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Opinions – 3/14/13: Maryland Court of Appeals

Environmental law

Public notice requirement 

BOTTOM LINE: In prosecution of defendant for illegal use of hydraulic clam dredge in an submerged aquatic vegetation protection zone, Maryland Department of Natural Resources was required to prove as element of its case its compliance with statutory “public notice” provision requiring publication of delineations of protection zones, and failure to do so rendered defendant’s conviction invalid.

CASE: Lowery v. State, No. 26, Sept. Term, 2012 (filed Feb. 28, 2013) (Judges Bell, Battaglia, GREENE & Adkins) (Judges Harrell, Barbera & McDonald dissenting). RecordFax No. 13-0228-21, 43 pages.

FACTS: Section 4-1006.1(e)(3) of the Natural Resources Article (“NR”) requires that the Maryland Department of Natural Resources (“DNR”) publish, by public notice, delineations of submerged aquatic vegetation (“SAV”) protection zones and revisions to SAV protection zones. An SAV zone is an area within a body of water set aside, or delineated, by DNR where the use of certain commercial fishing equipment is prohibited in order to protect the growth of submerged aquatic vegetation, or sea grass, on the floor of the body of water. In the present case, the defendant, Edward Lowery, contended that the DNR failed to fulfill this obligation, and that this failure served as a defense against his prosecution for the illegal use of a hydraulic clam dredge in an SAV protection zone in violation of NR §4-1006.1.

Lowery was a waterman with a commercial license, issued by the DNR, to harvest clams. On June 17, 2011, Lowery was operating a boat and clamming in or near Cook’s Point Cove in Dorchester County. As Lowery was clamming, he was approached by Natural Resources Police Sergeant Randall Bowman. Sgt. Bowman cited Lowery for using a hydraulic clam dredge (“HCD”) in an SAV protection zone in violation of NR §4-1006.1(f), which provides that a person may not use certain gear, including a hydraulic clam dredge, in an SAV protection zone.

In 1998, the Maryland General Assembly enacted NR §4-1006.1(e), so as to provide that DNR: (1) Shall utilize buoys or other visible landmarks as appropriate to mark SAV protection zones; (2) May make revisions to the delineations of SAV protection zones at any time if determined to be necessary; and (3) Shall publish, by public notice, delineations of SAV protection zones and revisions to SAV protection zones.

On September 21, 2011, the district court convicted Lowery, finding him guilty of violating NR §4-1006.1. Lowery appealed his conviction to the circuit court, which concluded that Lowery was guilty.

Because the circuit court had served as an appellate court, Lowery appealed directly to the Court of Appeals, which reversed and remanded.

LAW: Lowery did not contest the trial court’s determination that he used an HCD in an AV zone. Rather, he contended he could not be prosecuted because DNR failed to fulfill its obligation, pursuant to NR §4-1006.1(e)(3), to “publish, by public notice, delineations of SAV protection zones and revisions to SAV protection zones.”

To discern what DNR must publish, it was necessary to determine the meaning of the two key words in that phrase, “delineations,” and “revisions.”

Because these terms were not defined in the statute, it was necessary to turn to a dictionary that was contemporaneous with the drafting and enacting of the language in the statute giving rise to the obligation. See Harvey v. Marshall, 389 Md. 243, 260-61 (2005). From the dictionary definitions, the plain meaning of the phrase was clear and unambiguous. “Delineation” is defined as the act of representing, portraying, or describing (as by lines, diagrams, sketches), or by accurate and precise graphic representation as distinguished from that which is careless or sketchy as to details, something (as a diagram, picture, description) made by delineating. Webster’s Third New International Dictionary of the English Language Unabridged 597 (2002).

Thus, an accurate and precise graphic representation or a representation made by diagram would likely be a map or chart of the SAV zones. A representation made with accuracy and minute attention to detail could be a written description, but would have to include specific detail or the precise coordinates of the SAV zones.

