Crescent City Estates, LLC v. Bank of America, NA (Maryland U.S.D.C.)

Filed August 13, 2009
Opinion by Judge Catherine C. Blake

Held: Under the Maryland Uniform Commercial Code (the "Code"), the term "forgery" includes signatures that are unauthorized in addition to signatures that are fake.

Facts: In a suit for statutory conversion under section 3-420 of the Code, the signature on a draft was the real signature of a person who lacked authority to sign on behalf of the plaintiff payee. The defendant raised a comparative negligence defense under section 3-406 of the Code. The defense is viable only in circumstances where a claim is based upon a "forged" signature. The plaintiff countered that because the signature was the genuine signature of the signor, the defense was not available.

Analysis: The Court examined the history of the term "forgery" under Maryland law. Noting Maryland's traditionally broad treatment of the term, it held that the term "forgery" encompasses both fake signatures and unauthorized signatures. Because the signature at issue was unauthorized, the comparative negligence defense was available.

The full opinion is available in PDF.

Fischer v. Fischer (Cir. Ct. Mont. Cnty)

Filed May 21, 2009.
Opinion by Judge Mary Beth McCormick.

Held: Unnamed co-owner of a business was entitled to one half of the net proceeds from the sale of the business, despite the lack of agreement or "paper trail" evidencing ownership, because an implied-in-fact contract existed between the co-owners.

Facts: A father and son created a business based upon the son's business plan to create coin changing machines for retail and grocery stores. The son's name was kept off of all documents to shield him and the business from his creditors and the bankruptcy trustee. Upon a sale of the business, the son sought one half of the proceeds of sale as a co-owner.

The Court found it to be clear that the son "did a great deal of the work necessary to start up" the business. The son developed the software that allowed the business to be run through a telephone or computer, which was instrumental to the company's profitability. The buyer of the company, a competitor, did not have this technology. The son also found customers, conducted mass mailings and ran the day-to-day workings of the business. In summary, "his efforts were relentless." The Court also noted the father's e-mails, which demonstrated the "actual intent behind the ownership of the company."

The full opinion is available in PDF.

Glynn v. EDO Corp. (Maryland U.S.D.C.)

Opinion by Judge J. Frederick Motz
Filed July 23, 2009

Facts: Glynn sold assets of his company to EDO and signed a non-disclosure and confidentiality agreement and restrictive covenants. He went to work for EDO and worked with one James Martin. EDO ultimately discharged both Glynn and Martin who formed companies that began to compete against EDO.

Glynn brought this action against EDO alleging retaliation in violation of the False Claims Act, 31 U.S.C. § 3730 et seq., and wrongful termination. EDO filed counterclaims against Glynn and his wholly-owned LLC asserting numerous state law causes of action arising from Glynn’s alleged actions during and after his employment with EDO's corporate predecessor, including breach of contract, breach of fiduciary duty, misappropriation of trade secrets, conversion, defamation, tortious interference with advantageous relations, unjust enrichment, and civil conspiracy. While styled as a "cross-claim," EDO asserted similar claims against Martin.

Martin was not a resident of Maryland. He was served while in Maryland to file, pro se, a request for an extension of time to challenge EDO's assertion of the Court's ability to exercise personal jurisdiction over him.

Held:

1. Claim for conversion based upon alleged conversion “proprietary documents, employee information, technology design and schematics, contact lists, vendor and pricing information, and other trade secrets and non-trade secret proprietary and confidential information” are based on the misappropriation of EDO's information. Hence, such claims are subject to dismissal because such claims are preempted by the New Hampshire Uniform Trade Secrets Act (“NHUTSA”). Claims for conversion of physical property such as a desk or a chair is not preempted.

2. A claim for conversion by spending company time on matters for the company's competitors is also subject to dismissal because an employee's conduct on company time is not in the nature of a property or right which may be the subject of conversion.

3. EDO asserted that the alleged wrongful acts of Glynn and his company allowed them to “gain a head start” in developing and producing products, resulted in benefits such as profits, earnings, patent royalties, and commissions. Thus, EDO made a claim for unjust enrichment. Judge Motz denied the motion to dismiss of the unjust enrichment claim, holding that it was “premised on wrongdoing over and above” the misappropriation or misuse of EDO's information.

4. The Court denied the motion to dismiss claims of civil conspiracy because the allegations that Glynn et al. agreed and conspired to “misappropriate, defraud, and convert [EDO]’s proprietary and confidential information and trade secrets” and “unlawfully commit unfair competition and interference with [EDO]'s contractual and prospective business relationships” was sufficient to state a claim “where the elements of the claim require[d] some allegation or factual showing in addition to that which [formed] the basis for [the] claim of misappropriation of a trade secret.”

5. As to Martin, there were insufficient facts upon which to assert either general or long-arm jurisdiction. Martin's appearance in Maryland to request an extension of time to raise the jurisdictional defense does not constitute an implied waiver of the defense.

The opinion has been recommended for publication and the full opinion is available in PDF.

Green v. N.B.S. Inc. (Ct. of Appeals)

Opinion by Judge Joseph F. Murphy, Jr.
Filed July 21, 2009

Held: The statutory cap on non-economic damages applies to personal injury claims brought pursuant to the Consumer Protection Act.

