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Opinions – 11/28/11: Court of Special Appeals

Civil Procedure

Discovery

BOTTOM LINE: In a medical malpractice action that some of the defendants settled prior to trial, those settlement amounts were not subject to discovery by the remaining defendants at the pre-verdict stage because the amounts did not, in any way, concern the facts relevant to the non-settling defendants’ liability or the extent of the plaintiff’s damages.

CASE: Tempel v. Murphy, No. 1199, Sept. Term, 2010 (filed Oct. 28, 2011) (Judges EYLER, J., Watts & Sharer (retired, specially assigned)). RecordFax No. 11-1028-00, 22 pages.

FACTS: This appeal arose out of a medical negligence lawsuit filed in circuit court, involving the death of 59-year-old Thomas Murphy. Survival and wrongful death claims were subsequently brought by Elena Murphy, individually and as the personal representative of the Estate of Thomas Murphy, and Caroline and Meghan Murphy, against defendants Melissa Fox, M.D.; Patient First of Maryland (Dr. Fox’s employer); David Utzschneider, M.D.; St. Joseph Medical Center (Dr. Utzschneider’s employer); Richard Tempel, M.D., and Osler Drive Emergency Physician Association (Dr. Tempel’s employer).

Prior to the jury trial, the plaintiffs settled with Dr. Fox, Dr. Utzschneider, and their employers at a private mediation.

Dr. Tempel and his employer did not settle and, after learning of the other settlements, moved to compel the production of the settlement documents. Their motions were denied.

During the trial against Tempel and his employer, the plaintiffs called Dr. Tom Borzilleri, who qualified as an “economic expert,” to testify to the estimated losses in the case. Borzilleri testified that, based on his calculations, the plaintiffs’ loss of support, that is, the income that Mr. Murphy would have produced minus his personal spending, was $525,648. Borzilleri explained that he calculated that number by using Mr. Murphy’s 2006 W–2 form, and the Social Security Administration’s “growth rates,” which were in the range of 3% per year. Borzilleri testified that he relied on the SSA’s growth rates as an “objective forecast” of how much an individual’s salary will increase from year-to-year. He then assumed that Mr. Murphy would work until age 66 or 67, using the “Work Life Expectancy” calculation.

At the conclusion of trial on March 29, 2010, the jury awarded the plaintiffs damages totaling $1,440,000: $5,000 in funeral expenses; $235,000 in loss of household services; $600,000 for the loss of Mr. Murphy’s salary; $300,000 in noneconomic damages to Mrs. Murphy; $100,000 in non-economic damages to Meghan Murphy; $100,000 in non-economic damages to Caroline Murphy; and, $100,000 in damages to Mr. Murphy’s estate for pain and suffering.

Tempel and his employer moved for judgment notwithstanding the verdict on the issue of Mr. Murphy’s lost salary, arguing that the $600,000 award was speculative and that the plaintiffs had failed to satisfy their burden of production in that regard. The court denied the motion.

Tempel and his employer appealed. The Court of Special Appeals affirmed the judgment of the circuit court.

LAW: Dr. Tempel and his employer first argued that, because the Maryland Contribution Among Joint Tort–Feasors Act (Courts & Judicial Proceedings §§3–1401 et seq.) entitles the defendants to a “credit of either the total amount paid by the settling defendants or a pro rata share of the judgment, whichever was greater,” they should have been permitted to discover the amount of that credit so as to engage in an intelligent assessment of the risks and benefits of proceeding to trial versus settlement.

As a sub-argument, defendants asserted that they should have been allowed to discover the amounts of the settlements prior to judgment because the only Maryland case addressing the discoverability of settlement amounts by non-settling joint tortfeasors held in favor of disclosure — Porter Hayden Co. v. Bullinger, 350 Md. 452 (1998).

Before reaching either of those arguments, the Court of Special Appeals addressed the question of mootness under Hamot v. Telos Corp., 185 Md.App. 352, 360 (2009). It determined that while the issue presented was moot, it was capable of repetition and likely to evade review. Thus, the court addressed the issue on its merits.

Pursuant to Maryland Rule 2–402(a), a party may obtain discovery regarding any matter that is not privileged, including the existence, description, nature, custody, condition, and location of any documents and tangible things if the matter sought is relevant to the subject matter involved in the action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party.

Maryland courts have noted that the purpose of the discovery rules is to require the disclosure of facts by a party litigant to all of his adversaries, and thereby to eliminate, as far as possible, the necessity of any party to litigation going to trial in a confused or muddled state of mind, concerning the facts that gave rise to the litigation.

Absent some fact in a given case that would change the result, the settlement amount contained in a joint tortfeasor release is not relevant at the pre-verdict stage.

Here, the settlement amounts did not, in any way, concern the facts relevant to a determination of the defendants’ liability or the amount of any damages; thus, they were not relevant at the pre-verdict stage. As in Bullinger, the information sought by defendants did not become relevant until after the verdicts were rendered, and the amounts were necessary to determine the apportionment of damages as to each party under the Maryland Contribution Among Joint Tort–Feasors Act. See Bullinger, 350 Md. at 463. Even after final judgment, however, the settlement would not be evidence relevant to any issue in the case other than the ministerial apportionment of damages. Id. at 463.

By contrast, the terms of the jointfeasor releases, other than the amount of consideration, were relevant pre-trial because the nature of the release would determine whether defendants, if liable, would get an automatic pro rata reduction or whether the jointfeasor status of the settling parties would have to be adjudicated. That information was provided to defendants. At the stage in the proceedings in which the settlement amounts became relevant, defendants were provided with the pertinent information, and they made no assertion on appeal that the amount apportioned to them was in error.

