Penthouse 4C, LLC v. 100 Harborview Drive Council of Unit Owners (Cir. Ct. Balto. City)

Filed: June 5, 2012.

Opinion by Judge Evelyn Omega Cannon.

Held:   The Circuit Court for Baltimore City held that it had jurisdiction to confirm an arbitration award on a petition filed within 30 days after the arbitrators’ decision on a motion to modify the award, that the arbitrators did not exceed their jurisdiction in awarding the Plaintiff LLC the amount of costs of living and relocation expenses of the LLC’s sole member who was not a party to the arbitration, and that the award would not be vacated for manifest disregard of the law because the Defendant could not show that the arbitrators disregarded the law after understanding and correctly stating it. Finally, the Circuit Court refused to modify the specific performance part of the award based on Defendant’s evidence presented to the Court but not to the arbitrators.      

Facts: On March 9, 2010, the Plaintiff LLC, whose sole member was the primary resident of a condominium managed by the Defendant condominium council and directors, sued for specific performance and damages alleging that that the Defendant’s failure to perform required maintenance caused water exposure damage (mold) in the Plaintiff LLC’s condominium unit. The Plaintiff LLC’s sole member, an individual residing in the unit, was not individually named as a party to the suit.

The Circuit Court granted the Defendant’s motion to stay pending arbitration and after five days of hearings, on November 28, 2011 a majority of the three retired judges serving as arbitrators awarded the Plaintiff $1,252,487 in damages, including $433,722 for the sole member’s consequential costs, and ordered the Defendant to perform the required maintenance.

The Plaintiff filed a petition to confirm the award in the Circuit Court.   A day later the Defendant filed with the arbitrators a motion to modify the award as to what all agreed was an inadvertent mistake. On December 28, 2011 the majority panel issued its modification of the award, in part. On January 23, 2012 the Defendant filed in the Circuit Court a Petition to Vacate the Monetary Award and to Modify the Award’s order of specific performance.

Analysis:   The Circuit Court first addressed the Plaintiff’s claim that the Petition to Vacate was not timely filed. Relying on Mandl v. Bailey, 159 Md. App. 64 (2004),  the Circuit Court found that an arbitration award, although final and complete when issued, is rendered incomplete and no longer final when a motion is timely filed with the arbitrator to modify the award, therefore tolling the 30 day period in which a petition to vacate the award can be filed with the Court. In accordance with Mandl,  the Court found the Petition to Vacate was timely because filed within 30 days of delivery of the corrected award.

The Circuit Court next addressed whether the arbitrator panel exceeded its jurisdiction when making a $433,722 award to the Plaintiff LLC for consequential costs of the LLC’s sole member. The Court found that the Defendant participated in the arbitration without objection about jurisdiction or the appropriateness of a consequential costs award to the Plaintiff LLC’s sole member. The Circuit Court further found that the arbitration panel explicitly made the award to the Plaintiff LLC and not to the LLC’s sole member, therefore no jurisdictional issues were present.  

Next, the Circuit Court addressed the Defendant’s claim that the award for the consequential costs was “completely irrational” and a “manifest disregard of the law.” Although “manifest disregard of the law” is not stated as grounds to vacate an award in the Federal Arbitration Act or the Maryland Uniform Arbitration Act, the Court followed Sharp v. Downey, 197 Md. App. 123 cert. granted, 419 Md. 646 (2011) in applying the doctrine under principles of stare decisis. Reviewing authorities, the Circuit Court found that the “manifest disregard” standard requires some showing in the record, other than the obtained result, that the arbitrators knew the law and consciously disregarded it. The Circuit Court found that the Defendant never presented an issue to the arbitrators as to an award of the amount of the LLC’s sole member’s consequential costs and the arbitrators never provided any explanation for the award. In light of the Defendant’s silence, the award could not be “completely irrational” and the Defendant’s failure to refer the arbitrators to any law on consequential damages was fatal to the requirement of the “manifest disregard of the law” doctrine that the record show that the arbitrators were aware of the law and disregarded it.

Finally, the Defendant sought three modifications to the specific performance portion of the award: 1) incorporation of two Project Manuals that were not introduced into evidence, 2) allowing the Defendant to perform a peer-review of the Project Manuals, and 3) allowing value-engineering of the Project Manuals. Because the Project Manuals were not presented into evidence before the arbitrators, the Circuit Court could not conclude whether the proposed modifications would affect the award. Defendant also was silent during the arbitration hearing about peer-reviewing and value-engineering. Consequently, the Circuit Court denied the Defendant’s Petition to Vacate or Modify the Award and granted Plaintiff’s Petition to Confirm the Award.

