Bartenfelder v. Bartenfelder (Ct. of Special Appeals)

Filed: July 2, 2020 

Opinion by: Judge Steven B. Gould 

Holding: 

In the absence of a petition for dissolution, demand for appointment of a receiver does not trigger the statutory right, under §4-603(a) of the Corporations & Associations Article of the Maryland Code, to purchase the complainant’s stock in the subject company.

Facts: 

Appellant (“Aggrieved Shareholder”, or “Aggrieved”) and Appellee (“Continuing Shareholder”, or “Continuing”) were the sole shareholders in a two Maryland close corporations and one Maryland LLC (the “Businesses”).  In February 2017, Aggrieved Shareholder filed a complaint in the Circuit Court for Harford County against Continuing Shareholder and the Businesses, alleging malfeasance by Continuing and requesting (1) injunctive relief in the form of appointment of a receiver to prevent Continuing’s further alleged malfeasance and to conduct forensic accounting in order to detect past malfeasance, (2) an award of damages, expenses, attorney’s fees, and costs, and (3) declaratory relief in the form of a finding that certain of Aggrieved’s actions related to the Businesses were lawful.

Continuing Shareholder considered receipt of the complaint to have triggered his right under CA §4-603(a) to acquire Aggrieved Shareholder’s shares in the Businesses, answering with a request to stay dissolution in order to determine the fair value of Aggrieved’s interests, and enforce his election to purchase Aggrieved’s shares.

In January 2018, Aggrieved Shareholder amended her complaint to add breach of contract claims and other injunctive relief and damages. 

In April 2018 the Circuit Court for Harford County agreed that the statutory right had been triggered and ruled that appraisers be nominated and appointed, and proceedings stayed until the valuation process had concluded.  Aggrieved Shareholder filed motion for reconsideration which was denied, and then filed notice of appeal.

In June 2019, Aggrieved Shareholder filed for bankruptcy, resulting in automatic stay of all litigation.  That month, the appraisers determined Aggrieved’s interest in the two close corporations to be $560,000.  In November 2019, the circuit court granted Continuing Shareholder’s motion to confirm the appraisal and further ordered Continuing to pay to Aggrieved two installments of $280,000.  The court granted leave for Continuing to escrow the installments with the court, to be disbursed only on court order.  Aggrieved appealed in December 2019. The circuit court in February 2020 declared Continuing to have satisfied the payment obligations.

In May 2020, the Court of Special Appeals consolidated the two appeals.

Analysis: 

The first threshold issue before the Court was whether to dismiss the second appeal on grounds of mootness; whether the passage of the valuation process and satisfaction of Continuing Shareholder’s ensuing payment obligations had rendered the controversy moot due to the fact that Aggrieved Shareholder had filed for bankruptcy, making the proceeds subject to claims by creditors and therefore unavailable to repurchase the shares.  The bankruptcy court in September 2019 had lifted the stay of the instant litigation, but ordered enforcement of judgments against Aggrieved to remain stayed.  Because the funds Continuing Shareholder deposited with the circuit court remained there, subject to the stay and unavailable to Aggrieved, the Court found the second appeal not to be moot and denied its dismissal.

The second threshold issue before the Court was jurisdictional; because Aggrieved Shareholder’s initial and amended complaints had asserted claims related to the LLC but the circuit court’s orders had applied only to claims related to the close corporations, the decision had not adjudicated all claims, rights and liabilities of the parties to the action and had not resulted in a final judgment.  The Court noted, however, that statutory exceptions to the final judgment rule, enumerated in CJP §12-303 allowed for interlocutory appeal of orders “for the sale, conveyance, or delivery of…personal property or payment of money…”.  Because the circuit court’s second order compelled conveyance of Aggrieved’s personal property (shares in the close corporations) and payment of Continuing's money ($560,000), and its first order meritoriously intertwined with the second, the Court found both interlocutory orders to be properly reviewable on appeal.

The Court subsequently turned to the substantive issue on appeal, whether the purchase right under CA §4-603(a) had been triggered by Aggrieved Shareholder’s complaint for appointment of a receiver.  That statute provided:

Any one or more stockholders who desire to continue the business of a close corporation may avoid the dissolution of the corporation or the appointment of  a receiver by electing to purchase the stock owned by the petitioner at a price equal to its fair value. (emphasis added)

Success in the argument would turn on whether CA §4-603(a) applied to any kind of receiver (statutory or equitable), whether CA §4-603(a) applied only to situations where a receiver had been appointed in a dissolution proceeding, or whether  Aggrieved Shareholder’s plea for appointment of an equitable receiver was tantamount to a statutory receiver.

