Walton v. Network Solutions (Ct. of Special Appeals)

Filed: February 26, 2015

Opinion By: Michael W. Reed

Holding: Appellant, Jeffrey Walton, failed to allege facts sufficiently specific to substantiate his claims against Appellee, Network Solutions, for violating either the Maryland Commercial Electronic Mail Act (“MCEMA”) or the Maryland Consumer Protection Act (“MCPA”), and his claims were timed barred under the applicable three year statute of limitations.

Facts: Appellant was the recipient of certain unsolicited commercial email (“spam”) from Appellee starting in 2009.  Appellant complained twice to Appellee, but continued to receive spam, which he alleged in his complaint was false or misleading as to where the spam came from and the information provided in the subject line of each email message.

Analysis: The Court began with the language of MCEMA, which specifically bars sending commercial emails that contain unauthorized, false or misleading information under section 14-3002.  Md. Com. Law Code Ann. § 14-3002 (2014).  Section 14-3002(b)(2)(ii) specifically bars “sending a message that contains false or misleading information about the origin or the transmission path of the commercial electronic mail.”  Appellant had asserted that Appellee had violated this provision because when Appellant sent a message to the reply-to address of Appellee, the message was returned indicating that the destination mailbox was full.  The Court concluded that this was not prohibited conduct under the statute because the statute did not require the mailbox to accept messages, only that it be a misrepresentation of where the spam originated from.  Moreover, the Appellant was able to determine from the sending email address to contact Appellee

Section 14-3002(b)(2)(iii) prohibits sending a message that contains false or misleading information in the subject line of the message.  The Court examined the subject lines of the emails attached to Appellant’s complaint, and concluded that because the subject lines of each such message were related to Appellee’s business of selling domain names, the subject lines did not, as a matter of law, have “the capacity, tendency, or effect of deceiving” the Appellant.  Instead, the case before the Court was factually distinguishable from a California case, Hypertouch, Inc. v. ValueClick, Inc., 123 Cal. Rptr. 3d 8 (Ct. App. 2011), because the subject lines in Hypertouchoffered free gifts without any limitation when the offer was actually far more limited.

Finally, the Court determined that Appellant’s claims under MCPA were time barred, holding that Appellant was aware on December 1, 2009 that Appellee had failed to remove him from Appellee’s email list, but failed to file a claim against Appellee until March 7, 2013 – more than three years from when he knew or should have known of the allegedly false or misleading conduct of Appellee.  Appellant’s claim here is premised on the statements of Appellee’s employees that Appellant was removed from the mailing list, but continued to receive spam after being told he was removed.  The Court concluded that such a claim had to be filed within three years, and that the continuing harm doctrine, which if applicable, might extend the limitations period for each new spam message received, was not applicable to the present matter.  The Court held that this argument was waived by not being raised and decided by the trial court at the hearing on the motion to dismiss, but that even if not waived, the continuing harm doctrine should not be applied to alleged violations of MCEMA.

The full opinion is available in PDF.

Tucker v. Specialized Loan Servicing, LLC (Maryland U.S.D.C.)

Filed: February 3, 2015

Opinion by: Paul W. Grimm

Holding: A creditor waives an express condition precedent to a loan modification when it signs and accepts payments under that modification without satisfaction of the condition precedent.  

Facts: Plaintiff purchased a home through a mortgage loan and deed of trust, which she jointly executed with her husband (“Husband,” collectively “Plaintiffs”).  The deed of trust provided that Plaintiff could modify the terms of the mortgage loan without Husband’s approval.  Plaintiff later applied to her mortgage servicer for a permanent loan modification.  The servicer returned a signed copy of the modification agreement (the “Modification”), which stated that the modification was effective as of February 1, 2010.  Despite language in the Modification requiring signatures from both mortgagors, Husband never signed.  Plaintiff made payments under the Modification, which the were accepted.  The servicer later assigned the loan to Defendants.  Plaintiff continued to make payments pursuant to the Modification, which Defendants rejected, insisting that the Modification was ineffective.  Defendants reported to credit agencies that Plaintiffs were in default and appointed trustees to foreclose on the home.