The dictionary further defines the word “revise” as “to make a new, amended, improved, or up-to-date version of.” Webster’s Dictionary at 1944. Looking at the definition of the word “revisions” within the phrase “publish, by public notice, delineations of SAV protection zones and revisions to SAV protection zones,” the logical interpretation is that it refers back to delineations and means new, amended, improved, up-to-date, or corrected delineations of an SAV zone. Thus, NR §4-1006.1(e)(3) requires DNR to publish maps or written descriptions with specific details of SAV zones. In addition, the statute requires DNR to publish new, amended, improved, up-to-date, or corrected versions of the same.

Because the meaning of the language was unambiguous, it was unnecessary to engage in further analysis of what was required of DNR.

At trial, the State offered a number of exhibits, but the only evidence submitted of DNR’s publication of notice about the location of the SAV zone in Cook’s Point Cove was the public notice entered as State’s Exhibit 12 (“the 2003 Public Notice”).

The 2003 Public Notice contained three pieces of information: first, DNR stated that the new SAV zones were effective at 12:01 a.m. on Friday, August 1, 2003; second, the public notice indicated that there was an SAV zone in, among other places, Cook’s Point Cove; and third, the public notice listed the names and contact information for two DNR employees, from whom members of the public could obtain the specific location of the SAV zones. None of these constituted “delineations” or “revisions” of SAV zones.

Thus, DNR did not comply with NR §4-1006.1(e)(3). The 2003 Public Notice did not specify where a waterman could use an HCD. From the list of DNR employees, the public would know where to obtain information about the specific locations of the SAV zones. However, DNR was statutorily required to publish not simply information about where the public can obtain delineations of and revisions to SAV protection zones, but to publish the actual delineations and revisions to the public.

Violation of NR §4-1006.1 is not a strict liability crime. Therefore, because the State did not establish that DNR complied with NR §4-1006.1(e)(3), Lowery’s conviction for violating NR §4-1006.1 could not stand. Accordingly, the judgment of the circuit court was reversed.

COMMENTARY: Construction of a statute which would render the statutory language, and its underlying purpose, surplusage, is a result which courts strive to avoid. See Hirsch v. Dep’t of Natural Resources, 288 Md. 95 (1980). To interpret NR §4-1006.1 as not requiring the State to establish as an element of its case that DNR published “delineations” and “revisions” of the SAV zones, NR §4-1006.1(e)(3) would be rendered meaningless and the language superfluous. To ensure that subsection (e)(3) is not rendered meaningless, when prosecuting a violation of NR §4-1006.1, the State, in its prima facie case, must establish that DNR complied with NR §4-1006.1(e) in addition to proving that a person was using prohibited equipment in an area that had been delineated as an SAV zone. See id. Similarly, the prohibition upon the use of HCDs and other prohibited equipment listed in NR §4-1006.1 (f) is ineffective unless DNR complies with NR §4-1006.1(e)(3)’s publication requirements.

DISSENT: As typically applied in other Maryland regulations calling for “public notice,” the term “public notice” does not generally require that an entire proposal, decision, or document appear verbatim in the “public notice.” Thus, here, it was reasonable to conclude that DNR was not required to print the coordinates for every SAV zone in the State in its public notice concerning the adoption or revision of SAV delineations. Nothing in the legislative history of the SAV protection law suggested that a public notice concerning the delineation or revision of SAV zones was itself to contain the a map or the precise coordinates of all of those zones.

Torts

Compensatory damages 

BOTTOM LINE: Even though defendant’s counsel conceded liability and, in opening and closing arguments at trial, stated to the jury that defendant would pay whatever the jury awarded, defendant did not waive its right to appeal the award for compensatory damages.

CASE: Exxon Mobil Corp. v. Ford, et al., No. 16, Sept. Term 2012 (Filed Feb. 26, 2013) (Judges Bell HARRELL, Battaglia, Greene, Barbera, McDonald & Eldridge (retired, specially assigned)). RecordFax No. 13-0226-21, 70 pages.