The Court briefly paused to explain the dilemma affecting “trapped” shareholders in close corporations: with no liquid market for shares, no board of directors, and transfer of shares made possible only on unanimous consent), a shareholder desiring to exit the company is suddenly pit against their partners and left with few options.  Such a shareholder can risk accepting a lower price per share in order to gain unanimous consent, or they can invoke dissolution and either end the going concern or be bought out.

The Court next turned to construe the meaning of CA §4-603: its plain language if clear while read in context of the surrounding statutory section(s); but with other indicia of intent if ambiguous (such as structure, caption, relationship to other laws, legislative history, and purpose, e.g.).  Citing to both CA §4-602 (Involuntary dissolution) and CA §4-603 (Avoidance of dissolution by purchase of petitioner’s stock), the Court made four general observations.

First, the Court pointed out that the captions had been written by the General Assembly and were part of the bills considered prior to enacting the statute, giving weight to the argument that CA §4-603(a) was intended only to apply in situations where a shareholder sought to avoid dissolution.

Second, the Court found the plain language of CA §4-603(a) confirmed the intent espoused by the caption, implying an option (1) created for shareholders who desire to continue the business of a close corporation and (2) one made necessary to spare the business from extinction.

Third, CA §4-603 routinely used the words petition or petitioner, which could only be read logically in conjunction with CA §4-602 as the shareholder/petitioner seeking dissolution in CA §4-602(a).

Fourth, the exchange of shares for value contemplated by CA §4-603 was only possible after a determination of fair value, defined by CA §4-603(b) as occurring on the close of business on the day when the petition for dissolution is filed.

If CA §4-603(a) only operated in the context of dissolution proceedings, did the phrase “or the appointment of a receiver” retain any meaning?  To find an answer, the Court looked to Title 3 of the Corporations & Associations Article, specifically CA §3-413 and §3-414 which defined grounds and process for involuntary dissolution proceedings.  CA §3-414 provided for the appointment of two types of receivers: a temporary receiver to operate the business pending final determination as to dissolution, and a liquidating receiver charged with the dissolution of the company.  Answering its question in the positive, the Court supposed a scenario in which the non-petitioning shareholder might opt to exercise the purchase right rather than suffer a perceived intrusive or meddlesome court-appointed temporary receiver.

Next examining the legislative history, the Court was further persuaded that the CA §4-603(a) purchase right only applied in dissolution proceedings, pointing to its own discussion of the legislative history in Papillo (199 Md. App. at 86), as well as the re-codification in 1975 of the Annotated Code which separated a single section, Article 23 §109 Judicial Dissolution – Close Corporations, into now CA §4-602 and CA §4-603, thus revealing the original legislative intent that they be construed together.  Under the express language of the original text, the buy-out right existed only in a dissolution proceeding.

Finding that CA §4-603(a) applied only to statutory receivers and only in the context of a dissolution proceeding, the Court turned to the last question: was CA §4-603(a)  invoked by a shareholder requesting appointment of an equitable receiver with powers authorized by CA §3-414?  The Court, noting that dissolution consisted of a particularly harsh irrevocable and “all or nothing” remedy, indicated that it had recommended equitable remedies short of dissolution in relevant Maryland caselaw, particularly the appointment of a non-liquidating receiver to continue the operations of the corporation for the benefit of all shareholders.  Aggrieved Shareholder, then, was entitled to seek an equitable remedy short of dissolution without triggering the CA §4-603(a) purchase rights.

The Court noted that while equitable receivers had broad applicability (partnership disputes, mortgagor-mortgagee disputes, divorce proceedings, e.g.) and enjoyed a long history, dating back to the chancery courts of England, such appointments were to be reserved for extraordinary circumstances involving fraud, danger of spoliation, or imminent prospect of loss or injury to property.  An equitable receiver’s authority did not extend to dissolution, which was only granted by statute to a receiver appointed to wind up the corporation’s affairs.

Accordingly, finding that Aggrieved Shareholder’s complaint requested appointment of an equitable receiver vested with authority to operate the Businesses, not to liquidate them, her complaint did not invoke dissolution, did not invoke Continuing Shareholder’s CA §4-603(a) purchase right, and did not compel Aggrieved’s transfer of shares to Continuing.  A shareholder who seeks equitable relief to stop alleged oppression should not have to do so at the risk of being forced to sell her shares to the alleged oppressor.

The Court denied the motion to dismiss, reversed the lower court's orders and ruling, and remanded to the circuit court.

The full opinion is available in PDF.

Ellis v. Palisades Acquisition XVI LLC, and Protas, Spivok & Collins, LLC (Maryland U.S.D.C.)

