Justia Maryland Court of Appeals Opinion Summaries

Articles Posted in Business Law
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The Court of Appeals answered certified questions asking whether Maryland recognizes an independent cause of action for breach of fiduciary duty, holding that this Court recognizes an independent cause of action for breach of fiduciary duty and outlining its scope and parameters.The Court of Special appeals filed a certification pursuant to Maryland Rule 8-304 requesting that the Court of Appeals provide guidance concerning whether an independent cause of action exists for breach of fiduciary duty. The Court of Appeals answered (1) Maryland does recognize such a cause of action, and to establish a breach of fiduciary duty a plaintiff must demonstrate the existence of a fiduciary relationship, breach of the duty owed by the fiduciary to the beneficiary, and harm to the beneficiary; and (2) a court should consider the nature of the fiduciary relationship and possible remedies afforded for a breach on a case by case basis, and the remedy will depend upon the specific law applicable to the specific fiduciary relationship at issue. View "Plank v. Cherneski" on Justia Law

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The Court of Appeals dismissed this appeal concerning compliance with the law governing Maryland LLCs, holding that this appeal was not properly before the Court.Petitioner 7222 Ambassador Road, LLC initiated this action against Respondent National Center for Institutions and Alternatives, Inc. Respondent prevailed in the circuit court and the court of special appeals. Before Petitioner filed a petition for certiorari with the Court of Appeals it forfeited its right to do business in Maryland and failed to reverse that forfeiture. Respondent filed a motion to dismiss the appeal based on the forfeiture. The Court of Appeals granted the motion to dismiss, holding that, as a result of Petitioner's forfeiture of its right to do business in Maryland, it lost the ability to prosecute this action during the period of forfeiture, including the filing of a timely petition for a writ of certiorari. View "7222 Ambassador Road, LLC v. National Center on Institutions & Alternatives, Inc." on Justia Law

Posted in: Business Law
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The Court of Appeals held that an independent cause of action exists for breach of fiduciary duty and that, to establish a breach of fiduciary duty, a plaintiff must demonstrate the existence of a fiduciary relationship, breach of the duty owed by the fiduciary to the beneficiary, and harm to the beneficiary.William Plank and Sanford Fisher, both minority members of Trusox, LLC, filed an action alleging direct and derivative claims against James Cherneski, Trusox's president and majority member. Among other relief, Plank and Fischer (together, Minority Members), sought an order dissolving the LLC or appointing a receiver to take over its management. The circuit court entered judgment in favor of Cherneski on most of the Minority Members' claims and in favor of the Minority Members on certain other claims and awarded attorneys' fees in favor of Cherneski and Trusox. The Court of Appeals affirmed, holding that the circuit court (1) did not err in entering judgment in favor of Cherneski on the breach of fiduciary duty count; (2) did not err in interpreting the contractual language of the fee-shifting provision and concluding that Cherneski and Trusox were the substantially prevailing parties; and (3) did not abuse its discretion by awarding Cherneski and Trusox all of their attorneys' fees. View "Plank v. Cherneski" on Justia Law

Posted in: Business Law
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The Supreme Judicial Court reversed the determination of the trial court that the parties in this case intended to form a general partnership, holding that the evidence could not sustain the simultaneous intent to form both an LLC and a partnership and that Respondent failed to provide competent material evidence demonstrating intent to form a partnership.Respondent brought this action claiming breach of contract and requesting a declaratory judgment asking for a determination of "the buyout price of his partnership interest." The trial court concluded that there was no enforceable written agreement but that that a partnership existed between the parties. The court then awarded Respondent more than $1 million. The Court of Special Appeals affirmed. The Court of Appeals reversed, holding that where the parties were also actively engaged in the process of negotiating to become members of an LLC, there was insufficient evidence of the parties' intent to form a partnership. View "MAS Associates, LLC v. Korotki" on Justia Law

Posted in: Business Law
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When P. Thomas Hoff, the founder of One Call Concepts, Inc. and Hanover Investments, Inc. (Hanover), terminated the employment of Susan Volkman and redeemed her shares of Hanover, Hoff and others brought this declaratory judgment action against Volkman in the circuit court to defend the procedures it followed to redeem her stock. At the time the declaratory judgment action was filed, Volkman had already filed, in a Minnesota state court, a breach of contract action against Hanover concerning the same issue. The circuit court refused to dismiss or stay the action in deference to the pending Minnesota action. The court then issued a declaratory judgment in favor of Hanover. The court of special appeals ruled that there were not unusual and compelling circumstances justifying the circuit court’s issuance of a declaratory judgment to resolve the same question at issue in the pending Minnesota litigation. The Court of Appeals affirmed, holding that this action did not create unusual and compelling circumstances that would justify an exception to the principle that a court should not entertain a declaratory judgment action when there was a pending lawsuit involving the same issues. View "Hanover Investments, Inc. v. Volkman" on Justia Law

