables Construction v. Red Coats

Gables Construction v. Red Coats (Ct. of Special Appeals)

Filed: February 27, 2019

Opinion by: Judge Alexander Wright.

Holding:

Contractual waivers of subrogation do not shield a contracting party from third-party contribution and direct liability under the Maryland’s Uniform Contribution Among Joint Tort-Feasors Act (“UCATA”)

Facts:

Upper Rock was the owner of a residential building project and hired Plaintiff Gables Construction (“GCI”) as the General Contractor, wholly owned by Gables Residential Services, Inc. (“GRSI”), to build the building. GSRI hired Defendant Red Coats, Inc./Admiral (“Red Coats”) to provide security and fire watch services monitoring during the construction period from approximately 5 pm to 6 am pursuant to a vendor services agreement (the “VSA”).  In the GSRI-Red Coats VSA, Red Coats waived subrogation; also, GCI is named as an additional insured in the VSA.

A fire damaged a building as it was almost completed.  The fire may have been caused by space heaters.  Upper Rock sued Defendant, and they settled.  Defendant then sued Plaintiff, claiming it was liable because it provided no training on the operation of the space heaters to Defendant.

Analysis:

The Court of Special Appeals agreed with the Montgomery County Circuit Court that Red Coats’ settlement with Upper Rock does not preclude Red Coats from seeking contribution from GCI under Maryland’s UCATA.

Citing Homeseekers’ Realty v. Silent Automatic Sales, 163 Md. 541, 545 (1933), a “contract is binding only upon the parties to the contract and their privies.”  

Before Maryland enacted its UCATA in 1941, “a statutory right of contribution among joint tortfeasors….did not exist.”  See Central GMC v. Helms, 303 Md. 266, 276(1985).  Thus, injured parties cherry-picked which tortfeasor to sue.

UCATA provides that a release of one joint tortfeasor does not relieve the liability of other joint tortfeasors.  If it did, it could create a chilling effect on business relationships.

The full opinion is available PDF.

O'Brien & Gere Engineers, Inc. v. City of Salisbury (Ct. of Appeals)

Filed: April 26, 2016

Opinion By: Adkins

Holding: The litigation privilege in Maryland extends to breach of a non-disparagement contract clause arising out of statements made by the party's counsel and witnesses in a judicial proceeding, and there is a rebuttal presumption that such privilege was not waived when a party enters into a contract that contains a non-disparagement clause.

Facts: The City of Salisbury entered into a contract for an $80 million upgrade of its wastewater sewage treatment plant with O'Brien & Gere Engineers, Inc. ("OBG") and Construction Dynamics Group ("CDG").  The City believed it had not received the benefit of its bargain and filed a lawsuit against OBG and CDG, which subsequently resulted in a settlement agreement among between OBG and the City.  The settlement included a non-disparagement clause where both parties promised to not making disparaging statements concerning the wastewater sewage treatment project.

The City subsequently pursued litigation (ultimately favorable to the City) against CDG concerning the wastewater sewage treatment project. During opening statements of the City, counsel for the City argued that CDG was liable to the City for failing to advise the City as to design failures of the project that were the result of errors by OBG.  In addition, the City put on witness testimony during the CDG trial concerning OBG's design failures for the project.  OBG then filed a lawsuit against the City for breach of the settlement agreement's non-disparagement clause, which was subsequently dismissed by the trial court for a failure to state a claim as a result of the litigation privilege, which was affirmed by the Court of Special Appeals and ultimately by the Court of Appeals.

Analysis: Maryland recognizes a litigation privilege for statements made during litigation.  Historically, this privilege was recognized as an absolute one as to defamation and other tort actions because of Maryland's strong public policy in favor of the unfettered administration of justice, which in part relies on witnesses speaking truthfully and counsel advocating zealously for their clients.  Adams v. Peck, 288 Md. 1 (1980).  The Court extends this same absolute privilege to a breach of contract claim involving a non-disparagement clause in a settlement agreement on the grounds that the same public policy considerations in a tort case - free expression in the court room by witnesses and counsel - apply with equal force in a breach of contract claim arising out of a non-disparagement clause.

However, the Court next addresses the question of whether the City waived this immunity by entering into a settlement agreement that contained a non-disparagement clause.  The Court was persuaded that it is possible for a party to waive this immunity, but as a matter of law, there is a rebuttal presumption in settlement agreements that such immunity is not waived.  The Court reasoned that this presumption properly balances the strong public policy in favor of parties and counsel speaking freely in litigation with the strong public policy in Maryland favoring settlement agreements.  The Court held that in this instance, the presumption of non-waiver was not rebutted by OBG, leaving open the possibility that such a waiver in a contract is possible in another case.

The Court arrived at this conclusion concerning the presumption by applying well-known contract interpretations principles, starting with the definition of waiver as the intentional relinquishment of a known right, and requiring the intent to waive a right by express word or act, or omission to speak out. Smith v. State, 394 Md. 184, 201 (2006); see Harrison v. State, 276 Md. 122, 137 (1975) (both Smith and Harrison involve waiver of the attorney-client privilege).

The Court then examined the plain language of the non-disparagement clause in the settlement agreement, and found that the City had not expressly waived its right to disparage OBG in the pending lawsuit against CDG.  Moreover, the settlement agreement itself was made while the City's lawsuit against CDG was pending, with OBG's express knowledge that its role would be a part of the City's litigation against CDG, yet OBG failed to include an express waiver of the City's immunity as a part of the settlement agreement's non-disparagement clause.  As a result, the Court concluded that the presumption the City had not waived its litigation immunity was not rebutted by the settlement agreement's plain language and context.

The full opinion is available in PDF.