U.S. Court of Appeals for the 4th Circuit
Securities; misrepresentations or omissions: Where shareholders suing a biopharmaceutical company for alleged misstatements failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to a duty to disclose, and certain statements amounted to puffery or inactionable opinion or were sufficiently hedged with cautionary statements and risk warnings, the lawsuit was dismissed. Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge v. MacroGenics Inc., Case No. 21-2238 (filed March 2, 2023).
Maryland Supreme Court
Criminal; sexual exploitation of minor: Where a middle school teacher engaged in acts that involved the sexual exploitation of a minor at a time that he had responsibility for the minor’s supervision, his conviction was affirmed. State v. Krikstan, No. 18, Sept. Term, 2022 (filed Feb. 27, 2023).
Maryland Appellate Court
Administrative; private duty nursing services: Where the Maryland Department of Health argued that its regulations preclude 24/7 private nursing services as a matter of law, it erred. Program services may only be based on lack of medical necessity, and not on any additional criteria. In the Matter of Abigail Sulerzyski, No. 302, Sept. Term, 2022 (filed March 1, 2023).
Consumer Protection; residential leases: Where the circuit court granted summary judgment to a residential landlord in a suit brought by tenants alleging that certain charges violated Maryland law, it erred. Smith v. Westminster Management LLC, No. 2508, Sept. Term, 2019 (filed March 3, 2023).
Contract; waiver of contract clause: Although a subcontract required written authorization for extra-contractual work, and no written authorization was obtained before a subcontractor performed certain work, the subcontractor was entitled to payment because reasonably relied on the contractor’s authorized representative. Patriot Construction LLC v. VK Electrical Services LLC, No. 942, Sept. Term, 2021 (filed March 2, 2023).
Contract; repair of commercial premises: Where a landlord claimed a commercial tenant failed to repair the premises following termination of the lease, the trial court must determine whether the tenant breached this duty or whether the landlord frustrated performance of this obligation. EBC Properties LLC v. Urge Food Corp., No. 1952, Sept. Term, 2021 (filed Feb. 28, 2023).
Contract; security deposit: Where residential tenants volunteered to pay the full 12 months’ rent up front, the landlord did not violate Md. Code, Real Prop. § 8-203(b), which prohibits excessive security deposits. The landlord did not actively request, demand or require the payment, as required to violate the statute. Cerrato v. Garner, No. 301, Sept. Term, 2022 (filed March 1, 2023).
Domestic Relations; bigamous marriage: Although a court ruled in 2011 that a woman’s 1991 divorce judgment was void, where the wife waited until 2020, which was 13 years after the husband died, before asserting any interest in his estate, her claim was denied. Peete v. Peete, No. 2098, Sept. Term, 2021 (filed March 1, 2023).
Tort; company liability for shooting spree: Where employees injured by a mass shooter sued the company for allegedly providing negligent security, but the attack wasn’t reasonably foreseeable and the employees failed to identify a causal link between the alleged breaches of duty and their injuries, the employer prevailed on the claims. Mitchell v. Rite Aid of Maryland Inc., No. 21, Sept. Term, 2022 (Filed March 2, 2023).
U.S. Court of Appeals for the 4th Circuit
Misrepresentations or omissions
BOTTOM LINE: Where shareholders suing a biopharmaceutical company for alleged misstatements failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to a duty to disclose, and certain statements amounted to puffery or inactionable opinion or were sufficiently hedged with cautionary statements and risk warnings, the lawsuit was dismissed.
CASE: Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge v. MacroGenics Inc., Case No. 21-2238 (filed March 2, 2023) (Judges GREGORY, Wilkinson, Gibney).
FACTS: Plaintiffs initiated this action against MacroGenics Inc., its CEO and its CFO for alleged violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, Securities and Exchange Commission Rule 10b-5, and sections 11, 12(a) and 15 of the Securities Act of 1933.
In their amended complaint, plaintiffs alleged that after purchasing MacroGenics’ stock, they experienced economic harm proximately caused by defendants’ material misrepresentations, misleading statements or omissions concerning MacroGenics’ clinical trial drug, Margetuximab. The district court granted defendants’ motion to dismiss after concluding that plaintiffs had failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to defendants’ duty to disclose, and that most of defendants’ statements were also immunized from suit.
LAW: In order for plaintiffs’ claims to prevail under § 10(b) and Rule 10b-5, they must sufficiently allege: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; (6) and loss causation.” For a fact to be considered material, there must be a “substantial likelihood that a reasonable purchaser or seller of a security (1) would consider the fact important in deciding whether to buy or sell the security or (2) would have viewed the total mix of information made available to be significantly altered by disclosure of the fact.”
