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Law Digest — 4th US Circuit, Md. Court of Special Appeals — March 3, 2022

U.S. Court of Appeals for the 4th Circuit

Consumer Protection; RESPA: Where a borrower’s letter to his loan servicer included the name, account number and other information that would enable the servicer to identify the account, and it explained why the borrower believed the account was in error, it constituted a qualified written request, or QWR, under the Real Estate Settlement Procedures Act, or RESPA. Morgan v. Caliber Home Loans Inc., Case No. 20-1745 (filed Feb. 22, 2022).

Criminal; Vagueness challenge: Where a defendant did not dispute that his conduct fell “squarely” within the confines of a federal firearms’ statute, he could not challenge that statute as vague. Both the Supreme Court and this court have held that a litigant whose conduct is clearly prohibited by a statute cannot be the one to make a vagueness challenge. United States v. Hasson, Case No. 20-4126 (filed Feb. 22, 2022).

Maryland Court of Special Appeals

Administrative; Standard of review: Where a procurement officer cancels a bid or request for proposal because it is not “fiscally advantageous or otherwise in the best interests of the State,” the Maryland State Board of Contract Appeals can reverse that decision only if it determines that it was unreasonable, arbitrary and capricious. Montgomery Park, LLC v. Maryland Department of General Services, Nos. 0035 and 0048, Sept. Term, 2021 (filed Feb. 23, 2022).

Civil Procedure; Default: Where the plaintiff filed an amended complaint with new substantive allegations while the motion to vacate a default as to the original complaint was pending, the amended complaint mooted the existing order of default as to the original complaint. Pomroy, et al. v. Indian Acres Club of Chesapeake Bay, Inc., No. 386, Sept. Term, 2021 (filed Feb. 23, 2022).

Zoning; Jurisdiction: Although a Planning Board has exclusive jurisdiction to approve or disapprove conceptual site plans, where the site plan is one component of a larger process of deciding whether to approve requested zoning changes, that ultimate decision is one that must be made by the District Council. City of Hyattsville, et al. v. Prince George’s County Council, et al., No. 1261, Sept. Term, 2020 (filed Feb. 23, 2022).

U.S. Court of Appeals for the 4th Circuit

Consumer Protection

RESPA

BOTTOM LINE: Where a borrower’s letter to his loan servicer included the name, account number and other information that would enable the servicer to identify the account, and it explained why the borrower believed the account was in error, it constituted a qualified written request, or QWR, under the Real Estate Settlement Procedures Act, or RESPA.

CASE: Morgan v. Caliber Home Loans Inc., Case No. 20-1745 (filed Feb. 22, 2022) (Judges THACKER, King) (Judge Richardson, dissents).

FACTS: The issue is whether letters sent by borrowers Rogers Morgan and Patrice Johnson to their loan servicer, Caliber Home Loans, constitute QWRs under RESPA or the related Consumer Financial Protection Bureau Regulation X, such that they triggered an obligation for Caliber to cease providing adverse information about appellants’ accounts to credit reporting agencies.

The district court concluded (1) the Morgan letter is not specific enough to constitute a QWR and (2) the Johnson letter is not a QWR because it “challenges only [appellee’s] stated denial for the loan modification,” which “does not implicate servicing of the loan.”

LAW: The district court erred by concluding the Morgan letter is not a QWR and does not “trigger[] RESPA’s prohibition on credit reporting” because it does not “dispute specific payments.” RESPA does not limit the reporting of overdue payments to disputes of specifically identified payments but includes any “qualified written request relating to a dispute regarding the borrower’s payments.” The Morgan letter is a QWR subject to RESPA, as it is “a written correspondence” that articulates a “statement of reasons” in “sufficient detail” to indicate to appellee why Morgan believed the credit reporting was in error.

Specifically, the Morgan letter includes the name, account number and other information that would “enable[] the servicer to identify” the account, and it includes “reasons for the belief of the borrower, to the extent applicable, that the account is in error.” Morgan described the conflicting balance information he had received from his employer’s reports, showing that he “owe[d] [appellee] $16,806,” and appellee’s representative, who allegedly identified the balance as “$30,656.89” in addition to “$630.00 on [his] record” for “late charges.”