Therefore, the defendants were not entitled to discover the amounts of settlements from other health care providers at the pre-verdict stage, and the circuit court’s ruling was affirmed.

COMMENTARY: The defendants also argued that the court erred by denying their motion for judgment N.O.V. as to the speculative nature of the jury’s award for loss of Mr. Murphy’s financial support. According to defendants, the award of $600,000 was “overly speculative” because there was “no evidence upon which the jury could have concluded that Mr. Murphy would have retired at age 66 or 67,” rather than 61, or 62, or 70.

The plaintiffs responded that the defendants’ objection was unpreserved because they did not object, pursuant to Maryland Rule 2–517, during Borzilleri’s testimony, nor did they move to strike any of Borzilleri’s testimony, or make a motion for judgment, pursuant to Maryland Rule 2–532, on the issue of whether direct testimony regarding the age at which Mr. Murphy intended to retire was necessary. The plaintiffs further argued that even if the issue was properly preserved, Maryland law does not require the family members of a deceased plaintiff to prove the specific age at which the decedent would have retired to recover lost financial support. Finally, the plaintiffs suggested that even without Borzilleri’s testimony, the evidence before the jury, specifically the testimony of Mrs. Murphy and witness Wayne Kennard, supported the jury’s award.

With regard to the issue of preservation, based on the two pages of transcript included in the defendants’ reply brief, the Court of Special Appeals concluded that the issue was raised on a motion for judgment and, thus, could properly be raised in a motion for judgment notwithstanding the verdict. Moreover, the defendants’ failure to object to Borzilleri’s testimony did not constitute a waiver because defendants were challenging legal sufficiency to support the claim, not admissibility.

However, the court agreed with the plaintiffs that they were not required to prove a specific age of retirement. In addition to Borzilleri’s testimony, the jury heard testimony by Mrs. Murphy, Caroline Murphy, and Mr. Kennard, describing Mr. Murphy prior to the events which gave rise to this lawsuit. The jury could consider the totality of the evidence, including Mr. Murphy’s age, health, employment, financial situation, and general population statistics, i.e., life expectancy and work life expectancy, to determine the amount of lost support. As such, there was sufficient evidence to support the jury’s verdict.

Civil Procedure

Final judgment rule

BOTTOM LINE: Judgment form signed by trial court, granting precise amount of jury verdict in favor of patient on medical malpractice claim against physician’s estate but failing to address issue of costs, was final and appealable because, under rule entitling prevailing party to costs unless the court orders otherwise, patient’s entitlement to costs was automatic and entry of costs was a ministerial function, omission of which did not affect the finality of judgment.

CASE: Mattison v. Gelber, No. 1399, Sept. Term, 2010 (filed Oct. 28, 2011) (Judges Eyler, Matricciani, WILNER & Alan (retired, specially assigned)). RecordFax No. 11-1028-02, 18 pages.

FACTS: Cheri Mattison filed a medical malpractice action in circuit court against defendants Teresa Rosas, as personal representative of the Estate of Dr. Henry Rosas, and Dr. Rene Gelber. The complaint alleged that Drs. Rosas and Gelber were negligent in their performance of thoracic surgery on Mattison, for which she sought compensatory damages and court costs.

On defendants’ motion, the case was removed to Howard County, where it was tried before a jury. The jury returned a verdict in Mattison’s favor against the Estate of Dr. Rosas in the amount of $811,162. Finding no liability on the part of Dr. Gelber, however, it returned a verdict in his favor. Those verdicts were not at issue in this appeal.

On April 9, 2010, immediately following the return of the verdicts, the trial judge and the court clerk signed two written judgments on what appear to be pre-printed forms. On the form reflecting the verdict in favor of Gelber, the judge or clerk checked a box next to the statement “All relief is denied.” A box next to the statement “Costs are assessed against” was not checked, however, and no specific mention was made of costs. The judgment form reflecting the verdict against Rosas’s Estate recited that judgment was entered in favor of Mattison against the Estate in the precise amount of the jury verdict: $811,162. As with the first document, the box regarding the assessment of costs remained unchecked and nothing was said about costs. Those judgments were entered as they were written.

On April 16, Mattison filed what was captioned Plaintiff’s Motion For A New Trial, To Alter Or Amend The Judgment And To Revise The Judgment, but which sought only a new trial as to Gelber, principally on the ground of his failure to provide timely discovery responses. No relief was sought against the Estate of Rosas, and nothing was said about the failure of the court to assess costs. Notwithstanding that the motion was docketed and shown as “entered” after the docket entry showing the judgment as entered, Mattison, in what she claimed was an exercise in caution, filed a second motion, identical to the first, on April 30, 2010.4 On May 24, the court entered an order denying “the Plaintiff’s Motion.” On May 27, 2010, the clerk entered on the docket that the second motion was denied.

On July 19, 2010, Mattison filed a Motion for Entry of Final Judgment, in which she claimed that: (1) the docket did not reflect that the court had ever ruled on the first motion for new trial; and (2) the court had not addressed the assessment of costs, as requested in the complaint. Those omissions, in her view, meant that “no final judgment has been entered in this action and the time for appealing has not yet begun to run.” She asked that the court enter a final judgment “consistent with the jury’s verdict adjudicating all claims by entering an award of court costs to the Plaintiff.

Gelber opposed the motion, noting that the order denying the motion for new trial, on its face, made clear that the court had considered both motions. On Aug. 10, a summary order denying the motion for entry of final judgment was entered. Mattison appealed the denial of her motion to enter final judgment.

The Court of Special Appeals held that the judgment forms were final appealable judgments, and affirmed the circuit court order.