 

Filed: July 26, 2019

Opinion: Chief Judge James K. Bredar

Holdings:

(1) Defendants’ motion for summary judgement is denied because issues of intent, knowledge, and identity of debt are all factual issues that require discovery;

(2) Defendants’ motion to dismiss the Fair Debt Collection Practices Act (FDCPA) claim is denied because the claim is not barred by the statute of limitations and the complaint properly alleged that the debt at issue was incurred for “personal, family, or household purposes.”

(3) Defendants’ motion to dismiss the claim under the Maryland Consumer Debt Collection Act (MCDCA) is granted in part, and denied in part, because plaintiff could only plausibly allege that one of the defendants had knowledge that the underlying debt had been previously collected.

(4) Violation of the MCDCA is a per se violation of the Maryland Consumer Protection Act (MCPA) preventing dismissal of Plaintiff’s MCPA claim.

(5) Plaintiff failed to state a cause of action for abuse of process.

Facts:

Donald Ellis (“Plaintiff”) sued Palisades Acquisition LLC (“Palisades”) and Protas, Spivok & Collins, LLC (“Protas,” and collectively with Palisades, “Defendants”) alleging that Defendants attempted to collect a debt that Plaintiff did not owe, and consequently violated the FDCPA and Maryland state law. Plaintiff had a credit card with Providian Bank that was used primarily for personal, family, or household purposes. Plaintiff incurred a debt on the credit card upon which a judgment was obtained. Defendant Palisades ultimately became the owner of the Plaintiff’s debt.  

Palisades retained Asset Acceptance to collect the debt. Plaintiff paid Asset Acceptance to satisfy the debt; however, Palisades did not file a satisfaction of judgment in Maryland court acknowledging the payment. Instead, Palisades retained Defendant Protas, a law firm, to collect the debt for the second time. Plaintiff was unaware that Protas was attempting to collect the same debt as Asset Acceptance and filed a Motion for an Exemption from Garnishment.  Defendants, in the second attempt to collect the debt, obtained a garnishment order that was executed against Plaintiff’s bank account resulting in the funds being withdrawn and an overdraft charge against Plaintiff.

Alleging that Defendants were attempting to collect the same debt twice, Plaintiff filed this action claiming violations of the FDCPA, the MCDCA, the MCPA, and abuse of process. Defendants moved for summary judgement on all claims, or in the alternative, moved to dismiss the claims for failure to state a claim.

Analysis:

The court denied the Defendants’ motion for summary judgment because the Plaintiff raised issues that were genuinely in dispute and requiring discovery. Contrary to Plaintiff’s allegations, Defendants asserted that the debt at issue was actually two different debts. However, whether the debt is actually two debts or a single debt is a factual issue. Furthermore, Plaintiff is required to prove Defendants’ knowledge and intent as elements of the claims. Such factual issues preclude summary judgment.

Alternatively, the Defendants’ motion to dismiss was denied in part because Plaintiff plausibly alleged violations of the FDCPA and Maryland state law.

Defendants argue that Plaintiff’s FDCPA claim is barred by the one-year statute of limitations. However, while the Defendants’ attempt to collect the debt twice began more than a year before the suit was instituted, the Plaintiff asserts that he was unaware, and could not have reasonably known, that the debt being collected was the same in both instances. Thus, the discovery rule tolled the statute of limitations and the suit was properly brought within the limitations period.

Plaintiff also sufficiently alleged that Defendants violated the FDCPA. Violations of the FDCPA require the debt at issue to be incurred primarily for “personal, family or household purposes . . . .” 15 U.S.C. §1692(a). Plaintiff’s bald assertion that the credit card was used for personal, family, or household purposes, as required by the statute, is sufficient on its own to survive Defendants’ motion to dismiss.

The court granted Defendants’ motion to dismiss Plaintiff’s MCDCA claims as to Defendant Protas, but denied as to Defendant Palisades.  Violation of the MCDCA requires Plaintiff to prove that the Defendants knew that collection of the debt was improper. The court held that Plaintiff sufficiently alleged that Palisades knew collection of debt the second time was improper because it could be inferred that Asset Acceptance – the entity first contracted to collect the debt – informed Palisades of its successful collection of the debt. However, it was not alleged that Defendant Protas, who was subsequently contracted to collect the debt, had any knowledge of any previous efforts to collect the debt at issue. As such, the knowledge element required to be pled under the MCDCA had been met as to Defendant Palisades, but not as to Defendant Protos. Thus, the court granted Defendants’ motion to dismiss the MCDCA claim as to Defendant Protas.

The court denied the Defendants’ motion to dismiss the MCPA claims on the grounds that violation of the MCDCA is a per se violation of the MCPA.

Finally, the court granted the Defendants’ motion to dismiss Plaintiff’s abuse of process claim because Plaintiff failed to allege facts to support that Defendants instituted the action to satisfy an ulterior motive or that Plaintiff was damaged by Defendants’ perverted use of process.

