U.S. Disitrict Court, Maryland

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Civil ProcedureSubject matter jurisdictionBOTTOM LINE: The district court that issued the final settlement order in a class action against a life insurer was the proper forum for insureds, who were members of the class, to argue that they never received proper notice of settlement of class action, and therefore were not bound by final settlement order. CASE: Magnolia v. Connecticut General Life Insurance Company, No. H-01-1705 (decided Aug. 1, 2001) (Judge HARVEY). RecordFax No. 1-0801-41, 10 pages.COUNSEL: Michael P. Darrow, Hillman, Brown & Darrow, P.A., Annapolis, for Joseph M. Magnolia, John Magnolia, the Magnolias. Glen Keith Allen, James D. Mathias, John R. Wellschlager, Piper Marbury Rudnick and Wolfe LLP, Baltimore, for Connecticut General Life Insurance Company, Connecticut General.FACTS: In December 1986, Joseph Magnolia and John Magnolia each purchased a life insurance policy from Connecticut General. In May 2001, Joseph M. Magnolia and John Magnolia filed suit in Maryland state court against Connecticut General Life Insurance Company. The one-count complaint asserted a claim of negligent misrepresentation against Connecticut General. As relief, the Magnolias sought substantial damages.

According to the complaint, the Magnolias were promised at the time of purchase that the performance of Connecticut General’s life insurance policies would produce dividends which would allow for premium refunds substantially in excess of what the Magnolias in fact received.

In their purchases, the Magnolias allegedly relied upon the representation by an agent of Connecticut General that they would not have to pay premiums after five years because there would be enough cash value in the policies to sustain premium payments. When Connecticut General purchased the assets and liabilities of Lincoln Financial Corp., the dividends were lowered without notice to the Magnolias. The Magnolias have continued to make premium payments on the polices and have even been required to borrow against the policies’ values to do so.

The complaint noted the pendency of a related class action lawsuit in federal court in California entitled Spitz v. Connecticut General Life Insurance Company. That class action involved claims against Connecticut General similar to the ones asserted by the Magnolias. That lawsuit was settled, and the settlement was approved by the California court. The Magnolias asserted, however, that they never received notice of the pendency of any proposed settlement of that class action suit, and they stated that they never had an opportunity to file a claim in that case nor did they receive notice of their right to do so.

There had been two separate related class actions previously brought against Connecticut General. Spitz v. Connecticut General Life Insurance Company, Civil No. 95-3566, was instituted in federal court in California. Novacheck v. Connecticut General Life Insurance Company, Civil No. 96-2472 was filed in federal court in Pennsylvania. Claims similar to those alleged in this case by the Magnolias were asserted by the Magnolias in the Spitz and Novacheck actions. The two cases were centralized in California, and were docketed as In re Connecticut General Life Insurance Company Premium Litigation, MDL No. 1136. The two class actions were settled in February 1997. The settlements were approved in a final order and judgment entered in California. Connecticut General Life Insurance Company, 1997 WL 910387 (C.D.Cal. 1997).

Connecticut General removed the Magnolias’ state court action to federal court. The court granted Connecticut General’s motion to dismiss the Magnolias’ complaint for lack of subject matter jurisdiction.LAW: Connecticut General argued that the Magnolias were members of the settlement class in the Spitz/Novacheck class action and that their claims were released pursuant to the final order. Connecticut General contended that the Magnolias were barred by the injunction contained in that final order from commencing or continuing to prosecute their suit. Connecticut General further maintained that the Magnolias’ assertion that the class action settlement was unenforceable as to them on grounds of lack of notice could not be pursued in Maryland federal district court, but had to be presented in California federal district court.

The Magnolias argued that they had the right to present their claims of negligent misrepresentation in this court because they were not bound by provisions of the final order. The Magnolias recognized that, in the Spitz/Novacheck consolidated class action, Connecticut General was charged with misrepresentations in the sales of policies like those purchased by the Magnolias. However, they asserted that they never received notice of the commencement of the Spitz/Novacheck litigation nor notice of the pendency of the proposed settlement of that consolidated class action. They accordingly argued that the final order did not enjoin them from proceeding with their claims in this jurisdiction.

Since the claims asserted here clearly related to those involved in the class action litigation, the Magnolias were members of the settlement class in that litigation, and they had, if they received proper notice, been enjoined by the terms of the final order from prosecuting this lawsuit in this jurisdiction. At issue then, was whether, the Magnolias received proper notice of the settlement of the California litigation and were therefore bound by provisions of the final order.

When the California court determined that the Spitz/Novacheck litigation should be maintained as a class action, it was required by FRCP 23(c)(2) to direct to the members of the class “the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.” The Magnolias argued that there was no compliance with this requirement, that a factual issue had been presented and that this issue had to be decided by the Maryland district court. The court found no merit to this contention.

It was apparent from the language of the final order that the California court intended to retain exclusive jurisdiction over issues like the one presented here. Assuredly, California rather than Maryland was the proper forum for determining whether parties like the Magnolias received proper notice and were therefore bound by the settlement. It would make no sense for the California court to retain jurisdiction to interpret and apply its own judgment but permit another court to construe what it meant in that judgment. See Flanagan v. Arnaiz, 143 F.3d 540, 545 (9th Cir. 1998). Since jurisdiction was retained by the California court as to all matters relating to the administration and enforcement of the settlement agreement, it was the California Court which should determine whether the Magnolias received proper notice and whether they were bound by provisions of the final order.

