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 ...
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Muffoletto v. Towers (Ct. of Special Appeals) and more


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.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.


     
 


Clear Channel Outdoor, Inc. v. Director, Department of Finance of Baltimore City (Ct. of Special Appeals, Reported)


Filed: January 29, 2020

Opinion By:  Stuart R. Berger

Holding:  A Baltimore City ordinance that imposes an excise tax on outdoor advertising displays does not violate the right to freedom of speech guaranteed by the First Amendment of the Constitution or Article 40 of the Maryland Constitution.

Facts:  Clear Channel Outdoor, Inc. (“Clear Channel”) owns billboards in Baltimore City that it rents out to third parties.  The third parties pay Clear Channel fees to use the billboards to advertise.  In 2013, Baltimore City signed Ordinance 13-139 (the “Ordinance”) into law, which imposes an excise tax on advertising hosts who (1) own or control a billboard in Baltimore City and (2) charge fees for the billboard’s use as an outdoor advertising display.  The amount of tax (the “Tax”) levied on such advertising hosts depends on the size of the display and whether it is an electronic display.  Baltimore City enacted the Ordinance purely as a revenue-raising measure to lower property tax rates, increase infrastructure investment, and better manage Baltimore City’s pension and retiree healthcare liabilities. 

For the 2014 and 2015 fiscal years, Clear Channel paid the Tax for each year, but in February 2016, demanded a refund of its Tax payments.  When Baltimore City refused to issue a refund, Clear Channel appealed the denial in the Maryland Tax Court, alleging that outdoor advertising is a “constitutionally protected medium of speech under the First and Fourteenth Amendment and Article 40 of the Maryland Declaration of Rights” and that the Tax unconstitutionally restricts that speech.  Clear Channel also argued that heightened scrutiny applied to the Ordinance because the Tax “targeted a small group of speakers on the basis of their participation in such speech.”  Baltimore City argued that the Tax is an excise tax that does not implicate the First Amendment or Article 40 because it is “simply a tax on the privilege to charge fees.”  The Tax Court agreed with Baltimore City and affirmed Baltimore City’s denial of Clear Channel’s refund requests.  The Circuit Court for Baltimore City affirmed the Tax Court’s decision. 

Analysis:  The Court of Special Appeals of Maryland first determined that the Ordinance does not implicate the right to free speech because it is an excise tax that lacks sufficient communicative elements to invoke First Amendment protection.  Classified by the Baltimore City Council as an excise tax, the Tax is imposed on the billboard owners’ ability, or privilege, to charge third parties fees to use the billboards to display the third parties’ messages.  The Tax is only triggered when the billboard owner charges third parties a fee to host the advertisement; it is not triggered by the actual content of the advertisement. 

Because the First Amendment and Article 40 protect speech, including symbolic or expressive conduct, and not the privilege to receive financial compensation for displaying such symbolic or expressive conduct, the Court held that the Ordinance does not violate the First Amendment or Article 40.  Thus, the Court did not apply a heightened scrutiny to the Ordinance and instead analyzed it under a rational basis review.  The Court found that Baltimore City has a legitimate governmental interest in raising revenue, and the Ordinance is rationally related to such interest as the Ordinance does raise revenue for Baltimore City.  The Court accordingly affirmed the circuit court’s judgment and denied Clear Channel’s request for refunds.

The opinion is available in PDF.

     
 


Bayou Place Limited Partnership v. Alleppo’s Grill, Inc. (Maryland U.S.D.C.)


Filed: March 13, 2020

Opinion By:  Richard D. Bennett

Holding:  Under Texas law, while Hurricane Harvey has been recognized as an Act of God, Hurricane Harvey is not a legal excuse for failure to perform under a contract when the terms of the contract do not contain a force majeure clause.   

Facts:  Landlord, a Maryland limited partnership, brought suit against tenant, a Texas corporation, alleging continuing violations of a commercial lease agreement governing a property in Houston, Texas.  Tenant began to miss rent payments due under the lease beginning July 2017.  Hurricane Harvey made landfall in Houston in August 2017.  Harvey caused substantial damage to the property and the nearby theater district. 

Landlord provided notices of default from late 2017 through February 2018 and filed its complaint on September 14, 2018.  Tenant admitted receiving notice and failure to pay the entirety of its rent, while asserting several affirmative defenses and requesting declaratory judgement that “they be excused from certain obligations to pay rent due to Acts of God.”  Tenant argued that Hurricane Harvey was an Act of God that caused substantial damage and interference to the property and should excuse Tenant’s performance under the lease.  The Landlord moved for summary judgment. 