The full opinion is available in PDF.

Oliver v. Crump (Maryland U.S.D.C.)

Filed: September 15, 2011

Opinion by: Judge Ellen Lipton Hollander

Held: In a suit alleging breach of fiduciary obligations of directors of a corporation, a Maryland court may exercise personal jurisdiction over out-of-state directors of a Maryland corporation that conducts its business operations in Maryland.

Facts: Defendants were directors, officers and employees of a Maryland corporation. Plaintiff alleged defendants acted in a course of misconduct. All of the defendants reside in Delaware.

Analysis: A court exercising personal jurisdiction over non-resident defendants does not violate the due process clause of the U.S. Constitution when the defendants have "minimum contacts" in the state and "the exercise of jurisdiction based on those contacts is constitutionally reasonable." The Court applied the logic of Pittsburgh Terminal Corp. v. Mid Allegheny Corp., 831 F.2d 522 (4th Cir. 1987), which involved a West Virginia corporation and directors who lived in the State of Virginia.

In Pittsburgh Terminal, the Fourth Circuit held "the acceptance of a directorship constitutes minimum contacts in a derivative suit." The Court also found minimum contacts because, among other reasons, (a) Maryland law, like West Virginia law, provides the business and affairs of the corporation shall be managed under the direction of a board of directors, (b) directors participate in business decisions that have a primary effect in the forum state and (c) by becoming directors, the defendants purposefully availed themselves of the privilege of doing business in that state.

Turning to the constitutional reasonableness portion of the due process test, the Court cited Pittsburgh Terminal, which noted the factors of the case made the "assertion of jurisdiction more reasonable." The Court agreed. As in Pittsburgh Terminal, the defendants live in a neighboring state. Maryland has a strong interest in providing a forum to hear a claim alleging wrongful acts by the directors of one of its domestic corporations. And, according to the Court, while defendants receive many benefits of the legal fiction of a corporation, requiring "them in turn to shoulder one of the few burdens of such fiction" did not seem unfair.

The opinion is available in pdf.

Music Makers Holdings, LLC v. Sarro (Maryland U.S.D.C.)

Filed: July 14, 2010
Opinion by Judge Roger W. Titus

Held: A foreign defendant was not subject to personal jurisdiction in Maryland on the basis of correspondence sent to and received from the jurisdiction, maintenance of a website, advertising, or tortious conduct not intentionally directed into the State.

Facts: A Maryland plaintiff sued a foreign defendant for infringing upon its trademark. The defendant moved to dismiss for lack of personal jurisdiction. The plaintiff argued that the defendant was subject to personal jurisdiction because it transacted business in the State, caused tortious injury in the State, and engaged in a "persistent course of conduct in the State." The plaintiff pointed to five things that justified the exercise of personal jurisdiction, which the court addressed in turn:

Analysis:

The defendant sent cease and desist letters to the plaintiff in the State: The plaintiff argued that the defendant subjected herself to personal jurisdiction by sending the plaintiff cease-and-desist letters in Maryland about the mark. Relying on multiple cases from outside the jurisdiction, the court held that cease and desist letters, alone, are an insufficient basis. A defendant does not "transact business" within the meaning of the long-arm statute by sending letters to a purported infringer of its rights. Moreover, the maintenance of a suit based solely on such letters would “offend traditional notions of fair play and substantial justice."

The defendant received e-mails and phone calls originating from Maryland inquiring about the mark: The plaintiff argued that such contacts were sufficient to establish personal jurisdiction. The court held that these contacts did not establish that the defendant was transacting business or engaging in a persistent course of conduct in the State. Moreover, the contacts would not satisfy due process because they did not show that the defendant purposefully availed herself of conducting activities in the State.

The defendant's website: The court articulated the standard in the Fourth Circuit for establishing personal jurisdiction by means of a website. In the Fourth Circuit, the mere act of “placing information on the Internet is not sufficient by itself to subject that person to personal jurisdiction in each State in which the information is accessed.” Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 399 (4th Cir. 2003). Rather, the defendant “must have acted with the manifest intent of targeting Marylanders.” Id. at 400.

The Fourth Circuit has adopted a “sliding scale” model for website-based specific jurisdiction. Under this sliding scale, there are passive, interactive, and semi-interactive websites. At one end of the spectrum are situations where a defendant clearly does business over the internet. If the defendant enters into contracts with residents that involve the knowing and repeated transmission of computer files over the internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on a web site. A passive web site that does little more than make information available is not grounds for the exercise of personal jurisdiction. The middle ground is occupied by interactive web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information.