If the Magnolias received actual notice of or were properly apprised of the Spitz/Novacheck litigation in some other way, they were barred from pursuing their claim of negligent misrepresentation in Maryland district court or any other court. On the other hand, if it was determined by the California court that the Magnolias never received proper notice of the class action litigation and were never notified of their right to opt out of the settlement, then the Magnolias would be entitled to sue Connecticut General in Maryland or any other appropriate jurisdiction.

The district court therefore concluded that it lacked subject matter jurisdiction and that Connecticut General’s motion to dismiss had to be granted, without prejudice to the right of the Magnolias to pursue their claims in federal court in California.Civil ProcedurePersonal jurisdiction over non-resident corporationBOTTOM LINE: Establishment of a contract governed by Maryland law a
nd a website that can be accessed by Maryland residents was insufficient to show that a defendant expressly aimed its alleged tortious conduct toward the state.CASE: Ottenheimer Publishers, Inc. v. Playmore, Inc., No. CCB-00-3081 (decided Aug. 13, 2001) (Judge BLAKE). RecordFax No. 1-0813-40, 12 pages.FACTS: Peter Haddock, Ltd., a British corporation, purchased books from Ottenheimer Publishers, Inc., a Baltimore book publisher. The two companies entered into a licensing agreement whereby Ottenheimer licensed to Haddock the right to publish a book called “The Seasons of Fern Hollow,” for a period of five years. The parties also agreed that, regardless of the place of physical execution, the agreement would be governed by the laws of the State of Maryland and the United States.

Nine years later, as a result of their negotiations at a trade show, Haddock purchased 10,000 copies of four pop-up books based on holiday themes from Ottenheimer. No licensing agreement was involved in the purchase. The books were printed in Columbia, South America, and shipped to Haddock in the United Kingdom, where they were sold. The purchase orders and checks for each order were sent to Ottenheimer in Maryland.

Subsequently, the parties signed a second licensing agreement by which Ottenheimer licensed to Haddock the rights to publish a set of four books known as the “Teaching Train Board Books,” for a two year term. The parties again agreed that the agreement would be enforced under the laws of the State of Maryland and of the United States. That same year, Haddock entered into an agreement with Playmore, Inc., a New York corporation, whereby it licensed to Playmore a set of four pop-up books based on holiday themes. The agreement was negotiated and executed in New York.

Ottenheimer filed suit against Haddock and Playmore, alleging that the holiday theme pop-up books infringed on its copyrights. Haddock moved to dismiss for lack of personal jurisdiction. Haddock has no offices anywhere in the United States, nor does it have employees, a telephone listing, or agents located here. Haddock maintains a website, which can be accessed from anywhere in the world, which includes contact information, advertisements, and retail prices for its books. Visitors can order books by sending an email or fax to the company. Haddock claimed that he had never received any orders from customers located in Maryland.

The district court granted Haddock’s motion to dismiss.LAW: A federal court may exercise personal jurisdiction over a defendant who could be subjected to the jurisdiction of a state court in the state in which the district court is located. See FRCP 4(k)91)(A). Thus, the district court must first determine whether the defendant would be subject to personal jurisdiction under the state’s long arm statute and whether that exercise of jurisdiction would comport with due process under the 14th Amendment. See ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 622 (4th Cir. 1997).

Maryland’s long arm statute extends personal jurisdiction to the extent permitted by the 14th Amendment. See Joseph M. Coleman & Assoc., Ltd. v. Colonial Metals, 887 F.Supp. 116. 119 n.2 (D. Md. 1995).

Ottenheimer did not attempt to establish that Haddock had minimum contacts, the test typically used in examining the question of personal jurisdiction over a non-resident defendant. See Municipal Mort. & Equity, L.L.C. v. Southfork Apartments, L.P., 93 F.Supp.2d 622, 629 (D. Md. 2000). Instead, it relied on the “effects test,” and asserted that Haddock’s copyright infringement was an intentional tort aimed at a Maryland corporation. See Calder v. Jones, 465 U.S. 783, 789 (1984).

To assert personal jurisdiction under Calder, a plaintiff must show that the defendant’s conduct was intentional and tortious, “expressly aimed” at the forum state, and the forum state was the focal point of the harm. See, e.g., Calder, 465 U.S. at 789-90. Even assuming that Haddock’s conduct was tortious and intentional, Ottenheimer failed to demonstrate that it met the other two prongs. Though Ottenheimer asserted that the effects of Haddock’s conduct would be felt in Maryland, the location of Ottenheimer’s headquarters, its business presence within Maryland was insufficient to establish jurisdiction, absent a showing that Haddock also had some contacts with the state. See ESAB, 126 F.3d at 626. Furthermore, Haddock’s activities were not expressly aimed at Maryland.