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This suit arose from the actions of iStar’s Board of Directors in modifying performance-based executive compensation awards, which were granted in the form of stock. Petitioners filed suit against current and former members of iStar’s Board and senior management, alleging breach of fiduciary duty, unjust enrichment, waste of corporate assets, breach of contract, and promissory estoppel. The circuit court dismissed all of Petitioners’ claims for failure to state a claim upon which relief can be granted. The Court of Special Appeals affirmed. The Court of Appeals affirmed, holding (1) Petitioners’ claims were properly dismissed by the circuit court for failure to overcome the business judgment rule presumption; and (2) furthermore, Petitioners’ claims for breach of contract and promissory estoppel are derivative claims that are subject to the business judgment rule. View "Oliveira v. Sugarman" on Justia Law

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Brown, Brown & Brown, P.C. (BB&B), a Virginia law firm, entered into more than fifty agreements over a nine-month period with Maryland homeowners facing foreclosure. Under the agreements, in return for an advance payment of money, BB&B promised to attempt to renegotiate the mortgage loan so that the homeowner could avoid foreclosure. Ultimately, BB&B did not obtain loan modifications for any of the homeowners. The Commissioner of Financial Regulation (Commissioner) concluded that BB&B had violated the Maryland Credit Services Businesses Act (MCSBA) and directed BB&B to pay treble damages to the Maryland homeowners with whom they had agreements. The circuit court reversed, concluding that the MCSBA did not apply to BB&B because the agreements at issue were for legal services rather than credit services. The Court of Appeals reversed, holding (1) BB&B’s activities fell within the definition of “credit services business” under the MCSBA; and (2) BB&B did not qualify for the attorney exemption in the MCSBA. View "Comm'r of Fin. Regulation v. Brown, Brown & Brown, P.C." on Justia Law

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Petitioner, a former employee and a minority shareholder in Quotient Inc., filed this action alleging that he had been oppressed by Clark Lare, whose shares together with those owned by his wife, Jodi Lare, were the majority interest in Quotient. The trial court found that Clark oppressed Petitioner by firing him for refusing to sell his shares. The court ordered an accounting and awarded Petitioner damages, unpaid corporate distributions, and attorneys’ fees. The court, however, declined to dissolve Quotient, to require Quotient to reinstate Petitioner as an employee, or to award other employment-related relief. The court also found that Petitioner failed to meet his burden of proving that Clark’s actions were fraudulent and accordingly declined to award punitive damages. The Court of Appeals affirmed, holding that the trial court did not abuse its discretion in deciding on appropriate relief. View "Bontempo v. Lare" on Justia Law

Posted in: Business Law
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The United States Bankruptcy Court for the District of Maryland submitted to the Supreme Court a certified question of law. The Court reformulated the question to be this: “Under Maryland law, where there is no allegation of common law fraud, may a court disregard the corporate entity and establish personal liability to enforce a paramount equity?” The Supreme Court answered the question in the affirmative, holding that the corporate veil may be disregarded when necessary and personal liability established to prevent fraud or to enforce a paramount equity. View "Schlossberg v. Bell Builders Remodeling, Inc." on Justia Law

Posted in: Business Law
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Nordstrom, Inc. created several subsidiary corporations, including NIHC, Inc., which engaged in a series of transactions, with each other and with Nordstrom, involving the licensing rights to Nordstrom’s trademarks. The rights to use Nordstrom’s trademarks eventually ended up back with Nordstrom. In the process, Nordstrom’s Maryland taxable income was significantly reduced, and Nordstrom realized a significant gain. The Comptroller of the Treasury issued tax assessments against the subsidiaries’ income, determining that the transactions were an effort to shift income from Nordstrom, where a portion of the income would be taxable by Maryland, to the subsidiaries, where the income would escape Maryland taxation, as the subsidiaries had arguably no nexus to Maryland. The tax court affirmed the assessments against the two subsidiaries, concluding that the activities of the subsidiaries must be considered the activities of Nordstrom, which had a nexus with Maryland, and therefore, the subsidiaries’ income was taxable by Maryland. The circuit court and court of special appeals affirmed. The Court of Appeals affirmed, holding that NIHC did not carry its burden of showing that the Comptroller’s assessment was wrong. View "NIHC, Inc. v. Comptroller of the Treasury" on Justia Law

Posted in: Business Law, Tax Law