Plaintiffs filed an action alleging, inter alia, violations of the Maryland Consumer Debt Collection Act and the Maryland Consumer Protection Act, defamation, injurious falsehood, and breach of contract.  Defendants moved to dismiss.

Analysis: The Court found that all of Plaintiff’s claims hinged on the validity of the Modification. Defendants contended that the Modification was ineffective because the servicer never waived, in writing, the stated requirement of both signatures. The Court rejected this argument, reasoning that statements or actions may constitute waiver of a condition precedent in a contract. Although the Modification expressly required both signatures, the servicer waived this requirement through its actions of returning the signed Modification and accepting payments without Husband’s signature. After rejecting Defendants' statute of limitations arguments, the Court denied the motion to dismiss.

The opinion is available in PDF.

BJ's Wholesale Club, Inc. v. Rosen (Ct. of Appeals)

Filed: November 27, 2013

Opinion by Lynne A. Battaglia

Held:  The Maryland Court of Special Appeals erred by invoking the State’s parens patriaeauthority to invalidate the exculpatory clause found in a liability waiver signed by the father of a five-year-old child who was injured at a kid’s club. 

Facts: Plaintiffs, mother and father, sued BJ’s Wholesale Club on behalf of their son, who was injured at the Club’s Owings Mills location.  The Incredible Kids’ Club, is a free supervised play area in BJ’s Wholesale club, where children can play while their parents shop at the warehouse.  Plaintiff’s son was in the club when he fell from a small apparatus onto the floor, resulting in a serious brain injury.  Prior to the day of the accident, along with other membership documents, the father had executed an agreement, which contained an exculpatory provision and indemnification language pertaining to the use of Kids’ Club. 

The complaint pled a cause of action in negligence.  BJ’s filed an Answer with a general denial in addition to a counterclaim alleging a breach of contract for failing to indemnify, defend, and hold BJ’s harmless pursuant to the indemnification clause.  In their Motion for Summary Judgment under Rule 2-501, BJ’s asserted that no factual matters were in dispute and that, pursuant to the Court’s decision in Wolf v. Ford, 335 Md. 525 (1994), the exculpatory clause was valid and the claim was barred as a matter of law.  Plaintiffs filed an opposition contending that the exculpatory and indemnification clauses were unenforceable, because they violated Maryland’s public policy interest of protecting children. 

The trial court noted that in general, Maryland courts have upheld exculpatory clauses that were executed by adults on their own behalf.  The trial court recognized that the issue of whether or not an exculpatory clause signed by a parent on behalf of their minor child was in fact one of first impression in Maryland.   In Wolf, the Court of Appeals had recognized three circumstances in which enforcement of an exculpatory clause could be precluded.  The trial court addressed the relevant exception, that public policy will not permit exculpatory agreements in transactions affecting the public interest.  Under Wolf, “transactions affecting public interest” fall into three categories.  Of those three, the only one relied upon by the trial court was a catchall category of the public interest exception to the validity of exculpatory clauses.  The trial court recognized this category was not easily defined, opining that while the Maryland Court of Appeals has intended to create a public interest exception, without further guidance, the trial court was not capable of evaluating the “totality of the circumstances” against a “backdrop of current societal expectations,” as it quoted from the Wolf decision.  The trial court closed by indicating that it did not have the ability to pronounce public policy grounds to invalidate the clause that the plaintiff had signed on behalf of his minor child, and granted BJ’s motion for summary judgment on the grounds that the exculpatory clause was valid. 