Plaintiffs first argue that defendants’ February 2019 written statements referencing Margetuximab’s phase 3 clinical trial, named “SOPHIA,” results put the study’s interim overall survival, or OS, results “in play,” and their subsequent oral and written statements that positively characterized SOPHIA’s OS data triggered a duty to disclose because they contained either materially false and misleading statements or omissions.
In analyzing the “total mix of information” available to investors, the district court determined that MacroGenics’ release of the progression free survival, or PFS, data did not address the interim OS results, and that a reasonable investor could not have received from MacroGenics’ statements the mistaken impression that the interim OS results would inevitably satisfy the OS endpoint based solely on the PFS results.
Plaintiffs posit that the district court erroneously narrowed defendants’ written statements to the PFS data, rather than SOPHIA trial’s overall progress. Plaintiffs also contend defendants’ positive oral statements concerning the interim OS results unambiguously put the data in play. Finding these arguments unpersuasive, this court agrees with the district court.
Second, plaintiffs posit that none of defendants’ statements contained immaterial puffery, inactionable opinion or risk warnings which would immunize them from liability. This court disagrees. Instead, it agrees with the district court that a handful of defendants’ statements are also inactionable as a matter of law because they amount only to puffery or inactionable opinion, warrant protection under the safe harbor provision of the Private Securities Litigation Reform Act or are sufficiently hedged with cautionary statements and risk warnings.
Finally, with respect to plaintiffs’ claims arising under §§ 11, 12(a) and 15 of the Securities Act and Items 303 and 1055 of SEC Regulation S-K, the district court determined that plaintiffs failed to plead sufficient facts showing that defendants made materially false or misleading statements or omissions. On appeal, plaintiffs narrowly argue that defendants violated the Securities Act by “breaching their independent ‘duty to speak’ under Items 303 and 105 of SEC Regulation S-K.” Finding plaintiffs’ arguments unpersuasive, this court affirms the district court’s decision dismissing their Securities Act claims.
Maryland Supreme Court
Sexual exploitation of minor
BOTTOM LINE: Where a middle school teacher engaged in acts that involved the sexual exploitation of a minor at a time that he had responsibility for the minor’s supervision, his conviction was affirmed.
CASE: State v. Krikstan, No. 18, Sept. Term, 2022 (filed Feb. 27, 2023) (Judges WATTS, Booth Biran, Gould) (Judges HOTTEN, Eaves, Battaglia dissent).
FACTS: Keith Krikstan, a 30-year old substitute teacher, was charged with sexual abuse of a minor after his out-of-school sexually exploitative relationship with A.G., a 12-year-old middle school student, came to light.
The issue is whether Krikstan engaged in acts that involved sexual exploitation of the minor at a time that he had responsibility for the minor’s supervision. The Appellate Court of Maryland reversed his conviction for sexual abuse of a minor, theorizing that he had not “said or implied anything sexual” in his conversation with the minor in school.
LAW: This court concludes that to support a conviction under Md. Code Ann., Criminal Law § 3-602, where a person has sexually exploited a minor through electronic communications at a time that the person did not have care, custody or responsibility for the supervision of the minor, there must be a showing that the person engaged in an act that related to, affected or was a part of the out-of-school sexual exploitation of the minor when the person had care, custody or responsibility for supervision of the minor.
In addition, the act taken while the person is responsible for the care, custody or supervision of the minor need not be of a sexual or criminal nature. It is enough that the act relates to, affects or is a part of the sexual exploitation of the minor.
In this case, the evidence demonstrated that Krikstan’s in-school conduct fell squarely within the meaning of the language of the statute providing that sexual abuse means an act that involves either sexual molestation or exploitation of a minor, regardless of whether physical injuries occur or not. In the classroom after math class, Krikstan discussed with A.G. his anger and demonstrated jealousy over her attraction to another adult man.
At the time of the in-school interaction, A.G. had already informed Krikstan of her attraction to the other man in the context of a sexually exploitative relationship conducted through electronic communications, and Krikstan had already expressed his anger about the other adult man while communicating with A.G. during the existing out-of-school sexually exploitative relationship. And, after the in-school display of anger, Krikstan continued the out-of-school sexual exploitation, which included emotionally charged electronic communications about whether A.G. loved Krikstan or the other man.
