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Surety must arbitrate disputes based on contract incorporated by reference in bonds
In Developers Surety and Indemnity Co. v. Resurrection Baptist Church, Case No. RWT 10cv1224 (D. Md. Dec. 1, 2010), the Court held that the surety must arbitrate disputes related to performance bonds where the performance bonds specifically incorporated by reference construction contracts containing an arbitration clause. In so holding, the district court followed precedent in the First, Second, Fifth, Sixth and Eleventh Circuits.
In addition, the Court found that the surety is equitably estopped from refusing to arbitrate its disputes with the co-obligees under the performance bonds. The Fourth Circuit has held in a non-surety context that a nonsignatory is estopped from refusing to comply with an arbitration clause when it receives a direct benefit from a contract containing an arbitration clause. Here, the surety asserted claims against the co-obligors for breach of the building contract, but simultaneously sought to avoid enforcement of the arbitration clause in the same contract.
The Court also rejected the surety's argument that arbitration was waived because the opposing parties had filed their answers, asserted crossclaim and counter-claims, and engaged in some discovery. The Court, following Fourth Circuit precedent, observed that absent a showing of prejudice, a court will not find waiver where the parties seeking to arbitrate merely answered pleadings and engaged in minimal discovery. Thus, the Court held that defendants did not waive their right to insist upon arbitration of this dispute.
Posted by David B. Stratton on 01/19/2011 at 06:59 PM
Arbitration •
Maryland •
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No immediate right in D.C. to appeal an order compelling arbitration and staying the lawsuit
In Stuart v. Walker , No. 09-CV-900 (D.C. Oct. 28, 2010), the Court held that a trial court's order granting a motion to compel fee arbitration and to stay the case, was not a final judgment and therefore, was not immediately appealable.
In this case, the plaintiff, who is an attorney, brought suit to recover attorney's fees from her former client. The former client then moved to compel fee arbitration under D.C. Bar Rule XIII, which mandates binding arbitration of all attorney-client fee disputes in D.C. The trial court granted the motion and stayed the case pending an arbitral award. The attorney than appealed.
The Court held that it did not have jurisdiction to hear the appeal as it was taken from a non-final order, and the Court's jurisdiction is limited to review of final orders of the Superior court.
The Court reasoned that while an order compelling arbitration that dismissed the action would be an appealable final order, in this case there was no final appealable order since the action was only stayed.
The Court also held that an amendment to D.C. Code sec. 16-4427(a) that purported to make orders granting a motion to compel arbitration immediately appealable was invalid. That was because the D.C. Council does not have authority to pass laws enlarging the Court of Appeals' jurisdiction.
Posted by David B. Stratton on 01/19/2011 at 04:06 AM
Arbitration •
District of Columbia •
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Fourth Circuit affirms summary judgment on Title VII claims
In Bonds v. Leavitt, No. 09-2179 (4th Cir. Jan. 3, 2011) the Fourth Circuit affirmed the District Court's award of summary judgment to the defendant employer for three Title VII claims. (Note: the Court reversed the dismissal of the federal whistle blowing statute claims which are not addressed here.) The employment relationship appears to have been soured, in large part, by a dispute about the medical ethics of immortalizing cell lines taken from children who were subjects of a sickle cell study.
The employee attempted to assert a Title VII claim on the basis that she was retaliated against for opposing actions by the employer that allegedly infringed upon the rights of minority patients participating in a clinical trial. The Court ruled that even if the employee was attempting to prevent the employer from participating in allegedly discriminatory acts, the acts did not constitute unlawful employment practices. The Court stated that Title VII is not a general bad acts statute and affirmed summary judgment on the claim.
The employee also asserted a hostile work environment claim alleging that she was harassed. The claim was dismissed because the actions she alleged were harassing, such as her dismissal, were taken in response to performance issues and were not due to her race or gender. The Court upheld the dismissal.
