Required Automobile Security – Transportation Article 17-104

Under Maryland law (specifically Md. Code Ann. TA § 17-104), an owner of a vehicle must maintain required security (almost always insurance, in rare cases a self-insured bond substitute) during the registration period for the vehicle.

Three trial issues present themselves regarding any prosecution of this charge. While it’s non-jailable, defense counsel who face this charge along with others at trial should keep this in mind.

Article 20 of the Md. Declaration of Rights holds that the trial of facts where they arise is one of the “greatest securities” of the people. This provision has been interpreted to require the trial of criminal charges, including non-jailable traffic misdemeanors, in the county/Baltimore City where they arose. If a motorist receives this citation in July 2013 for a lapse that occurred in another Maryland jurisdiction previously, the citation may lack proper venue which in this case may be fatal. At a minimum, the government may have a hard time proving the geographical nexus during the alleged lapse.

The second involves the proof of the violation itself. Certified records from the MVA are admissible but the registration record at hand will not always be certified, not will there likely be a proper chain of custody for a non-certified record. Further, the defendant retains his constitutional confrontation rights and that may get the MVA paperwork thrown out.

Finally, there is a 1-year statute of limitations for most misdemeanors in Maryland. A violation charged more than a year after an alleged failure to maintain security may fail due to that statute.

New Court Rules in Maryland

This is a head’s up primarily to other practitioners in Maryland.

I learned of several court rules at the MSBA Annual Meeting several weeks ago.  In Circuit Court, complaints seeking more than $75,000.00 should not put the damage claim in precise numbers, but should state only that the damages sought exceed $75,000.00.

According to the discussions in the Court’s “Are You Smarter Than a Law Clerk?” session, the purpose of the new rule is to prevent some of the headline-grabbing mega-bucks demand numbers that aim at sensationalism and newspaper headlines, while focusing on whether a federal court exercising diversity jurisdiction could hear the case on removal.

Other new rules prohibit the disclosure of certain personally identifiable information as financial or medical account numbers, dates of birth, tax ID number or social security numbers.  I wonder, however, whether the date of birth limit will cause problems with pleadings.  How does one plead that a cause of action extends during a lack of majority for a minor without identifying a birth date? Similarly, obstetric malpractice cases would be difficult to draft without identifying a birth date of someone, as would some contested probate matters in complex estates, etc.  The rule states that the information can be provided if there is a “legal obligation” to provide it, but that term begs the question itself.  At a minimum, a court could waive or limit the application of this rule for good cause shown under an appropriate motion.

Liquor License Liability for Car Crashes in Maryland

Baltimore Sun, March 11, 2013:

“If you’re going to load up somebody with liquor, at least be responsible so they don’t get behind the wheel,” said the Rev. William Warr of Urbana , the child’s disabled grandfather who, with his wife, Angela, were raising Jazimen and her sister Cortavia Harris. Cortavia suffered a broken hip in the wreck.

Dogfish Head Alehouse has fought back, urging the Court of Appeals to reject the Warrs’ claim. An attorney representing the corporation that owns the tavern declined to comment on the pending case.

Bar and restaurant owners are among those watching the case closely.

Legal reporters sometimes get legal details wrong to the supreme irritation of attorneys, but this is an excellent article from Sun reporter Andrea Siegel both on the tragic events of the death of 10-year-old Jazimen Warr nearly five years ago and the appellate litigation on the issue of tavern or bartender liability for the injuries committed by their drunken patrons off-premises.

I think the industry lobbyists and the plaintiffs’ attorneys who urge the Court to impose or not to impose liability have some respectable arguments. At common law, taverns didn’t bear liability for the acts of their patrons, but their patrons generally walked home; riding a horse under a pitch-black sky isn’t easy sober and a innkeeper’s out of town visitors generally stayed the night. No one at common law had a fuel-propelled death cart, and horses can only be guided, not mechanically steered at high speed. Patrons who got drunk at a public house generally did not have a convenient way to go get more lit at another pub; while London had a few potentials for pub crawls, the sheer effort of travel on foot between pubs and ultimately back home in the dark made the pub crawl a mostly modern concept. Accordingly, an English “landlord” or barkeep in the days of the formation of the common law would likely have few drunks enter his pub on a pub crawl. Today that is quite possible in e.g. Fell’s Point.