A rational juror could easily have found that Krikstan’s reiteration in the classroom of his angry, jealous reaction to A.G.’s feelings for another man related to, affected or was a part of the ongoing sexual exploitation of A.G. outside of school. By returning to the classroom as her substitute teacher and discussing his anger with A.G. at school, Krikstan continued his sexual exploitation of the minor by conveying the same anger and jealousy that he had demonstrated earlier in an exploitative electronic communication, when he said he had “loved” her but was “done” with her. After his in-school demonstration of anger and jealousy about the other adult man, Krikstan resumed sexually exploiting A.G. outside of the classroom, including by sending her messages about the other adult man and, among other things, causing her to engage in acts of masturbation.
Under the language of the statute and this court’s case law, it was not necessary for Krikstan specifically to say or imply anything sexual during the classroom conversation. The legislative history of the statute indicates an intent by the General Assembly that the statute be interpreted broadly to include a wide range of conduct and to protect children. With these principles and the evidence presented at trial in mind, it is clear that the evidence was sufficient for a rational juror to have found that Krikstan’s in-school acts met the definition of conduct involving sexual exploitation of a minor.
Judgment of the Appellate Court of Maryland reversed.
DISSENT: Respectfully, I dissent. This case involves serious allegations of sexual abuse of a minor. The dilemma lies in the State seeking a broader interpretation of § 3-602 that extends beyond and constrains the scope of what the General Assembly enacted. I agree with the Appellate Court of Maryland that the state failed to establish that Krikstan had “permanent or temporary care or custody or responsibility for the supervision” of the minor victim during the relevant period of alleged sexual abuse.
Maryland Appellate Court
Private duty nursing services
BOTTOM LINE: Where the Maryland Department of Health argued that its regulations preclude 24/7 private nursing services as a matter of law, it erred. Program services may only be based on lack of medical necessity, and not on any additional criteria.
CASE: In the Matter of Abigail Sulerzyski, No. 302, Sept. Term, 2022 (filed March 1, 2023) (Judges Kehoe, BEACHLEY, Tang).
FACTS: This case involves appellee Abigail Sulerzyski’s request for 31 additional hours of private duty nursing, or PDN, services per week through the Maryland Medical Assistance Program. Because she already receives 137 hours per week of PDN services, granting Ms. Sulerzyski’s request for the additional hours would result in her receiving “24/7 PDN” services.
After a summary decision by an administrative law judge, or ALJ, affirmed the Maryland Department of Health’s denial of her request for 24/7 PDN services, Ms. Sulerzyski sought judicial review in the circuit court. The circuit court reversed the ALJ’s decision, ruling that the ALJ improperly converted the department’s motion to dismiss into a motion for summary decision, and remanded the matter for further proceedings.
LAW: The record confirms that Ms. Sulerzyski’s request for 24/7 PDN services meets the “medically necessary” threshold for “covered services.” As such, the court turns to the crux of the department’s argument—that the regulations, properly interpreted, place limitations on the provision of PDN services so as to preclude 24/7 PDN as a matter of law. The court rejects this position.
The caselaw is clear that the denial of Early and Periodic Screening, Diagnosis and Treatment, or EPSDT, program services may only be based on lack of medical necessity, and not on any additional criteria. The federal cases hold that limitations on PDN based on the presence of caregivers able to provide skilled nursing care is an additional criterion beyond what is medically necessary for the participant.
Similarly, this court rejects the department’s attempt to incorporate the Code of Maryland Regulations, or COMAR, 10.09.53.05B into the REM program as a limitation on covered services because that interpretation substantially ignores what is medically necessary for the participant’s care. To that extent, the Department’s interpretation invalidly adds criteria that effectively “denies services to those who would normally receive medically necessary treatment.”
Because the department must provide medically necessary care under REM (and under EPSDT for participants under age 21), subject to the requirement that the participant have a caregiver and certain other requirements not at issue in this appeal, the ALJ erred in ruling as a matter of law that PDN is only available during the times listed in COMAR 10.09.53.05B.
Finally, the ALJ found that Ms. Sulerzyski does not have a caregiver as required by COMAR 10.09.69.11A(4)’s incorporation of 10.09.53.04A(10). Mother’s affidavit clearly indicates that Ms. Sulerzyski has at least one caregiver available. Furthermore, viewing the evidence in the light most favorable to Ms. Sulerzyski, the ALJ clearly erred in finding that Ms. Sulerzyski’s “parents/guardians are unavailable to act as caregivers.”
Judgment of the Circuit Court for Anne Arundel County affirmed.