FACTS: In this companion case brought by residents of Jacksonville, Maryland, against Exxon Mobil Corporation for an underground gasoline leak from an Exxon Mobil-owned gasoline service station in January 2006, Plaintiffs, composed of eighty-four households, sought compensatory and punitive damages based on allegations of fraudulent concealment, intentional infliction of emotional distress, strict liability, trespass, private nuisance, and negligence. They sought punitive damages and three types of compensatory damages: (1) monetary damages for diminution in the fair market value of their real property; (2) non-economic damages for emotional distress, including fear of contracting cancer; and (3) damages for the costs of future medical monitoring.

Liability was not contested by Exxon, so the trial focused on whether any Plaintiffs suffered compensable injuries as a proximate result of the leak and, if so, what compensatory damages should be awarded. The jury was asked also whether Exxonwas liable for fraud warranting the award of punitive damages.

In March 2009, the jury returned a verdict in favor of Exxon with respect to the fraudulent concealment and punitive damage claims, but found in favor of plaintiffs as to all other claims for compensatory damages. The jury found that each of the plaintiffs’ properties was worthless, and awarded monetary damages for diminution of real property value in an amount equal to the full value of the properties before the leak. The jury also awarded to all plaintiffs non-economic damages for emotional distress, including fear of contracting cancer and damages for the cost of future medical monitoring. Generally, in households with children, the awards for the adults were reduced by the amount of the awards for the minors. The total amount of damages awarded to Plaintiffs was approximately $147 million.

Exxon filed six post-judgment motions for judgment notwithstanding the verdict, for a new trial, or for remittitur, challenging the property damage awards, the emotional distress awards, and the damages for medical monitoring, based on various grounds. Although Judge Baldwin denied each motion, he reduced the awards for non-economic damages for four plaintiffs because of the applicable statutory cap of $665,000. Plaintiffs filed a motion arguing that Exxon should be estopped from challenging the jury verdicts because of seemingly concessionary statements made by its counsel during opening and closing arguments; however, the circuit court denied the motion.

Exxon appealed to the Court of Special Appeals, which left about $60 million in property damages intact but largely reversed the rest of the awards.

Plaintiffs appealed to the Court of Appeals, which affirmed in part and reversed in part.

LAW: Plaintiffs contended that Exxon’s counsel waived Exxon’s right to appeal the compensatory damages awards when he made certain statements during opening and closing arguments. According to Plaintiffs, Exxon’s waiver arose when Exxon sought a “quid pro quo” arrangement with the jury, promising the jury that Exxon would pay any compensatory damages awarded in exchange for the jury’s decision not to award punitive damages. Plaintiffs contended that, in his opening statement, Exxon’s counsel “made it abundantly clear that the trial was not about compensatory damages but was about punitive damages.”

Plaintiffs’ claim relied also on the following excerpts of Exxon’s closing argument to the jury: “[W]e accept responsibility to pay for whatever damages you find occurred here, that’s not blaming somebody else. That’s saying it’s us. We’ve taken responsibility. We pay.” Regarding the compensatory damages for diminution in property value, Exxon’s attorney told the jury, also in his closing argument: “I do not want you to award even a dollar less than the amount you think it takes to make it right for each plaintiff household that you determine is actually harmed.” These statements, Plaintiffs contended, amounted to Exxon forfeiting its right to appeal by its counsel’s anticipatory acquiescence to the jury’s verdict.

Waiver is conduct from which it may be inferred reasonably an express or implied “intentional relinquishment” of a known right. Gould v. Transamerican Assocs., 224 Md. 285, 294 (1961). “The doctrine of acquiescence — or waiver — is that a voluntary act of a party which is inconsistent with the assignment of errors on appeal normally precludes that party from obtaining appellate review.” Bd. of Physician Quality Assurance v. Levitsky, 353 Md. 188, 200 (1999). A party’s right to appeal may be waived only “where there is acquiescence in the decision from which the appeal is taken or by otherwise taking a position inconsistent with the right to appeal.” Grandison v. State, 305 Md. 685, 765 (1986). The waiver doctrine applies only to conduct that is necessarily “inconsistent” with the right to appeal. Downtown Brewing, 370 Md. at 149. “To take actions that are necessarily inconsistent with challenging a judgment, a party must have knowledge of the nature and effect of the judgment.” Boyd v. Bowen, 145 Md. App. 635, 666 (2002).