 The full opinion is available in PDF

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.

Mayor and City Council of Baltimore v. Prime Realty Associates, LLC (Ct. of Appeals)

Filed: May 12, 2020

Opinion by: J. Getty

Holding:  The Court of Appeals held that the Circuit Court for Baltimore City erred in invalidating the order ratifying the sale of Respondent’s vacant property on due process grounds.  The Court of Appeals held that Maryland Rule 3-124(o) allows for substituted service of process on a LLC by service on the State Department of Assessments and Taxation (“SDAT”) and satisfies a litigant’s due process rights. 

Facts:  Petitioner Mayor and City Council of Baltimore initiated a receivership action against Respondent Prime Realty Associates LLC, when the property owned by Respondent remained vacant and its condition deteriorated.  The Petitioner made several attempts to serve Respondent’s resident agent at the address on record with SDAT.  After unsuccessful attempts, Petitioner made substitute service on SDAT pursuant to Maryland Rules 3-124(o).  Respondent’s participation in this matter did not occur until the court-appointed receiver sold the property and the sale was ratified by the District Court of Maryland for Baltimore City.  Respondent moved to vacate the sale arguing that it had not been adequately served, violating its due process rights.  The District Court denied Respondent’s motion and Respondent appealed.  The Circuit Court for Baltimore City vacated the sale of property holding that Respondent’s due process rights were violated as Petitioner had knowledge of an alternative address for Respondent’s resident agent, having previously mailed notices to that known address. 

Analysis:  The Court of Appeals examined the history of substituted service pursuant to Maryland Rule 3-124(o).  The review demonstrates a policy decision of the General Assembly and of the Courts for efficiency in judicial procedures involving service of process.  In reviewing the first known challenge to Maryland Rule 3-124(o) on due process grounds, the Court concluded that substituted service upon SDAT is a practical method of service which affords litigants their due process rights.  LLC’s enjoy privileges such as tax benefits and liability protections in return for the company fulfilling its statutory obligations.  Specifically, LLC’s are obligated to keep accurate information including addresses for its principal office and resident agent.  Maryland Rule 3-124(o) is not the default method of service for LLC’s.  Rather, substitute service is only available in three limited circumstances, including after two good faith attempts to serve the resident agent have failed.  Once SDAT receives service it is required to forward a copy of the process and notice to the party at their last known mailing address or principal place of business.  Respondent’s failure to comply with its statutory obligation to accurately update its information and address on SDAT did not invalidate Petitioner’s attempts of service and therefore did not constitute a due process violation.

The full opinion is available in PDF.

Lee v. Lee (Ct. of Appeals)

Filed: January 23, 2020 

Opinion by: Judge Shirley M. Watts 

Holding: 

Docket entries not otherwise subject to shielding that are unclear, ambiguous, or unavailable to the public via the Judiciary’s online case search fail to satisfy the requirements of Maryland Rule 2-601(b)(3) and do not trigger the 8-202(a) thirty-day appeal period.

Recordation and indexing of a federal judgment creates a lien, not a new judgment.

Facts: 

In 2002, Petitioner (“Lender”) obtained a default judgment in the United States District Court for the District of Maryland against Respondent (“Borrower”), in the principal amount of approximately $140,000 plus attorney’s fees, court costs, and interest.

In June 2004, the Circuit Court for Howard County approved Lender’s Request to File Notice of Lien based on the federal judgment.  In July 2015, Lender sought and obtained a Notice of Renewed Judgment from the circuit court.

In March 2016, Borrower moved to vacate the renewed judgment and requested a hearing.  On June 2, 2016, the circuit court conducted the hearing, denied the motion, and issued a one-page order.  On June 3, 2016, the clerk stamped and mailed copies of the order and made a docket entry to the court’s case management system.  Due to a series of clerical errors, results of the Judiciary’s online case search (“Case Search”) made in the weeks following June 2 for the instant case produced unclear and confusing results, creating ambiguity as to what had been decided and when, with date fields containing entries as early as March 24 and as late as June 6.

On July 6, 2016, Borrower appealed.  The circuit court granted Lender’s motion to strike the appeal as untimely.  Borrower timely appealed.  After a remand to the circuit court to produce an accurate timeline of events, the Court of Special Appeals denied the motion to dismiss and held that the first appeal, while initially premature, had ripened.   The Court went on to reverse the denial of the motion to vacate and remand to the lower court to vacate the renewed judgment, explaining that there was nothing to renew because the lien created in 2004 became ineffective when the predicate federal judgment expired in 2014.

Lender subsequently sought and received a writ of certiorari.