Though the interpretation of the licensing agreement was governed by Maryland law and Ottenheimer received payments from Haddock, those factors were insufficient to show Haddock’s conduct was expressly aimed at Maryland. Nor was the fact that Haddock’s website could be accessed by Maryland residents, particularly because it was not targeted at Maryland and had never received an inquiry from a Maryland customer. See American Information Corp. v. American Infometrics, 139 F.Supp.2d 696, 700 (D. Md. 2001).

The business relationship between Haddock and Ottenheimer took place outside of Maryland. Haddock’s agents had never visited Maryland and Haddock had not established a physical presence in the state. Most importantly, all negotiations regarding the books at issue occurred at a trade show outside the United States, as did the sale of the books.PRACTICE TIPS: Because Maryland’s long arm statute authorizes an exercise of personal jurisdiction to the limits permitted by the Due Process Clause, “the statutory inquiry necessarily merges with the constitutional inquiry, and the two inquiries essentially become one.” Stover v. O’Connell Assocs., Inc., 84 F.3d 132, 135-36 (4th Cir. 1996). Nevertheless, the court must also identify a specific Maryland statute authorizing jurisdiction. If the sole basis for personal jurisdiction is through the long arm statute itself, then a defendant may be sued only on a cause of action expressly enumerated in the statute. See CJ §6-103(a).Civil RightsUnreasonable search and seizure claimBOTTOM LINE: Summary judgment in favor of the police officer was not warranted on claim for unreasonable search and seizure and excessive force, where a reasonable officer would have known that his actions in stopping plaintiff without reasonable suspicion or a plausible risk to his safety violated her clearly established rights.CASE: Kebe v. Brown, No. DKC 2000-1772 (decided Sept. 12, 2001)(Judge CHASANOW). RecordFax No. 1-0912-40, 26 pages.FACTS: Prince George’s County Police Corporal Parke Brown and his partner, Officer Gerald Knight, responded to a dispatch call that a group of 4 or 5 black males, one of them allegedly wielding a chain as a weapon, were chasing another black male. One of the black males was described as having corn-rows and wearing a white t-shirt. He was wielding a large chain as a weapon. The dispatcher received this information from a tip called in by a woman in the neighborhood who gave her address, but no other information.

The dispatcher’s description was, in fact, a misstatement of the 911 call. In fact, the tipster described separate black males, one with corn rows and another one with a white t-shirt who may have been carrying the chain but was not said to be wielding the chain as a weapon.

Brown and his partner spotted Alice Johnson Kebe’s daughter, 14-year-old K.J., talking to a black male youth (her cousin). Immediately before the stop, Officers Brown and Knight witnessed two more black male youths running towards K.J. and her cousin from a school bus stop 15 to 20 yards away. One of these two males allegedly fit the description of one of the males from the dispatch call.

When Officer Brown’s cruiser pulled up next to K.J. and the other youths, a male who allegedly fit the dispatch description ran from the scene and ducked behind a car. Offic
er Knight pursued and detained the youth, frisked him, ran a background check, explained why he stopped him and released him. Meanwhile, Brown pulled his gun and ordered the other youths, including K.J., to lie on the ground. K.J., who had been returning home from running an errand for her mother at a nearby apartment complex, was wearing silk boxer shorts, a tank top and ballerina shoes. Brown had received no information indicating that a female was involved in the chase or armed. Brown frisked the two males with K.J., checked the records of K.J. and the two males, found no evidence of criminal activity and released all three. The entire incident lasted ten minutes.

Although Brown agreed that he stopped K.J. and had her lie face down on the ground along with the two males, he denied that he frisked K.J. Kebe alleged that Brown frisked K.J., feeling her breasts and placing his hand between her legs and on her pubic area.

Kebe brought suit alleging unreasonable search and seizure, excessive force, and defamation by police officers. The district court granted Kebe’s motion for partial summary judgment, holding that, as a matter of law, the stop of K.J. violated her Fourth Amendment right against unreasonable searches and seizures. It denied Brown’s motion for summary judgment with respect to Kebe’s §1983 claim but granted it with respect to her state law claims for battery and defamation.LAW: Kebe contended that Brown’s stop of K.J. violated her Fourth Amendment rights because it was not based on reasonable suspicion to justify an investigatory stop. Any frisk undertaken pursuant to an illegal stop would be unjustified. Clearly, K.J. was seized within the meaning of the Fourth Amendment when she was stopped at gunpoint and told to lie on the ground. The court had to determine whether that seizure was unreasonable and therefore a violation of the Fourth Amendment.

Under Terry v. Ohio, 392 U.S. 1 (1968), “[t]he police can stop and detain a person for investigative purposes if the officer has a reasonable suspicion supported by articulable facts that criminal activity may be afoot.” Park v. Shiflett, 250 F.3d 843, 850 (4th Cir. 2001). “While ‘reasonable suspicion’ is a less demanding standard than probable cause and requires a showing considerably less than preponderance of the evidence, the Fourth Amendment requires at least a minimal level of objective justification for making the stop.” Wardlow v. Illinois, 120 S.Ct. 673, 675-76 (2000). “The bottom line under a reasonable suspicion analysis is that the court must consider the totality of the circumstances-the whole picture—in deciding whether officers had reasonable suspicion.” Park, 250 F.3d at 851.