LAW: With respect to the matter of costs, the issue related only to the action against the insolvent Estate of Dr. Rosas. Maryland Rule 2–603(a) states that, unless otherwise provided by rule, law, or court order, the prevailing party is entitled to costs. Dr. Gelber was unquestionably the prevailing party in the action against him, but, as he did not assert a claim for the $60 transfer fee he paid, there was no basis for assessing any cost either in favor of or against him. The judgment document signed by the judge and the clerk reflected that fact and necessarily covered the matter of costs. The box stating “All relief is denied” was checked, a clear ruling that Mattison was not entitled to recover costs from Gelber.

The issue with respect to the action against the Estate was not as facially clear. Mattison was unquestionably the prevailing party in that action; it appeared that she had paid a $115 filing fee to the clerk in Prince George’s County; and she did demand costs in her complaint. This issue, and this appeal, could have been avoided entirely if the judge, having decided to sign the judgment form, had paid attention to the box on the pre-printed judgment form and decided whether to award costs against the Estate. However, because the judge did not do so, it was left to the Court of Special Appeals to determine the effect of the judge’s omission.

To understand the import of silence by the court, it is necessary to appreciate the elements that factor into the determination of costs. Rule 2–603(a) provides that the prevailing party is entitled to costs but that the court, by order, may allocate costs among the parties. The services performed by clerks for which costs are assessed and the amount to be collected by the clerk for those services are set forth in a Schedule adopted by the State Court Administrator, as authorized by §7–202 of the Cts. & Jud. Proc. Article. The Schedule is printed in the Code immediately following that section. Until recently, §7–202 imposed a “surcharge” of $25 that must be collected in civil cases, which made the initial cost to be collected $105. In addition, CJP §7–402 requires sheriffs to collect certain fees for the service of various papers and for conducting execution and attachment sales.

Fees paid or payable to the sheriff for the service of papers prior to the entry of judgment are also subject to assessment and allocation pursuant to Rule 2–603. Rule 2–603(b) requires the clerk to “assess as costs all fees of the clerk and sheriff” and statutory fees paid to witnesses plus, on written request, “other costs prescribed by rule or law,” and to “notify each party of the assessment in writing.” The Rule also provides that, on motion of a party filed within five days after receipt of the notice of the clerk’s assessment, the court shall review the action of the clerk.

However, some clerks are apparently reluctant to add to the amount of a judgment entered by the court an amount for costs collected by or owed to the clerk or sheriff unless the judge has specifically allocated costs against the defendant (or some other party), and such was apparently the case here. As noted, the judgment was entered in precisely the amount of the verdict with nothing said about costs. While it may well be that plaintiffs who have recovered a collectable judgment or defendants who have escaped liability do not care whether they are reimbursed for relatively modest fees they have paid and do not ordinarily press the issue, the issue remains, and may affect whether there is in fact a judgment under Rule 2–602. That issue was, at least facially, the problem complained of by Mattison in the present case.

Dr. Gelber noted that Rule 2–603(a) entitles the prevailing party to costs unless the court orders otherwise and that the court here did not order otherwise and contended that therefore, as a matter of law, costs were awarded in Mattison’s favor against Dr. Rosas’ Estate. Thus, in his view, the court properly denied the motion to enter final judgment because final judgment had been entered four months earlier. Under long-standing precedent, an order merely sustaining a demurrer did not constitute a judgment; rather, it was required in that situation that the court implement that order by entering a judgment for costs in favor of the defendant. See Martin G. Imbach, Inc. v. Deegan, 208 Md. 115, 119 (1955).

More instructive than Deegan, however, was the history of Rule 2–603(a) and (b) and the relationship of those Rules to Rule 2–601.

As adopted by the court in 1984, Rule 2–601(a) provided that, upon a general verdict of a jury or a decision by the court allowing recovery of a sum certain or costs or denying all relief, the clerk was to enter the judgment forthwith unless the court ordered otherwise. Rule 2–603(a) kept intact most of the language from the prior Rule, including an entitlement of the prevailing party to “the allowance of costs,” but deleted the direction that the costs were to be “taxed by the clerk and embraced in the judgment.” Section (b) of Rule 2–603 provided that, on written request of a party, the clerk was to “assess as costs” the fees of the clerk and the sheriff, statutory fees paid to witnesses, and costs prescribed by Rule or law and to notify each party of the assessment. On motion of a party, the court was to review the action of the clerk.

The changes to Rule 2–603 aimed to significantly reduce the role of the clerk in assessing costs. Under Rule 604, all assessments of costs, other than those imposed as sanctions, were made by the clerk, which led to the undesirable consequence of court clerks being called upon to decide, at least preliminarily, contested issues between attorneys. Under the current Rules, in the absence of an order to the contrary, the clerk is obliged to ascertain and add to a judgment in favor of the prevailing party, without request, those costs that the prevailing party paid, or still owed, to the clerk or the sheriff — a ministerial function which easily can be performed by adding to the judgment the words “with costs” or some similar language.

In this case, such a judgment was entered in April 2010, and it became appealable when the court denied the motions for new trial. The Court of Special Appeals affirmed the trial court’s ruling denying the motion to enter final judgment. However, the matter was remanded to the circuit court with instructions to direct the clerk to assess costs in conformance with Rule 2–603(b) and to note that amount on the docket as part of the judgment against the Estate of Dr. Rosas.

COMMENTARY: The Court of Special Appeals also considered, briefly, Mattison’s contention that the first motion for new trial was never effectively resolved. There were two aspects to that argument: first, whether the court’s order actually addressed that motion; and, if so, whether the clerk’s May 27 docket entry sufficed to record the court’s decision.

The order stated, on its face, that the court had considered both the initial motion and the second motion, which were identical in all respects, and that “the Plaintiff’s Motion” was denied.

