Monday, August 30, 2010

Cloverleaf Enterprises, Inc. v. Maryland Thoroughbred, Horsemen's Association, Inc. (Maryland U.S.D.C.)

Filed: August 25, 2010
Opinion by Judge Richard D. Bennett.

This is a companion opinion to the opinion, the summary of which was posted on August 16, 2010.

Held: (1) Allegations that the defendants conspired to orchestrate an illegal boycott require more proof to survive summary judgment than e-mails informing defendants that other parties to a consent agreement were withdrawing their consent.

(2) Contract provisions that provide that the contract can be terminated if certain governmental approvals or consents are not "private rights of action" to enforce provisions of legislative enactments, but are, instead, contractual provisions.

Facts: Cloverleaf Enterprises, Inc. owns a racetrack in Maryland that accepts horse racing wagers on live simulcast signals provided by other racetracks. The signals come from both Maryland and out-of-state racetracks. As required under federal and Maryland law, Cloverleaf obtained the consent of other Maryland racetracks and certain other groups before receiving the simulcast signals. The consent was in the form of a Cross-Breed Agreement, pursuant to which Cloverleaf paid weekly fees in return for the right to accept wagers on the simulcast races. Cloverleaf and TrackNet Media Group, LLC entered into a Simulcast Agreement, pursuant to which TrackNet agreed to simulcast horseracing content from certain other racetracks.

Cloverleaf breached the Cross-Breed Agreement by failing to pay the required weekly fees. As a result, the other Maryland racetracks withdrew their consent to Cloverleaf receiving the simulcast signals of their own races and out-of-state races. Following the withdrawal of consent, TrackNet informed Cloverleaf it could no longer distribute the horseracing content under the Simulcast Agreement.

Cloverleaf filed a complaint against TrackNet and Churchill Downs Incorporated alleging breach of contract. (Additional claims brought by Cloverleaf are discussed in the posting of August 16, 2010.) Defendants moved for summary judgment.

Cloverleaf contended summary judgment should be denied for three reasons: 1. the Maryland Jockey Club did not have the right under law to withdraw consent; 2. the Simulcast Agreement required approval to be withdrawn from a government entity for termination; and 3. the defendants participated in an illegal group boycott.

Analysis: The court applied Kentucky law to find the Simulcast Agreement was not breached. The agreement was free of ambiguity and "automatically terminated . . . upon the failure to obtain or withdrawal of any approvals required by any applicable laws . . . ." Thus, the agreement terminated when consent was withdrawn.

The court disagreed with all of plaintiff's arguments against summary judgment. First, the legality of the withdrawal of consent is irrelevant because the Simulcast Agreement did not require the defendants to assess the validity of the withdrawal. Second, the use of different words in the Simulcast Agreement, such as "approvals," "consents," and "requirements," did not convey different authorizations as the agreement stated termination can occur upon the "withdrawal of any approvals." Third, as a "party cannot create a genuine dispute of material fact through mere speculation or compilation of inferences," e-mails sent to defendants informing them of the withdrawal of consent lacked sufficient proof of an illegal group boycott to withstand summary judgment.

The full opinion is available in pdf.

Wednesday, August 18, 2010

Monmouth Meadows HOA, Inc. v. Hamilton; Montpelier HOA, Inc. v. Thomas-Ojo; Constant Friendship HOA, Inc. v. Tillery (Ct. of Appeals)

Filed: July 27, 2010
Opinion by Judge Sally D. Adkins

Held: In calculating attorneys' fees in breach of contract cases between private parties where the award of fees is not based on the terms of the contract, it is improper to use either the lodestar method or to calculate the attorney's fee by applying a flat percentage of the amount claimed. Instead, courts should use the factors set forth in Rule 1.5 of the Maryland Lawyers' Rules of Professional Conduct as a rubric for determining the reasonable attorneys' fees to award.

Facts:
This opinion grew out of a number of cases involving claims by howeowners' associations against some of their members for delinquent association fees. As a condition of membership in each of the HOAs, each of the defendants was contractually obligated to pay annual assessments to their respective HOA and interest and late charges were assessed on any past due amounts that were owed for the annual assessments.

In each case, when the Defendant Resident did not pay the annual assessments or late fees when due, their respective HOA directed the law firm of Nagle & Zaller, P.C. to collect the debt. After Nagle & Zaller's attempt to collect the debt by contacting each of the Defendant Residents in writing was unsuccessful, each of the HOAs established and recorded liens on the property of their respective Defendant Resident in accordance with the Contract Lien Act as authorized by Section 14-203 of the Real Property Article of the Maryland Code, notified their respective Defendant Resident of the lien and demanded payment of the debt and the HOA's attorneys' fees in pursuing collection of the debt. When payment was not received, each HOA, through Nagle & Zaller, initiated suits against their respective Defendant Resident seeking payment of the debt and attorneys' fees as calculated by the lodestar method.

In each case, the district court elected to not use the lodestar method to calculate the attorneys' fees that would be awarded to the HOA, but instead awarded attorneys' fees based on a flat percentage of the principal amount sought by the HOA. Each HOA appealed the fee award to the applicable Circuit Court.