Further, the district court erred by concluding the Morgan letter is not a QWR due to a “lack of specificity.” The Morgan letter is not a general or vague complaint. To the contrary, as noted, the Morgan letter includes an account number, as well as a reference to an agent and that agent’s ID number related to a specific phone call Morgan had with a representative of appellee to discuss the conflicting balance information.

The Morgan letter also details conflicting balance information received from appellee and the credit reporting service. Although the Morgan letter does not state which amount, if either, is the correct amount, this type of discrepancy is sufficient to indicate a dispute exists as to the servicing of loan.

However, correspondence limited to the dispute of contractual issues that do not relate to the servicing of the loan, such as loan modification applications, do not qualify as QWRs. The Johnson letter does not relate to any dispute of Johnson’s payments, or assert an error related to the servicing of the loan. Rather, the Johnson letter merely challenges the denial of a modification of the terms of Johnson’s loan. The only error alleged in the Johnson letter is denial of the loan modification based on title issues regarding the solar panel company lien. This does not fall within the ambit of “servicing” so as to trigger RESPA’s protections against providing adverse information to credit reporting agencies.

Affirmed in part, reversed in part and remanded.

DISSENT: I disagree that the Morgan letter constitutes a “qualified written request” triggering protection under RESPA. The Morgan letter fails to identify the believed error and provides no “statement of the reasons” for believing that unidentified error exists.

Criminal

Vagueness challenge

BOTTOM LINE: Where a defendant did not dispute that his conduct fell “squarely” within the confines of a federal firearms’ statute, he could not challenge that statute as vague. Both the Supreme Court and this court have held that a litigant whose conduct is clearly prohibited by a statute cannot be the one to make a vagueness challenge.

CASE: United States v. Hasson, Case No. 20-4126 (filed Feb. 22, 2022) (Judges Motz, Diaz, RUSHING).

FACTS: After unsuccessfully challenging the statute as unconstitutionally vague, Christopher Hasson pleaded guilty to violating 18 U.S.C. § 922(g)(3) by possessing firearms as someone “who is an unlawful user of or addicted to any controlled substance,” in addition to three related counts. At sentencing, the district court increased Hasson’s guidelines range pursuant to U.S.S.G. § 3A1.4 upon concluding that his offense was intended to promote a federal crime of terrorism, and the court sentenced him to 160 months’ imprisonment.

On appeal, Hasson contends that § 922(g)(3) is facially vague. He also argues that § 3A1.4 cannot apply because he was not convicted of a federal crime of terrorism and, in any event, the district court clearly erred in applying the provision.

LAW: Hasson again challenges 18 U.S.C. § 922(g)(3) as unconstitutionally vague on its face. But Hasson does not dispute the district court’s holding that his conduct “falls squarely within the confines of [section 922(g)(3)].” That abandonment dooms Hasson’s vagueness challenge. The Supreme Court and this court have repeatedly held that it must “consider whether a statute is vague as applied to the particular facts at issue, for ‘[a] plaintiff who engages in some conduct that is clearly proscribed cannot complain of the vagueness of the law as applied to the conduct of others.’”

According to Hasson, however, in Johnson v. United States, 576 U.S. 591 (2015), and Sessions v. Dimaya, 138 S. Ct. 1204 (2018), the Supreme Court repudiated this principle, and those decisions so “clearly undermined” this court’s precedents that they no longer bind this panel. The court disagrees. Neither Johnson nor Dimaya “explicitly question[ed] the rule that a litigant whose conduct is clearly prohibited by a statute cannot be the one to make a facial vagueness challenge.” Indeed, any suggestion that Johnson discarded that rule is foreclosed by Expression Hair Design v. Schneiderman, 137 S. Ct. 1144 (2017), in which, the term after Johnson, the Supreme Court applied the rule to deny a vagueness claim.