BOTTOM LINE: Where the circuit court granted summary judgment to a residential landlord in a suit brought by tenants alleging that certain charges violated Maryland law, it erred.
CASE: Smith v. Westminster Management LLC, No. 2508, Sept. Term, 2019 (filed March 3, 2023) (Judges KEHOE, Arthur, Leahy).
FACTS: The Maryland General Assembly has enacted several statutes in an effort to provide some degree of protection to tenants while still permitting landlords expedited procedures to evict tenants who fail to pay their rent or otherwise breach their lease agreements. Among the issues presented in this factually and procedurally complex case are the proper meanings of the terms “rent” and “costs” in Md. Code, Real Prop. § 8- 208, which prohibits landlords from including or enforcing certain provisions in residential leases; and § 8-401, which establishes an expedited process by which landlords can evict tenants who fail to pay their rent.
Westminster’s tenants are required to pay their fixed monthly rent in advance, in full, and on or before the first day of the month. If a tenant fails to pay their rent in full by the fifth day of the month, Westminster charges a late fee of five percent of the month’s rent. Appellants concede that Westminster has the right to charge a late fee, but they assert the five percent penalty is the maximum permitted by § 8-208(d)(3)(i). However, according to appellants, Westminster imposes additional fees at the sixth day of the month or shortly thereafter. Appellants contend these charges violate the law.
The circuit court granted Westminster’s cross-motion for summary judgment and denied appellants’ second motion for class certification.
LAW: Most of the summary judgment arguments presented by Westminster both to the circuit court and this court are based upon one or more of the following premises: (1) Westminster, as a landlord: (i) has the right under Maryland law to define what constitutes “rent” and “costs” in its leases and (ii) its definitions are is binding on courts in summary ejectment actions; (2) Maryland’s statutory scheme for protecting residential tenants against overreaching by landlords prohibits only the inclusion of certain provisions in residential leases but does not extend to acts by landlords to enforce those provisions; (3) the Maryland Consumer Debt Collection Act does not apply to Westminster’s actions in this case and (4) the Maryland Consumer Protection Act does not apply to Westminster’s actions in this case. None of these premises are correct.
Westminster presented 27 contentions, sub-contentions and variations on the same themes to the circuit court in support of its summary judgment motion. In granting Westminster’s motion, the circuit court stated that its decision was based on the “reasons outlined in Defendants’ Cross Motion for Summary Judgment . . . . and those which [Westminster] made during argument in open Court[.]” Appellants contend that none of the contentions that are presented by Westminster as to its cross-motion for summary judgment were a valid basis for the circuit court’s decision to grant summary judgment in Westminster’s favor. By and large, appellants are correct.
Turning to the second issue, this court does not agree with the circuit court that appellants’ second motion for class action certification was merely a request that the court reconsider its prior decision. Appellants made several changes to the way that they framed their causes of action and their proposed class definition to address several of the concerns identified by the circuit court in its prior decision. To the extent that the circuit court viewed the second motion for class certification as simply a motion for reconsideration, the court erred.
As explained above, this court has concluded that appellants presented viable claims pursuant to § 8-208 as well as viable claims for breach of contract, violations of the Maryland Consumer Debt Collection Act and violations of the Maryland Consumer Protection Act. Thus the legal landscape confronting the circuit court has changed significantly. For these reasons, appellants may file a new motion for class certification on remand. If they do so, the circuit court shall treat it as an initial motion for class certification and shall hold a hearing on the motion if any party requests one.
Judgment of the Circuit Court for Baltimore City reversed.
Waiver of contract clause
BOTTOM LINE: Although a subcontract required written authorization for extra-contractual work, and no written authorization was obtained before a subcontractor performed certain work, the subcontractor was entitled to payment because reasonably relied on the contractor’s authorized representative.
CASE: Patriot Construction LLC v. VK Electrical Services LLC, No. 942, Sept. Term, 2021 (filed March 2, 2023) (Judges Wells, FRIEDMAN, Eyler).
FACTS: VK Electrical Services LLC, or VKES, filed a breach of contract action against Patriot Construction LLC in the circuit court, alleging that Patriot had refused to pay VKES for completed subcontract work. The trial court denied Patriot’s motion to dismiss but for one count, and the matter proceeded to a bench trial. VKES prevailed, and the trial court awarded it a judgment in the amount of $64,575.09.
LAW: Patriot asserts that because the subcontract contained at least three explicit clauses stating that there would be no compensation for any work outside the contract in the absence of written authorization—and VKES admitted that it did not receive written authorization to perform the ticket work—Patriot should not be liable for payment for that work.