A waiver of a right to appeal was warranted where a party accepted a condemnation award in the underlying proceeding, but later sought to appeal that same judgment. See Downtown Brewing, 370 Md. at 151. “[T]he right to appeal may be lost by acquiescence in, or in recognition of, the validity of the decision below from which an appeal is taken.” Id. at 149. Moreover, waiver by acquiescence is limited to a party’s post-judgment conduct. Except for consent to a judgment, the Court has not applied waiver by acquiescence to conduct before entry of judgment, namely because a party cannot relinquish knowingly a right to appeal the nature and effect of a judgment before that judgment is known and entered. Boyd, 145 Md. App. at 666.

Here, a reasonable view of the closing argument of Exxon’s counsel was that, by counsel saying “we pay,” Exxon’s counsel asserted only his client’s intention to take responsibility for its actionable and proven conduct affecting adversely Plaintiffs. Counsel’s other statements, taken within their context, urged the jury to award an appropriate compensatory award based on the properly admitted evidence at trial and proper jury instruction. Counsel’s arguments illustrate strategic advocacy, rather than a blatant offer of a quid pro quo arrangement with the jury to avoid a punitive damage award.

In any event, the conduct of Exxon’s counsel occurred before the rendition of the jury’s verdict and entry of judgment, and thus it is unreasonable for Plaintiffs to argue that Exxon could relinquish knowingly the right to challenge the jury’s decision. As there was no implicit or express consent to the jury’s actual judgment, the conduct of Exxon’s counsel was not inconsistent with the Exxon’s right to appeal the final judgment, and therefore did not amount to Exxon’s waiver of the right to appeal.

Accordingly, the judgment of the Court of Special Appeals was affirmed.

COMMENTARY: Exxon argued that the trial court erred in denying its motion for JNOV regarding damages for medical monitoring.

To sustain an award for recovery of medical monitoring costs, a plaintiff must show that such costs are necessary due to a reasonably certain and significantly increased risk of developing a latent disease as a result of exposure to a toxic chemical. Albright, ___ Md. at ___, ___ A.3d at ___ (slip op. at 86-87). In determining whether to award relief, a court must consider whether the plaintiff has shown: (1) that the plaintiff was exposed significantly to a proven hazardous substance through the defendant’s tortious conduct; (2) that, as a proximate result of significant exposure, the plaintiff suffers a significantly increased risk of contracting a latent disease; (3) that increased risk makes periodic diagnostic medical examinations reasonably necessary; and (4) that monitoring and testing procedures exist which make the early detection and treatment of the disease possible and beneficial. Id. (slip op. at 86-87). To determine what is a “significantly increased risk of contracting a latent disease” for a particular plaintiff, the plaintiff must present quantifiable and reliable medical expert testimony that indicates the individual plaintiff’s particularized chances of developing the disease had he or she not been exposed, compared to the chances of the members of the public at large of developing the disease. Id. (slip op. at 83-84).

Here, the jury awards indicated that if, at any point in time, a household’s potable well had a MTBE reading above 0.5 ppb, the members of that household received 100% of his or her claimed costs for future medical monitoring; if the MTBE reading was less than 0.5 ppb, that individual received 50% of his or her claimed costs for future medical monitoring; and, lastly, if a household’s potable well never tested positively for MTBE, each member of that household nonetheless received 25% of his or her claimed future medical monitoring costs.

Tests of the potable wells on the all properties showed that seventeen properties did not suffer any contamination as a result of the leak. Monitoring well results showed that benzene levels above the action level were found only in five of the Plaintiffs’ potable wells, while six of the properties contained contamination above the MTBE action level.

Those Plaintiffs who owned and/or resided on properties where the potable well lacked any contamination failed to show exposure to a toxic substance, which is a threshold requirement to recover for medical monitoring. Although one of Plaintiffs’ hydrogeologist experts testified that the potential for future contamination of these non-detect properties was possible, he could not predict which well or wells might become contaminated in the future or when. The possibility of future contamination for these non-detect properties was therefore too speculative. Thus, with respect to these claims, the trial court erred in denying Exxon’s’ motion for JNOV.