The defendant's site provided information regarding her camp, a toll-free number, and a registration form which visitors could print and mail to defendant in New York. It also had a Google search box. It did not have an electronic application, a payment-by-credit card function, live chat, or an interactive e-mail form. Accordingly, the court deemed the site passive and an insufficient basis for personal jurisdiction.

The defendant advertised on camp marketing web sites: The plaintiff argued that this was a purposeful availment of the Maryland marketplace. The court concluded that, as with the defendant's own site, the third-party websites do not indicate that defendant “direct[ed] electronic activity into the State . . . with the manifested intent of engaging in business or other interactions within the state.” The generic advertising found on these third-party websites was insufficient to invoke personal jurisdiction.

The effects test: The plaintiff argued that the defendant's willful infringement of its rights satisfied the effects test. The effects test requires that a plaintiff show 1) an intentional tort, 2) suffered by the plaintiff in the forum, and 3) the defendant expressly aimed its conduct at the forum. The court found that the third requirement was lacking - there was no showing that the defendant aimed its conduct at Maryland.

Accordingly, the court dismissed for lack of personal jurisdiction.

The full opinion is available in pdf.

Custom Direct, LLC v. Wynwyn, Inc. (Maryland U.S.D.C.)

Filed: May 4, 2010.

Opinion by: Judge Richard D. Bennett.

Held: Reaffirming that a plaintiff who is a business competitor of a defendant is not a "consumer" with standing to bring a claim under the Maryland Deceptive Trade Practices Act, Md. Code Ann., Comm. Law § 13-301, et seq. ("MDTPA") and holding that the maintenance of a passive Internet website that merely makes information available to viewers located in Maryland who may be interested in it is insufficient to establish personal jurisdiction over a non-resident defendant.

Facts:

Plaintiff is one of the top manufacturers and suppliers of business and personal checks in the United States. After Defendant’s contract to perform Internet marketing for Plaintiff expired, Plaintiff alleges, Defendant continued to use Plaintiff’s trademarks to attract customers to Plaintiff’s competitors. Accordingly, Plaintiff sued Defendant for trademark and copyright infringement under the Lanham Act and the Maryland Deceptive Trade Practices Act and for unfair competition under common law.

Plaintiff also brought claims against a co-defendant, who is a full-time college student, living in Minnesota, who is not an employee of Defendant, and who has never resided in Maryland. This Co-Defendant after the contract expired maintained a website that offers products that compete with Plaintiff. While under contract with Plaintiff, Co-Defendant directed from his website potential customers navigating on the web (including those residing in Maryland) to the Plaintiff’s website and he received referral fees for any successful transactions between Plaintiff and a referred internet user. The Co-Defendant did not sell anything to Maryland residents.

Analysis:

Initially, the Court determined that Plaintiff was not entitled to recover statutory copyright damages, enhanced or punitive damages and attorneys’ fees under the Copyright Act because Plaintiff’s copyright registration did not predate the date of first infringement.

Next, the Court held that Plaintiff lacked standing to bring a claim under the MDTPA. In particular, the Court reaffirmed the holding in Penn-Plax, Inc. v. Schultz, Inc., 988 F. Supp. 906 (D. Md. 1997), which rejected the argument made by the Plaintiff that the MDTPA’s definition of “person” gives corporate plaintiffs standing to sue under the MDTPA. Because the statute expressly limits standing to consumers, the MDTPA claim was dismissed.

The Court also dismissed all claims against the Co-Defendant for lack of personal jurisdiction. The Court held to exercise personal jurisdiction over a non-resident: two conditions had to be satisfied: (1) jurisdiction must be authorized under the State’s long-arm statute, and (2) the exercise of jurisdiction must comport with due process. In order to comport with due process, a non-resident Defendant must have sufficient “minimum contacts” with the forum state so that it “does not offend traditional notions of fair play and substantial justice” before a MD has personal jurisdiction over a non-resident.

To support jurisdiction, Plaintiff had to show that the Co-Defendant: “'(1) direct[ed] electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) that activity create[d], in a person within the State, a potential cause of action cognizable in the State's courts.'” (quoting ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 714 (4th Cir. 2002)). Passive internet activity, which does little more than make information available to those who are interested in it, does not satisfy the first or second elements of the ALS Scan test.