If bars are responsible for preventing drunken driving of their patrons, they have to have a way to measure drunkenness and prevent the drunks from driving; per Peter Drucker, management requires measurement. I suppose one could mandate breathalyzers at the Bar, but their are a number of problems with that. Another could be for the bar to estimate the BAC based on the number and timing of drinks, but it could get awkward. (“Prove to me how fat you are and maybe my manager will let you have a third shot.”) The other thing that can be done is to control parking – you don’t get a ________ drink unless your designated driver is identified, your parking space, etc. But you don’t have to be a defense attorney to see multiple problems with that approach. (“Jane, come get me in my car and bring me the keys, I am driving us back.”)

We could impose draconian anti-alcohol laws, such as making it a crime to get into the driver’s seat of a car after even one drink; such were the laws in the former German Democratic Republic, but we usually do not look to Germany, let alone East Germany, for our approach to criminal justice (and almost all of Germany has a more elaborate system of urban planning and public transit than does the sprawl-it-out-baby United States.) If bars are responsible for some of their patrons’ acts, is it strict liability? Some standard of negligence or gross negligence? Is the mere violation of a liquor license rule evidence of negligence; if so, with 24 local liquor boards, we could have county-level bar negligence law in this state. Who in the bar is responsible for patron supervision on such matters? Do bouncers have to watch patrons get into the backseat, and call the police if they don’t?

The facts of this case are pretty extreme. According to the reports, the patron of the Gaithersburg Dogfish Alehouse (where I have indeed enjoyed a fine meal in good company with responsibly consumed beer) consumed perhaps 17 drinks – probably sufficient to pickle Jabba the Hutt. While if such an Olympic consumer of beer were in a large party that might be missed, no bartender is going to forget a 17-drink bar tab for one drinker. You don’t have to be a DUI attorney, an alcohol counselor, a breath tech for the police or a liquor license investigator to know that someone who drinks 17 of ANYTHING – water, diet Coke, Gatorade – is engaging in some extreme behavior. Seventeen 12-ounce beers have a total volume of over a gallon and a half. While it’s not unheard of for problem drinkers to knock down even a 24-beer case at home on an extended bender, in a bar it’s unusual enough behavior that the bar manager should have been notified that someone needed to be 86ed at probably the 9th drink or earlier (cut off and kicked out safely into the custody of a responsible adult or police officer.)

The Court of Appeals is, as a whole, not an adventurous court looking to make a mark and get written up in all of the law journals for doing something “innovative.” The Court of Appeals declined to interpret same-sex marriage to be a mandate of the equal protection clause, the due process clause or even the Maryland-specific equal rights amendment to the state constitution; it took confidence in the ability of the General Assembly to solve this problem in that matter and does so often. It is jealous of its own prerogatives and jurisdiction but often reluctant to expand it into areas where the General Assembly has not placed a boundary marker. I suspect that the Court might entertain imposing liability in cases of gross negligence only, but that is a no-money-on-the-table hunch. The decision will be a very interesting read and probably will deserve a place on the list of top 100 Maryland cases for practicing attorneys to read.

Stopping for red flashing lights on a schoolbus in Maryland

Under 21-706 of the Maryland Transportation Article, you have to stop at least 20 feet behind (if approaching from behind) or 20 feet from the front (if approaching from the front) of a schoolbus with red flashing lights or a stop-sign extended out from the bus.  There is an exception for buses on the opposite side of a “divided highway.”  The definition of a divided highway is a little complicated and could be clearer, but it essentially means space, barrier or impediment between two “roadways.”  There’s no definition of precisely how sharp the division has to be; there’s no requirement for a curb, a jersey wall, a separation by dirt or something other than pavement, an physically impenetrable barrier, etc.; the statute could be much clearer, particularly since it involves 2 points and up to $1000.00 in fines.

If there is any doubt in your mind about whether you are or are not on a “divided highway”, you should absolutely stop for the bus in Maryland.

Maryland Daily Record comes out for same-sex marriage bill.

From the Maryland Daily Record, February 13, 2011:

“While we understand and respect the sensitive nature of this issue to the opponents of the proposed legislation, we feel that the times have changed, our understanding of the origins of sexual orientation has changed, and public opinion is shifting by the day. It is time for Maryland to afford equal rights and equal protections to all its citizens. It is time for Maryland to pass the Religious Freedom and Civil Marriage Protection Act of 2011.”