Therefore, the court had to look at the totality of the factors relied upon by Officer Brown in the current case and determine whether he had reasonable suspicion to stop K.J.

The anonymous tip was one of the factors relied upon by Officer Brown in determining that reasonable suspicion existed to stop K.J. in this particular circumstance. An officer may rely on information provided by a known third party to establish a reasonable suspicion that could justify an investigatory stop. Adams v. Williams, 407 U.S. 143, 146 (1972).

An anonymous tip is not sufficient to establish reasonable suspicion, absent corroboration. Florida v. J.L., 529 U.S. 266, 269-74 (2000); see also United States v. Christmas, 222 F.3d 141, 143 (4th Cir. 2000). However, the anonymous tip may be corroborated and serve as the basis for a stop. In United States v. Perrin, 45 F.3d 869 (4th Cir. 1995), the constitutionality of an investigative stop based on an anonymous tip was upheld where the tip, coupled with the observations of the officers in question, created a “totality of the circumstances—[a] whole picture” that gave rise to a reasonable and articulable suspicion that criminal activity was taking place. Id. at 872.

Even if the tip was inadequate to provide reasonable suspicion to make a stop of any of the 4 youths, the stop of the youth matching the dispatch description was likely supported by reasonable suspicion because he ran from the police and ducked behind a van. See Illinois v. Wardlow, 528 U.S. 119, 120 S.Ct. 673 (2000). However, nothing about the flight of the one youth could be imputed to K.J. to provide support for reasonable suspicion that she might be engaged in criminal activity or pose a danger. K.J. did not plausibly match even the vague description given to the police by the tipster since the tip did not indicate that a female was involved. The flight of the one youth did not alter K.J.’s status as a bystander with no link to criminal activity.

Brown argued that because of the risk to safety, he could justifiably detain the youths until he ascertained that they were not armed. Whether there is reasonable suspicion is based largely on the common sense and experience of the investigating officer. See Wardlow, 528 U.S. at 125. However, the “officer must be able to articulate more than an ‘inchoate and unparticularized suspicion or hunch of criminal activity.” Id. at 123. Brown’s concern that the others might also be armed was based on nothing more than a hunch without an articulable basis. It did not rise above the level of guilt by association. Accordingly, it was inadequate to provide reasonable suspicion. There was no specific individualized articulable suspicion existed under the totality of the circumstances to justify Officer Brown’s stop of Kebe’s daughter. Brown’s stop of K.J. violated her Fourth Amendment rights.

Brown argued that even if the court found evidence of an underlying constitutional violation, he should be granted qualified immunity. Under the qualified immunity doctrine, law enforcement officials are not liable under federal law for civil damages to the extent that their conduct does not contravene “clearly established statutory or constitutional rights of which a reasonable person would have known.” Porterfield v. Lott, 156 F.3d 563, 567 (4th Cir. 1998).

Officers are “entitled to summary judgment on the ground of qualified immunity if they can establish that reasonable officers could have believed that their actions were lawful in light of both clearly established law and the information that the officers possessed at the time.” Anderson v. Creighton, 483 U.S. 635, 641 (1987); see also Gooden v. Howard County, 954 F.2d 960,966 (4th Cir. 1992).

Applying a three-pronged test to determine whether Brown was qualifiedly immune, the court had to 1) identify the right allegedly violated; 2) determine whether the right was clearly established at the time of the alleged violation; and 3) if so, determine whether a reasonable person in the officer’s position would have known that his conduct would violate that clearly established right. See Gould v. Davis, 165 F.3d 265, 269-73 (4th Cir. 1998).

Brown’s actions in stopping K.J. failed the test for qualified immunity. Kebe articulated a violation of her Fourth Amendment rights to be free from unreasonable seizures. Given the facts available to Brown, a reasonable officer would have known that his actions in stopping K.J. without reasonable suspicion or a plausible risk to his safety violated her clearly established rights. Accordingly, Brown’s motion for summary judgment was denied and Kebe’s motion for partial summary judgment as to the illegality of the stop was granted. There were triable issues of fact regarding damages for the stop, as well as whether Brown frisked K.J. pursuant to the illegal stop.COMMENTARY: Brown also claimed that public official immunity barred the state cause of action for battery. Public official immunity relieves a government official of liability for his negligent acts. Dipino v. Davis, 354 Md. 18, 49, 729 A.2d 354, 370 (1999). In order to find this type of immunity, &#8220
;the individual actor, whose conduct is at issue must be a public official rather than a mere government employee or agent” and the tortious conduct must have occurred “while he was performing discretionary, as opposed to ministerial acts in furtherance of his official duties.” James v. Prince George’s County, 288 Md. 315, 323-24, 418 A.2d 1173 (1980).

Police officers are public officials who, when carrying out their official duties, receive immunity in the absence of actual malice. Dipino, 354 Md. at 49. This immunity is meant to protect officers from fear of litigation when they try to preserve public safety. See generally Pinder v. Johnson, 54 F.3d 1169 (4th Cir. 1995). However, this immunity is not absolute and is inapplicable when a police officer acts with malice. CJ §5-507. Malice is established by proof that the officer intentionally performed “an act without legal justification or excuse, but with an evil or rancorous motive influenced by hate, the purpose being to deliberately and wilfully injure the plaintiff.” Williams v. Mayor & City Council of Baltimore, 359 Md. 101, 131 n. 16, 753 A.2d 41, 57 (2000).