The trial court found that Patriot’s representative, Duane Spriggs, had acted with apparent authority and waived the written authorization requirement. This court agrees.
VKES performed the fire alarm and other ticket work at Spriggs’s specific direction on an emergency basis after the government client declared the work had to be completed immediately.
Patriot claims that Spriggs did not have the authority to waive or modify the contract’s provisions. The trial court disagreed, however, and was persuaded that there were sufficient facts to find that Spriggs acted with apparent authority. Moreover, the trial court was persuaded that Patriot and VKES waived the written authorization requirement by their actions.
This court cannot say that the trial court clearly erred in determining that Spriggs had at least apparent authority to direct VKES to perform work outside the subcontract in the absence of written authorization. There was also significant evidence presented for the trial court to conclude, by a preponderance of the evidence, that Spriggs, with at least apparent authority, waived the condition precedent that work outside the subcontract was required to be approved in writing.
Patriot next contends that the trial court erred in concluding that VKES’s lawsuit was not barred by the three-year statute of limitations. The question is whether the three-year statute of limitations began to run when VKES completed its work on the project and invoiced Patriot in July 2016, or whether the statute of limitations began to run when Patriot was paid for the general contract but refused to pay VKES, sometime in late 2019.
Due to the pay-when-paid clause, VKES could not maintain its action against Patriot until the contractor paid Patriot for the work on the project, but Patriot refused to pay VKES. As a result, the trial court properly found that the statute of limitations did not bar VKES’s lawsuit.
Patriot next asserts that, because the contract language was unambiguous, the trial court erred in admitting prejudicial parol evidence regarding the terms of the contract. Because the alleged parol evidence about which Patriot complains was received without objection on several occasions, and elicited by Patriot itself on more than one occasion, however, Patriot has waived the issue.
Patriot next asserts that the trial court’s ruling in favor of VKES was “nearly devoid of any factual or legal findings concerning the issues raised by the parties” in violation of Rule 2-522(a), and thus the case should be remanded for a new trial. This court disagrees. The court’s factual findings and legal conclusions at the end of the trial, while spare, were not so summarily articulated as to prevent this court from adequately assessing the cogency of its conclusion or the reasonableness of its remedy.
Finally, the court addresses Patriot’s contention that the trial court erred in denying its pretrial motion to dismiss VKES’s complaint for failure to state a claim. As an initial matter, Maryland’s appellate courts have not yet addressed whether a party may appeal from the denial of a motion to dismiss for failure to state a claim or whether success at trial on the merits of an issue renders such an appeal moot. In the absence of clear direction from the Supreme Court, the court assumes without deciding that such an order is appealable.
In its motion to dismiss, Patriot relied on the same grounds that it later argued at trial and that it has now also presented on appeal—that VKES’s complaint fails to state a claim and should have been dismissed because of the failure to satisfy the condition precedent in the contract and that the suit was filed beyond the statute of limitations.
Judgment of the Circuit Court for Anne Arundel County affirmed.
Repair of commercial premises
BOTTOM LINE: Where a landlord claimed a commercial tenant failed to repair the premises following termination of the lease, the trial court must determine whether the tenant breached this duty or whether the landlord frustrated performance of this obligation.
CASE: EBC Properties LLC v. Urge Food Corp., No. 1952, Sept. Term, 2021 (filed Feb. 28, 2023) (Judges BERGER, Leahy, Zic).
FACTS: Urge Food Corporation filed suit, seeking a declaratory judgment and damages for breach of contract. Landlord EBC Properties LLC filed a counterclaim and a third-party complaint against Urge and the individual guarantors of the lease contract between Urge and EBC, for breach of contract, as well as for detinue and conversion.
Following a two-day bench trial, the circuit court ruled in favor of EBC regarding Urge’s complaint for breach of contract. The court issued judgment in favor of EBC as to its claims that Urge breached the contract by failing to pay additional rents. The court ruled in favor of Urge as to EBC’s claims of conversion, damages and detinue regarding Urge removing property it installed to operate its grocery business on the premises and as to EBC’s claim that Urge failed to fully repair the premises to the same condition it was in prior to the start of Urge’s tenancy.
LAW: All of the chattels related to the operation of a grocery business: deli counters, walk-in coolers, freezers, display cases, shelving, registers and bakery ovens. Urge proceeded to operate the premises as Mega Mart grocery store for the life of the lease. Based on intent alone, the chattels installed by Urge constituted trade fixtures.