Torts

Sufficiency of evidence of fraud 

BOTTOM LINE: The circuit court erred by denying defendant’s motion for judgment notwithstanding the verdict of fraud because plaintiffs failed to establish that they detrimentally relied on defendant’s alleged misrepresentations.

CASE: Exxon Mobil Corp. v. Albright, et al., No. 15, Sept. Term 2012 (Filed Feb. 26, 2013) (Judges Bell HARRELL, Battaglia, Greene, Barbera, McDonald & Eldridge (retired, specially assigned)). RecordFax No. 13-0226-20, 132 pages.

FACTS: Due to pre-existing contamination of the underground water supply stemming from prior leaks in the Jacksonville area, the Baltimore County Office of Permits and Licenses initially denied Exxon’s request to construct a new gasoline fueling station in the community. Exxon appealed to the Baltimore County Board of Appeals.

At a hearing before the Board in August 1983, an environmental engineering specialist for Exxon, Frederick Anderson, testified regarding, among other things, the ongoing remediation efforts for the three prior spills in the community. Anderson described the containment prevention features of the proposed underground fuel storage system at the new station, stating that Exxon was “planning to really take some extraordinary measures” in constructing the underground storage system. Specifically, he asserted that Exxon planned to construct secondary containment measures at the Jacksonville Exxon station, including (1) fiberglass tanks and fiberglass lines; (2) sloped concrete troughs under the product lines running from the dispensers back to the tank field; (3) a polymer-coated polyester lining under the entire tank field; and (4) an observation well that would extend nearly to the bottom of the tank field. In response to concerns regarding potential repeated contamination in the wake of the prior gasoline leaks, Anderson opined that the proposed Jacksonville design ensured that the station would not be a source of contamination.

The Board granted Exxon the construction permit in October 1983. During the construction process, Exxon elected to depart from the containment design plans described by Anderson. Rather than installing the tank field liner and single-walled tanks, Exxon installed instead newly-available, double-walled, fiberglass Buffhide tanks, fabric-lined product lines, and a plastic overliner.

The Jacksonville Exxon station opened for business in November 1984. The station was retrofitted with additional protective features in 1992, made in response to enactment of amendments in 1990 to the federal Clean Air Act. Evidence was submitted at trial suggesting that, during the retrofitting construction, the plastic overliner containment system was destroyed and was not repaired subsequently. Nevertheless, the Jacksonville Exxon station was operated for its owner by Storto Enterprises, Inc. without a harmful incident for over twenty years.

On January 13, 2006, an employee from Crompco Corporation, an Exxon contractor, drilled unknowingly, while performing maintenance on a containment sump, a hole in the underground fiberglass “regular grade” gasoline feed line leading from one of the gasoline storage tanks to the pumps. This hole was detected duly by an electronic leak detection system, which signaled an alarm inside the station and at the central monitoring service, Gilbarco Veeder-Root, indicating a catastrophic line failure. The leak detection system shut down automatically the regular unleaded gasoline product line. Contractors from Alger Electric, Inc. investigated the cause of the alarm and concluded (incorrectly) that no actual leak existed. Rather, the technicians concluded that the alarm resulted from a problem with a submersible pump motor. After replacing the motor, the Alger technicians recalibrated the leak detection system (incorrectly), such that the alarm system could no longer detect the actual leak when the fuel system was reactivated.

As a result of this confluence of events, the leak continued uninterrupted without activating the alarm system. Andrea Loiero, the station operator, noticed inventory discrepancies following the incident. She testified that, although she realized in January that she had an inventory problem, she did not know that the daily inventory variances resulted from a leak. On February 16, 2006, Loeiro reported the discrepancies in her gasoline inventory to Exxon employee Russ Bowen, at which time the fuel system was shut down and the station closed. A sign posted on the property stated, “Please excuse our appearance, we are working to serve you better. Fueling facilities are temporarily closed for upgrade.” Following a manual precision line test, which the regular gasoline line failed, Exxon reported the gasoline release to the Maryland Department of the Environment (MDE), informing it of both the leak and the lost product amount. By then, over 26,000 gallons of gasoline were released into the underground environment by the Jacksonville Exxon station.