Kebe put forth no evidence that Brown performed the stop and frisk with an evil or rancorous motive or that he sought deliberately to injure Kebe. While Brown did stop Kebe illegally, neither the stop nor his actions in having Kebe lie on the ground while he frisked her for weapons are sufficient evidence that Brown acted with malice. Since Kebe had not put forth sufficient evidence of malice, the court granted Brown’s motion for summary judgment as to the state law claim of battery.PRACTICE TIPS: In barring the cause of action for battery on the grounds of public official immunity, the court advised that this type of public official immunity under DiPino “is hard to defeat.” McCoy v. Hatmaker, 135 Md.App. 693,719, 763 A.2d 1233, 1247 (2000).Civil RightsSection 1983 malicious prosecution claimBOTTOM LINE: A claim for malicious prosecution alone will not support a claim under 42 U.S.C. §1983 unless it amount to a Fourth Amendment violation.CASE: Lyles v. Montgomery County, MD, No. DKC 2000-2021 (decided Sept. 4, 2001) (Judge CHASANOW). RecordFax No. 1-0904-41, 9 pages.FACTS: In 1980, Peggy Lyles, who worked for the Montgomery County Department of Recreation, transferred to the police department. Noel Mangum, initially hired by the Montgomery County Department of Public Libraries, had transferred to the police department in 1976.

Lyles and Magnum filed a charge of discrimination with the Maryland Commission on Human Relations based on events allegedly occurring in 1997. After a right to sue letter was issued, Lyles and Magnum filed suit against Montgomery County (and its Chief of Police), as well as George Heinrich and Joyce Torchinsky. The action against Montgomery County was for violation of Title VII, and the claims against George Heinrich and Joyce Torchinsky were for violations of 42 U.S.C. §1983. Counts I, II, and III purported to allege Title VII claims, presumably solely against Montgomery County. Count IV was a malicious prosecution claim against Joyce Torchinsky and George Heinrich and Count V was a tortious interference with employment claim against Torchinsky and Heinrich.

Lyles and Magnum claimed that they were subjected to disparate treatment on account of race, through unequal application of personnel policies regarding computer usage, dress, scheduling and leave. Apparently, Lyles and Magnum were charged with misuse of their computers at work to conduct unauthorized searches within the police department computer system. They claimed that it was a common practice for employees to use the computer for non-police related activity and that no other employees faced criminal charges. The charges were, eventually, nolle prossed.

Lt. Heinrich, supervisor of the Records Department, allegedly instigated the criminal case. Torchinsky, Lyles and Magnum’s immediate supervisor in the Telephone Reporting Unit, allegedly actively encouraged and abetted Lt. Heinrich, her immediate superior.

The supervisors moved to dismiss. The district court granted their motions.LAW: Lyles and Magnum claimed that the supervisors had violated 42 U.S.C. §1983 through acts of malicious prosecution and tortious interference with employment. To state a claim under 42 U.S.C. §1983, a plaintiff must allege that the defendant, while acting under color of state law, violated a federal right. Presumably the supervisors, as employees of the Montgomery County Police Department, could be alleged to be acting under color of state law. The complaint faltered, though, with regard to the particular federal right allegedly violated for each count.

Under Lambert v. Williams, 223 F.3d 257, 261 (4th Cir. 2000), a §1983 malicious prosecution claim “is properly understood as a Fourth Amendment claim for unreasonable seizure which incorporates certain elements of the common law tort. … §1983 does not empower a plaintiff to bring a claim for malicious prosecution simpliciter. What is conventionally referred to as a §1983 malicious prosecution’ action is nothing more than a §1983 claim arising from a Fourth Amendment violation.” Id. at 260.

Lyles and Magnum did not allege a seizure under the Fourth Amendment. The complaint therefore failed to state a §1983 Fourth Amendment claim. Similarly, Lyles and Magnum had not alleged a viable federal claim encompassed in their tortious interference with employment claim. As Lambert makes clear, a plaintiff must go beyond stating a possible state tort to make a §1983 claim.COMMENTARY: Lyles and Magnum also failed to comply with the notice provision of the Local Government Tort Claims Act (LGTCA). See CJ §5-304.

Under §5-304(a) of the LGTCA, “an action for unliquidated damages may not be brought against a local government or its employees unless the notice of the claim required by this section is given within 180 days after the injury.” Subsection (b) of the statute provides that in Montgomery County “the notice shall be given in person or by certified mail, … by the claimant or the representative of the claimant, … the County Executive.” CJ §5-304(b).