Analysis: 

The main issue before the Court of Appeals was whether entry of a judgment must satisfy the requirements of both Maryland Rule 2-601(b)(2) and 2-601(b)(3) to start the thirty-day appeal period prescribed in 8-202(a).  Stated more plainly, was the date of entry of a judgment established by the act of a clerk keying it into the docketing system, or did it need to also be publicly available?

The Court began with de novo review of the trial court’s interpretation of the underlying Maryland Rules.  Because the date of an entry of a judgment is governed by 2-601(b), the Court examined that rule’s recent history and noted that the Standing Committee on Rules of Practice and Procedure in 2014 had proposed amendments to address the obsolescence of the then-current rule (requiring physical recordation on the file jacket) and lack of uniformity across the State in how clerks entered judgments.  By Rules Order of the Court of Appeals, amendments to 2-601 were adopted and became effective on January 1, 2016, notably providing that:

2-601(a)(4) A judgment is effective only when [set forth on a separate document] and when entered as provided in section (b) of this Rule.

* * * 

2-601(b)(2) Entry.  The clerk shall enter a judgment by making an entry of it on the docket of the electronic case management system used by that court along with such description of the judgment as the clerk deems appropriate. 

2-601(b)(3) Availability to the Public. Unless shielding is required by law or court order, the docket entry and the date of the entry shall be available to the public through the case search feature on the Judiciary website and in accordance with Rules 16-1002 and 16-1003.

* * * 

2-601(d) Date of Judgment.  On and after July 1, 2015, regardless of the date a judgment was signed, the date of the judgment is the date that the clerk enters the judgment on the electronic case management system docket in accordance with section (b) of this Rule. The date of a judgment entered prior to July 1, 2015 is computed in accordance with the Rules in effect when the judgment was entered.

Turning next to relevant caselaw, the court cited its prior discussion (in Hiob v. Progressive Am. Ins. Co., 440 Md. 466 (2014)) of 2-601’s separate document requirement.  The Hiob court had noted the importance of the date and form of entry of a judgment in creating precision (as to the time for filing an appeal), creating certainty (so as not to create a trap for inexperienced parties), and preserving appeal rights.  The Court here went on to highlight the need to provide the public, and not just the litigants, with an unambiguous and clear indication of the date and disposition of every civil claim brought in the State’s courts.  

Accordingly, the Court held that in order to constitute an effective judgment under 2-601 and begin the 8-202(a) thirty-day appeal period, the judgment must satisfy the plain language requirements of both 2-601(b)(2) and (b)(3).  Unless shielding is required, the docket entry and date of entry shall be available to the public through Case Search.  

Applying this framework to the instant case, the court found the June 2, 2016 Order to meet the separate document requirement of 2-601(a)(1).  However, the contemporaneous Case Search returns were unclear, ambiguous, confusing, and insufficient to establish whether a judgment had been entered as required by 2-601(b)(2) and, if so, the corresponding date of entry as required by 2-601(b)(3).  Case Search failed to provide adequate notice to the public of the date of entry of judgment and the thirty-day appeal period never triggered.

Where did this leave Borrower’s “premature” notice of appeal?  The Court pointed to 8-602(f)’s instruction that a notice of appeal filed after the signing by the trial court of an order but before entry of the order on the docket shall be treated as filed on the same day as but after the entry on the docket.  Thus, although Borrower’s notice of appeal was premature when filed, it would be treated as filed immediately after entry of the judgment on the docket and appeal would proceed.

Accordingly, the Court addressed Borrower’s appeal on its merits, affirming the Court of Special Appeals.  Explaining that a money judgment establishes a debt, while a lien creates the mechanism to enforce it, the Court found Lender’s 2004 action to have created a lien against Borrower’s property in Howard County – not a new judgment.  Lender’s failure to renew the federal judgment prior to its twelve-year expiration date in 2014 extinguished the lien predicated on it.  Because nothing remained to renew, the circuit court had erred in entering a renewed judgment and in denying Borrower's motion to vacate.

The full opinion is available in PDF.

Marcia Rankin, et al. v. Brinton Woods of Frankford, LLC, et al. (Ct. of Special Appeals)

Filed: June 27, 2019

Opinion by: J. Sharer

Holding: A contract was held to be procedurally and substantively unconscionable for failing to highlight arbitration, mediation and waiver of jury trial provisions through formatting; using misleading, contradictory, and undefined terms; and including an arbitration deposit requirement and loser-pay-all provision that could preclude recourse for parties lacking financial resources. 

Facts: Plaintiff filed a negligence suit for survival and wrongful death against the Defendant, a care center where the deceased allegedly developed serious health concerns. Defendant filed a motion to compel arbitration pursuant to the admission contract. The circuit court granted the motion as to the survival claims and stayed the wrongful death proceedings. On appeal, Plaintiff argued that the admission contract was unconscionable. 