Finally the Court affirmed the award of summary judgment on the Title VII claims because the Employee failed to demonstrate that the reasons for her dismissal were pretextual. The employee was not able to produce evidence to challenge the employer's non-discriminatory explanation for its decision to terminate her employment.
Posted by Sara A. Corle on 01/17/2011 at 11:43 PM
Employment Discrimination •
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Legal and tax malpractice summary judgment reversed by D.C. Court of Appeals
In Pair v. Queen, No. 08-CV-1646 (D.C. Aug. 26, 2010), the Court reversed the trial court's award of summary judgment to the attorney who allegedly was responsible for a million dollar tax bill from the IRS.
The relationship between the Pairs and Mr. Queen broke down after Mr. Queen informed appellants that the District of Columbia and the IRS had assessed penalties and interest charges against the estate totaling more than a million dollars. The Pairs allege that they learned the estate's tax returns had been improperly prepared and had been filed almost a year and a half late.
The former clients were both the personal representatives of the estate, and beneficiaries of the estate.
The trial court awarded summary judgment on the attorney malpractice claim. Relying on United States v. Boyle, 469 U.S. 241 (1985), the trial court reasoned that because the plaintiffs were personal representatives of the estate, and as such had a non-delegable duty to the IRS to timely file the tax returns, they were also negligent and did not have standing to bring a lawsuit against someone who joined them in the negligence. The trial court found that the contributory negligence of the personal representatives was a complete bar to the attorney malpractice action.
The trial court dismissed the accountant malpractice count on the same grounds, and also on the grounds that there was no privity between the personal representatives and the accountant.
The D.C. Court of Appeals brusquely reversed these rulings. The Court held that:
Appellants argue, and we agree, that the trial court erred, as a matter of law, in applying United States v. Boyle to bar the Pairs' claims for malpractice and breach of fiduciary duty. The question at issue in Boyle was "whether a taxpayer's reliance on an attorney to prepare and file a tax return constitutes `reasonable cause' under ? 6651 (a)(1) of the Internal Revenue Code, so as to defeat a statutory penalty incurred because of a late filing." Boyle, 469 U.S. at 242. Boyle concerned the duties an estate and its representative owed to the IRS. By contrast, the Pairs' claims of malpractice concern the duties a professional owes to a client.
Mr. Queen's dual status as a personal representative and as attorney for the estate has, understandably, led to some confusion in analyzing the complaint. The Pairs are not seeking to excuse "[t]he failure to make a timely filing of a tax return . . . by [their] reliance on an agent." Boyle, 469 U.S. at 252 (holding that the executor's reliance on the estate attorney to file the return did not constitute "reasonable cause" for the failure to file a timely return). Instead, they are seeking "compensatory and consequential damages" through a malpractice claim. Importantly, nothing in Boyle suggests that a taxpayer's non-delegable duty to the IRS relieves a professional from liability for negligent failure to perform the duties for which an estate has employed him.
The Court of Appeals also held that the trial court had erred in its finding that contributory negligence barred the claims. The Court pointed out that in a 1993 decision, it had recognized that there was a difference between the non-delegable duty of a personal representative to file tax returns with the IRS, and the delegation that occurs when the personal representative reasonably relies on expert advice concerning substantive questions of tax law, such as whether liability exists in the first instance.
Moreover, the Court stated that it is not clear that the personal representatives would be without recourse even if the penalties derived solely from the late filing of the tax returns.
No one contests that the estate suffered substantial penalties as a result of both improper preparation and late filing of the estate tax returns. However, the trial court did not determine whether "the failure to file timely returns was [] due to a lack of diligence or dereliction of duty on the part of [the Pairs] with regard to ascertaining and meeting filing deadlines, [or] rather due to [their reasonable] reliance on [professionals'] erroneous advice and assistance regarding substantive issues."
The Court held that on the record before it, a finding of contributory negligence per se could not be sustained.