The notice is a condition precedent to the right to maintain an action for damages, Grubbs v. Prince George’s County, 267 Md. 318, 297 A.2d 754, 755-56 (1972); Neuenschwander v. Washington Suburban Sanitary Comm’n, 187 Md. 67, 48 A.2d 593 (1946)), and compliance with the notice provision must be alleged in the complaint as a substantive element of the cause of action. Madore v. Baltimore County, 34 Md.App. 340, 367 A.2d 54, 56 (1976). Because Lyles and Magnum failed to give notice, they were precluded from bringing state tort claims.Criminal ProcedureAcquiring cause for vehicle searchBOTTOM LINE: Exclusionary rule applied where officer extended traffic stop beyond time necessary to issue a citation for a seat belt violation and searched the vehicle without the driver’s consent.CASE: United States v. Rodriguez-Diaz, No. AMD 01-0065 (decided Sept. 11, 2001) (Judge DAVIS). RecordFax No. 1-0911-41, 12 pages.FACTS: Officer Rick Shull responded to a call from the Motel 6 in the Woodlawn area of Baltimore. Bruce Dalrymple, the motel manager, reported that he had gotten into a dispute with three guests, who had just checked out and departed the motel in a white Mitsubishi Gallant. Dalrymple stated that the believed that the guests, who were from New York, were involved in drug trafficking because they had associated with other registered guests who were from Florida. Officer Shull also knew that the Motel 6 was a frequent scene for narcotics activity.

After leaving the motel, the white Mitsubishi made a turn down a dead end street and, after turning around, it drove back
past the motel. Dalrymple pointed out the car to Officer Shull, who observed that the front passenger was not wearing a seat belt. After Officer Shull effected a traffic stop, he was joined by Officer Lawrence Fulton, Jr.

Gaki Antonio Rodriguez-Diaz was driving the car. Raphael Rodriguez was in the front passenger seat and Jeffrey Baez was in the back. Rodriguez-Diaz produced his driver’s license and a rental agreement showing that Rodriguez-Diaz had rented the car in New York and that the car should have been returned the previous week. Officer Shull returned to his car and about ten minutes later learned from the police dispatcher that Rodriguez-Diaz had renewed the rental agreement.

At this point, the parties each had different versions of the facts. The government’s evidence showed that after Shull returned the documents to Rodriguez-Diaz, the occupants said they were in Maryland to see some girls and denied having any drugs. The government also claimed that all three occupants consented to a search of the car. Finding no contraband, Officer Shull asked Rodriguez-Diaz consent to search the trunk. After Rodriguez-Diaz consented to the search, Officer Shull found a jacket and a bag, both of which were owned by Rodriguez-Diaz. Officer Shull found a large amount of heroin in the bag.

Rodriguez-Diaz claimed that Officer Shull returned the documents to him and then ordered all three occupants out of the car. Rodriguez-Diaz also claimed that Officer Shull asked only Baez, the back seat passenger, for consent to search the vehicle, but Baez said that the vehicle was not his. Officer Shull did not ask either Rodriguez-Diaz nor the other passenger for consent to search and did not ask Rodriguez-Diaz for consent to search the bag that he found in the trunk.

Rodriguez-Diaz was charged with possession with intent to distribute more than 100 grams of heroin in violation of 21 U.S.C. §841(a)(1). The district court granted his motion to suppress the heroin, as the fruit of an illegal search. LAW: Under the totality of the circumstances, the government failed to demonstrate that the search of the vehicle and the bag found in the trunk were constitutional because it failed to prove by a preponderance of the evidence that Rodriguez-Diaz consented to the search. The government conceded that the information Officer Shull received from Dalrymple did not amount to reasonable suspicion for the search.

Thus, the only justification for the traffic stop was the failure of the front seat passenger to wear a seat belt and the traffic stop was limited in scope to issuing a citation on that basis and to ensure officer safety. See, e.g., Whren v. United States, 517 U.S. 806 (1996). Officer Shull’s decision to use the traffic stop as an opportunity to investigate a possible drug-related crime unreasonably prolonged the traffic stop. See, e.g., Florida v. Royer, 460 U.S. 491, 500 (1983) (plurality opinion).

Officer Shull’s observation that the occupants of the vehicle were nervous carried virtually no weight. See United States v. Wood, 106 F.3d 942, 947 (10th Cir. 1997) (recognizing that it is not uncommon for even innocent citizens to show signs of nervousness when stopped by a law enforcement officer). Though Officer Shull prepared a detailed written report, it failed to mention that Rodriguez-Diaz expressly consented to a search. Though Officer Shull admitted that Baltimore County police officers employ a written consent form, it was not used in the instant case. Officer Shull testified that he did not have any forms with him and neglected to ask the other officer if he had any. Though a written consent was not legally necessary, a law enforcement officer’s failure to obtain a written consent when one could readily be obtained can seriously compromise the government’s ability to prove that the consent was voluntary. Cf. United States v. Marc, 1997 WL 129324, *7 (D. Del., March 18, 1997).

