Farm Fresh Direct by a Cut Above, LLC v. Downey (Maryland U.S.D.C.)

Filed: October 26, 2017

Opinion by: Judge Ellen Lipton Hollander

Holding:

Under Maryland law, the liability protections afforded to limited liability company (“LLC”) members with respect to obligations of an LLC did not support dismissal of claims that an individual engaged in unfair competition and deceptive trade practices by forming and participating in an LLC, where the plaintiff alleged conduct supporting direct claims against the individual.

Facts:

A Maryland LLC, Farm Fresh Direct by a Cut Above LLC (“Plaintiff”), brought suit against multiple defendants, including another Maryland LLC, Farm Fresh Direct Home Food Services, LLC (“Defendant LLC”), and an individual who allegedly filed Defendant LLC’s Articles of Organization with the Maryland State Department of Assessments and Taxation (“Defendant Individual” and together with Defendant LLC, the “Defendants”), alleging that the Defendants engaged in unfair competition in violation of both Section 43(a) of the Lanham Act, codified at 15 U.S.C. § 1125(a), and Maryland common law, by establishing and engaging in a competing business under a name which was confusingly similar to the name of the Plaintiff.  The Defendant Individual moved, pro se, to dismiss the action.  Despite construing the motion liberally in favor of the Defendant Individual, the district court denied the motion, holding that the Plaintiff had alleged sufficient facts to satisfy the pleading requirements of Fed. R. Civ. P. 8(a).    

Analysis: 

The district court analyzed as a threshold issue whether the Defendant Individual was subject to suit in light of the Defendant LLC’s status as a Maryland LLC.  The district court’s analysis begins with a review of Maryland and Fourth Circuit law regarding the corporate shield and the corresponding LLC shield.  The court then notes that, notwithstanding the LLC shield, which generally protects LLC members from personal liability for obligations of the LLC, the LLC shield does not protect LLC members from direct liability for that member’s own actions.  Because Plaintiff alleged that the Defendant Individual formed the Defendant LLC and acted as its resident agent, the district court held that Plaintiff had alleged sufficient facts to plead direct claims against the Defendant Individual.  Further, because Plaintiff alleged that the name of the Defendant LLC was confusingly similar to the name of the Plaintiff and that the Defendant LLC engaged in substantially the same business as the Plaintiff, the district court held that Plaintiff alleged sufficient facts to plead claims of unfair competition and deceptive trade practices under Maryland and Federal law.  Accordingly, the district court denied Defendant Individual’s motion to dismiss.

The full opinion is available in PDF.

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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.  

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.