Plaintiffs filed suit initially in the circuit court for Baltimore County alleging, inter alia, that Exxon perpetuated an ongoing fraud designed to deceive both public authorities and members of the community, beginning in 1983 with the construction of the containment system and continuing through the remediation efforts following the discovery of the leak. In support of their allegations, Plaintiffs presented evidence regarding six specific instances of alleged fraud: (1) Anderson’s 1983 testimony before the Board of Appeals (construction fraud); (2) failure to inform the MDE that the 1992 retrofitting of the station, pursuant to the Clean Air Act, would involve destruction of the overliner (1992 permit fraud); (3) the posting of a misleading sign outside of the Jacksonville Exxon following the discovery of the leak (sign fraud); (4) a 2001 statement by Exxon to the MDE representing that the underground piping at the Jacksonville Exxon was double-walled piping, when actually it was single-walled piping (2001 double-walled piping fraud); (5) inaccuracies in remediation reports regarding the quantity of leaked product recovered and the alleged flow of the leak (remediation fraud); and (6) deception of the MDE during the remediation process.

Additionally, Plaintiffs sought emotional distress damages for fear of contracting cancer, as well as relief in the form of medical monitoring costs, stemming from their alleged actual or future exposure to gasoline constituents.

The jury returned verdicts for 466 plaintiffs on all causes of action amounting to a total compensatory damages award of $496,210,570 and punitive damages totaling $1 billion. Exxon filed motions for judgment notwithstanding the verdict and for a new trial and/or remittitur, which were denied. Exxon appealed to the Court of Special Appeals. Before the intermediate appellate court could decide the appeal, the Court of Appeals granted certiorari.

LAW: In reviewing a trial court’s denial of a motion for judgment notwithstanding a verdict for fraud, the Court must determine whether “there is any evidence adduced, however slight…from which reasonable jurors, applying the appropriate standard of proof, could find in favor of the plaintiff on the claims presented.” Hoffman v. Stamper, 385 Md. 1, 16 (2005). The trial court’s decision is reviewed to “determine whether it was legally correct, while viewing the evidence and the reasonable inferences to be drawn from it in the light most favorable to the non-moving party.” Scapa Dryer Fabrics, Inc. v. Saville, 418 Md. 496, 503 (2011). The denial of a motion for judgment notwithstanding the verdict will be reversed “only if the facts and circumstances permit but a single inference as relates to the appellate issue presented.” Jones v. State, 425 Md. 1, 31 (2012).

Thus, because fraud must be proven by clear and convincing evidence, Hoffman, 385 Md. at 16, reversal of the trial court’s denial of the motion for judgment notwithstanding the verdict is only appropriate when, looking at the evidence in the light most favorable to Plaintiffs, it is determined that Plaintiffs did not meet their burden of establishing fraud by clear and convincing evidence.

At trial, Plaintiffs alleged on Exxon’s part a continuous course of fraudulent conduct continuing over approximately thirty years, based on six specific instances. Exxon challenged the legal sufficiency of the jury’s verdict as to three of those instances — the 1983 construction fraud, 1992 permit fraud, and 2001 double-walled piping fraud — on the grounds that the jury relied improperly on a theory of third party reliance, which Exxon contends is not recognized under Maryland law.

To establish fraud, a plaintiff must prove by clear and convincing evidence that “(1) the defendant made a false representation to the plaintiff, (2) the falsity of the representation was either known to the defendant or the representation was made with reckless indifference to its truth, (3) the misrepresentation was made for the purpose of defrauding the plaintiff, (4) the plaintiff relied on the misrepresentation and had the right to rely on it, and (5) the plaintiff suffered compensable injury as a result of the misrepresentation.” Hoffman, 385 Md. at 28. Exxon took issue with the trial court’s jury instructions on reliance, which read, in relevant part, that, in order to recover damages for fraud, Plaintiffs need only prove that Exxon “intended the Plaintiffs or Baltimore County or the State of Maryland would act in reliance on [its false] statements” and that “the Plaintiff or Baltimore County or the State of Maryland did justifiably rely on the representations of the Defendant.”