Rodriguez-Diaz had lawfully leased and operated the vehicle and thus had a reasonable expectation of privacy in the vehicle and its contents. See TR §22-412.3 (operator of motor vehicle has no duty to ensure that an adult front seat passenger wears a seat belt). Officer Shull never developed any individualized suspicion based on acts or omissions which justified prolonging the stop. See, e.g., Minnesota v. Olson, 495 U.S. 91, 95-96 (1990). Because the narcotics were obtained through an illegal search, the exclusionary rule applied and the evidence was suppressed.PRACTICE TIPS: As the individual who lawfully leased the car, only Rodriguez-Diaz was authorized to consent to a search. See Schneckloth v. Bustamonte, 412 U.S. 218, 227 (1973). If, in fact, Officer Shull had obtained Rodriguez-Diaz’s consent to search the car, that consent would have extended to a search of the trunk, as well as to the interior of the passenger compartment, without the need for additional consent. See Florida v. Jimeno, 501 U.S. 248, 251 (1991).TortsDuty of care by lenderBOTTOM LINE: Commercial lender owed no duty of reasonable care in processing commercial loan application from sophisticated borrower, and thus borrower could not recover for lender’s alleged negligent failure to close loan.CASE: Silver Hill Station Limited Partnership v. HSA/Wexford Bancgroup, LLC, No. PJM 99-3439 (decided July 30, 2001) (Judge MESSITTE). RecordFax No. 1-0730-40, 25 pages.COUNSEL: Brian C. Parker, Mark Menton Dumier, Parker, Dumler & Kiely LLP, Baltimore, for plaintiff. Roger W. Titus, David R. Warner, Venable, Baetjer & Howard, LLP, Rockville, for defendant.FACTS: Silver Hill Station Limited Partnership (Siena) owns the Silver Hill Station Shopping Center in Suitland. It had developed between 45 and 50 commercial real estate projects and was managing over one million square feet of commercial property. HSA/Wexford Bancgroup, LLC (Wexford) is a mortgage banking concern specializing in funding first mortgage loans for income- producing commercial real estate.

Beginning in the fall of 1997, Siena sought a new loan to refinance the mortgage loan on the shopping center which had been placed at the time of original construction and which was due to expire in March 2001. Siena’s President, who had been personally active in Siena’s multiple financings and refinancings over several years, hired Stephen Rozga of H.G. Smithy Company, a commercial mortgage broker, to act as the “principal point of contact” with potential lenders. Siena was looking for a non-recourse loan of approximately $3.2 million dollars with a repayment term of 10 to 20 years. Rozga decided to seek refinancing through what is known as a conduit or CMBS lender because they believed the property presented “more degree of risk” than might be acceptable to other types of lenders.

In January 1999, Rozga was contacted by Mark Tucker, a mortgage broker working for Wexford. Tucker, who had learned of Siena’s quest for a loan, inquired about the possibility of Wexford providing it. Rozga followed up promptly, sending Tucker the same preliminary loan package that had been given to other prospective lenders. Not long after, Tucker, on behalf of Wexford, submitted a blank mortgage loan application to Rozga containing a “preliminary loan amount” of $2.959 million. On February 18, 1999, the application, signed by Siena’s President was submitted to Wexford, along with a $2,500 application fee and a $10,000 expense deposit.

Siena maintained that from the beginning Tucker represented that it would qualify for financing in the amount of $2.959 million. In early May Tucker allegedly told Siena that its application had actually been approved and that a formal commitment letter would be delivered. In fact the loan had not been approved and no firm commitment letter was forthcoming. When Wexford had still not issued a firm commitment by late September, 1999, Siena commenced litigation.

Wexford emphasized that it had a number of underwriting concerns that Siena never satisfactorily addressed, an especially important one of which related to the environmental status of the shopping center site. Thus, before Siena ever submitted its application to Wexford, Wexford had furnished it with guidelines for third party environmental reports which provided that: Any concern for a potential hazard should be presented with clear & concise language, whereby the issue is either closed or can be managed by a methodology or, with a definitive corrective action, will result in a closed or controllable issue. Wexford contended that it was fully justified in refusing to issue a final loan commitment so long as the environmental issue, among others, remained unresolved.

Siena alleged that Wexford’s representative had falsely led applicant to believe loan would be approved, and asserted claims for negligence and negligent misrepresentation. Wexford moved for summary judgment, which the district court granted.LAW: Causes of action based on either negligence or negligent misrepresentation require, first and foremost, that the party sued owed a duty in tort to the party bringing the suit. Jacques v. First Nat’l Bank of Maryland, 307 Md. 527, 515 A.2d 756 (1986); Parker v. Columbia Bank, 91 Md.App. 346, 604 A.2d 521 (1992).

Siena cited the seminal case of Jacques, for the proposition that a lender owes its customer a duty of reasonable care in the processing of a loan application whenever contractual privity exists between the lender and the customer, and that such privity is established whenever the customer pays the bank a processing fee. In contrast, Wexford argued that, under Jacques, contractual privity by itself is insufficient, that additional factors such as unusual or extraordinary risk, particular vulnerability or dependence by the customer, or public policy must be present before a tort duty will be imposed. The language in Jacques points in both directions.

Siena relied principally on High v. McLean Fin. Corp., 659 F.Supp. 1561, 1570 (D.D.C. 1987), applying District of Columbia law. Wexford, on the other hand, submitted that no reported Maryland case — state or federal — has ever held a lender liable for the negligent processing of a loan application.