Analysis: In order to decline to enforce an arbitration agreement, a court must find both procedural and substantive unconscionability. Doyle v. Fin. Am., LLC, 173 Md. App. 370, 383 (2007). The Court held that the contract was procedurally unconscionable because it was a standard-form contract, drafted entirely by Defendant. The first paragraph misleadingly stated that the contract contains financial obligations and residents’ rights. It failed to mention that the contract also contained a waiver of a constitutional right to a jury trial. Another section of the contract stated that it was impossible to cover all important matters in that document and that additional important documents were attached as exhibits. However, no attachments were included in the record, and there were no attachments regarding arbitration, mediation, and waiver. Additionally, the mediation and arbitration provisions were simply numbered paragraphs in the same format as the other paragraphs. They were not emphasized by bold, underlined or italicized font. The failure to highlight the arbitration, mediation and waiver provisions supported a finding of unconscionability. 

The Court held that the contract was substantively unconscionable because it did not provide criteria for the selection of mediators or scheduling and timing details for mediation. It did not address allocation of fees or costs of mediation. The arbitration provisions lacked clarity and were conflicting. The arbitration process would be consistent with the “American Arbitration Associate (sic)”. The terms “Arbitration Committee” and “subcommittee of three” were not defined; the latter was used only once. The word “binding” is used for the first and only time in section D of the clause. The last two paragraphs of section D present conflicting terms: the first paragraph states that the losing party can submit the matter to a state court. The next paragraph states that the “judgement” shall not be appealable; this is the first and only time the term “judgment” is used. Defendant is a sophisticated party, and these errors and ambiguities support a finding of unconscionability. Furthermore, there is no guidance on any estimated range of fees and costs, in addition to a loser-pays-all provision. A party who cannot pay the $1,000 arbitration deposit may have to forgo arbitration. These clauses could preclude recourse for a party lacking financial resources.

The circuit court had held that the admission contract was not unconscionable, but provided no factual support for its finding. See Henry v. Gateway, Inc., 187 Md. App. 647, 658 (unconscionability issues are often fact-intensive and the burden is on the party opposing arbitration). On appeal, Plaintiff also argued that the circuit erred in granting the motion based on its finding of apparent agency theory; the Court agreed. 

Full opinion available in PDF. 

D2L Ltd. v. Biggs (Maryland. U.S.D.C.)

 Filed: August 22, 2019

Opinion by: Blake, J.

Holding: Plaintiff’s lawsuit for breach of a noncompetition agreement in Maryland against out of state defendants was dismissed for lack of personal jurisdiction as the Defendant had little contact with Maryland, did not conduct but a small percentage of business with Maryland customers, and no evidence was offered that the Defendant had induced Plaintiff’s former employee to breach his obligations under the noncompetition agreement.

Facts: Plaintiff is a “global cloud software company” incorporated in Maryland and headquarted in Canada. Kevin Biggs, a California resident and former employee, was sued by Plaintiff on the basis of Plaintiff’s allegations that Biggs had violated his non-solicitation agreement with Plaintiff. This agreement provided a consent to suit in Maryland provision. After leaving his employment with Plaintiff, Biggs began working for Defendant OneLogin, a Delaware corporation with its principal place of business in California, which also provides cloud-based services. Plaintiff advised OneLogin of the non-solicitation agreement, and subsequently alleged that OneLogin induced and materially benefited from Biggs' breach of the agreement.

 

Analysis: A state court may exercise personal jurisdiction under the 14^th amendment on an out-of-state defendant if the defendant had “minimum contacts” with the forum sufficient to put the defendant on notice that he might be sued in the forum in the future. Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). A court may exercise personal jurisdiction over a defendant based on general or specific jurisidiction.

 

The plaintiff has the burden to show that the court could exercise general jurisdiction over the defendant by demonstrating that the defendant’s contacts with the state are “continuous and systematic” making the defendant essentially at home in the forum state. Daimler AG v. Bauman, 571 U.S. 117, 127 (2014).

 

Three factors are considered to determine specific personal jurisdiction over a defendant (where the present lawsuit arises out of the defendant’s prior contacts with Maryland): “(1) the extent to which the defendant has purposefully availed itself of the privilege of conducting activities within the State; (2) whether the plaintiff’s claims [arose] out of those activities; and (3) whether the exercise of personal jurisdiction is constitutionally reasonable.” Universal Leather LLC v. Koro AR SA, 773 F.3d 553, 559 (4^th Cir. 2014). 

 

The Court found that it lacked general jurisdiction over the Defendant. The Defendant was neither organized under the laws of Maryland, nor was its principal place of business in Maryland. 