With regard to the accountant malpractice claim, the Court held as follows:
We have already concluded that the court erred, as a matter of law, by relying on Boyle to bar the malpractice claims. Moreover, further factual inquiry is required to clarify the roles of Mr. Smith and Mr. Tolliver. The exact nature of their relationship to Mr. Queen is not clear from the present record, and it is important to remember that Mr. Queen was wearing two hats. A key question (perhaps not susceptible of a clear answer) is whether he engaged Mr. Smith and Mr. Tolliver while acting as a personal representative of the estate or solely in his capacity as the estate's attorney.
Posted by David B. Stratton on 01/15/2011 at 02:41 PM
District of Columbia •
Legal Malpractice •
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Undocumented Workers Are Covered by D.C. Workers Compensation Act
In Asylum co. v. D.C. Depart. of Employment Services, No. 08-AA-1158 (D.C. Dec. 23, 2010), the Court of Appeals considered an issue of first impression in D.C.: whether a worker who is an undocumented alien is covered under the District of Columbia Workers' Compensation Act.
The Court affirmed the Compensation Review Board's judgment that based on the plain meaning of the language of the Act and the legislative intent, an undocumented or illegal alien is an "employee" as defined in the Act. The Court observed that:
we have little difficulty agreeing with the CRB's conclusion. It is consistent with the language of the Act, specifically, D.C. Code ? 32-1501 (9) (2001), which excepts certain specified categories of workers from the definition of "employee," but otherwise sets out a broad definition that neither excludes undocumented aliens nor makes a worker's immigration status relevant. See Report on Bill 3-106 at 10 (referring to the legislation's "all[-]inclusive delineation of coverage"). As the CRB recognized, the Council has made repeated amendments to the definitional section of the Act, including amendments to the provision defining the term "employee."
The Court followed the reasoning of precedent from Connecticut, which stated that:
declining to treat contracts of employment with undocumented aliens as "contracts" within the meaning of the workers' compensation statute would provide unscrupulous employers with a financial incentive to hire undocumented workers, while "including employment agreements between illegal aliens and their employers within the purview of `contracts of service' . . . would accord with, rather than contravene, the public policy Congress espoused when [IRCA] was enacted."
The Court also considered and rejected the argument that IRCA preempted the D.C. Workers Compensation Act.
In reaching its decision, the Court in a footnote acknowledged a pragmatic reason for according undocumented workers rights under the Workers Compensation Act: if the undocumented workers cannot recover under the Act, then they would be able to file tort suits to recover damages. Among other authorities, the Court cited to a leading treatise on this point:
Larson's Workers' Compensation Law, supra, ? 66.03[3][c] ("Given that illegal aliens are entitled to access to the courts and have the ability to file both contract and tort claims, it would seem illogical to bar illegal alien workers from seeking compensation benefits long considered a substitute for damages").
Posted by David B. Stratton on 01/14/2011 at 01:45 PM
District of Columbia •
Workers Compensation •
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Fourth Circuit affirms award of summary judgment to defense in employment discrimination case
In Mascone v. American Physical Society, Inc., the Fourth Circuit affirmed the District Court's award of summary judgment to the defendant, and the District Court's denial of the plaintiff's motion for reconsideration.
The Court affirmed summary judgment on the wrongful termination claim, finding that the plaintiff failed to demonstrate that the employer used a forbidden consideration with respect to any employment practice. Further, she failed to show that the employer's proferred reasons for her dismissal were pretextual.
Further, the Court affirmed summary judgment on the plaintiff's pre-termination, gender-based disparate treatment claim. The plaintiff could not establish a prima facie case because she could not show that the other employee in question was similarly situated.
The Court rejected the plaintiff's mixed-motive claim under Title VII, because the plaintiff did not show that the protected trait actually motivated the employer's decision.
Finally, the Court affirmed the award of summary judgment on the plaintiff's retaliation claim. The plaintiff hired a firm to contact the employer pretending to be a potential employer. Plaintiff contended that she was given negative references in retaliation for engaging in protected activity. The Court found that plaintiff could not prove dissemination of false reference information that a prospective employer would view as material to its hiring decision.