Further, applying the strict interpretation of “permanency” the installations were not so affixed to the premises to lose their status as trade fixtures. This court, therefore, holds that the circuit court was factually and legally correct in finding that the property installed by Urge constituted trade fixtures because of their movable status, coupled with Urge’s clear intention to make such investments as a means to benefit the use of the premises to carry out its grocery business trade.
Urge’s breach of the lease due to its failure to pay the outstanding additional rents (mostly tied to its refusal to pay for what it deemed “redundant” security personnel), is not before this court. Germane to this matter regarding the removal of trade fixtures, though, is the timing of when Urge defaulted, and how that default affected other rights and obligations under the lease. Reading the lease provisions in concert, this court agrees with EBC that Urge was in default when it failed to cure, within 10 days of receiving notice thereof, its delinquency as to the additional rents required under the lease.
As such, EBC could have exercised its remedies under the lease at any point between the close of that 10-day notice period and Sept. 30, 2019, the actual termination date of the lease. In so doing, it could have re-entered and repossessed the premises. In accordance with the lease, any of the trade fixtures remaining on the realty, and any other tenant’s property, would have been treated as abandoned, and, thus, EBC could have rightfully taken possession of such tenant’s property.
However EBC did not repossess the land upon Urge’s default but instead permitted Urge to remain on the premises until the end of the lease term. The court thus holds that the circuit court correctly concluded that ownership of the trade fixtures did not immediately transfer to EBC upon Urge’s default. Accordingly, barring EBC exercising its rights to detain such property upon default, Urge did not commit further breach by removing its trade fixtures.
Both the common law regarding trade fixtures and the terms of the contract required Urge to repair the damage to the premises caused by the installation and removal of its trade fixtures, and to do so by the end of the lease’s term. EBC claimed that Urge’s surrender of the property in a state of disrepair constituted breach of the terms of the lease. This issue is remanded to the circuit court to determine whether Urge breached the duty to return the premises to its condition prior to the commencement of the lease, and, therein, whether EBC frustrated Urge’s performance of this obligation, thereby relieving Urge of liability for damages regarding repairs.
If the circuit court determines EBC prevented Urge from entering the property to make such repairs prior to the end of the term, then that court must further determine if this action constitutes frustration thereby alleviating Urge from some or all liability for damages. The circuit court must also issue the declaratory judgment sought by Urge’s complaint.
Judgment of the Circuit Court for Prince George’s County affirmed in part, vacated in part.
BOTTOM LINE: Where residential tenants volunteered to pay the full 12 months’ rent up front, the landlord did not violate Md. Code, Real Prop. § 8-203(b), which prohibits excessive security deposits. The landlord did not actively request, demand or require the payment, as required to violate the statute.
CASE: Cerrato v. Garner, No. 301, Sept. Term, 2022 (filed March 1, 2023) (Judges Wells, ALBRIGHT, Eyler).
FACTS: In July 2019, Jose Ortiz Cerrato leased a residential property from Toni and Richard Garner for one year. Before signing the lease agreement, Mr. Ortiz and his wife, Denise Cintron, who was not on the lease and is not a party to this case, offered to pay the full 12 months’ rent up front, in addition to a “security deposit” equivalent to one months’ rent, in exchange for a reduction in the monthly rent. The Garners accepted that offer.
After Mr. Ortiz and his family had lived at the property for four months, he filed suit against the Garners. Mr. Ortiz asserted multiple claims, including that the Garners had violated Md. Code, Real Prop. § 8-203(b), prohibiting excessive security deposits. He asserted that the Garners had accepted $30,000 from Mr. Ortiz upfront and that $27,500 of that amount was a “security deposit” as that term is defined in § 8-203(a) because it was a “payment of money” made in advance of the time it was due to protect the Garners against the risk of unpaid rent.
Because the Garners were prohibited from collecting more than the equivalent of two months’ rent ($5,000) as a security deposit, Mr. Ortiz asserted that they had violated § 8-203(b)(1) and that he was entitled to recover up to three times the excess $22,500, or
$67,500, plus reasonable attorney’s fees. On cross-motions for summary judgment, the circuit court resolved this claim in favor of the Garners.
LAW: Real Prop. § 8-203(b) limits the amount that a landlord may impose as a security deposit to the equivalent of two months’ rent. The statute is intended to prevent a landlord from demanding an excessive upfront payment from a tenant to secure the landlord against risk, which payment would be cost prohibitive for many prospective tenants. Further, because a landlord may withhold a security deposit at the end of a tenancy, a tenant would be significantly disadvantaged if a security deposit was excessive and improperly withheld.