Applying this rule, the Court found no evidence that the Co-Defendant’s website targeted customers in Maryland, or that it was anything but passive in nature. Because any commissions the Co-defendant made arose from a consumer purchasing goods from the Plaintiff after linking from the Defendant’s site to Plaintiff’s, the Defendant was doing nothing more than making information available to persons interested in it. The Co-Defendant had no active or direct relationships with any of Plaintiff's purchasers and had even signed an agreement with the Plaintiff that prohibited the Co-Defendant from engaging in any active relationship or exchanging information with visitors to the Co-defendant site. As a result, the Co-Defendant’s electronic "contacts" with Md residents were insufficient to support personal jurisdiction over the Co-Defendant in Maryland.

The full opinion is available in PDF.

St. Paul Mercury Insurance Company v. American Bank Holdings, Inc., et al. (Maryland U.S.D.C.)

Filed: March 5, 2010.
Opinion by Judge Roger Titus.

Held: The U.S. District Court of Maryland may exercise personal jurisdiction over a non-resident defendant who enrolled foreign default judgments in Maryland.

Facts: The plaintiff initially sued American Bank Holdings, Inc., a Delaware corporation with its principal place of business in Maryland, in Illinois. On July 23, 2008, the Illinois court entered three default judgments against American. The plaintiff then enrolled the foreign default judgments in Maryland.

American notified its insurance carrier of the default judgments and moved to set aside the default judgments in Illinois. The motion was denied. The insurance carrier denied American's request for coverage and commenced a declaratory judgment action against American and the plaintiff. The plaintiff filed a motion to dismiss for lack of personal jurisdiction, contending he had insufficient contacts with the state.

Analysis: A federal court may exercise personal jurisdiction over a non-resident defendant if (1) the requirements of the forum state's long-arm statute are satisfied and (2) the exercise of jurisdiction comports with the Due Process Clause of the 14th Amendment.

Under Maryland's long-arm statute a court may exercise personal jurisdiction over a person that "transacts any business or performs any character of work in the State." There must be some act by which the defendant purposefully avails itself of the privilege of conducting activities in the State. Based on the similarities between the purposeful availment when a judgment creditor enrolls a foreign default judgment and when a litigant files a lawsuit, the Court found that the plaintiff transacted business and engaged in purposeful activity in Maryland. The plaintiff expressly invoked the "benefits and protections of Maryland's laws" by enrolling the foreign judgments. Therefore, the Court found it could exercise personal jurisdiction under Maryland's long-arm statute.

Due process allows personal jurisdiction over a non-resident defendant when the defendant has minimum contacts with Maryland, "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." According to the Court, jurisdiction was permitted because (1) the plaintiff could not reasonably argue that litigating in Maryland is burdensome when he enrolled the foreign judgments, (2) Maryland has an interest in adjudicating a matter involving a Maryland policy holder, (3) no other identifiable forum exists for the insurance company, (4) states have an interest in adjudicating claims in a single action, and (5) the only social policies involved in the action concerned a Maryland policyholder and its insurance company.

The opinion is available in pdf.

Micro Focus (US), Inc. v. Bell Canada (Maryland U.S.D.C.)

Filed: February 23, 2010
Opinion by Judge Roger W. Titus

Held: The forum selection clause in the license agreement between the parties did not allow courts in Maryland to exercise personal jurisdiction over Bell Canada, a Canadian corporation with its principal place of business in Toronto. Other than this provision, the plaintiffs did not assert any other basis for the exercise of personal jurisdiction over Bell Canada.

Facts and Analysis: Prior to December 31, 2008, Bell Canada entered into a license agreement with Micro Focus for certain software. The license agreement had the following provision:

If Licensee acquires the Software in North America, the laws of the state of Maryland govern this License Agreement. If Licensee acquires the Software in France, Germany or Japan, this License Agreement is governed by the laws of the country in which Licensee acquired the Software. In the rest of the world the laws of England govern this License Agreement. The aforesaid applicable law shall apply without regard to conflicts of laws provisions thereof, and without regard to the United Nations Convention on the International Sale of Goods. This License Agreement shall be subject to the exclusive jurisdiction of the courts of the country determining the applicable law as aforesaid.

(Emphasis by the Court.)

Applying Maryland law, the Court found that Micro Focus' interpretation was unreasonable:

Micro Focus’ interpretation requires two questionable inferences. The first inference is that the “country” governing licenses executed by North Americans must be the United States because Maryland is part of the United States. The second inference is that “courts of the country” means all federal courts in the United States. Both inferences are tenuous. Accordingly, the Court rejects Micro Focus’ contention that the forum selection clause unambiguously refers to the federal courts of the United States.