 

As for specific jurisdiction, the Court found that the Defendant only conducted a nominal amount of business in Maryland – one percent of its revenue and one to two percent of its total solicitation was derived from Maryland. Moreover, the Court found that none of these contacts were specifically connected to the allegations of breach of contract or tortious interference made by the Plaintiff.

 

The alternative theory offered by the Plaintiff was that Defendant had “encouraged,” “actively and wrongfully induced,” and “accepted the benefits of Biggs’ breach” of the agreement at issue in the case. However, the Court found that these general allegations lacked sufficient specificity as to when the solicitation happened, which employees were solicited, and where those employees were located.

 

Moreover, the Court denied the Plaintiff’s motion for jurisdictional discovery, as the Court concluded that the information sought by the Plaintiff would not provide additional facts to establish personal jurisdiction over the Defendant.

 

As a result, the Court concluded it lacked jurisdiction over the Defendant and dismissed the Plaintiff’s action against the Defendant.

 

Full opinion available in PDF.

Pinner v. Pinner (Ct. of Appeals)

Filed: March 3, 2020

Opinion by: Booth, J.

Holding: Defendant’s filing of a single lawsuit in Maryland, without further connection to the forum, did not place Defendant on notice she might be sued in a separate, though related, action by Plaintiff, and therefore such litigation violated the 14^th amendment due process clause.

Facts: Plaintiff is the son of the defendant. Both parties are residents of North Carolina. Defendant had filed a prior action in Maryland on behalf of her late husband against various Asbestos Entities for her late husband’s death due to exposure to asbestos while working in Maryland.  Plaintiff was not included in the proceedings until it his ability to intervene was barred by the statute of limitations, and Defendant received a settlement as a result of that litigation that was not deposited in her late husband’s Estate, nor was any portion of it paid to Plaintiff. 

 

Subsequently, Plaintiff filed a separate action in Maryland for his alleged share of the asbestos settlement, alleging that the Defendant was negligent and breached a fiduciary duty as personal representative of her late husband’s Estate. Defendant failed to file a responsive pleading, and Plaintiff sought and obtained a default judgment for $99,856. Defendant appealed on the grounds that the trial court lacked personal jurisdiction over her to enter a judgment.

 

Analysis: A state court may exercise personal jurisdiction under the 14^th amendment on an out-of-state defendant if the defendant had “minimum contacts” with the forum sufficient to put the defendant on notice that the might be sued in the forum in the future. Beyond Systems, Inc. v. Realtime Gaming Holding Co., 388 Md. at 1, 22 (2005). Three factors are considered to determine specific personal jurisdiction over a defendant (where the present lawsuit arises out of the defendant’s prior contacts with Maryland): “(1) the extent to which the defendant has purposefully availed [herself] of the privilege of conducting activities within the State; (2) whether the plaintiff’s claims arise out of those activities directed at the State; and (3) 

whether the exercise of personal jurisdiction would be constitutionally reasonable.” Id. At 26.

 

The Court held that the Defendant’s prior asbestos litigation was the sole contact of the Defendant with Maryland. No evidence was offered that the Defendant had actively participated in hearings or depositions in Maryland, or that she had even traveled at all to Maryland during the six year period the case was litigated. Moreover, the Court found that the present dispute involved issues arising under North Carolina law, between North Carolina residents, where the injury to Plaintiff arose in North Carolina. As to the second factor, the Court found that a breach of a fiduciary duty under North Carolina law is tenuously connected to the original asbestos litigation. 

 

As to the third factor, the Court noted that numerous specific considerations come into play with constitutional reasonableness such as: “the burden on the defendant; the interests of the forum State; the plaintiff’s interest in obtaining relief; the interstate judicial system’s interest in obtaining the most efficient resolution of controversy; and the shared interest of the several states in furthering fundamental substantive social policies.” Examining these considerations, the Court found that overall there was no efficiency in litigating North Carolina-based claims between North Carolina residents in a Maryland court, and that the Maryland court system had no interest in adjudicating such claims.

 

As a result, the Court concluded that the Maryland trial court lacked jurisdiction over the Defendant.

 

Full opinion available in PDF.

Muffoletto v. Towers (Ct. of Special Appeals)

Muffoletto v. Towers (Ct. of Special Appeals)

Filed: January 30, 2020

Opinion by: James A. Kenney, III

Holdings: (1) An action seeking a declaration concerning the location of a common boundary line between adjacent boat slips was barred by the applicable statute of limitations. (2) Substantive and substantial discovery violations warranted the imposition of sanctions.