Even assuming the first motion was not effectively withdrawn and replaced by the second and still retained some vitality, it was clear that the order was intended to constitute, and did constitute, a ruling on both motions, and the clerk obviously so regarded the order in making the docket entry. Because no issue was raised and no relief was sought in the first motion that was not also raised and sought in the second, the docket entry showing that the second motion was denied effectively encompassed a ruling that the relief sought in the first motion was also denied.

Contracts

Merger agreements

BOTTOM LINE: Where disclosure statement, which was evidence of an oral contract between consultant and client, contained inconsistent conditions for payment of consultant’s bonus, and consultant presented persuasive evidence to support his contention that his bonus fee was not contingent on an event argued by the client, the client was not entitled to summary judgment that it was relieved of liability.

CASE: Ramlall v. MobilePro Corp., No. 01309, Sept. Term, 2010 (filed Oct. 28, 2011) (Judges Woodward, Wright & MATTRICCIANI). RecordFax No. 11-1028-01, 27 pages.

FACTS: This case involved a breach of contract action filed by Richard Ramlall against defendants MobilePro Corp. and CloseCall America, Inc. MobilePro and CloseCall America, Inc. were both Delaware corporations. Two other corporations also played a role in the litigation: Delaware corporation MVCC Acquisition Corp., a wholly owned subsidiary of MobilePro; and Maryland corporation CloseCall America, Inc. (CloseCall MD), Ramlall’s former employer.

In 2002, CloseCall MD hired Ramlall to negotiate a billing dispute it had with Verizon Maryland Inc. and Verizon New Jersey Inc. (collectively Verizon). Litigation followed, and CloseCall MD also filed a complaint against Verizon with the Maryland Public Service Commission.

Ramlall assisted CloseCall MD by preparing and responding to interrogatories, collecting and investigating prior bills, and advising CloseCall MD based on his experience as a former employee of Verizon. As a result of the billing dispute, CloseCall MD withheld monies from Verizon’s monthly bills. Verizon sued CloseCall MD to recover the amount withheld, and CloseCall MD filed counterclaims. The two eventually negotiated a settlement whereby CloseCall MD agreed to pay Verizon between $750,000 and $800,000, Verizon waived its claims to $1,459,886 of the withheld monies, and CloseCall MD waived its counterclaims and stipulated to a dismissal of its complaint before the Public Service Commission.

Ramlall was one of the lead negotiators during this settlement process, along with former CloseCall MD employees Tom Mazerski and Greg Van Allen. CloseCall MD and Ramlall initially agreed to an hourly rate of $110 for Ramlall’s compensation. At a certain point in the billing dispute, CloseCall MD advised Ramlall that it was capping his billable time at 20 hours per week and instructed him to keep track of any additional hours he worked. The parties later negotiated a contingent “bonus” fee to be divided equally by Ramlall, Mazerski, and Van Allen.

Before Ramlall could collect his fee, CloseCall MD merged with MVCC and dissolved. MVCC incorporated in Delaware on Aug. 4, 2004. MVCC was a wholly owned subsidiary of MobilePro and was created for the express purpose of merging with CloseCall.

On Aug. 31, 2004 MobilePro, MVCC, and CloseCall MD entered into a merger agreement. That agreement provided, in part, that all the property, rights, privileges, powers and franchises of CloseCall MD and MVCC would vest in the surviving corporation, and that all debts, liabilities and duties of CloseCall MD and MVCC not paid by CloseCall MD and MVCC would become the debts, liabilities and duties of the surviving corporation.

The merger agreement incorporated a disclosure statement from CloseCall MD to MVCC, which noted that CloseCall MD had been involved in a billing dispute with Verizon. The disclosure statement further provided that the Compensation Committee of CloseCall MD had agreed that, in the event that the disputes were resolved in favor of CloseCall MD, a bonus equal to 10% of the refund would be paid to CloseCall MD employees Tom Mazerski, Greg Van Allen and Richard Ramlall, and that this obligation would remain in place after the consummation of the merger.

MVCC and CloseCall MD merged on Oct. 15, 2004, after which MVCC survived as the successor corporation and CloseCall MD dissolved.

Following the merger, MVCC changed its name to CloseCall (DE), and the surviving Delaware corporation created by the merger of CloseCall MD into MVCC was CloseCall (DE). Neither CloseCall (DE) nor MobilePro paid Ramlall’s bonus fee. On June 4, 2009, Ramlall filed a breach of contract action against defendants MobilePro Corp. and CloseCall (DE), seeking treble damages of $144,999 under the Maryland Wage Payment and Collection Law, plus interest, attorney’s fees, and costs. Ramlall argued that CloseCall (DE) was liable for his bonus fee because it was the successor corporation to the merger between CloseCall MD and MVCC. Ramlall also asserted that MobilePro, as parent corporation of CloseCall (DE), was responsible for the debts and liabilities of CloseCall (DE).

The parties filed cross-motions for summary judgment in March 2010. The circuit court denied Ramlall’s motion for summary judgment, denied CloseCall (DE)’s motion for summary judgment, and granted MobilPro’s motion for summary judgment.

Ramlall appealed. The Court of Special Appeals affirmed the judgment of the circuit court as to MobilePro, and vacated the judgment of the circuit court as to CloseCall.

LAW: The general rule of corporate liability is that, barring certain limited exceptions, successor corporations are not liable for the debts and obligations of their predecessor corporations. Baltimore Luggage Co. v. Holtzman, 80 Md.App. 282, 290 (1989).

Under one such exception, applicable in the present case, the debts and liabilities of the predecessor corporation are imposed on the successor corporation when the transaction amounts to a consolidation or merger. This exception has been codified under Corporations and Associations Article §3–114(f)(1), which provides that, when there is a consolidation or merger, the successor is liable for the debts and obligations of each non-surviving corporation.

