4th Circuit: First Amendment, statute of limitations, hearsay

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Arbitration; scope

BOTTOM LINE: Where a man initially sued by a debt collection firm then filed his own lawsuit against the law firm, an arbitration provision in the underlying loan did not extend to the law firm. As such, its motion to compel arbitration was denied.

CASE: Jackson v. Protas, Spivok & Collins LLC, Case No. 25-1971 (filed May 18, 2026) (Judges WILKINSON, Harris, Benjamin).

FACTS: WebBank initially extended a loan to Donte Jackson. Then it sold the loan to Velocity Investments LLC. When Jackson failed to pay his debt, Velocity sued him in Maryland state court. Velocity was represented in the state court action by Protas, Spivok & Collins LLC, or PSC, a debt collection law firm. Shortly before trial, Velocity dismissed its own suit with prejudice.

Then Jackson initiated this lawsuit against both Velocity and PSC. In response, Velocity and PSC asked the district court to send the case to arbitration based on a provision in Jackson’s original promissory note with WebBank. The court agreed that Velocity was a party to the arbitration agreement but held that it had waived its right to arbitrate by filing suit against Jackson. As to PSC, the court held that it was not a party to the agreement at all.

LAW: The relevant question is whether PSC is “servicing this Note.” PSC points to three dictionary definitions of the word “service” and argues that they all “involve[] payments,” just as its legal representation of Velocity involves payments. The relevant definitions of “service” are “to pay interest on (a loan or debt),” “to meet interest and sinking fund payments on” and “to pay interest on money that has been borrowed.”

The fact that the definitions above involve payments does not mean that anything related to payments satisfies them. In fact, the definitions above involve making payments. The word “service” is used in this way when, for example, a company sets aside money in its annual budget for “debt service.”

This could not possibly be the meaning intended by the phrase “servicing this Note” in Jackson’s promissory note. Maryland courts consider words “in context,” and the context of the phrase “servicing this Note” is the arbitration agreement’s definition of “you.” The person making payments on the note is, by contrast, “me.” The arbitration agreement would mean nothing at all if “you” were the same as “me.”

PSC points to a different set of dictionary definitions of “service.” Here the relevant definitions are “to provide (someone) with something that is needed or wanted,” “to perform any of the business functions auxiliary to production or distribution of” and “to provide people with something they need, such as shops, or a transport system.” According to PSC, these definitions “involve[] . . . providing something necessary,” just as its legal representation of Velocity involves providing something necessary.

The object of contract interpretation in Maryland is to discern “what a reasonable person in the position of the parties would have meant,” which requires courts to employ a healthy dose of “common sense.” If the phrase “servicing this Note” in the arbitration agreement referred merely to the provision of something necessary, then it would sweep in entities as far afield as the bank and internet service provider which enable Jackson to withdraw money from his checking account before making payments on the note.

There is one obvious candidate of “service” that PSC ignores: “to collect payments and maintain a payment schedule for (a loan).” This is a definition commonly attached to the present participle form of the word—“servicing”—and especially when the word is used in association with a debt instrument.

This definition makes perfect sense in context. It limits the scope of the arbitration agreement to a specific kind of entity, rather than opening it up to an unlimited universe of them. This definition is also consonant with the way the term is used in the borrower registration agreement. It explains that an entity named Prosper will collect all of Jackson’s regular payments, proceeds to name Prosper as “the servicer” of the loan and contains a nearly identical arbitration provision to the one in the promissory note except it replaces “any person servicing this Note” with “Prosper.”

PSC is not like Prosper, and it does not fit any aspects of the applicable definition of “servicing.” It did not maintain a payment schedule for the loan, collect regular payments, keep records of regular payments, send and receive regular communications or in any other way administer the loan.

Instead, it prepared and submitted briefs in a collection lawsuit against the debtor. That is an altogether different function. While PSC performed a service for Velocity that was intended to collect Jackson’s debt, it did not service Velocity’s loan. As a result, it cannot enforce Velocity’s arbitration agreement.

Affirmed.

Civil Procedure; statute of limitations

BOTTOM LINE: Where the district court held a man’s fraud and conspiracy claims against a hospital were subject to the statute of limitations for medical malpractice claims, it erred. Maryland courts have limited the Health Care Malpractice Claims Act’s applicability to traditional malpractice claims arising from the breach by a professional of his duty to comply with a standard of care. The claims here were instead about whether the hospital misrepresented itself as the employer of a doctor involved in his gallbladder removal surgery.

CASE: Brunenkant v. Suburban Hospital, Inc., Case No. 24-1197 (filed May 21, 2026) (Judges KING, Agee, Heytens).

