Maryland Appellate Court: Consumer protection, business judgment rule, child support

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Consumer Protection; CLEC

BOTTOM LINE: Where a downstream loan servicer and sub-servicer that acquired a loan argued the Credit Grantor Closed End Credit Provisions contained in Title 12 of the Commercial Law Article did not apply, this argument was rejected. An assignee of servicing rights is not exempt from the statutory requirements.

CASE: Lakeview Loan Servicing LLC & Nationstar Mortgage LLC v. Baxter, No. 691, Sept. Term, 2024 (filed Nov. 28, 2025) (Judges NAZARIAN, Kehoe, Wright).

FACTS: Three years after Tonda Baxter took out a loan secured by a deed of trust on her home, Lakeview Loan Servicing LLC acquired the servicing rights to the loan and retained Nationstar Mortgage LLC as its sub-servicer. In a civil complaint for declaratory relief in the circuit court, Ms. Baxter alleged that Lakeview and Nationstar violated the Credit Grantor Closed End Credit Provisions, or CLEC, contained in Title 12 of the Commercial Law Article, when they charged and collected convenience fees in connection with the loan.

Lakeview and Nationstar moved for summary judgment and Ms. Baxter responded with a cross-motion that asked the court to decide CLEC’s applicability to the loan, to Lakeview and Nationstar as credit grantors, and to the relationship between the parties. The circuit court denied Lakeview and Nationstar’s summary judgment motion, granted Ms. Baxter’s cross-motion and entered a declaration in her favor.

LAW: Lakeview and Nationstar argue first that the circuit court erred as a matter of law when it concluded that they qualify as “credit grantors” whose actions fall within CLEC’s reach. They maintain that NFM Inc. is the lender of record who extended credit to Ms. Baxter and that they merely service the loan. They admit that they obtained an assignment of servicing rights to the loan but deny that they own the note, and they argue that CLEC would apply to them only if the latter were true.

This court holds that Lakeview and Nationstar are credit grantors under CLEC because they hold rights and obligations under the debt instrument, in this case the note. CLEC provides that a credit grantor includes “any person who acquires or obtains the assignment of an agreement for an extension of credit made under [the statute].” Therefore, under a plain construction of CL § 12-1001(g)(2)(iii), a credit grantor includes any person who comes into possession or gains the assigned task or work of a CLEC agreement.

This conclusion squares with the legislative intent that assignees avert unforgiving penalties for unintentional errors committed by them or their assignor, and it finds support in the undisputed facts of record. Moreover, CLEC is a remedial statute that the court construes liberally to effectuate its broad remedial purpose, and that construction would be difficult to accomplish if the court was to accept the proposition that an assignee of servicing rights is exempt from the statutory requirements.

Lakeview and Nationstar argue next that CLEC doesn’t apply to Nationstar’s convenience fees because Nationstar assessed them after the loan originated. They contend that CLEC seeks to regulate fees imposed at loan origination and that CL §§ 12-1002 and 12-1005 support their interpretation. As a result, they assert that Nationstar’s convenience fees fall beyond CLEC’s reach because they were not assessed when NFM extended credit to Ms. Baxter. The court again disagrees and instead holds that CLEC prohibits credit grantors from assessing unauthorized fees at any point during the life of the loan.

Lastly, Lakeview and Nationstar argue that the circuit court erred in concluding that CLEC applied to the loan. They maintain that the loan is an extension of credit secured by a first lien on a residential property and that CLEC exempts those kinds of credit extension agreements from its fee limitations. In response, Ms. Baxter points to CL § 12-1005(d), a provision that allows credit grantors to charge and collect fees from consumer borrowers if the loan agreement so permits. The court agrees that CLEC, through CL § 12-1005(d), applies to the loan.

Judgment of the Circuit Court for Anne Arundel County affirmed.

Corporate; business judgment rule

BOTTOM LINE: Where the losing bidder for a company argued the company’s directors breached their fiduciary duties by recommending another company as the winning bidder, but their allegations, taken as true, do not defeat the business judgment rule, their lawsuit was dismissed.

CASE: Special Situations Fund III QP LP v. Travel Centers of America Inc., No. 678, Sept. Term, 2024 (filed Nov. 25, 2025) (Judges Berger, NAZARIAN, Sharer).

FACTS: BP Products North America Inc. entered into an agreement to acquire Travel Centers of America Inc. ARKO Corp., a competitor, also sought to buy the company and forwarded a bid after BP and the company had agreed to merge but before the company’s stockholders had voted to approve the merger. The company’s board of directors concluded that ARKO’s offer was not superior to BP’s and could not reasonably be expected to lead to a superior proposal. The directors rejected ARKO’s proposal and the stockholders approved the transaction.

Southeastern Pennsylvania Transportation Authority, or SEPTA, and Special Situations Fund III QP LP, Special Situations Cayman Fund LP and Special Situations Private Equity Fund LP (collectively “SSF”) each filed complaints arising from the merger. The cases were consolidated, and on a collective motion to dismiss from the defendants, the circuit court dismissed SSF’s complaint.