Under CA §§1–101(x)(2) and 3–114(f)(1), CloseCall (DE) was therefore liable for all the debts and obligations of CloseCall MD.

To allow successor corporations to contract around obligations of predecessor corporations would permit corporations to use the merger statute to evade their legal obligations. The Maryland statute reflects a strong public policy, designed for the protection of creditors and parties who dealt in good faith with the predecessor corporation. Mesa Partners v. Phillips Petroleum Co., 488 A.2d 107, 116 (Del.Ch.1984).

By merging under the Maryland corporate statutes, CloseCall (DE) consented to be bound by the condition that the debts and obligations of CloseCall MD would become its own. The only remaining question was the extent of that obligation.

The construction of an undisputed oral contract is for the court to decide as a matter of law. Marr v. Langhoff, 322 Md. 657, 667 (1991). On the other hand, where the terms of an oral contract are in dispute, the fact-finder must decide what terms were actually agreed upon by the parties. Service Realty Co. v. Luntz, 210 Md. 228, 234 (1956).

Here, the disclosure statement was evidence of the oral agreement between Ramlall and CloseCall MD. However, the statement contained inconsistent conditions for payment of the bonus. While it set the broad condition that the settlement negotiations be resolved in favor of CloseCall MD, the statement conditioned payment of a bonus on a Verizon’s payment of a refund to CloseCall MD. Given this ambiguity, it was necessary to construe the agreement in light of the extrinsic evidence that surrounded it. See Service Realty Co., 210 Md. at 235. In addition, a contract should not be construed to produce a result that is absurd, commercially unreasonable or contrary to the reasonable expectations of the parties. Middlebrook Tech, LLC v. Moore, 157 Md.App. 40, 66 (2004).

Ramlall presented persuasive evidence to support his contention that his bonus agreement with CloseCall MD was not conditioned on a “refund” in the strictest sense. Moreover, it seemed unreasonable that Ramlall, knowing that CloseCall MD had withheld money from Verizon and thus would not be entitled to repayment under any circumstances, would agree to a bonus fee that was contingent on a refund. CloseCall (DE) received the benefit of the bargain it struck concerning the Verizon billing dispute, and it could not now refuse payment in return. See Campbell v. Potash Corp. of Saskatchewan, Inc., 238 F.3d 792, 803 (2001).

Therefore, the circuit court erred in finding the disclosure statement to be dispositive of the disputed oral agreement and in holding that Ramlall’s bonus was conditioned on Verizon’s payment of a refund to CloseCall MD. In so holding, the circuit court erred as a matter of law in disregarding substantial evidence indicating that the disclosure statement was not an accurate representation of the oral agreement between Ramlall and CloseCall MD, and in construing the oral agreement as having a bonus conditioned on a refund.

The entry of judgment in favor of CloseCall (DE) was vacated and the case remanded for a factual determination on the merits.

COMMENTARY: In Maryland, shareholders generally are not held individually liable for debts or obligations of a corporation except where disregarding the corporate entity is necessary to prevent fraud or enforce a paramount equity. Bart Aconti & Sons, Inc. v. Ames–Ennis, Inc., 275 Md. 295, 310 (1975). When asking a court to “pierce the corporate veil,” the burden of proof is on the one charging fraud to establish by clear, specific acts, facts that in law constitute fraud. Starfish Condo. Ass’n v. Yorkridge Serv. Corp., 295 Md. 693, 714 (1983).

In this case, Ramlall’s pleadings, arguments in the circuit court, and briefs to the circuit court failed to allege specific acts of fraud on the part of MobilePro. Because Ramlall did not meet his burden of establishing fraud by clear, specific acts, there was no reason for the court to disregard the corporate entity. Accordingly, the circuit court’s entry of summary judgment in favor of MobilePro was affirmed.

PRACTICE TIPS: Under the method of corporate acquisition known as a “forward triangular merger,” the buyer creates an acquisition subsidiary, and the target corporation then merges into the acquisition subsidiary. After the merger, the target dissolves and the merged acquisition subsidiary remains.

Criminal Procedure

Search & seizure

BOTTOM LINE: Defendant had no legitimate expectation of privacy in the common laundry room in which a gun was discovered, and he was not undergoing custodial interrogation at the time a cell phone was discovered; therefore, both items were admissible as evidence.
CASE: Grymes v. State, No. 1838, Sept. Term, 2010 (filed Oct. 28, 2011) (Judges EYLER, D., Matricciani & Wilner (retired, specially assigned)). RecordFax No. 11-1028-04, 46 pages.

FACTS: In the early evening of Nov. 30, 2009, a group of friends gathered at Carroll Walker’s apartment, including Mabel Williams and her boyfriend Robert Pumphrey. During the gathering, Delores Amankwah, a friend of Williams, came by to see Williams and Pumphrey.

Williams, Pumphrey, and Amankwah had been planning to move into an apartment together beginning Jan. 1, 2010. That evening Pumphrey told Amankwah she could not move in with him and Williams unless she contributed one-third of the security deposit. Amankwah could not afford it and became very upset.

At the time, Amankwah was living temporarily in an apartment at 657 Houston Ave., leased by Sharon Harkum. Antwan Grymes also was staying at Harkum’s apartment.

Amankwah left Walker’s apartment and walked to Harkum’s apartment, where Grymes was present. Amankwah told Harkum and Grymes about her dispute with Pumphrey. Grymes went to Walker’s apartment to talk to Pumphrey.