Deborah Murrell Whelihan, Esq., of Jordan Coyne & Savits, LLP, represented the defendant in this matter.
Posted by David B. Stratton on 01/13/2011 at 04:15 PM
Employment Discrimination •
Maryland •
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Legal Malpractice Claim Arising From Criminal Representation Barred By Collateral Estoppel
In Johnson v. Sullivan, the Court dismissed a legal malpractice claim arising out of prior criminal representation, based in part on the doctrine of defensive collateral estoppel.
The plaintiff brought a legal malpractice action against his former criminal attorneys, who had represented him at trial and in post-trial proceedings. Among other things, the defendants moved to dismiss on the ground that the plaintiff could not demonstrate that, but for the alleged negligence, the outcome of the plaintiff's post-conviction application for relief would have concluded in his favor. The defense argued that the plaintiff was collaterally estopped from litigating one element of his negligence claim -- that the alleged negligence in the post-trial proceedings resulted in or was the proximate cause of the plaintiff's loss.
The district court agreed:
Because the doctrine of collateral estoppel bars relitigation of the adequacy of Blitzer's representation, the plaintiff cannot show that Blitzer breached a duty owed to him or that the outcome of his post-conviction proceedings would have been favorable. And where, as here, the plaintiff's breach of fiduciary duty, fraud and breach of contract claims are indistinguishable from his legal malpractice claim, his inability to prove the malpractice claim renders these other claims unsustainable. See Hinton, 2010 WL 2710603, at *1 ("[A]ppellant cannot recast his malpractice claim as a breach of fiduciary duty claim . . . and he has not shown that his claims of negligence, breach of care, breach of trust, and bad faith are distinguishable from his malpractice claim."); Macktal v. Garde, 111 F. Supp. 2d 18, 23 (D.D.C. 2000) ("f plaintiff is unable to prove his professional negligence claim, contract and tort claims which are essentially restatements of the failed malpractice claim must also fail."); Biomet, 967 A.2d at 670 n.4 (rejecting appellant's "attempt to recast its malpractice argument as also breach of contract and breach of fiduciary duty"). The Court will therefore grant Blitzer's motion to dismiss.
John Tremain May, Esq., of Jordan Coyne & Savits, LLP, represented one of the defendants in this matter.
Posted by David B. Stratton on 01/06/2011 at 02:59 PM
District of Columbia •
Legal Malpractice •
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Legal Malpractice Claim Barred by Virginia Statute of Limitations
In Van Dam v. Gay, No. 091659 (Va. Sept. 16, 2010), the Court affirmed the trial court's award of summary judgment to an attorney in a legal malpractice case based on the statute of limitations.
The alleged malpractice involved the representation of the former wife in a divorce case. As part of the divorce settlement, the wife's attorney drafted a property settlement agreement. During the marriage, the former husband participated in two federal retirement plans, military and civil service. The property settlement agreement made only the following reference to them: "The wife shall receive . . . survivor's benefits from the husband's retirement pay."
Twenty years later, the former husband died. The former wife then applied for survivor's benefits under her former husband's two retirement plans. Both claims were denied on the ground that the 1986 property settlement agreement was insufficient, as a matter of federal law, to entitle her to benefits under either plan.
The former wife then brought a legal malpractice suit against her attorney, who entered a plea in bar asserting the statute of limitations.
The Circuit Court sustained the plea in bar of the statute of limitations, and the wife was awarded an appeal.
On appeal, the former wife argued that her cause of action could not have accrued until her husband's death in 2006, because up to that point, her right to survivor's benefits would have been purely contingent upon the former husband predeceasing her.