Section 8-203(a)(3) defines a “security deposit” in relation to the purpose for which the payment is made and payments of money made to “protect the landlord” against certain risks of loss, including “nonpayment of rent,” fall within its scope. In this case, the payment of all but the last month’s rent in advance clearly had the effect of protecting the Garners against the non-payment of rent during the term of the lease and, consequently, it fell within the broad definition of a security deposit.
Turning to § 8-203(b), this court is satisfied that the Garners did not impose or charge an excessive security deposit based the undisputed facts in the summary judgment record. The legislature chose to use words that require that a landlord have actively requested, demanded or required the payment of an excess security deposit in order for a tenant to avail him or herself of the remedies in Real Prop. § 8-203(b).
On the facts present here, no such demand was made. It is undisputed that Mr. Ortiz offered to pay the total rent in advance in exchange for a reduction in the monthly rent from the advertised price of $2,900 per month to $2,500 per month, for a savings of $4,800 over the term of the lease. He testified at his deposition that he negotiated this deal because “[l]ogically . . . it was cheaper.” By accepting this offer, the Garners did not impose or charge a security deposit of $27,500. Rather, they accepted Mr. Ortiz’s voluntary payment of the total rent in advance.
The voluntariness of the payment is further underscored by the terms of the lease, which did not obligate Mr. Ortiz to make the rent payment in advance. The lease required a $2,500 security deposit and stated that $2,500 in rent was due in monthly installments, payable on the first day of each month. Mr. Ortiz executed the lease on Aug. 1, 2019. Ms. Cintron did not wire the advance rent to Samson until on or about Aug. 8, 2019. Thus, by the express terms of the lease, the only security deposit imposed or charged was $2,500.
Judgment of the Circuit Court for Anne Arundel County affirmed.
BOTTOM LINE: Although a court ruled in 2011 that a woman’s 1991 divorce judgment was void, where the wife waited until 2020, which was 13 years after the husband died, before asserting any interest in his estate, her claim was denied.
CASE: Peete v. Peete, No. 2098, Sept. Term, 2021 (filed March 1, 2023) (Judges WELLS, Arthur, Harrell).
FACTS: On Jan. 18, 1971, Bessie and Author were married in Washington, D.C. but separated in the spring of 1975. On April 9, 1991, Author filed a complaint for absolute divorce in the DC Superior Court. Bessie did not file an answer, nor did she appear at the subsequent divorce hearing, during which the court took testimony from Author and the parties’ son. Finding that the parties had lived apart since the spring of 1975 without cohabitation, the court granted Author a default judgment of absolute divorce from Bessie.
On June 13, 1992, several months after Author obtained the judgment for divorce, he married Maryland in Maryland. The two remained married until Author’s death on Sept. 9, 2007. Upon his death, Maryland was appointed as the executor of Author’s estate.
On Nov. 18, 2011, Bessie filed a motion in the Superior Court to vacate the judgment of divorce based on improper and ineffective service of process. Bessie alleged she had not received the complaint for absolute divorce. She believed she was still married to Author and claimed to have had marital relations with him up to the time of his death. After a hearing the DC court ruled that service was defective and the divorce judgment void.
On Dec. 7, 2020, Bessie filed a complaint in the circuit court, seeking to annul the marriage between Author and Maryland on grounds of bigamy. Bessie admitted that the purpose of her action was to obtain a share of Author’s pension. The circuit court entered judgment for Maryland, finding that Bessie lacked standing.
LAW: In 2012, the DC Superior Court ruled that Author’s 1991 judgment of divorce was void and as a result the court vacated the divorce decree. The effect was to create a bigamous marriage between Author and Maryland. A bigamous marriage is void because there is no way to “fix it.” Therefore, contrary to the court’s ruling, Bessie has standing in this unique situation to annul the bigamous marriage because that marriage directly affected her marriage to Author.
Bessie next argues that the circuit court erred in considering the effect the nearly 21-year delay had on her motion to annul Author’s second marriage. She cites no case law to support her argument, nor does she set forth any further reasoning or argument to explain it. Essentially, she flatly states that the doctrines of laches or equitable estoppel do not apply in this case.
Although this court agrees that generally the application of laches will not bar a suit to set aside a bigamous marriage, under the unique circumstances presented here, laches or equitable estoppel is applicable. Very helpful are cases from other jurisdictions where courts have applied estoppel or laches to bar the suit when presented with a similar (and rare) fact pattern as the one presented here – where a first wife sought to invalidate a second marriage several years after the death of the husband in order to reap a financial windfall.