According to Pumphrey, Grymes pulled out a handgun, aimed it at him, and demanded that he hand over his coat and wallet, which he did. Pumphrey’s cell phone was inside his coat. His wallet contained $150 and a debit card.

Pumphrey and Williams called 911 and reported that he had just been robbed at gunpoint. The police responded and interviewed Pumphrey, Williams, and Walker. All three identified Pumphrey’s assailant as “D” or “Dogg” and said they thought he was staying at 657 Houston Ave. Pumphrey further described the weapon used as “black with a brown handle,” and having a long barrel. He thought it possibly was a .38 caliber.

While speaking with police, Pumphrey noticed Amankwah on the street. The police stopped Amankwah, who gave them a false name because there was an outstanding warrant for her arrest. She provided the police with Grymes’s first name and confirmed that he was staying in the 657 Houston Ave. apartment building.

Around 9:00 p.m., the police went to the Houston Avenue apartment building to look for Grymes. The front door of the building was unlocked. Harkum consented to a search of her apartment which was on the third floor. Grymes was not there.

Six hours later, around 3:00 a.m. on Dec. 1, the police returned to the Houston Avenue apartment building with a warrant for Grymes’ arrest. They entered the unlocked front door, went to Harkum’s apartment, and found Grymes asleep on the floor in the bedroom. They placed him under arrest. Certain items of clothing belonging to Grymes were searched and revealed Pumphrey’s cell phone and $112 in cash. Amankwah also was present in Harkum’s apartment. She was arrested on the outstanding warrant.

When police interviewed Amankwah at the police station, she told him that, earlier in the day, she had seen Grymes with a gun. She also suggested that the gun might be in the laundry room of the apartment building. Thus, at 5:30 a.m., the police returned to the Houston Avenue apartment building for a third time. They did not have a warrant. They entered the laundry room, which was on the first floor and was unlocked, and recovered a loaded .38 caliber revolver from behind a row of washing machines.

Grymes was charged with robbery with a dangerous weapon, assault in the first degree, and use of a handgun in the commission of a crime of violence. Before trial, he moved to suppress from evidence the gun and the cell phone. The motion was denied.

A jury acquitted Grymes of all charges except the lesser included offenses of robbery and assault in the second degree. He was sentenced to a prison term of 15 years for robbery and a concurrent term of 10 years for assault.

Grymes appealed. The Court of Special Appeals affirmed.

LAW:     The Fourth Amendment guarantees individuals the right to be secure in “‘their persons, houses, papers, and effects, against unreasonable searches and seizures.’” Whiting v. State, 389 Md. 334, 346 (2005) (quoting United States v. Stevenson, 396 F.3d 538, 545 (4th Cir.2005)). A defendant invoking Fourth Amendment protections “bears the burden of demonstrating his or her legitimate expectation of privacy in the place searched or items seized.” Williamson v. State, 413 Md. 521, 534 (2010).

In deciding the existence of a legitimate expectation of privacy, the court must determine whether the defendant possessed 1) “an actual (subjective) expectation of privacy in the item or place searched” and 2) whether “the expectation is one that society is prepared to recognize as reasonable.” Id.

In Fitzgerald v. State, 384 Md. 484 (2004), a K–9 unit police officer directed his dog to scan the vestibule and second-floor common hallway of an apartment building. The dog alerted outside the defendant’s apartment. The police obtained a search warrant for the apartment. The search revealed substantial amounts of marijuana.

The defendant unsuccessfully moved to suppress the contraband from evidence. The Court of Appeals explained that “government tests, such as a canine sniff, that can reveal only the presence or absence of narcotics and are conducted from a location where the government officials are authorized to be, i.e., a public place, are not searches.” Id. at 493. Because the canine sniff that detected the smell of drugs inside Fitzgerald’s apartment was carried out in the common hallway of the apartment building, where the public, including the police, had a right to be, Fitzgerald’s Fourth Amendment rights were not implicated, and therefore could not have been violated.

Here, as in Fitzgerald, the Houston Avenue apartment building was accessible to outsiders 24 hours a day. The front door of the building and of the laundry room were unlocked at all times. Grymes did not own the building, control its common areas, possess or have the right to possess, to the exclusion of others, the common areas; nor did he lease those areas or have a right to occupy or possess them to the exclusion of others. See Whiting, 389 Md. at 359.

Although the police search of the laundry room did not take place within the hours posted on the laundry room door, the room was not physically inaccessible during those hours. The likely purpose of the sign was to limit noise that would bother tenants within their individual units. Under these circumstances, Grymes did not have an objectively reasonable expectation of privacy in the laundry room. Therefore, the circuit court properly denied Grymes’ motion to suppress evidence of the gun recovered in the search of the laundry room.

When the police arrested Grymes, they escorted him out of Harkum’s apartment, to the hallway of the apartment building, and informed him that he was going to the police station. At that point, Grymes asked the detective to get certain items of his clothing from the apartment. The detective retrieved the clothing and showed it to Grymes, who confirmed it was his.

Before giving Grymes the clothing, the detective searched its pockets and found Grymes’ ID and a cell phone matching the description of the one stolen from Pumphrey.

Grymes argued that the act of showing the clothing to him for his identification constituted the “functional equivalent of interrogation” requiring Miranda warnings.

Grymes made a voluntary request for his clothing and then, when the clothing was brought to him, volunteered that it belonged to him. The police acted “reasonably and lawfully” in responding to Grymes’ request as he did and in confirming that the clothing he had retrieved from an apartment shared by a number of people belonged to Grymes. Also, Grymes was not “subjected to compelling influences, psychological ploys or direct questioning.” See State v. Conover, 312 Md. 33, 45 (1988). Thus, there was no interrogation for Miranda purposes and the circuit court did not err in denying Grymes’ motion to suppress evidence of the cell phone.