FACTS: Jon Lodwick Brunenkant appeals the district court’s order dismissing his complaint, which alleged two Maryland state law claims against Suburban Hospital Inc. and Suburban Hospital Healthcare System Inc., for fraudulent misrepresentation and conspiracy to commit fraud. Brunenkant says the court incorrectly applied Maryland’s five-year statute of limitations for medical malpractice claims in the Health Care Malpractice Claims Act, Md. Code Ann., Cts. & Jud. Proc. § 5-109, when the court should have applied the state’s general three-year statute of limitations for civil claims in Md. Code Ann., Cts. & Jud. Proc. § 5-101.

LAW: The Supreme Court of Maryland has never ruled on the precise question of whether fraudulent misrepresentation and conspiracy claims — such as those asserted by Brunenkant in his fraud and conspiracy complaint of May 2023, which stem from alleged medical malpractice — are subject to § 5-101 or 5-109. In 1983, however, the Maryland Supreme Court recognized that the state’s Health Care Malpractice Claims Act, which includes § 5-109, “covers only those claims for damages arising from the rendering or failure to render health care where there has been a breach by the defendant, in his professional capacity, of his duty to exercise his professional expertise or skill.”

Against this backdrop of Maryland legal principles, this court is of opinion that the claims alleged by Brunenkant in his fraud and conspiracy complaint fall well within the ambit of § 5-101, and not § 5-109. Although Suburban Hospital maintains on appeal that Brunenkant’s fraud and conspiracy claims relate to the emergency gallbladder removal surgery that Brunenkant underwent at Suburban in October 2015 — and thus appear to arise in the health care context — they are simply not the “traditional malpractice claims” subject to § 5-109’s five-year statute of limitations.

Thus, rather than invoking § 5-109, the district court should have applied Maryland’s general three-year statute of limitations for civil claims to assess whether the claims alleged in Brunenkant’s fraud and conspiracy complaint are time barred. Furthermore, in applying § 5-101’s three-year statute of limitation, Maryland courts utilize the so-called “discovery rule,” which provides that “the cause of action accrues when the claimant in fact knew or reasonably should have known of the wrong.”

And in a similar vein, Maryland’s high court has recognized that “[w]hether or not the plaintiff’s failure to discover his cause of action was due to failure on his part to use due diligence, or to the fact that defendant so concealed the wrong that plaintiff was unable to discover it by the exercise of due diligence, is ordinarily a question of fact for the jury.”

Vacated and remanded.

Constitutional; First Amendment

BOTTOM LINE: Where a Maryland law restricts the speech of renewable energy suppliers, it was enjoined.

CASE: Retail Energy Advancement League v. Brown, Case No. 25-1012 (filed May 15, 2026) (Judges Diaz, FLOYD, Giles).

FACTS: A Maryland law provides that renewable energy suppliers advertising “green power” are prohibited from using certain descriptive terms when their product is not majority-backed by renewable energy credits, as defined by state law. The statute also requires these suppliers to include disclosures with information about the system of renewable energy credits.

Retail Energy Advancement League and Green Mountain Energy Company sought to enjoin the statute. The district court denied their motion.

LAW: Courts apply “a four-part intermediate scrutiny test” to determine whether a commercial speech restriction is constitutional: “(1) to receive any First Amendment protection, commercial speech “must concern lawful activity and not be misleading;” (2) the government must assert a “substantial” government interest to justify its regulation; (3) the regulation must “directly advance[] the governmental interest asserted” and (4) the regulation must not be “more extensive than is necessary to serve that interest.”

Maryland argues S.B. 1 regulates inherently misleading speech that should receive no First Amendment protection. The state contends, for example, that “representations of delivering ‘100% wind electricity’” would be “untrue unless the customer’s residence is physically connected to a windmill, and [suppliers’] representations of delivering ‘100% solar electricity’ are untrue unless the residence is physically connected to solar panels.” But, in this argument, the state only demonstrates that one possible use of these terms is misleading, which is not enough to deprive the language of any First Amendment protection.

Maryland further argues that “consumers will likely be confused” about the complexity of the energy grid and renewable energy credits, or REC, system, perhaps in an effort to show that the regulated speech is actually misleading. But the state cites no authority for the proposition that potentially confusing speech is not protected by the First Amendment, and the Supreme Court has in fact provided guidance to the contrary.

The court agrees, however, that Maryland has asserted a substantial interest to be achieved by restrictions on commercial speech: protecting consumers from misleading information and price gouging by energy companies.

Under the third and fourth factors, plaintiffs argue that S.B. 1’s restrictions do not directly advance the state’s asserted interest in consumer protection and are not adequately tailored. This court agrees.

Although testimony demonstrates general consumer confusion about the REC system, the restriction alone does not address any of this confusion. S.B. 1 problematically allows for confusing marketing to persist—defeating the state’s asserted interest in protecting consumers from misleading information, rather than advancing it.

Maryland responds that the restriction and disclosure work in tandem “to ensure that Maryland consumers know that the ‘green’ power they buy is backed by RECs, know what RECs are, know where the renewable electricity that created the RECs was generated, and know what percentage of the RECs meet Maryland’s [statutory] requirements.” But all of the work of resolving consumer confusion is done by the disclosures, not the restriction.