Analysis:

The Court applied Texas law to govern the breach of contract claim pursuant to the lease’s choice of law provision.  “An occurrence is caused by an act of God if it is caused directly and exclusively by the violence of nature, without human intervention or cause, and could not have been prevented with reasonable foresight.”  The Court recognized that Texas courts have found Hurricane Harvey to be an Act of God. 

The Court then discussed the interplay between an Act of God and a contract. “[A]n [A]ct of God does not relieve the parties of their [contractual] obligations unless the parties expressly provide otherwise.”  Further, “the scope and applicability of a force majeure clause depend on the terms provided in the contract.” 

“In other words, when the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure.”  The Court summarized, “[i]f the contract does not contain a force majeure clause, ‘Act of God is not a legal excuse for failure to perform.’”  Because the lease did not include a force majeure clause, the Court found that Hurricane Harvey is not a legal excuse for Tenant’s failure to perform the contract.  Further, Tenant began to miss payments prior to Harvey. 

The Court also reviewed the following additional affirmative defenses raised by Tenant:  offset of payments, unconscionability of late fees and frustration of purpose. 

The opinion is available in PDF.

     
 


Connaughton v. Day (Cir. Ct. Mont. Co.)


Filed: December 9, 2019

Opinion by: Judge Anne K. Albright

Holding: Plaintiffs alleging securities fraud were denied class certification because, despite demonstrating commonality of questions of law and fact, they failed to show that joinder of approximately 35 putative claimants was impracticable or that their claims were typical or their representation adequate, given the variety in the source, nature of and reliance on information received by the plaintiffs and putative class members.

Facts: The four Original Defendants were individuals and entities accused of procuring investors for a Ponzi scheme run by three non-parties, the MLJ Group. The second amended complaint named 14 New Defendants and additional related claims.

Plaintiff’s Amended Motion for Class Certification requested certification of a class of all persons who invested in securities, in the form of promissory notes, by lending money to borrowers of the MLJ Group. The requested class excluded individuals who profited off the Ponzi scheme and those affiliated with any Defendant.

The Amended Motion was served via counsel on the Original Defendants, but there were no Affidavits of Service for the New Defendants. The Original Defendants responded to the Amended Motion and participated in prior discovery; the New Defendants did not do either.

Analysis: The Court held that the Amended Motion did not meet the threshold requirements of Maryland Rule 2-231(b). As to the first numerosity requirement, the Court accepted an Original Defendant’s estimate that the putative class would be made up of 35 members, and the Plaintiffs provided only conclusory arguments for why joinder would be impracticable. As to second requirement of commonality, the Court was satisfied that Plaintiffs identified seven common questions of law and fact.  

As for the third typicality requirement, some Plaintiffs were contacted regarding the transaction by a non-party accountant rather than a Defendant. Other putative class members contacted by the Defendants themselves did not receive scripted, uniform information. The variety in the sources of information, the information received, and the reliance on the information makes the Plaintiffs’ claims less typical.

As for the fourth adequacy requirement, because the Plaintiffs may have relied on statements of the non-party accountant rather than a Defendant, the named Plaintiffs cannot adequately represent the putative class. Additionally, the accountant is both a potential target of claims and putative class member. Thus, only one of the four threshold requirements of Maryland Rule 231(b) was met.

The Plaintiffs also failed to meet the requirements of Maryland Rule 2-231(c)(3). As for the predominance requirement, fraud claims are not normally susceptible to class treatment because there could be too much variety regarding the degree of reliance placed on representations. This appears to be case here given the role of the non-party accountant and the receipt of unscripted information, as discussed above. As for the superiority of class action requirement, considering the pre-set trial schedule, the fact that the New Defendants were not given a chance to address these questions, and that more time would not cure the other failings of the Amended Motion, Plaintiff’s argument fails.

Thus, Plaintiffs’ Amended Motion for Class Certification was denied.

The full opinion is available in PDF.

     
 

Transamerica Premier Life Ins. Co. v. Selman & Co., LLC (Maryland U.S.D.C.)


Filed: July 9, 2019

Opinion by: Ellen L. Hollander

Holding:

The United States District Court for the District of Maryland denied a motion for failure to state a claim for (1) breach of contract, in light of ambiguous extrinsic evidence of intent to create a novation, and (2) unjust enrichment, where the existence of a contract governing the subject matter was in dispute.