The judgment of the circuit court was affirmed.

COMMENTARY: The trial court declined to grant Grymes’ request for a missing evidence instruction, which would have required the jury to draw an inference negative to the state from the fact Pumphrey’s cell phone was not produced at trial.

In Cost v. State, 417 Md. 360 (2010), the defendant was charged with crimes stemming from the stabbing of a fellow prisoner in a prison cell at the Maryland Correctional Adjustment Center (MCAC). After the attack, all the evidence from inside the cell was destroyed. The trial court denied the defendant’s request for a missing evidence instruction, reasoning that there was nothing to show the State deliberately had destroyed the evidence.

The Court of Appeals reversed, holding that the destroyed evidence went to the heart of the defendant’s case, and that merely allowing counsel to argue the adverse inference from the destruction of evidence would be insufficient to ensure that the interest of justice was protected. Under those exceptional circumstances, the trial court was required to instruct the jury that it could infer that the evidence that was destroyed was unfavorable to the state.

However, the court emphasized that a trial court only will abuse its discretion in denying a request for a missing evidence instruction if “‘the jury instructions, taken as a whole, [do not] sufficiently protect the defendant’s rights’ and ‘cover adequately the issues raised by the evidence.’” Id. at 382 (quoting Fleming v. State, 373 Md. 426, 433 (2003)).

In Gimble v. State, 198 Md.App. 610 (Aug. 15, 2011), the defendant crashed his vehicle in a field after being chased by police. A backpack was recovered by police a short distance from where the crash occurred, inside of which were drugs, drug paraphernalia, and personal items. The defendant was charged with possession with intent to distribute marijuana and cocaine.

The backpack, along with other evidence, had mistakenly been destroyed during a routine purge of the evidence room. The trial court declined to instruct the jurors that, if they found that the state destroyed evidence, they could infer that the evidence destroyed was unfavorable to the state’s case.

The Court of Special Appeals affirmed, concluding that the destroyed evidence “was not critical to the defense and was not of a sort that usually would be subjected to forensic testing.” Id. at 631. Even if fingerprint evidence had been collected and was favorable to the defendant, it still would not have negated the evidence against him, i.e., that he was in possession of drugs with intent to distribute them. Id. at 631–32.

Here, after the phone was seized from Grymes’ jacket pocket, the police confirmed that it matched the description provided by Pumphrey and photographed the phone to preserve a record of certain of its identifying features. Then, in response to Pumphrey’s request, the phone was returned to him. Grymes did not present any evidence below that the police ordinarily would have preserved the phone or examined the voice mail and text messages prior to returning it to its rightful owner.

Also, as in Gimble, even if fingerprint evidence had been collected from the cell phone, it is not clear how this evidence could have exculpated Grymes. The absence of Pumphrey’s prints would not prove that the phone did not belong to him. Thus, the cell phone was not the type of evidence necessitating a missing evidence instruction and the trial court did not abuse its discretion in declining to give such an instruction.

PRACTICE TIPS: With one exception, all of the federal courts of appeal that have considered whether tenants of multi-unit apartment buildings have an objectively reasonable expectation of privacy in the common areas of their buildings have held they do not. See United States v. Hawkins, 139 F.3d 29, 32 (1st Cir.1998) (opining that “[i]t is now beyond cavil in this circuit that a tenant lacks a reasonable expectation of privacy in the common areas of an apartment building”); United States v. Barrios–Moriera, 872 F.2d 12, 14–15 (2nd Cir.1989) and United States v. Concepcion, 942 F.2d 1170, 1172 (7th Cir.1991) (no reasonable expectation of privacy in the hallway of an apartment building); United States v. Eisler, 567 F.2d 814, 816 (8th Cir.1977) (no reasonable expectation of privacy in common hallways of a locked apartment building); United States v. Nohara, 3 F.3d 1239, 1242 (9th Cir.1993) (no reasonable expectation of privacy in apartment hallway despite locked entrance with buzzer system); United States v. Miravalles, 280 F.3d 1328, 1333 (11th Cir.2002) (no reasonable expectation of privacy in the common area of a multi-unit apartment building without functioning locks).

Torts

Immunity

BOTTOM LINE: Under CJ §5–518, defendant, a county school board employee, was not completely immune from suit; rather, the board was required to indemnify and protect defendant from execution of a judgment against him.

CASE: Board of Education of Prince George’s County v. Marks-Sloan, No. 1447, Sept. Term, 2010 (filed Oct. 28, 2011) (Judges EYLER, J., Graeff & Rodowsky (retired, specially assigned)). RecordFax No. 11-1028-03, 13 pages.

FACTS: On Sept. 26, 2007, Norman Iglehart, an employee of Board of Education of Prince George’s County (the Board), was driving a school bus owned by the Board. Iglehart’s bus forced a motorcycle driven by Stephanie Marks–Sloan, a fellow Board employee, off the road. Marks-Sloane sustained injuries as a result of the accident.

After the accident, Marks-Sloane was awarded her medical expenses, temporary total disability, and attorneys’ fees from the Maryland Worker’s Compensation Commission (the Commission). Thereafter, Marks-Sloane filed suit in the circuit court against Iglehart, the Board and Prince George’s County (the County), alleging that she was injured as a result of Iglehart’s negligent driving and that the Board and the County were vicariously liable for Iglehart’s alleged negligence. By stipulation, the parties dismissed the claim against the County.

Iglehart and the Board filed a motion to dismiss, or alternatively for summary judgment. The circuit court denied the motion as to Iglehart and granted the motion as to the Board. Nevertheless, the court required the Board to remain a party to the litigation for the “purposes of any potential indemnification.”