Analysis:  In their appellate decision, the Court of Special Appeals began by framing the issue as follows:  “The central issue in this case is whether a parent may waive any and all future tort claims his or her child may have against a ‘commercial enterprise.’”  Rosen v. BJ's Wholesale Club, Inc., 206 Md. App. 708, 718 (2012)

To begin its analysis the Court of Special Appeals emphasized that Maryland case law provided very little guidance on the issue.  The Court turned to the appellate courts of other states, where they found that a substantial majority of states (majority view) that had “squarely considered whether a release agreement may bar future negligence claims of a child, have held that such agreements are invalid and unenforceable on public policy grounds.”   Their observation was that the minority view – states which held the exculpatory clause signed by the parent to be valid – only applied where a “commercial enterprise” was not the subject of the release, but instead where the release was of a claim against either a government agency or non-profit organization, or its agents.  The Court pointed to their observation that in nearly all of the other states where the majority view was adopted, the facts were nearly identical to those of the case at bar, in that a parent had executed, on his or her minor child's behalf, a release agreement (with or without an indemnification clause) in favor of a private commercial enterprise, usually as a pre-condition for allowing the child's access to and participation in some recreational activity.   While participating in that activity, the child sustained injuries, and suit was thereafter brought on the child's behalf.   In each case, the defendant entity attempted to shield itself from liability by invoking the release agreement, and the trial court granted summary judgment or a motion to dismiss.   Thus, all of the cases presented the same legal issue and were in essentially the same procedural posture. 

 With these considerations in mind, the Court first reflected on the Court of Appeals decision in Wolf.  Wolf v. Ford, 335 Md. 525 (1994).  However, where the trial court had stopped by expressing that it was not capable of evaluating the “totality of the circumstances” against a “backdrop of current societal expectations,”the Court of Special Appeals pointed to that third of the three exceptions discussed above – transactions effecting the public interest – and declared that such a backdrop may be found 1.) in the Plaintiffs claim 2.) in the Maryland Code and 3.) in Maryland common law, which, the Plaintiffs point out, reflected a substantial public interest in protecting children and their rights to seek redress for negligence, when that negligence results in injury to them.  The Court, in addition to relying on this wording in Wolf, rested their opinion on two other considerations.  First, they rooted their opinion on a perceived distinction between commercial and non-commercial enterprises.  Second, they based their decision on the exercise of the State’s parens patriae interest in caring for those, such as minors, who cannot care for themselves.  The Court of Special Appeals ruled the exculpatory agreement invalid and unenforceable. 

The Court of Appeals reversed.  In the Court’s review of the statutes and case law, they observed a reflection of a societal expectation that a parent’s decision-making is not limited.    The Court did not however believe that the plaintiff’s execution of an exculpatory agreement on behalf of their son was a transaction affecting the public interest within the meaning of Wolf, which otherwise would have impugned the effect of the agreement.   The Court took further issue with COSA’s opinion as to the perceived distinction between commercial and non-commercial enterprises.  The Court disagreed, and posited that the distinction between commercial and non-commercial entities is without support in Maryland jurisprudence.  The Court added that whether an agreement which prospectively waived a claim for negligence executed by a parent on behalf of a child should be invalidated because a commercial entity may better be able to bear the risk of loss than a non-commercial entity by purchasing insurance, is a matter for the legislature to consider.  Finally, the Court addressed COSA’s reference to the State’s parens patraie authority.  The Court clarified that the authority only reflects the State’s intervention when a parent is unfit or incapable of performing the parenting function, which was not alleged in the present case.

The Court concluded that they had never applied parens patriae to invalidate, undermine, or restrict a decision made by a parent on behalf of her child in the course of the parenting role.  The Court held the exculpatory agreement signed by the plaintiff on behalf of his son to be valid and enforceable. 

The full opinion is available in PDF here.

Ohio Learning Centers, LLC v. Sylvan Learning, Inc. (Maryland U.S.D.C.)