Even if this court were to view Johnson and Dimaya as instances in which the Supreme Court bypassed as-applied challenges to proceed directly to facial vagueness, their unique context sets them apart. Because Hasson does not contest that § 922(g)(3) clearly applies to his conduct, his attempt to assert a facial vagueness challenge fails.

Hasson also appeals his sentence—specifically, application of the terrorism adjustment, which more than tripled his guidelines range. Hasson mounts two challenges. First, he believes that U.S.S.G. § 3A1.4 is ultra vires to the extent it encompasses defendants not convicted of a federal crime of terrorism. Second, he contends that the district court summarily disregarded his expert’s findings and opinion that Hasson did not present a risk of violence and so the adjustment should not apply to him. The court disagrees with both contentions and therefore affirms Hasson’s sentence.

Affirmed.

Maryland Court of Special Appeals

Administrative

Standard of review

BOTTOM LINE: Where a procurement officer cancels a bid or request for proposal because it is not “fiscally advantageous or otherwise in the best interests of the State,” the Maryland State Board of Contract Appeals can reverse that decision only if it determines that it was unreasonable, arbitrary and capricious.

CASE: Montgomery Park, LLC v. Maryland Department of General Services, Nos. 0035 and 0048, Sept. Term, 2021 (filed Feb. 23, 2022). (Judges Fader, Berger, NAZARIAN).

FACTS: Montgomery Park LLC protested the Maryland Department of General Services’s, or DGS’s, decision to cancel a Request for Proposal, or RFP, for office space, that DGS had issued on behalf of the Maryland Insurance Administration, or MIA. Montgomery Park was the recommended awardee of the MIA lease, but DGS cancelled the RFP before presenting it to the Board of Public Works for approval. The DGS procurement officer denied Montgomery Park’s bid protest and Montgomery Park appealed to the Maryland State Board of Contract Appeals.

Montgomery Park also protested DGS’s decision to renew MIA’s lease with St. Paul Plaza Office Tower LLC on a sole-source basis. The DGS procurement officer denied this protest as well and Montgomery Park appealed to the Board again. The Board sustained both bid protests and DGS sought judicial review in the Circuit Court for Baltimore City. The circuit court reversed the judgments of the Board and reinstated the DGS procurement officer’s original decisions. Montgomery Park appeals.

LAW: Before a procurement officer may cancel a bid or RFP, they must first “determine[] that it is fiscally advantageous or otherwise in the best interests of the State” to do so. The dispute here revolves initially around the level of deference the Board owes to the officer’s decision, and how to articulate that level of deference.

The Board’s core conclusion—that the base standard for reviewing procurement officers’ cancellation decisions is whether the officer’s reasons for canceling were unreasonable, arbitrary and capricious—was fundamentally correct. But the court disagrees with the Board that the core arbitrary and capricious standard and the “fraudulently or so arbitrarily as to constitute a breach of trust” language from Hanna v. Board of Education of Wicomico County, 200 Md. 49 (1952), utilized in earlier Board  decisions represent categorically different standards. The court reads these as differing in degree rather than kind, and the latter as articulating the sort of conduct that would demonstrate arbitrary or capricious decision-making in the context of a cancellation.

The fraud notion in Hanna was never meant to replace arbitrariness or capriciousness, but to demonstrate the extent of deviation from reason necessary to justify finding a procurement officer’s cancellation decision arbitrary and capricious. Therefore, the Board was correct in deciding that the standard of review to be applied in cancellation decision is whether the procurement officer’s decision was unreasonable, arbitrary and capricious.

Although the court agrees with the Board’s view of the standard it articulated in this case, it disagrees with the Board’s application of that standard to the record in this case. Ms. Scott-Napier testified before the Board that she cancelled the RFP because the Insurance Commissioner had articulated reasons why cancellation was in the best interests of the state and she agreed with those reasons. This is all that was required of Ms. Scott-Napier. She was not required, as the Board found, to conduct an independent investigation into whether Commissioner Redmer’s four reasons were accurate.