The High case is short on analysis — in fact there is none at all — since it merely asserted that the holding of Jacques is as Siena contended. On the other hand, at least one case relied on by Wexford seems distinguishable. In Parker v. Columbia Bank, the court expressly distinguished Jacques, where the court held that a bank, which contracted for a specified fee to process a residential loan application, was required to “use reasonable care” in doing so. Id. at 540, 515 A.2d at 762. Thus, as carefully explained in Jacques, the basis for the duty of care was an express, albeit oral, contract. In Parker, unlike Jacques, no contractual promise provide[d] a predicate for a tort duty of reasonable care. 91 Md.App. at 532, 604 A.2d at 367-68.

Two cases provide solid support for Wexford’s interpretation of Jacques. In G & M Oil Co. v. Glenfed Fin. Corp., 782 F.Supp. 1078 (D.Md. 1989), the court noted that the Jacques court had referred to “the rather extraordinary provisions contained in the real estate sales contract … [that] left the Jacques particularly vulnerable and dependent upon the Bank’s exercise of due care.” 782 F.Supp. at 1083. In the case before it, the court found “nothing unusual in the proposed transaction between [the borrower and the lender]. [Borrower] was seeking a fairly standard business loan and was in no way ‘particularly vulnerable and dependent upon [lender’s] exercise of due care.’ “ 72 F.Supp. at 1084.

Similarly, in Howard Oaks Inc. v. Maryland Nat’l Bank, 810 F.Supp. 674 (D.Md. 1993), the court dismissed a cause of action for negligent processing of a loan brought under Jacques on the grounds that there was no allegation of “extraordinary circumstances (such as those in Jacques involving purchase of a personal residence). Rather, this was merely a commercial financing arrangement between a bank and its sophisticated business customer, in which no Jacques duty inhered.” 810 F.Supp. at 677- 78.

Here, the court accepted the reading of Jacques that Wexford, has given it. In the first place, as has been noted many times, “[w]hat … the courts [have] actually done with the particular principle, and not what they should have done with it, is the crucial test of stare decisis.” Beyond that, the Maryland Court of Appeals has continuously affirmed — as recently as 1999 in Jones v. Hyatt Ins. Agency, Inc. — that a “contractual obligation, by itself, does not create a tort duty.” 356 Md. 639, 741 A.2d 1099 (1999); see also Jacques, 307 Md. at 534, 515 A.2d at 759.

Finally, Wexford made what the court found to be the most compelling argument of all, that the Jacques court, “[h]aving therefore found that a contract was created between the parties, and that this contract included an implied promise to use reasonable care,” thereafter turned to a further consideration, which was “whether a concomitant tort duty should be recognized under these circumstances.” 307 Md. at 540, 515 A.2d at 762. The court then went on to recite the “extraordinary financing provisions” in the borrowers’ real estate contract and their “particularly vulnerable and dependent” status vis-a-vis the bank. Id.

Therefore, a lender in Maryland owes no duty in tort to reasonably process a loan, absent extraordinary risk or particular vulnerability or dependency on the part of the borrower. Accordingly, Wexford owed no duty in tort to Siena. As with the prospective borrower in G & M, Siena was an established business being shepherded through the loan process, if not by competent counsel, then by an equally competent mortgage broker. As in Howard Oaks, the transaction at bar was merely a commercial financial agreement between a lender and its sophisticated customer. As in G & M, what the court was faced with is nothing more than “a financing deal gone awry between two businesses bargaining at arm’s length and with their eyes open.” 782 F.Supp. at 1084. And, as in both G & M and Howard Oaks, under such circumstances, no tort duty can be imposed.COMMENTARY: Siena also failed in its claim of negligent misrepresentation. As with ordinary negligence, negligent misrepresentation in the context of a failed loan transaction presupposes the existence of a duty on the part of the lender. See Parker, 91 Md.App. 346, 604 A.2d 521. While in the negligence context the duty is cast as one in tort after the fashion of Jacques, in the negligent misrepresentation context it is fiduciary in nature. Id.

But, for a tort duty to come into play, extraordinary circumstances above and beyond contractual privity are required. For a fiduciary duty to exist, “special circumstances over and above any contractual obligations” must exist. Id. at 369, 604 A.2d 521, 604 A.2d at 532. Among those special circumstances, as established by Parker, are (1) assumption by the lender of extra services over and above the contractual obligation and (2) receipt by the lender of economic benefits other than those accruing to the ordinary mortgage. Id. at 371-72, 604 A.2d at 533-34.

Viewing Jacques and Parker together, the former dealing with negligence and the latter with negligent misrepresentation, it is apparent that they travel an essentially identical analytical path. Circumstances above and beyond contractual privity must be present before any duty comes into play.

But, just as the court has found no extraordinary circumstances or particular vulnerability or dependence insofar as the Jacques cause of action is concerned, it finds no special circumstances that
call into being the fiduciary duty described in Parker. Both Siena’s President and its mortgage broker conceded that Wexford assumed no services other than “the normal investigations, evaluations and inspections that a prudent lender makes.” Parker, 91 Md.App. at 371, 604 A.2d at 533. At the same time, Wexford did not stand to gain any benefit beyond the mortgage loan itself, as Parker requires. Accordingly, Wexford owed Siena no fiduciary duty for purposes of positing a cause of action for negligent misrepresentation.