Filed July 24, 2012

Opinion by Judge Richard D. Bennett

Held:  (1) A forfeited corporation may defend against a lawsuit and file counterclaims arising out of the same subject matter as the underlying suit.  (2) Courts employ a totality of the circumstances approach in reviewing a jury trial waiver provision, including factors such as the parties' bargaining power, the conspicuousness of the waiver provision and whether the provision is comprehensible.
 

Facts:  Plaintiffs and Defendants entered into an asset purchase agreement, a license agreement and two promissory notes pursuant to which Plaintiffs would purchase and operate a  franchise.   The license agreement also contained a non-compete clause.  Shortly thereafter, Plaintiffs were unable to make payments on the promissory notes.  Defendants sent two notices of default and intent to terminate license agreement to the Plaintiffs. 

The Court ordered Plaintiffs to "not use any or all of the trademarks, service marks, or trade names associated" with the Defendants.  The Court also held that the agreements were valid and enforceable and that Plaintiff breached those agreements.  The Court withheld ruling on any damages in order to adjudicate the remaining claims, set forth below. 
 

Analysis:  Plaintiffs argued that because two of the Defendants had forfeited their charters for failing to file personal property tax returns with the State Department of Assessments and Taxation, the defendants were prohibited from maintaining or defending any lawsuit in the state.  The Court disagreed and stated that “it is well established in Maryland that a forfeited corporation may defend against a lawsuit and file counterclaims arising out of the same subject matter as the underlying suit.”  Finch v. Hughes Aircraft Co., 57 Md. App. 190 (1984) and Price v. Upper Chesapeake Health Ventures, 192 Md. App. 695 (2010) ("an LLC whose rights have been forfeited...may only defend an action in court, not prosecute one"). 

Defendants moved to strike Plaintiffs' demand for a jury trial because the promissory notes and the asset purchase agreement contained a jury trial waiver.  The Court agreed that three of the four agreements at issue contained jury waiver clauses.  But, the Court highlighted that the main contract governing the claims in litigation did not.  The Court employed a totality of the circumstances approach.  It denied the motion after review of the superior bargaining power of the Defendants, the integrations clause in the license agreement and the inconspicuous location of the waiver clause in the promissory notes and the asset purchase agreement.   

Defendants' also moved to dismiss with respect to several fraud claims, including claims involving Maryland Franchise Registration and Disclosure Law.  The Court stated "a plaintiff can successfully bring a tort action for fraud that is based on false pre-contract promises by the defendant even if (1) the written contract contains an integration clause and even if (2) the pre-contractual promises that constitute fraud are not mentioned in the written contract."  Next Generation Group, LLC v. Sylvan Learning Ctrs, LLC, No. CCB-110986 (2012).  Because the materiality of any alleged omissions are factual questions inappropriate for determination at the motion to dismiss stage, the Court denied the motion.

The Court briefly reviewed other claims, including tortious breach of good faith, unfair competition, defamation, tortious interference in contractual relations, deceptive trade practices and antitrust conspiracy.

The full opinion is available in pdf. 

Hovnanian Land v. Annapolis Towne Centre (Ct. of Appeals)

Filed: July 20, 2011
Opinion by Judge Sally D. Adkins

Held: A condition precedent may be waived by a party’s conduct despite a non-waiver clause found in a purchase agreement that requires waiver to be in writing.

Facts: Respondent is the owner and developer of a 33-acre, mixed-use development project. Respondent intended to sell parcels while retaining ownership over a few common parcels that were to be maintained through a collection of an annual Common Area Maintenance (“CAM”) fee from the owners of each parcel.

Respondent entered into a Purchase Agreement with Petitioner for the sale of two parcels where the Petitioner was planning on constructing three residential towers. The Purchase Agreement required the Respondent to establish CAM fees for the Petitioner’s parcels, and provide common area maintenance funding for the other parcels as conditions precedent to the Petitioner completing the purchase, which the Petitioner could enforce or waive. The Purchase Agreement also contained a non-waiver clause that required any waiver to be in writing.