Because the Board committed legal error in shifting the burden to Ms. Scott-Napier to prove that her reasons for cancelling the procurement with Montgomery Park weren’t unreasonable, arbitrary and capricious, the court agrees with the circuit court that the Board’s decision to sustain the first bid protest must be reversed.

Regarding Montgomery Park’s second protest, the court finds that it lacked standing. Although the timeline supports the Board’s assertion that the sole-source procurement “arises and flows” from DGS’s decision to cancel the RFP with Montgomery Park, that logical and temporal connection doesn’t give Montgomery Park a legal interest in the sole source renewal lease.

Although Montgomery Park asserts it “is a qualified, prospective offeror with a substantial chance of being selected in a competitive procurement for the proposed award under protest,” this was not a competitive procurement, there was no competitive bidding process and Montgomery Park was never in line for the renewal lease between DGS and St. Paul Plaza. Accordingly, Montgomery Park lacked standing to file its second protest, and the circuit court correctly found that the Board’s finding that Montgomery Park was an interested party in the renewal lease between MIA and St. Paul Plaza must be reversed.

Affirmed.

Civil Procedure

Default

BOTTOM LINE: Where the plaintiff filed an amended complaint with new substantive allegations while the motion to vacate a default as to the original complaint was pending, the amended complaint mooted the existing order of default as to the original complaint.

CASE: Pomroy, et al. v. Indian Acres Club of Chesapeake Bay, Inc., No. 386, Sept. Term, 2021 (filed Feb. 23, 2022) (Judges Fader, ARTHUR, Battaglia).

FACTS: The circuit court denied the defendants’ motion to vacate an order of default as to the original complaint, but the plaintiff had amended the complaint to add new substantive allegations while the motion to vacate was pending. In these circumstances, if the defendant fails to file a timely response to the amended complaint, may the court proceed to enter a default judgment on the amended complaint? Or may the court enter a default judgment on the amended complaint only after the defendants have failed to file a timely response to the amended complaint, the plaintiff has obtained a second order of default, and the court has declined to vacate the second order of default?

LAW: When a party files an amended complaint, the original complaint is considered withdrawn, and the amended complaint becomes the operative pleading. Second, when the amended complaint introduces new facts, asserts new or additional claims for relief or materially varies the case, the amended complaint is treated like an original complaint, particularly when the adverse party is in default. Finally, a court cannot issue a default judgment pursuant to Rule 2-613(f) without first issuing an order of default and giving the defaulting party an opportunity to vacate that order.

Applied here, the circuit court erred in granting plaintiff’s request for a default judgment without issuing an order of default after the filing of plaintiff’s amended complaint. When plaintiff filed the amended complaint, it became the operative complaint, and the original complaint was withdrawn. Consequently, the existing order of default became a legal nullity, as the claims in the original complaint had been abandoned in favor of the amended complaint.

Moreover, because the amended complaint asserted a new and additional claim for relief, plaintiff was required to serve the Pomroys in accordance with the rules for service of original process, which it did (at least as to Mr. Pomroy) on March 30, 2021. Once they were served, the Pomroys were required to file a timely responsive pleading in the event that they contested the new allegations. They failed to do so, and that failure was (at least for Mr. Pomroy) a “failure to plead,” which triggered the strictures of Rule 2-613. At that point, if plaintiff intended to pursue its remedies under Rule 2-613, it was required to request a new order of default and to allow the Pomroys an opportunity to move to vacate the new order of default.

Instead, however, plaintiff skipped several steps by asking the court to proceed directly to the entry of a default judgment on the amended complaint. The court erred by absolving plaintiff of its obligation to request an order of default as to the amended complaint and by entering a default judgment on the claims in the amended complaint, including the claim that the Pomroys had breached an obligation to pay a charge that came due only after plaintiff filed the original complaint.

The circuit court’s judgment is reversed and the matter is remanded for further proceedings. If, on remand, IAC wishes to pursue a default judgment on the amended complaint, it must request an order of default pursuant to Rule 2-613(b). Upon the filing of such a request, the court should move forward in accordance with the procedures set forth in Rule 2-613.

Judgment of the Circuit Court for Cecil County reversed.