Facts: The Plaintiff won a verdict in the Circuit Court for Baltimore City on her claim for lead paint poisoning pursuant to the Maryland Consumer Protection Act (the "CPA"). The Circuit Court reduced the verdict to comply with Maryland's statutory cap on non-economic damages for personal injury - §11-801, Courts and Judicial Proceedings Article.

The Plaintiff argued on appeal that the cap on non-economic damages, which applies to "victims of tortious conduct" in "personal injury actions," does not apply to awards pursuant to the CPA. She contended that a violation of the CPA is not a tort, and an action for violation of the CPA is not a "personal injury action."

The Court of Appeals rejected the argument. The full opinion is available in PDF.

Baltimore Street Builders v. Stewart (Ct. of Special Appeals)

Filed: July 7, 2009
Opinion by Judge James P. Salmon

Held: Home improvement contractor that failed to comply or "substantially comply" with the regulatory requirement to hold a home improvement license was not entitled to enforce its contract.

Facts: Affirming the Circuit Court's dismissal of a petition to establish a mechanic's lien based on construction contract where builder did not have home improvement license.

A builder entered into a contract and performed construction on a residence in Maryland. The defendant owner failed to pay in full. The builder sued to establish and enforce a mechanic's lien. The builder was not licensed as a home improvement contractor. The builder protested that a principal owner of the builder did hold a license.

The Court noted that contracts made by unlicensed persons subject to regulatory statutes designed to protect the public are illegal and unenforceable. The Court discussed the principle that strict application of the rule is not always appropriate. There may be circumstances where such contracts may be enforced. Such circumstances would include where the contractor "substantially complied" with the regulatory requirement. Factors relevant to this issue would be (1) whether the contractor had a license at the time of contracting; (2) whether the contractor readily secured a license; (3) the responsibility and competence of the contractor.

Finding that neither the contractor nor its contracting agent ever held a license, the Court rejected the notion that the contractor substantially complied.

The full opinion is available in PDF.

*The opinion contains a detailed explication of the principle of "substantial compliance."

Milchling v. U.S. (Maryland U.S.D.C.)

Filed: July 7, 2009
Opinion by Judge J. Frederick Motz

Held: CFO and controller of corporation found personally liable under 26 U.S.C. § 6672 for unpaid federal wage withholding amounts.

Facts: Milchling was responsible for payroll for the entire company when he was controller or CFO, as well as when he was project manager. Milchling also prepared checks to the company's creditors. According to Bryan Meinken, one of the company's principals, Milchling participated in decisions as to which creditors to pay and when to pay them. Milchling prepared the company's quarterly federal employment tax returns for the four taxable periods at issue in this case.

In arguing that Milchling was a “responsible person” for the company, the government pointed to evidence that Milchling:

• Was the controller and CFO of the company,
• Had control over the company's payroll,
• Had input on which creditors to pay and when to pay them,
• Participated in the day-to-day management of the company,
• Possessed the power to write checks, and exercised that power,
  
• Had the authority to hire or fire employees,
• Had access to the company's books and records, and
• Was aware of the outstanding trust fund tax liabilities as they were accruing.

The Court held that:

1. Milchling was a "responsible person" within the meaning of § 6672(a) because he "so participated in decisions concerning payment of creditors and disbursement of funds that he effectively had the authority – and hence a duty – to ensure payment of the corporation’s payroll taxes.” Citing Plett v. United States, 185 F.3d 216, 219 (4th Cir. 1999).

2. Milchling was a "responsible person" even for quarters when he was not actually employed by the company, because he was a "responsible person" at the time when the tax payments were due.

3. Milchling "willfully" failed to pay over the tax because he "was aware throughout the period of his employment with [the company] that [the company] was not paying the withholding taxes which it was required to pay to the government and that [the company] was instead paying employee salaries and paying other creditors."

The full opinion is available in PDF. The opinion has not been approved for publication.

Siegel v. Comptroller (Ct. of Special Appeals)

Filed: July 2, 2009
Author: Judge Timothy E. Meredith

Held: Gifts to nephews and great-nephews and great-nieces made by 87 year old man who died within two years after gifts were made are subject to Maryland inheritance tax.

Facts: Decedent died on November 23, 2003, at the age of 88. He had made gifts of partnership interests to his nephews on August 1, 2002. Those interests had a total value of $861,668. He made gifts totaling $385,000 via transfers on January 15, 2003, to "Section 529 Plans" of $55,000 for each of his seven great-nephews and great-nieces. Both the Maryland Tax Court and the Circuit Court for Montgomery County had previously upheld the assessment of inheritance taxes with respect to the transfers.

First, the Court concluded that the gifts, either considered individually or in the aggregate, constituted a material part of the property of the decedent.

Second, the Court rejected the argument that gifts were not made in contemplation of death because the decedent was healthy and vigorous when he made the gifts. The Court found that, based upon the decedent's medical records that had been introduced into evidence, the decedent was in declining health. The decedent suffered from, inter alia, coronary artery disease, congestive heart failure, prostate cancer, and progressive dementia.

The full opinion is available in PDF.