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Md. appeals court: Lawsuit’s dismissal does not void arbitrator’s decision

Plaintiffs cannot escape an arbitrator’s adverse decision by having the circuit court case that prompted the arbitration dismissed, Maryland’s second highest court has ruled.

Circuit courts retain the authority to confirm the arbitrator’s decision even if the underlying lawsuit has been dismissed, the Court of Special Appeals said in a reported decision last month. The circuit court may also award attorneys’ fees and costs in an arbitrated case despite its dismissal, the appellate court added in its 3-0 decision.

The Court of Special Appeals rendered its decision in upholding the Prince George’s County Circuit Court’s confirmation of an arbitrator’s decision that a sued developer had not violated a statutory duty to disclose water and sewer assessments during home purchases. The appellate court also upheld the circuit court’s award of more than $8,600 in attorney’s fees and costs to the developer.

In its decision, the Court of Special Appeals said the circuit court had erroneously denied plaintiffs Gwendolyn and Leeroy Nesbitt’s motion to dismiss the case after the arbitrator’s award, as dismissal was available because Mid-Atlantic Builders of Davenport Inc. had never filed an answer to the complaint. However, a dismissal would not have stripped the circuit court of its authority to confirm the arbitrator’s award or assess attorneys’ fees and costs, the appellate court said.

“The Maryland Uniform Arbitration Act, like the Federal Arbitration Act, contemplates that, in the absence of a motion to vacate, modify, or correct the award, the court shall confirm the arbitration award,” Judge Donald E. Beachley wrote for the Court of Special Appeals. “(A) court that compels arbitration retains jurisdiction to confirm the arbitration award independent of a party’s voluntary dismissal of its complaint.”

Circuit courts also retain “independent jurisdiction to hear claims that were collateral” to the arbitration, including attorney’s fees, Beachley added.

Neither the Nesbitts’ attorney, Cory L. Zajdel, nor the developer’s lawyer, David L. Rubino, immediately responded to messages Wednesday seeking comment on the decision. Zajdel is with the Z Law LLC in Timonium; Rubino is with McCarthy Wilson LLP in Rockville.

The Nesbitts claimed in their August 2019 lawsuit, a proposed class action, that Mid-Atlantic Builders violated the Maryland Real Property Article’s disclosure requirements by giving them inaccurate information regarding deferred charges and prepayment options related to an annual charge of $1,020 for water and sewer use.

Mid-Atlantic Builders filed a successful motion to compel arbitration as called for under the property purchase agreement. The developer also asked for attorney’s fees, which the agreement provided for as well.

The arbitrator concluded on Jan.26, 2021, that Mid-Atlantic Builders had not violated Maryland law and deferred to the circuit court the issue of attorneys’ fees and costs.

The Nesbitts moved to dismiss the case two weeks later, a motion opposed by Mid-Atlantic Builders.

The circuit court declined to dismiss the case, confirmed the arbitrator’s decision, and awarded Mid-Atlantic $8,644.43 in attorneys’ fees and costs.

The Nesbitts sought review by the Court of Special Appeals, arguing in vain that their motion to dismiss should have been granted and the arbitrators’ decision and award of attorneys’ fees and costs should have been struck.

Beachley was joined in the decision by Judges Melanie Shaw and James R. Eyler, a retired jurist sitting by special assignment.

The Court of Special Appeals rendered its decision in Gwendolyn Nesbitt et al. v. Mid-Atlantic Builders of Davenport Inc., No. 895, September Term 2021.