Facts:

Plaintiff (“Insurer”) underwrote insurance products brokered and administrated by Defendant (“Agent”). Agent and Insurer’s business relationship eventually came to include products called TRICARE Supplements: voluntary plans offered to members of the military and their families that covered the various out-of-pocket costs not covered by the government-provided TRICARE health insurance program.

As Insurer and Agent transacted their insurance business together, three relevant sets of contracts came into being: one from 2002 (the “Original”), two acquired by assignment in 2014 (the “Acquired”), and a 2016 amendment to the 2002 agreement (the “Amendment”).

Under the 2002 Original agreement, Agent would administer and manage certain life and health insurance products, but the Original agreement’s language did not contemplate TRICARE supplement policies and lacked an exclusivity clause.

Pursuant to the 2014 Acquired agreement, Agent began to market, sell, and administer TRICARE Supplement policies in consideration of a portion of the premiums collected on those policies. In order to help Agent meet its contractual obligations, Insurer provided significant confidential and proprietary information (such as customer leads, records, risk analysis, performance results, and other non-public data). Agent and Insurer agreed to a confidentiality clause in order to protect this information, and to a narrow exclusivity clause with regard to the TRICARE Supplement policies marketed toward employers. An at-will termination clause allowed either party to terminate the Acquired agreement with 180 days' notice.

The 2016 Amendment reaffirmed the Original agreement but replaced the original fee schedule with a revised one that included the TRICARE accounts Agent had taken on since 2014. Two years passed.

In a November 2018 meeting, an Agent executive informed an Insurer executive about Agent's intent to move its TRICARE Supplement policies to one of Insurer’s competitors on January 1, 2019. Agent’s executive acknowledged the existence and enforceability of the exclusivity clause but implied that the provision only served to limit Insurer’s rights to underwrite coverage – not to limit Agent’s rights to move its business elsewhere.

Insurer promptly requested Agent cease and desist taking actions to transfer the policies, but Agent failed to comply. Insurer brought suit, alleging breach of contract (of the exclusivity and confidentiality clauses), anticipatory breach of contract (for failure to adhere to the 180-day notice requirement), and unjust enrichment (for taking Insurer’s data, services, and commission payments without consideration).

Agent moved to dismiss for failure to state a claim.

Analysis:

The court began by noting that in order to survive a Rule 12(b)(6) motion, the complaint must contain facts sufficient to state a claim to relief that is plausible at face value. Sufficiency required more than bald accusation or mere speculation, but less than detailed factual allegations: enough to suggest a cause of action even if the actual proof was improbable or recovery was unlikely. Accordingly, the court indicated the authenticity and import of the contract documents at issue and noted it would consider them at the 12(b)(6) complaint stage.

The court next evaluated whether the 2016 Amendment constituted a novation. If so, it would supersede the terms of the earlier Original and Acquired agreements, eliminating any language about exclusivity or confidentiality and mooting Insurer’s claims for breach of contract.

A novation forms a new contractual relationship and requires four elements: (1) a previous valid obligation, (2) agreement of the parties to the new contract, (3) validity of the new contract, and (4) the extinguishment of the old contract by substitution.

The court was ultimately unpersuaded that the parties had intended a novation because the contract text failed to clearly establish the parties’ intent to extinguish the 2002 Original and 2014 Acquired documents with the 2016 Amendment. The court considered the parties’ conflicting and ambiguous extrinsic evidence about their motivations for the 2016 Amendment to indicate lack of the requisite clear intent. In a light most favorable to Agent, the extrinsic evidence suggested an intent to keep separate and in force certain terms. Due to the conflicting extrinsic evidence, the court considered it premature (at the 12(b)(6) stage) to conclude that a novation could have occurred. Because the court declined to find a novation at this stage, Insurer had clearly stated a viable claim for breach of contract. The court separately noted that although Insurer had established sufficiency for its anticipatory breach claim, it would construe the count as one for breach of contract because the “anticipatory” relationship to January 1, 2019 had expired.

Finally, the court evaluated the unjust enrichment claim, explaining the general rule that no quasi-contractual claim for relief could arise where an actual contract existed. But a plaintiff is not barred from pleading such a theory in the alternative where existence of a contract was in dispute. At the 12(b)(6) stage, the court found it premature to conclude that one or the other or no contract language might govern the claim at issue. Accordingly, Insurer had met its burden of sufficiency for a claim of unjust enrichment.

The court denied Agent’s motion to dismiss in its entirety.

The full opinion is available in PDF.

     
 

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