In making a laches determination, a court shall look to the reasonableness of the delay and whether the delay prejudiced the opposing party. Here, the record is unclear when Bessie learned that Author had remarried – whether it was around the time he obtained the 1991 divorce judgment, when he remarried in 1992 or, as she claimed, when he died in 2007. In any event, by her own account, she waited at least 13 years after Author’s death before asserting any interest in his estate in 2020.
This court concludes that the unusual set of facts necessitates the application of laches. This is particularly so where Bessie’s annulment suit was admittedly motivated only to gain financial rights, not to vindicate the status of the marriage. Additionally, because this court has applied laches under similar circumstances, specifically where the petitioning party alleged fraud instead of bigamy, it concludes that to not apply laches in this case would work a grave injustice.
Bessie’s 13-year delay in asserting her marital rights was unreasonable and unfairly prejudices Maryland (and Author). Accordingly, under these circumstances, Bessie’s action to annul the marriage between Author and Maryland is barred by laches.
Judgment affirmed on grounds consistent with this opinion.
Company liability for shooting spree
BOTTOM LINE: Where employees injured by a mass shooter sued the company for allegedly providing negligent security, but the attack wasn’t reasonably foreseeable and the employees failed to identify a causal link between the alleged breaches of duty and their injuries, the employer prevailed on the claims.
CASE: Mitchell v. Rite Aid of Maryland Inc., No. 21, Sept. Term, 2022 (Filed March 2, 2023) (Judges Berger, LEAHY, Zic).
FACTS: This appeal arises out of the tragic mass shooting that occurred on Sept. 20, 2018, at a warehouse facility leased by Rite Aid of Maryland Inc. in Aberdeen, Maryland. The shooter, Snochia Moseley was an employee of Abacus Corporation, temporarily assigned to work in Rite Aid’s facility. Haissaun Mitchell, Shyheim Mitchell and Michael Mitchell worked for Capstone Logistics LLC as temporary laborers at the facility.
The Mitchells filed suit against Rite Aid and Abacus, alleging that they suffered damages proximately caused by Rite Aid’s and Abacus’s (1) negligent failure to provide adequate security at the Aberdeen facility and (2) negligent hiring and supervision of Moseley. Following discovery, the circuit court granted the summary judgment motions filed by Rite Aid and Abacus.
LAW: The Mitchells challenge the grant of summary judgment in favor of Rite Aid on the ground that the Mitchells, as employees of Rite Aid, were barred by the Workers’ Compensation Act from filing the underlying negligence claims. The Mitchells contend that Rite Aid is a third-party tortfeasor rather than their employer and that Rite Aid was not entitled to workers’ compensation immunity.
This court holds that the circuit court erred, in part, by granting Rite Aid’s motion for summary judgment on the ground of workers’ compensation immunity. Genuine disputes of material fact precluded a determination of whether Rite Aid was the Mitchells’ employer on summary judgment. Specifically, the prospect that Rite Aid maintained ultimate control over its facility and directed Capstone’s supervisors on the services to be provided is not necessarily inconsistent with the possibility that the Mitchells remained employees of an independent contractor free from Rite Aid’s control, except as to the final product of their work.
However, the circuit court’s alternative grant of summary judgment in favor of Rite Aid on the Mitchells’ premises liability claim is affirmed because the Mitchells failed to present any admissible evidence establishing that Moseley’s tragic shooting spree was foreseeable. On the element of duty, the Mitchells did not establish that Moseley’s attack was a reasonably foreseeable criminal act because (a) there was no history of violent criminal activity in the vicinity of the facility, (b) there was no indication that Moseley posed a threat of violence and (c) the events immediately preceding the shootings did not presage any imminent violent outburst.
Additionally, on the element of causation, the Mitchells failed to identify a causal link between the alleged breaches of duty and the Mitchells’ injuries because the evidence established that Moseley would have gained access to the building with her ID badge regardless of the extra security measures suggested by the Mitchells.
Finally, the circuit court did not err in granting Abacus’s motion for summary judgment on the Mitchells’ negligent hiring and supervision claim because they failed to produce any evidence that Abacus was on notice of Moseley’s violent characteristics. The record reflects that Abacus conducted a reasonable inquiry into Moseley’s fitness as an employee that simply failed to reveal certain red flags which tend to evade most standard background checks. Abacus had no reason to know of Moseley’s mental health issues because they had never manifested in any identifiable criminal or disciplinary charges.
Judgment of the Circuit Court for Baltimore County affirmed.