Certain cases were first appealed to the Circuit Court for Harford County. That court awarded the fees that each HOA incurred during its trial in the district court and did not award any fees that were incurred in the appeal process.

One case was initially appealed to the Circuit Court for Prince George's County. In that case, the Circuit Court held that it was not appropriate to use the lodestar method to calculate the attorneys' fees that were due to the HOA. It then looked to Rule 1.5 of the Maryland Lawyers' Rules of Professional Conduct as guidance. Concluding that the attorneys' fees requested by the HOA was unreasonably high for the work actually required, the Circuit Court for Prince George's County reduced the fee award to the HOA to $300.00 and did not award any fees that were incurred by the HOA during its appeal.

Analysis: Before addressing the argument by each of the HOAs that the lodestar method is the proper method that should be used in each of their cases for calculating the award of attorneys' fees, the Court of Appeals first explained that a court that uses the lodestar method calculates the fee award by multiplying the number of hours reasonably spent pursuing a legal matter by a reasonable hourly rate for the type of work performed and then adjusts the amount based on its view of the following external factors )set forth, and approved by the US Supreme Court, in Blanchard v. Bergeron, 489 U.S. 87 (1989):

(1) the time and labor required;
(2) the novelty and difficulty of the questions;
(3) the skill requisite to perform the legal service properly;
(4) the preclusion of other employment by the attorney due to acceptance of the case;
(5) the customary fee;
(6) whether the fee is fixed or contingent;
(7) time limitations imposed by the client or the circumstances;
(8) the amount involved and the results obtained;
(9) the experience, reputation, and ability of the attorneys;
(10) the 'undesirability' of the case;
(11) the nature and length of the professional relationship with the client; and
(12) awards in similar cases.

The court noted that the lodestar method could lead to fee awards that are much larger than the principal amount sought. The Court of Appeals then noted that, as established by its precedent in Friolo v. Frankel , the lodestar method is only generally appropriate in the context of fee-shifting statutes where the goals of public policy are advanced, such as in complex civil litigation involving challenges to institutional practices or conditions.

Because the Defendant Residents were obligated to pay the attorneys' fees to the HOAs as a result of the contract that was entered into by each of the Defendant Residents when they became a member of their respective HOA and not as a result of public policy or a fee-shifting statute, the Court of Appeals concluded that the lodestar method was not the appropriate method that should be used to calculate the fee award. Instead, agreeing with the method used by the Circuit Court for Prince George's County, the Court of Appeals held that a trial court should use the factors set forth in Rule 1.5 of the Maryland Lawyers' Rules of Professional Conduct as the foundation of its analysis in determining what constitutes a reasonable fee when the court is awarding attorneys' fees based on a breach of contract case where the award of fees is based on the terms of the contract. The Court also held that it was error to automatically apply a percentage of recovery "without a substantive inquiry into the appropriateness of [such an] award[]."

The full opinion is available in pdf.

Monday, August 16, 2010

Cloverleaf Enterprises, Inc. v. Maryland Thoroughbred Horsemen’s Assoc., Inc. (Maryland U.S.D.C.)

Filed: August 6, 2010
Opinion by Judge Richard D. Bennett.

Held: A party’s mere acquiescence in another party’s illegal scheme is sufficient to create a conspiracy in violation of Section 1 of the Sherman Act.

Facts: Cloverleaf Enterprises, Inc. (“Cloverleaf”) owns a racetrack in Maryland that accepts horse racing wagers on live simulcast signals provided by other racetracks. The signals come from both Maryland and out-of-state racetracks. As required under federal and Maryland law, Cloverleaf obtained the consent of other Maryland racetracks and certain other groups before receiving the simulcast signals. The consent was in the form of a Cross-Breed Agreement (the “Contract”), pursuant to which Cloverleaf paid weekly fees in return for the right to accept wagers on the simulcast races.

Cloverleaf breached the Contract by failing to pay the required weekly fees. As a result, the other Maryland racetracks withdrew their consent to Cloverleaf receiving the simulcast signals of their own races and out-of-state races. This withdrawal of consent came just a few days before the Kentucky Derby, historically a significant source of revenue for Cloverleaf. Cloverleaf obtained a temporary restraining order enjoining the racetracks from withdrawing consent to the simulcast of out-of-state races, including the Kentucky Derby. Despite the TRO, the other Maryland racetracks communicated with out-of-state racetracks, including Churchill Downs (home of the Kentucky Derby), urging them to terminate simulcast signals.

Cloverleaf filed a complaint against the other Maryland racetracks alleging, among other things, violation of Section 1 of the Sherman Act for conspiracy to effectuate a group boycott, both among the Maryland racetracks themselves and with out-of-state racetracks. The defendants moved to dismiss for failure to state a claim.

Analysis: The U.S. District Court for Maryland granted the motion with respect to the alleged conspiracy among the Maryland racetracks themselves. Pursuant to the Contract, if Cloverleaf failed to pay the weekly fees, the defendants could withdraw permission to send signals of their races. Therefore, the defendants’ actions were expressly permitted by the Contract.