Zoning

Jurisdiction

BOTTOM LINE: Although a Planning Board has exclusive jurisdiction to approve or disapprove conceptual site plans, where the site plan is one component of a larger process of deciding whether to approve requested zoning changes, that ultimate decision is one that must be made by the District Council.

CASE: City of Hyattsville, et al. v. Prince George’s County Council, et al., No. 1261, Sept. Term, 2020 (filed Feb. 23, 2022) (Judges Kehoe, ARTHUR, Wells).

FACTS: This appeal concerns a decision by the Prince George’s County Council, sitting as the District Council, to approve zoning changes for a property located within the City of Hyattsville. The Circuit Court affirmed the District Council’s decision.

LAW: The City of Hyattsville first argues that the Planning Board has exclusive jurisdiction to decide whether to approve or disapprove conceptual site plans. If the decision under review involved nothing more than the approval of a conceptual site plan, then the City’s argument might be persuasive.

The target of the application here, however, was to obtain zoning changes. The statutory provisions treat the District Council as the primary and final decision-maker on a request to change the underlying zone or allowed uses for a property in the development district.

It is true that Werrlein’s application included a conceptual site plan. In this context, however, the site plan serves as one component in a larger process of deciding whether to approve requested zoning changes. Even though a conceptual site plan (or detailed site plan) is required as part of the application, the District Council’s decision to approve the application is, in substance, a decision to approve a zoning map amendment. That ultimate decision is one that must be made by the District Council.

The City next contends that the District Council erred by changing the zoning classification of the lower parcel without finding either a substantial change in the surrounding neighborhood since the previous comprehensive rezoning or a mistake of fact in the previous comprehensive rezoning. The court disagrees. The process that the District Council has established for approving certain amendments in the Development District Overlay, or D-D-O, zone is sufficiently analogous to the process for applying for a floating zone or special exception that it is an appropriate exercise of the District Council’s zoning powers.

In a separate argument, the City of Hyattsville observes that the 2004 sectional map amendment rezoned the lower parcel from the R-55 zone to the O-S  zone. The City argues that the subsequent decision to rezone the lower parcel to the R-55 zone and to allow townhouses on the property is “inherently inconsistent” with the 2004 sector plan.

The District Council’s conclusions withstand scrutiny under the standard for judicial review of administrative decisions. Based on the evidence presented, the District Council could reasonably conclude that rezoning the lower parcel and changing the list of allowed uses would conform with the purposes and recommendations for the development district, as stated in the sector plan, and would not substantially impair the implementation of the sector plan.

In their appeal, the Eisen parties contend that the District Council violated the County zoning ordinance by allowing the development of townhouses on the property and by allowing a density of nine dwelling units per acre for townhouses. Under their theory, even though the zoning ordinance generally authorizes changes to the list of allowed uses and density regulations for properties in the D-D-O zone, that provision does not authorize those types of changes for this particular property.

The Eisen appellants rely heavily on a footnote attached to the top line of the table of “Standards” for this D-D-O zone. This court rejects the contention that the footnote operates to prohibit changes to the list of allowed uses or to density regulations. The District Council was authorized to change the list of allowed uses for the subject property to include townhouses, provided that the District Council found that the proposal met the criteria listed in PGCC § 27-548.26(b)(5). The District Council was authorized to amend the Development District Standards, in order to modify the density regulations for the subject property, provided that the District Council found that the proposal met the criteria listed in PGCC § 27-548.26(b)(1)(b)(ii). Here, the District Council made those requisite findings.

However, the density that the District Council establishes for townhouses should be expressed as a specific number of dwelling units per net acre of net lot or tract area. The District Council erred to the extent that it approved a density in terms of “dwelling units per acre” rather than “net acre,” as required by the zoning ordinance. This error may be significant for a property on which the number of net acres may be substantially less than the total acreage of the property. On remand, the District Council must establish densities for one-family detached residences and for townhouses, expressed as a number of dwelling units per net acre of net lot or tract area.

Judgment of the Circuit Court for Prince George’s County vacated.