Facts: In the early 1980’s, a residential condominium was established in Dorchester County, Maryland.  Appurtenant to each condominium unit was a license to use a boat slip.  According to the 1982 site plan for the condominium, two adjacent boat slips were to be established as fourteen-feet-seven-inches wide each, separated by mooring piles.  However, according to an aerial photograph of the subject boat slips, taken in 1984, one slip was nineteen feet wide, and the adjacent slip was thirteen feet wide.

In 2004, the plaintiff purchased the condominium unit and corresponding slip license related to the thirteen-foot-wide boat slip.  Shortly thereafter, the plaintiff noticed the disparate sizes of the adjacent boat slips when he attempted to berth his boat.  In 2010, the plaintiff became a member of the condominium’s council of unit owners (the “council”), at which time he allegedly learned of a policy enacted by the council in 1999 requiring a unit owner who had made changes to the location of any mooring piles to return the piles to their original location when the appurtenant condominium unit is sold.  Title to each of the condominium units corresponding to the subject boat slips (and the related boat slip licenses) had been transferred multiple times before being transferred to the parties to this lawsuit.

In 2016, the plaintiff filed suit in the Circuit Court for Dorchester County, seeking (i) a declaration that the adjacent boat slips were intended and initially constructed to be of equal width and (ii) specific performance and injunctive relief, requiring that the mooring piles be moved to establish the adjacent boat slips as being equal in width.  During discovery, the defendants served the plaintiff with interrogatories.  Despite multiple court orders directing the plaintiff to respond to the interrogatories, the plaintiff failed to properly respond.

The Circuit Court entered sanctions against the plaintiff for failing to provide discovery responses as ordered, finding that the defendants had been prejudiced as a result.  Thereafter, the Circuit Court entered summary judgment in favor of the defendants, finding that the possible movement of the mooring piles was not a disputed material fact because they were placed in their current location no later than 1984 (when the aerial photograph was taken), and any legal action related to their present location was thus barred by the applicable three-year limitations period.  The plaintiff timely appealed the rulings to the Court of Special Appeals.

Analysis:  The Court of Special Appeals first addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the statute of limitations.  The plaintiff argued that the statute of limitations had been tolled by virtue of the “continuing harm” doctrine, which provides that claims in the nature of a continuous tort may toll the running of limitations based on new occurrences over time.  The court discussed Maryland case law applying the doctrine, and found that “courts have consistently held that the continuing harm doctrine rests on a new affirmative act” and does not apply to a “continuing ill effect” of a prior act.  The court then concluded that the continuing harm doctrine did not apply under the circumstances of this case because the act causing the harm was the alleged moving of the mooring piles, which occurred sometime before the photograph taken in 1984, and that “leaving them in place is a continuing effect of that act.”  Ultimately, the court held that the plaintiff’s claims were barred by the statute of limitations, noting that the action was filed six years after the plaintiff allegedly became aware that the piles may have been moved, twelve years after the plaintiff attempted to berth his boat in the slip, and more than twelve years after he bought the condominium unit (and corresponding boat slip license).

The Court of Special Appeals next addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the doctrine of laches.  The court noted that laches is an equitable doctrine intended to ensure fairness, and that it is “based upon grounds of sound public policy by discouraging fusty demands for the peace of society.”  The court also noted that, generally, “an action for declaratory judgment will be barred to the same extent that the applicable statute of limitations bars an underlying action in law or equity.”  The court concluded that the plaintiff’s claims were barred by the doctrine of laches because the mooring piles had been in place for thirty-five years and the only people who would have had definitive knowledge regarding when and if the piles had been moved (the developer and the person who initially bought the nineteen-foot-wide slip in 1983) had died before the suit was filed.

The Court of Special Appeals also addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the doctrine of adverse possession or prescription.  The court noted that whether or not the doctrine applies to riparian rights is unsettled in Maryland.  Ultimately, the court, without concluding that the doctrine applied to the boat slip licenses at issue, held that the requisite period of adverse possession (i.e., twenty years) had not run.

Finally, the Court of Special Appeals addressed the Circuit Court’s imposition of sanctions against the plaintiff for discovery violations.  The court first noted that circuit courts have very broad discretion to determine whether sanctions should be imposed.  The court then outlined the factors that circuit courts should consider when deciding whether to impose sanctions (noting that the factors need not be analyzed on a compartmentalized basis), which factors include (1) whether the sanctioned violations were “persistent and deliberate”; (2) whether the discovery violation was technical or substantial; (3) the timing of disclosures made; (4) any reason for the violation; (5) the degree of evidentiary prejudice resulting from the violation; and (6) whether the resulting prejudice might be cured by postponement and the desirability of a continuance.  Applying these factors, the court affirmed the Circuit Court’s imposition of sanctions.

The full opinion is available in PDF.

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