The court denied the motion with respect to the alleged conspiracy between the Maryland racetracks and out-of-state racetracks. The defendants violated the TRO by urging out-of-state racetracks to terminate their simulcast signals, and most of the racetracks complied with the request. Even though the out-of-state racetracks may not have had anti-competitive motives, mere acquiescence in an illegal scheme is sufficient to create a conspiracy under the Sherman Act.

The full opinion is available in pdf.

Wednesday, August 11, 2010

Abdou-Malik Yacoubou Adam v. Wells Fargo Bank, N.A. (Maryland U.S.D.C.)

Filed: July 28, 2010

Opinion by Judge J. Frederick Motz


Held: A complaint alleging alleging the defendant harassed the plaintiff with dozens of phone calls every week states a claim for strict liability for malicious conduct under the Fair Debt Collection Practices Act.


Facts: The plaintiff owned a property with a mortgage serviced by the defendant. In June 2008, the defendant began charging $22.42 more per month after receiving updated tax information. The plaintiff disputed the increase and made payments under the original monthly rate. The plaintiff and the defendant agreed to a loan modification agreement in November 2008 regarding payments beginning in January 2009. However, the plaintiff's January payment was returned. Upon inquiry, the plaintiff was informed the loan modification agreement was null and void and he needed to sign another contract. The defendant rejected the plaintiff's February payment for an amount equaling two months payment under the loan modification agreement. The plaintiff then "began to receive regular harassing phone calls from the defendant threatening foreclosure."


The plaintiff sued for, among other things, compensation of injuries arising out of the revised loan modification agreement. The defendant moved under Rule 12(b)(6) to dismiss counts II and V of the plaintiff's complaint, alleging discrimination on the basis of race, religion or national origin and strict liability for malicious conduct.


Analysis: To state a "claim of discrimination in lending practices, a plaintiff must allege (1) that plaintiff is a member of a protected class who sought a loan for property; (2) that plaintiff qualified for a loan; (3) that a bank denied plaintiff's application; and (4) that other similarly situated applicants who were not in the protected classes received loans or were treated more favorably." The plaintiff's claim was dismissed because he failed to plead sufficient facts to permit a conclusion that discrimination was a factor.


With respect to the strict liability claim, the Court agreed with the defendant that the plaintiff's allegation of strict liability is not a recognized common law tort cause of action in Maryland. However, the Court, after providing some assistance to the pro se plaintiff's argument, permitted the plaintiff's claim that the defendant's alleged harassment states a plausible claim under the Fair Debt Collection Practices Act. The Act is a strict liability statute. And, it prohibits the defendant's use of repeated telephone calls with the intent to "annoy, abuse, or harass," allegations made in the plaintiff's complaint. The Court denied the defendant's motion to dismiss the plaintiff's strict liability count.


The full opinion is available in pdf.

Tuesday, August 10, 2010

Pennsylvania National Mutual Casualty Insurance Co. v. City Homes, Inc. (Maryland U.S.D.C.)

Filed: June 25, 2010
Opinion by Judge Catherine C. Blake.

Held: An insurance company will owe a duty to indemnify an insured for any judgment against it for negligence and/or negligent misrepresentation if the insured does not foresee or expect an injury resulting from a negligent act. The act of negligence is an “accident” under liability insurance.

Facts: An insurance company filed a declaratory judgment action claiming that it did not have a duty to indemnify and defend a rental property company and its president in a lawsuit filed by two minors who alleged they were exposed to lead paint. The rental property company counterclaimed and both sides moved for summary judgment.

The house in question had been a subject property in a “Lead-Based Paint Abatement and Repair & Maintenance Study.” It had undergone a lead-abatement intervention. During the time period in which the two minors lived in the house, the rental property company held commercial general liability insurance. After the rental property company sought indemnification from the insurance company, the insurance company argued that it did not owe a duty to defend or indemnify the rental property company because the underlying litigation did not involve an “occurrence,” as defined in the insurance contract.

The insurance company also argued that, even if the underlying case involved an “occurrence,” the contract’s exclusion for bodily injury that was expected or intended by the insured applies. The insurance company argued that the participation in the lead paint study showed the rental property company must have foreseen and expected the alleged injuries.

The insurance contract defined an “occurrence” as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

Analysis: The court applied the standard set forth in Sheets v. Brethren Mutual Insurance Company, 342 Md. 634, 679 A.2d 540 (1996). In Sheets, the Maryland Court of Appeals held that an act of negligence constitutes an “accident” under a liability insurance policy and identified the relevant inquiry to be whether the insured actually foresaw or expected the injury resulting from the insured’s negligent act. By this standard, the court held that it could not be inferred from the rental property company’s participation in the study and its knowledge of the risks of lead poisoning that it foresaw the injuries sustained by the two minors.

Granting the rental property company’s motion and denying the insurance company’s motion for summary judgment, the court held that the insurance company will owe a duty to indemnify the rental property company for any judgment against it if the rental property company is ultimately found liable for negligence and/or negligent misrepresentation because the alleged were accidental and caused by an “occurrence.”

The full opinion is available in pdf.