The Court disagreed, reasoning that the legal injury suffered by the wife in 1986 was not vitiated by the fact that her right to pension benefits was contingent upon her surviving her former husband. Under the equitable distribution statute, Va. Code sec. 20-107.3(A)(2), in divorce proceedings all pensions are presumed to be marital property in the absence of satisfactory evidence that they are separate property and the court may direct payment of the marital share of such benefits whether they are "vested or nonvested" as they become payable.
Some injury or damage, however slight, is essential to a cause of action, but it is immaterial that all the damages resulting from the injury do not occur at the time of the injury.
Accordingly, the Court held that the Circuit Court correctly held that the wife's legal injury arising out of the defendant's alleged malpractice occurred on November 3, 1986, when the court entered a final decree of divorce, terminating the defendant's employment in the matter.
Carol T. Stone, Esq., of Jordan Coyne & Savits, LLP, represented the defendant/appellee in this matter.
Posted by David B. Stratton on 01/05/2011 at 10:41 PM
Legal Malpractice •
Virginia •
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Countering A Plaintiff’s Counsel’s Minimal Expert Witness Disclosures in Lead Paint Litigation
In the Jamal Logan v. LSP Marketing Corp., et al., the Court of Special Appeals upheld the trial court's granting of an order in a lead paint case precluding all but one of plaintiff's 12 experts as a sanction for failure to comply with Md. Rule 2-402(g) (i.e. failing "to state the subject matter, substance of the findings/opinions, and summary of grounds for each opinion; and produce any reports, to which the expert is expected to testify.")
Defendant's interrogatories requested information as to Plaintiff's experts. When Plaintiff did not respond to the interrogatories within the time prescribed, defense counsel made a good faith effort to resolve the dispute. Plaintiff's counsel eventually submitted its answers to interrogatories, but failed to provide any substantive information. Not having received sufficient or satisfactory information, Defendant moved to dismiss/compel. The Court compelled Plaintiffs to supplement their responses, but Plaintiff's counsel again responded vaguely and did not produce any reports. Consequently, Defendant moved for sanctions to exclude the experts or dismiss. The Court precluded all but one expert. As a result, Plaintiff was unable to put on a prima facie case resulting in the Court granting Defendants motion for summary judgment.
This opinion reiterates the expert designation requirement, specifically,
Plaintiff's answers to interrogatories did not comply with Rule 2-402 because he failed to include the substance of the experts' findings and opinions, as well as a summary of the grounds for each expert's opinion. For example, Plaintiff listed Mark Lieberman as a vocational rehabilitation expert who would testify "as to the vocational impact and loss of potential earning capacity of lead paint poisoning on the Plaintiff(s)." Although Plaintiff stated that Lieberman would "base his opinions on a review of the medical records, school records, other expert reports and depositions," Plaintiff did not state how Lieberman believed his earning capacity would be affected. In addition, Plaintiff listed 12 individuals, 10 of whom were located out-of-state, as experts in pediatric lead poisoning, who would "testify to the extent and permanency of the minor Plaintiff?s injuries due to exposure to lead paint." These answers failed to disclose, however, what each expert would opine as to the extent and permanency of the injuries, which might range from 0% to 100%. Plaintiff stated that all 12 experts were expected to "testify to the probable source of the lead exposure," but he did not include what each expert would opine the probable source was, and why the expert expressed this belief. Moreover, the experts were to "testify that exposure to lead-based paint at all of the defendants' subject premises . . . was a substantial factor in the plaintiff's injuries," yet Plaintiff did not state the reasons for their findings. And, Plaintiff stated at the end of each expert designation that a written report "will be provided when available" or "as soon as it becomes available." But none were provided. "Based upon Plaintiff's "boilerplate" expert designations, it was reasonable for the court to infer that the excluded experts' testimonies would be duplicative of Dr. Hurwitz's" (the only properly designated expert).
Also, noteworthy, the Plaintiff argued as a defense that Defendants could have taken the experts' depositions. However, since 10 experts were out of state the Court emphasized the importance of Plaintiff's compliance with Md. Rule 2-402(g) to provide a proper designation so that the Defendant did not have to unnecessarily incur the costs associated with depositions.