Eventually, the parties entered into a partial settlement agreement. The parties agreed that Iglehart negligently caused the accident, and that a verdict would exceed $100,000. Thus, judgment was entered on behalf Ms. Marks-Sloan in the amount of $100,000 against the Board and Iglehart, pursuant to the CJ §5–518, and Iglehart was dismissed.

The Board and Iglehart then filed a motion to alter or amend judgment, which the court denied.

The Court of Special Appeals affirmed.

LAW: CJ §5–518(d) provides: “The county board shall be joined as a party to an action against a county board employee,…that alleges damages resulting from a tortious act or omission committed by the employee in the scope of employment.” Under CJ §518(e), a county board employee acting within the scope of employment, without malice and gross negligence, is not personally liable for damages resulting from a tortious act or omission. CJ §5–518(h) provides: “[A] judgment in tort for damages against a county board employee acting within the scope of employment,…shall be levied against the county board only and may not be executed against the county board employee.”

Iglehart was acting in the scope of his employment at the time of the accident, and it was not alleged that his action rose to the level of malice or gross negligence. As a result, it was undisputed that Iglehart was “not personally liable for damages.”

The Board and Iglehart read §5–518(e) expansively to provide complete immunity from suit and judgment in tort to employees like Iglehart, and accordingly, they maintain that the tort action against him should have been dismissed with prejudice.

Ms. Marks-Sloan, however, contended that §5–518(e), together with other language in the statute, provides that employees of county boards of education are immune only from the ultimate financial consequences of their torts and, accordingly, are to be indemnified by their employers for tort damages.

Under the Local Government Claims Act, CJ §5–303(b)(1), a local government is liable for any judgment against its employee for damages resulting from the employee’s tortious acts or committed within the scope of employment.

CJ §5–302(b)(1) provides that a person may not execute against an employee of a local government on a judgment rendered for tortious acts or omissions committed by the employee within the scope of employment.

Together, these provisions make clear that in a tort action against a local government employee, a plaintiff may bring the claim against the responsible employee, and a judgment may be entered against the employee. The plaintiff may not execute on the judgment, however, and the local government employer must satisfy the judgment. See DiPino v. Davis, 354 Md. 18, 49 (1999).

A different scheme, and thus, a different type of limitation on employee liability is found in the Maryland Tort Claims Act.

Pursuant to SG §12–104, subject to exclusions and limitations, “the immunity of the State and of its units is waived as to a tort action.” Pursuant to CJ §5–522(b), state personnel are immune from suit and from liability in tort for a tortious act or omission that is within the scope of the public duties of the State personnel and is made without malice or gross negligence.

The Court of Appeals has explained this provision as completely precluding tort actions against state personnel who come within its terms; instead, such claims must be brought directly against the State. Smith v. Danielczyk, 400 Md. 98, 131 n. 11 (2007). Under cases governed by the Maryland Tort Claims Act, the State of Maryland is the proper party throughout tort litigation when the tortfeasor is a protected employee acting in the scope of employment.

As a recipient of a workers’ compensation award, Marks-Sloane cannot bring a suit in negligence directly against her employer, the Board, but no such barrier prevented her from bringing suit against a co-employee such as Iglehart. Hill v. Knapp, 396 Md. 700, 711 (2006).

As a result, if §5–518 operates like the Maryland Tort Claims Act rather than the Local Government Tort Claims Act, Iglehart would be immune from suit and Marks-Sloane would have to proceed directly against the Board. The Board would not be liable, however. In contrast, if §5–518 operates like the Local Government Tort Claims Act, Iglehart is not immune from suit but the Board must indemnify him with respect to damages.

The statutory scheme governing the tort liability of County Boards of Education employees had its genesis in 1985. 1985 Laws of Md., ch. 666. In that year, Governor Harry Hughes signed into law House Bill 940, which then became ED §4–105.1. This statute was subsequently amended, expanded and reenacted as CJ §5–518. It contained language that was functionally equivalent to the current statute.

Delegate Lucille Maurer sent to the Director of Legislative Services her draft of what became ED §4–105.1. In the initial draft, the purpose was stated as: “[J]oining the county board as a party in any tort claims against any member, employee, or volunteer; limiting the liability of county board personnel and making only the county board liable for certain tort judgments.” The Fiscal Note on House Bill 940 states that “[a] judgment for damages must be made against the county board only.”

The Maryland Tort Claims Act was enacted in 1981. Accordingly, the legislature in 1985 was aware of that act’s language, purpose, and function when it drafted ED §4–105.1. The legislature clearly did not interpret the Maryland Tort Claims Act as applying to employees of county boards, as evidenced both by the creation of a separate statute and by the legislative history for ED §4–105.1.

The legislature’s intent was that an employee is not granted immunity from suit under CJ §5–518 but rather is indemnified and protected from paying damages by the Board. Under CJ §5–518(d)(1), the employer board must be joined, not substituted, in tort actions against its employees. An employee is “not personally liable for damages.” CJ §5–518(e). Subsection (h) contemplates a judgment against the employee but provides that it may not be executed against the employee.

Finally, when the legislature enacted the Local Government Tort Claims Act in 1987, it expressly barred suits in tort against co-employees by plaintiffs who have received workers’ compensation awards. Under CJ §5–302(c), “[if] the injury sustained is compensable under the Maryland Workers’ Compensation Act, an employee may not sue a fellow employee for tortious acts or omissions committed within the scope of employment.” There is no similar provision applicable to County Boards of Education.

PRACTICE TIPS: Generally, a party cannot appeal from a consent judgment, Suter v. Stuckey, 402 Md. 211, 222 (2007), except where the parties agreed to the value of the claim but could not agree as to liability or the terms of the judgment that the court entered.