Commencing on May 11, 2006 and continuing until January 2007, Respondent drafted a declaration and a proposed Supplemental Agreement between the parties to handle the CAM fees and the Petitioner had questions on each draft concerning them. Declarations were even recorded on October 30, 2006, December 20, 2006 and January 22, 2007. Prior to the recording of the January 2007 Declaration, Petitioner expressed concerns that there were some changes to the documents agreed upon by the parties that did not appear. Respondent notified Petitioner that it would address its concerns in a Supplement Agreement.

Over the next year, the project proceeded towards closing, and as they approached the original closing date, Petitioner paid $100,000 to extend that date, and soon afterward, Petitioner realized the extent to which the recent housing collapse had reached the markets. Petitioner sought an additional extension and/or a discount from Respondent and the parties could not agree on an acceptable extension deal and throughout these negotiations, Petitioner referenced market difficulties as the major reason for the requests.

On February 1, 2008, Petitioner’s president sent a letter to Respondent asserting that Respondent failed to fulfill the conditions precedent. On March 3, 2008, Respondent responded in a letter asserting that it satisfied the conditions because the Amended Declaration provided for annual assessments through the use of Supplemental Agreements.

Respondent filed a complaint in the Circuit Court seeking a declaratory judgment that Petitioner breached the Purchase Agreement. Petitioner answered, claiming that its obligations were relieved by Respondent’s failure to comply with the terms of the Purchase Agreement.

After both parties moved for summary judgment, the Circuit Court granted Respondent’s motion for summary judgment. Petitioner appealed to the Court of Special Appeals, and in an unreported opinion, the court affirmed the Circuit Court’s decision.

Petitioner then sought certiorari from this Court.

Analysis:

The threshold issue considered by the Court is whether a party can waive a contract right through its actions even if the contract contains a “non-waiver” clause. Relying on Freeman v. Stanbern Const. Co., 205 Md. 71, 106 A.2d 50 (1954), the Court held that oral modifications of a written contract may be established by the preponderance of the evidence even if a contract provides that the contract cannot be varied except through a written agreement by the parties.

The Petitioner argued that there is a distinction between “mutual” waiver and the waiver of a condition precedent. The Court held that there was no distinction and that case law does require mutual knowledge and acceptance, whether implicit or explicit, of the non-conforming action, and that in this case, the alleged waiver was “mutual” in that Respondent drafted and proposed the assertedly non-compliant declaration while Petitioner scrutinized it and provided substantial feedback. The Court added that a condition precedent usually benefits one of the two parties, and the benefited party’s actions will weigh more heavily in those cases.

Based on that analysis, the Court reviewed the Circuit Court’s grant of Respondent’s motion for summary judgment. The Circuit Court, apparently at the suggestion of the parties, resolved the issue on summary judgment, concluding as a matter of law that Hovnanian had waived the condition precedent. Yet, whether subsequent conduct of the parties amounts to a modification or waiver of their contract is generally a question of fact to be decided by the trier of fact. Further, nonwaiver clauses, although not favored by courts, must be considered by the trier of fact. Given the highly factual nature of the waiver inquiry, it is an uncommon case in which the issue can be resolved by summary judgment.

The Court then analyzed the Circuit Court’s decision to grant the Respondent its summary judgment motion. The Circuit Court held that as a matter of law, the Petitioner waived the condition precedent. Relying on University Nat’l Bank v. Wolf, 279 Md. 512 (1977), the Court held that analyzing the subsequent conduct to determine whether a waiver of a contract term has occurred is generally a question of fact to be decided by the trier of fact. In this case, a party must show the intent to waive both the contract provision at issues and the non-waiver clause.

Conclusion

Applying the foregoing rules, the Court reversed the granting of summary judgment and remanded the case to the lower court for the trier of fact to determine whether any party waived any rights.

The full opinion is available in pdf.