Exxon argued that Plaintiffs failed to prove by clear and convincing evidence the remaining three instances of alleged fraud: (1) sign fraud; (2) remediation fraud; and (3) remediation fraud in allegedly misleading affirmatively the MDE. Specifically, Exxon contended that, of the approximately 125 Plaintiffs who testified that they saw the misleading sign, most did not provide any testimony lending itself to establishment of any detrimental reliance or change in their water consumption habits. Additionally, although 459 Plaintiffs received awards for remediation fraud either personally or on the basis of the MDE’s reliance, Exxon argued that at least 300 of these Plaintiffs did not offer any testimony mentioning the alleged remediation fraud in the first instance, no Plaintiff proved detrimental reliance, and Plaintiffs provided insufficient evidence to demonstrate that the MDE relied on any false statements.

A false statement by a defendant does not alone provide a sufficient basis to support a cause of action for fraud. Rather, the plaintiff must prove by clear and convincing evidence that he or she relied on the allegedly fraudulent statement to his or her detriment. See Hoffman, 385 Md. at 28. Here, Plaintiffs’ failure to demonstrate detrimental reliance was fatal to their claims. Very few Plaintiffs testified that they continued to use their well water after seeing the sign because they presumed the sign was correct, that they altered their water consumption following the discovery that the sign was misleading, or that they would have altered immediately their water consumption had the content of the sign been accurate at its installation. For example, many Plaintiffs who asserted that they saw the sign did not begin using bottled water or install purification systems until well after the leak was publicized and the sign removed, therefore negating any claim that their continued consumption of potentially contaminated water resulted from the sign’s inaccuracy. Thus, even though 186 Plaintiffs saw the sign, very few demonstrated reliance.

Of those Plaintiffs that claimed to have relied on the misleading sign, none established injury or damages as a result of such reliance. Plaintiffs either did not have demonstrable contamination of their wells stemming from the leak until months after Plaintiffs learned about the leak, or never had a positive well test for contamination. Thus, no Plaintiff proved by clear and convincing evidence any resulting injury from consuming contaminated water during the five-day period during which the sign was displayed. As a result, Plaintiffs failed to establish a cause of action for fraud based on the posting of the “misleading” sign. The sign fraud verdicts as to all Plaintiffs were therefore reversed.

The concept of remediation fraud appeared to encompass various subtheories premised mainly on actions taken by Exxon during the remediation process. Plaintiffs pointed to a number of Exxon’s representations, including recovery estimates of gasoline proclaimed by Exxon, which later proved to be incorrect and were amended by a subsequent recovery estimate; statements made by Exxon officials predicting that the contamination would migrate, and thus be contained generally, to a “strike line” within a half-mile radius of the station, which was proved incorrect later; representations concerning the safety of the state action level for contamination; Exxon’s decision to deliver or discontinue the delivery of bottled water; and, the decision of where to drill monitoring wells and sample for contamination.

It was concluded that the Plaintiffs’ claims for remediation fraud lacked sufficient proof. Specifically, some Plaintiffs never established that the source of their impressions related to the remediation efforts was a representation made by Exxon Mobil, nor that any statement allegedly relied upon was false, let alone intentionally so. Others relied on opinions or predictions regarding where the contamination would flow in the aquifer to form the basis for their fraud claims, which is an insufficient basis for fraud. See, e.g., Babb v. Bolyard, 194 Md. 603, 609 (1950).