LAW: This court finds that SSF failed to state a claim for breach of a fiduciary duty because their allegations, taken as true, do not defeat the business judgment rule. First, the circuit court articulated the correct standard for overcoming the business judgment rule.

A party has two ways to overcome the business judgment rule. “A shareholder may ‘show either that the board or committee’s investigation or decision was not conducted independently and in good faith, or that it was not within the realm of sound business judgment.’” Second, a party “may make a showing that a director has a conflict of interest relating to the board’s decision—i.e., that the director, or someone close to that director, has a personal financial interest in the outcome of the board’s decision.”

Here, the court agrees that SSF’s allegations of fraud and bad faith are insufficient as pled to overcome the business judgment rule. The court also agrees that SSF’s allegations as to the directors’ conflicts of interest are insufficient on this record to overcome the business judgment rule. SSF argues that the stockholders were not informed fully because the proxy statement “omitted a number of material facts.” But the directors disclosed all potential conflicts of interest. And once the stockholders are informed fully about the material facts concerning a proposed transaction, stockholder ratification extinguishes any such breach of fiduciary claim.

SSF argues next that circuit court erred by considering the exculpation clause in the company’s charter as part of its decision to dismiss SSF’s complaint. It asserts that because the exculpation clause was not alleged in SSF’s complaint, but rather was raised in defendants’ memorandum in support of their motion to dismiss, the court shouldn’t have considered it.

That clause limited the directors’ liability to stockholders to the fullest extent under Maryland law, accounting for the exceptions within Maryland’s law on exculpation clauses in a corporation’s charter. The circuit court did not err in considering the exculpation clause, which was found in publicly available documents, at the motion to dismiss stage.

Finally, SSF argues that this court should reverse the dismissal of SSF’s aiding and abetting claims. This court disagrees. If the breach of fiduciary duty claims are extinguished, so too are the aiding and abetting claims.

Judgment of the Circuit Court for Baltimore City affirmed.

Parent & child; child support

BOTTOM LINE: Where the father argued his child support obligations should be retroactively reduced because he lost his job, the circuit court correctly held it could not retroactively modify child support prior to the date the motion for modification was filed.

CASE: Pellet v. Pellet, No. 1439, Sept. Term, 2024 (filed Nov. 21, 2025) (Judges GRAEFF, Nazarian, Meredith).

FACTS: On Nov. 9, 2021, Michael T. Pellet filed a petition to modify child support in the circuit court. He alleged that, since the October 2017 consent order governing custody, visitation and child support, there had been material changes in circumstances that required a change in visitation and child support. These changes included that, in August 2019, he was terminated from his job. Tara Pellet then filed a counter-complaint to establish child support arrears.

On Oct. 4, 2023, the circuit court granted mother’s motion for summary judgment regarding child support arrears, ruling that it could not retroactively modify child support prior to the date the motion for modification was filed. The court ordered that judgment be entered in mother’s favor, against father, in the amount of $55,224.00. The court subsequently denied mother’s request for attorney’s fees, but it granted her request for pre-judgment interest in the amount of $7,038.00.

LAW: Father contends that the court erred in granting summary judgment on the issue of child support arrears. He asserts, as he did below, that the consent order required mediation before he could move for a modification of child support, but mother refused to mediate. He argues that mother’s improper conduct and intent in the two years leading up to the litigation “barred her from recovering arrears under the doctrines of unclean hands, waiver, failure to mitigate, and breach of contract,” and “these defenses made summary judgment inappropriate.”

Based on the plain language of Md. Code. Ann., Family Law, § 12-104, the circuit court properly ruled that it could not modify the child support arrears that accrued prior to the date the motion to modify was filed, i.e., Nov. 9, 2021. There is no equitable defense in this regard. Since the statute’s enactment, this court consistently has made clear that a court does not have authority to retroactively modify a child support award prior to the date that a motion for modification is filed. If a parent seeks to modify court-ordered child support based on a material change in circumstances, the parent should file a motion to modify with the court without delay.

Father contends that the circuit court abused its discretion in awarding mother pre-judgment interest in the amount of $7,038.00. He argues that such an award should “be reviewed through the lens of the best interest of the child,” and the award here was not “equitable, fair, nor was it in the best interests of the parties’ child.” Moreover, he asserts that the award of pre-judgment interest rewards mother’s “bad behavior.”

The court here stated that, in awarding pre-judgment interest, it was exercising its discretion. The exercise of discretion in awarding pre-judgment interest must be grounded in equity and justice between the parties and in light of all the circumstances. Based on the circumstances of this case, where the record shows that mother told father that he needed to take the issue of child support to the court, but he delayed doing so, this court perceives neither error nor abuse of discretion in the court’s award of pre-judgment interest.

Judgment of the Circuit Court for Frederick County affirmed.