The restriction is ineffective in alleviating confusion if a supplier may come into compliance by simply acquiring its RECs from within a certain portion of the country without otherwise changing its behavior. The resulting poor fit cannot be saved by the compelled disclosures. To the extent that Maryland also argues consumers are confused specifically about where RECs originate, the court similarly finds the restriction is ineffective in alleviating even this form of confusion.

The remaining preliminary injunction factors examine whether plaintiffs will suffer irreparable harm absent equitable relief, whether the balance of equities leans in plaintiffs’ favor and whether an injunction is in the public interest. The court finds that plaintiffs prevail on all three factors.

After the district court made its ruling on plaintiffs’ requested preliminary injunction, the Public Service Commission issued an order promulgating new disclosure language. This court remands the question of the constitutionality of S.B. 1’s compelled disclosure, as promulgated by the new order, to the district court for initial review.

Reversed in part and remanded with instructions.

Evidence; hearsay exception

BOTTOM LINE: Where a man who previously gave trial testimony was now dead, his testimony was admissible under Federal Rule of Evidence 804(b)(1). It permits the introduction of testimony given as a witness at another hearing if a predecessor in interest had an opportunity and similar motive to develop the testimony by examination.

CASE: McPherson v. Patton, Case No. 24-2143 (filed May 21, 2026) (Judges DIAZ, Wynn, Berner).

FACTS: After a Maryland court determined they were actually innocent of crimes for which the state incarcerated them for over two decades, brothers Kenneth McPherson and Eric Simmons sued the Baltimore Police Department and five detectives. The district court dismissed the claims against all but two defendants, Robert Patton and Frank Barlow.

During a hearing on their summary judgment motion, the district court raised an evidentiary issue about the admissibility of witness Marcus King’s state trial testimony. King, now deceased, allegedly participated in the murder conspiracy and gave a statement to Patton and Barlow implicating the brothers that he later recanted at their trial. The district court excluded the testimony and granted Patton and Barlow’s summary judgment motion.

LAW: “Federal Rule of Evidence 804(b)(1) permits the introduction of testimony given as a witness at another hearing if the party against whom the testimony is now offered, or, in a civil action or proceeding, a predecessor in interest, had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination.” McPherson and Simmons must show that the motive that Patton and Barlow’s counsel would have had when questioning King in a civil action today is similar to the one State’s Attorney Sharon Holback had when she questioned King during the criminal trial in 1995.

At first glance, the dissimilarities leap off the page. Holback, initially at least, called King to identify McPherson and Simmons as participants in a murder. Patton and Barlow’s counsel, by contrast, would question King to discredit claims that the detectives fabricated evidence in investigating that murder. But King’s recantation makes all the difference. When that happened, Holback attempted to rehabilitate King—or at least bolster the credibility of his recorded statement—and, in doing so, attempted to defend the interrogation that produced the statement.

Holback was concerned with proving that the detectives acted lawfully because she ensured the jury heard, at bottom, that Patton and Barlow Mirandized King before questioning him and allowed his mother in the room with him. She also made sure the jury knew that the detectives had King acknowledge his rights in writing before he gave any statement.

Holback also asked Patton on direct to explain what purpose his interrogative techniques—like handcuffing and shackling King, yelling at him and banging on the desk—served in questioning King. In short, the common threads from King’s examination to Patton’s examination to Holback’s closing were to convey both Patton’s and his investigation’s integrity. The district court thus abused its discretion in excluding King’s testimony under Rule 804(b)(1).

Turning to the fabrication claim, McPherson and Simmons must show that Patton and Barlow deliberately, or with reckless disregard for the truth, manufactured false testimony from King in his recorded statement.

In the light most favorable to McPherson and Simmons, King’s testimony supports that (1) King first denied his and the brothers’ involvement in the unrecorded portion of the interrogation; (2) he changed his story in the recorded portion after Patton berated him and made him “say stuff out of [his] mouth” about his and the brothers’ involvement and (3) this new version of events was a “lie.” That is enough to raise a triable issue. The circumstantial evidence that McPherson and Simmons cite confirms this conclusion.

Turning to the suppression claim, “to make out a claim that an officer violated one’s constitutional rights by suppressing exculpatory evidence, [a plaintiff] must prove that (1) the evidence at issue was favorable to him; (2) the officers suppressed the evidence in bad faith; and (3) prejudice ensued.”

Even in the light most favorable to McPherson and Simmons, there’s not “a reasonable probability” that the suppressed evidence would have led the jury to acquit the brothers of conspiracy to murder. And because the undisclosed witness notes didn’t include “especially pertinent exculpatory evidence,” McPherson and Simmons haven’t met the bad faith element (assuming they properly raised it in the first place).

Vacated in part, affirmed in part and remanded with instructions.