Most claims, however, suffered in particular from an insufficient showing of detrimental reliance, as most Plaintiffs did not demonstrate any change in behavior resulting from any of the allegedly false statements. Moreover, many Plaintiffs disclaimed expressly reliance on Exxon’s statements, testifying that they knew immediately of the gasoline release or thought Exxon was understating the severity of the leak. Additionally, many of the Plaintiffs who recovered for remediation fraud never experienced a positive well test for contamination, thereby undercutting conclusively any contention that false representations regarding recovery estimates, predicted migration of contaminants, necessity for bottled water, and locations of monitoring wells caused any harm. Further, most Plaintiffs offered no evidence that their period of alleged reliance on Exxon’s representations caused any damage, and some did not switch to bottled water after discovering contamination in their water supply. Bare contamination of a well or brief consumption of water containing contaminants at or below the MDE and EPA action levels is not, without more, sufficient to support detrimental reliance.

Plaintiffs’ proof, rather than proving fraud, demonstrates a general dissatisfaction with Exxon’s remediation efforts. The shortcomings in Exxon’s remediation efforts (and reporting) simply did not rise to the level of fraud, however. Not only was the decision of where and when to test or install monitoring wells directed by the MDE, but many of the allegedly fraudulent statements made by Exxon were statements of opinion and prediction reflecting the available knowledge at the time. Plaintiffs attempt to paint Exxon as attempting intentionally to deceive Jacksonville residents at every turn with a callous disregard for their health and safety, yet provided little but speculation as to Exxon’s actual knowledge during the remediation process. In the absence of such proof, the Court reversed the jury’s verdict for all Plaintiffs as to the two asserted types of remediation fraud.

Accordingly, the award to Plaintiffs of punitive damages was reversed as well, since punitive damages may be awarded only if a plaintiff proves at trial malice, ill will, or intent to injure. See, e.g., Ellerin v. Fairfax Savings, F.S.B., 337 Md. 216, 228-29 (1995) (noting that Maryland law restricts recovery of punitive damages to situations where the defendant acted wrongfully intentionally).

COMMENTARY: In the absence of personal reliance, Plaintiffs asserted an attenuated third-party reliance theory under which they claimed that they did not need to show any evidence of actual, personal reliance in order to establish fraud. Rather, they claimed, a cause of action for fraud may be successful under a theory of third-party reliance by demonstrating that Exxon made intentionally or recklessly a false statement to public officials, which the public officials then relied on to the ultimate detriment of the Plaintiffs — rather like fraud on the people’s government constitutes fraud on the people. Exxon, by contrast, contended that Maryland law requires that a plaintiff prove he had knowledge of, and relied upon, a misrepresentation on a direct and personal basis.

Ordinarily, a plaintiff seeking recovery for fraud must prove that “the defendant…made a false representation to the person defrauded.” Gourdine v. Crews, 405 Md. 722, 759 (2011).

Here, there was no dispute that (1) Exxon did not direct any of these three allegedly fraudulent representations to any of the Plaintiffs; and (2) none of the Plaintiffs relied personally on the three allegedly fraudulent misrepresentations. None of the Plaintiffs contended that they were present at the 1983 meeting of the Board of Appeals at which Anderson testified, knew about the 1992 permit application, or saw, prior to the leak, the 2001 MDE document representing that the Exxon station employed double-walled piping.

Maryland law does not permit a third party to recover damages for fraud purely on the basis of a false statement made to a governmental entity. Plaintiffs argued that such an interpretation, in effect, immunizes corporate deceit to governmental officials. However, government is capable and empowered generally to take action in such instances to protect its interests and those of the public. Other parties meeting the elements of fraud may proceed properly on such an action if they so choose. Plaintiffs, however, purely by virtue of being residents in the area, without more, could not maintain an action for fraud based on false statements for which they had admitted no direct, indirect, or personal reliance. Thus, to the extent the jury verdict was dependent on the 1983 construction fraud, the 1992 permit fraud, and the 2001 double-walled piping fraud claims, it was unsupported.

PRACTICE TIPS: A defendant’s tortious conduct does not have to produce necessarily a physical impact for a plaintiff to recover emotional distress damages. A plaintiff must prove, however, a “clearly apparent and substantial physical injury” in one of four ways: (1) an external condition; or (2) symptoms of a resulting pathological; (3) physiological; or (4) mental state. Bowman v. Williams, 164 Md. 397, 404 (1933).