(Footnote omitted.)

Further, the Court found that the "clause at issue is . . . nonsensical in that it vests courts with exclusive jurisdiction over a 'License Agreement' rather than over parties or over actions arising out of the License Agreement."

Perhaps as an admonition to drafters of contracts, the Court warned that "the best of intentions, if not clear and unequivocally communicated, simply will not suffice when it comes to a waiver of objections to personal jurisdiction."

The full opinion is available in PDF. The opinion has been approved for publication.

The Classics Chicago, Inc. v. Comptroller of the Treasury (Ct. of Special Appeals)

Filed: January 4, 2010.
Opinion by Judge James Eyler.

Held: When a parent company does business in Maryland, its subsidiary which does not do business in the State may be constitutionally required to pay State income taxes. Such taxation is constitutional if the subsidiary’s income is generated by the parent’s business in the State.

Facts: A subsidiary held its parent’s trademarks and licensed to the parent the right to use the trademarks in exchange for royalty payments. During a several year period, the parent, which did business in Maryland, filed State income tax returns that deducted royalty payments made to the subsidiary. The subsidiary, which did not do business in Maryland, did not file State income tax returns and received a tax assessment from the Comptroller for the royalty payments. The issue on appeal was whether the assessment against the subsidiary is constitutional.

Analysis: The court stated that the constitutionality of the tax is governed by the Commerce Clause to the U.S. Constitution and principles of due process. The analysis turns on whether there is a substantial nexus between the state and the person it seeks to tax. Both parties’ arguments addressed their differing interpretation of Comptroller of the Treasury v. SYL, Inc., 375 Md. 78, cert. denied, 540 U.S. 984 and 540 U.S. 1090 (2003).

As in the case at hand, SYL involved a subsidiary that licensed intellectual property rights to its parent in exchange for royalties. The SYL court held that a tax on the subsidiary was constitutional. In the matter at hand, the subsidiary argued that SYL adopted the “sham doctrine,” which examines whether an entity’s motivation behind a corporate structure was to obtain tax benefits. Because the subsidiary was not formed for tax-related reasons, it allegedly should not have been taxed. The Comptroller argued that SYL did not adopt the “sham doctrine,” and, accordingly, an entity’s motivation is not dispositive.

The court accepted the Comptroller’s argument, holding that SYL did not adopt the “sham doctrine.” Rather, the constitutional analysis simply turns on whether the parent’s business in the taxing state is what produced the subsidiary’s income. Because the subsidiary’s income was generated solely by the parent, the court held that the tax was constitutional.

The full opinion is available in PDF. The opinion in SYL is also available in PDF.

LTVN Holdings, LLC v. Odeh (Maryland U.S.D.C.)

Filed: November 5, 2009.
Opinion by: Judge Catherine C. Blake

Held: A non-resident defendant's assent to a forum selection clause in an Internet "clickwrap" agreement, alone, is sufficient to justify the exercise of personal jurisdiction over such a defendant and constitutes a waiver of any objection to venue.

Facts: Defendant LLC and its principal, citizens of Louisiana, obtained access to Plaintiff's Internet-based video content by registering on Plaintiff's website and accepting Plaintiff's on-line terms of use. The terms included a forum-selection clause, requiring that "any action to enforce this agreement shall be brought in the federal or state courts located in the State of Maryland." Plaintiff sued both the LLC and its principal in Maryland, alleging that they improperly tampered with Plaintiff's video content and passed it off on their website as the Defendant LLC's property. Defendants never visited Maryland and conducted no business there.

Analysis: The forum-selection clause in the Network Affiliate Agreement is valid, mandatory, and enforceable. Courts have routinely upheld such clauses where defendants clicked only once on a button indicating their assent to an on-line agreement containing those terms, even if they have not read the agreements. Defendant did not meet its "heavy burden" of showing that the forum-selection clause was "unreasonable, unfair, or unjust" in order to justify a judicial refusal to enforce it. As a result, Defendants' consent to the forum-selection clause, standing alone, is sufficient to confer personal jurisdiction in Maryland and makes venue in this district proper. Assent to the clause constitutes a waiver of objections to both personal jurisdiction and venue.

The plaintiff had previously prevailed in two other cases challenging the same type of contract provisions, Costar Realty Information, Inc. v. Field, 612 F.Supp. 2d 660 (2009) and Costar Realty Information, Inc. v. Meissner, 604 F.Supp. 2d 757 (2009).