Posted by Robert D. Anderson on 01/04/2011 at 03:06 PM
Expert Witness Issues •
Lead Paint Poisoning •
Maryland •
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Motion to Dismiss Upheld for Failure to State a Claim and Failure to Obtain Leave to Amend
In Rashid Mohiuddin v. Doctors Billing & Management Solutions, Inc., et al., ________ Md. App. _________ (Nov. 1, 2010), the Court of Special Appeals addressed two issues; (1) whether the trial court had sufficient grounds to dismiss Plaintiff?s complaint on the grounds that it failed to state a cause of action, and (2) whether the trial court was correct in dismissing Plaintiff's fourth amended complaint for failure to amend his complaint in accordance with Maryland Rule 2-322(c).
Mohiuddin was a physician who entered into an employment contract whereby he agreed to provide physician services to Doctors Billings' patients in exchange for salary and benefits. In addition, Mohiuddin would occasionally be assigned to see patients of Physicians House Calls, Inc. (PHC), a separate corporation that provides patients with physicians for home visits.
Mohiuddin filed a second amended complaint to recover unpaid wages and restitution for work he performed under his employment contract and asserted three counts against PHC: (1) violation of Maryland's Wage Payment and Collection Law; (2) quantum meruit; and (3) unjust enrichment. PHC responded by filing a motion to dismiss for failure to state a claim. The trial court granted PHC?s motion because it "didn?t believe that there's been a sufficient demonstration of a connection to [PHC] to justify leaving them in at this time."
The three claims were addressed as follows:
(1) Violation of Maryland's Wage Payment and Collection Law - Mohiuddin failed to allege sufficient facts to raise an inference that he was either engage to work by PHC, or that PHC exercised any degree of control over appellant in his work as a physician.
(2) Quantum Meruit - Mohiuddin failed to allege that either Doctors Billing or PHC was obligated to pay him for his services with PHC. Without the allegation that both parties intended that PHC was required to pay him for his services, Mohiuddin failed to plead the existence of a mutual agreement between the parties.
(3) Unjust Enrichment - Mohiuddin was required to plead facts comprising the cause of action with sufficient specificity, however, the Complaint failed to assert that PHC was enriched and left the Court guessing why equity would require PHC to compensate him.
In upholding the dismissal for failure to state a claim, the Court stated that "in order to survive a motion to dismiss, a complaint must plead 'the facts comprising the cause of action . . . with sufficient specificity. Bald assertions and conclusory statements by the pleader will not suffice".
The trial court's initial dismissal of Mohiuddin's second amended Complaint was "without prejudice". Seven months later, Mohiuddin filed a fourth amended complaint renaming PHC. In turn, PHC filed another motion to dismiss which the trial court granted "with prejudice".
The Court of Special Appeals noted that the words "with prejudice" are ordered in cases where the dismissal is based on an appraisal of the substantive merits of the case and prohibits a refilling. The words "without prejudice" is more likely in cases where dismissal is based on some procedural glitch that does not engage the merits or res judicata and can be rectified such that it permits a refilling.
In addition, Maryland Rule 2-322(c) provides that "an amended complaint may be filed only if the court expressly grants leave to amend." Thus, whether a pleading may be amended is resolved by the trial court by explicitly stating within the four corners of the Order itself, "with leave to amend." Leave to amend is either expressly stated on the face of the order or it does not exist, there is no in-between. If the Order grants leave to amend, there is no final judgment and the case is not closed. By contrast, an order that does not contain "with leave to amend" closes the case finally and there is nothing to amend, unless the case is being kept alive by some other means. Accordingly, the Court held that in the absence of the trial court granting leave to amend, Mohiuddin had no entitlement to amend at any time, early or late. The requirement that there must be an express and unqualified grant of leave to amend within the four corners of the dismissal order is ironclad.
Posted by R. Anderson on 12/06/2010 at 04:51 PM
Maryland •
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