Practice Pointer: Corporate principals, like the President of the Defendant LLC here, may be exposing themselves to personal liability merely by "clicking" their assent to an on-line service-provider's terms of use, even if the entity is the intended user of the on-line content. Such agreements may not distinguish between a user acting in his personal capacity and a user acting as agent for a corporate principal.

The full opinion is available in PDF.

CSR, Ltd. v. Taylor (Ct. of Appeals)

Filed: November 16, 2009
Opinion by Judge Clayton Greene, Jr.

Held: An Australian distributor of asbestos, who used the port of Baltimore as a conduit in shipping raw asbestos from Australia to U.S. customers located outside of Maryland, did not attain sufficient minimum contacts with the State of Maryland to be subject to the Court’s exercise of personal jurisdiction.

Facts: The personal representatives of two dockworkers who died from mesothelioma sued CSR based on the theory that the dockworkers became sick from the offloading of CSR’s raw asbestos from ships docked at the Port of Baltimore.

CSR acted as the exclusive distributor for a wholly owned subsidiary to sell asbestos to customers in the United States and regularly shipped distributions of asbestos through the Port of Baltimore. CSR regularly advertised its asbestos in a trade magazine that was published and circulated in the United States.

CSR also acted as the exclusive distributor of Australian sugar to customers in the United States and regularly used the Port of Baltimore to make such distributions.

The Circuit Court granted CSR’s motion to dismiss for lack of personal jurisdiction noting that CSR did not have any meaningful contacts with the State of Maryland. The Court of Special Appeals reversed finding that CSR’s packaging and shipping of asbestos to the Port of Baltimore was sufficient to establish such minimum contacts with Maryland as to render lawful the Circuit Court’s exercise of jurisdiction.

Analysis: A Maryland court may exercise jurisdiction over an out-of-state defendant if: (i) the requirements of Maryland’s long-arm-statute are satisfied, and (ii) the exercise of personal jurisdiction comports with the requirements imposed by the Due Process Clause of the Fourteenth Amendment.

Here, the court determined that it did not need to extensively consider the requirements of Maryland’s long-arm-statue because the Circuit Court’s exercise of jurisdiction would have offended the Due Process Clause

The Due Process Clause requires that an out-of-state defendant “have established minimum contacts with the forum state and that to hale him or her into court in the forum state would not comport with traditional notions of fair play and substantial justice.” The out-of-state defendant must “purposefully avail itself of the privilege of conducting activities within the forum state,” thus creating a substantial connection with the forum state. A substantial connection is forged when the out-of-state defendant either engages in significant activities in Maryland or creates continuing obligations with the State's residents.

CSR did not personally avail itself of the privilege of conducting activities within Maryland by shipping asbestos or sugar through the Port of Baltimore. CSR neither engaged in significant activities in Maryland nor created continuing obligations with residents of the State. CSR did not maintain a place of business in Maryland, nor was it licensed to do business in Maryland. CSR did not have a relationship with any customers in Maryland, nor with the Port of Baltimore dockworkers. In fact, CSR’s act of shipping asbestos and sugar through the Port of Baltimore was required by the unilateral activity of third parties.

CSR’s advertising of asbestos in a trade magazine published and distributed in the United States also did not satisfy the “purposeful availment” requirement because the advertisements did not target Maryland consumers.

The full opinion is available in PDF.

Strudwick v. Whitney (Cir. Ct. Balto. City)

Filed August 28, 2009.
Opinion by Judge Evelyn Omega Cannon.

Held: Defendants whose contacts with Maryland were primarily limited to sending correspondence into the state and maintaining a passive website lacked sufficient contacts for the court to exercise personal jurisdiction over them.

Facts: In a lawsuit concerning the ownership of business interests in Costa Rica, the plaintiffs alleged claims against two foreign defendants who moved to dismiss for lack of personal jurisdiction.

The plaintiffs alleged general jurisdiction on grounds that the defendants had clients in Maryland and had earlier entered their appearance as counsel in the case. The court held that the defendants' limited client roster in the State was not sufficient. The court further held that appearing in the case could not be considered a factor because a defendant's contacts are to be measured as of the time the claim arose.

The plaintiffs alleged specific jurisdiction based on 1) an e-mail and a letter sent to the plaintiff in Maryland, 2) an allegedly defamatory website, and 3) allegedly defamatory e-mails sent to third parties, including Maryland residents. The court held that a passive website and e-mails that allegedly caused harm to business interests outside the jurisdiction were not sufficient grounds upon which to exercise personal jurisdiction.

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.