There are many attorneys who do not believe that attorneys should take sides in political issues of the day. I know of one highly-respected Baltimore County boutique firm that believes that no attorney in its employ should comment publicly on matters of religion or politics at all, due to the sensitivities of their diverse clientele. Some of their attorneys – a brilliant bunch, actually – are active online, but it must be hard for them to be relevant on many issues.

As a matter of policy, I decline to allow the fear of losing a client or clients to keep me, a near life-long Marylander and natural-born U.S. citizen, from participating at least from time to time in civic and social life. Perhaps it’s because of the sorts of clients and practice that make up my office, but I just cannot impose a categorical gag rule on myself that way. It is true that I no longer blog under my former blog Crablaw; I want to be known primarily as an attorney, not as a political blogger. But this is not out of a desire to hide my views, but rather to make sure that people see me as an attorney first, opinionated citizen second. It’s also true that I am a “known quantity” such that anyone who wanted to find out my libertarian-left political views could find them fairly easily; the internet doesn’t really forget.

On this specific issue, I am very pleased that the Daily Record Editorial Board came out as they did. Judge Frederic Smalkin, my former professor of commercial law at MD Law, did not participate in the opinion – a very responsible choice for a federal judge in Maryland who may someday have to rule on constitutional issues regarding this potential statute or related laws. No one who doesn’t personally know Judge Smalkin’s views should derive any conclusion from his non-participation in the opinion, other than his judicial prudence.

I believe, though I have not independently confirmed, that if this bill passes and is signed, Maryland will be the first state in the Union to pass same-sex marriage without either passing a civil unions bill first or getting compelled to act by a court. The Court of Appeals declined, in a 4-3 decision, to overturn the same-sex marriage ban on equal protection grounds (and other grounds) in Deane v. Conaway some years ago.

Is incorporation worth it?

Is it worth it to incorporate or to form a limited liability company? For many businesses, the answer is probably no.

There is a myth – a dangerous one, actually – that the formation of a limited liability entity (LLC/corporation) protects the owners from getting sued. This is mostly false. There are a number of ways to get around the limited liability shell: theories of negligence aimed at the owner as manager/worker, theories of negligent entrustment of say a company car to an obviously negligent employee, in some states piercing the corporate to protect an undercapitalized entity from harming a “paramount equity”, professional liability that cannot be ducked through a limited liability shell, co-signatures on debts or credit accounts (usually required for new businesses, etc.) In some states, if an LLC or corporation acts beyond its narrowly defined entity purpose as stated on its charter, in some states its acts may be considered the acts of individuals and not of the company, i.e. direct personal liability. A corporation or LLC may lapse through failure to pay annual franchise taxes, or failure to hold regular meetings and make annual accounting statements properly, depending on the state.

None of this makes a limited liability company or a corporation per se a bad idea; some protection is better than no protection and it’s not necessarily easy to get around the limited liability shield in all cases. But the idea that a negligent driver can mow someone down on a street, then claim no personal liability because he was doing the business of the company that he owns, is preposterous – even if he was driving a car titled in the company name.

The following factors (among others) increase the usefulness of corporate/LLC liability protection:

1) Multiple employees
2) Hazardous materials or activities
3) No co-signatures needed from main creditors/lenders (rare for new business)
4) No professional liability (i.e. lawyers and doctors generally cannot get out malpractice exposure through limited liability)
5) Multiple owners currently or anticipated
6) Specific intent to sell the business at some point
7) High capital investment in the business (i.e. a shoestring business more likely to be considered “undercapitalized” anyway.)

The downside of limited liability company and corporation protection: annual franchise fees, accounting and paperwork compliance, probably increased tax compliance, exposure to some additional taxes (for corporations, salaries of owners are subjected to unemployment taxes in MD and many other states and for C corps, potential double taxation).

There is for some owner-operators a tax advantage in using an S-corp, namely the lack of self-employment taxes or their equivalent on profits about the owner’s salary. This is more likely to be beneficial in companies well-leveraged with employees where the owner can credibly claim that the profits came from the activities of others, not of herself. If you are the only employee in the company, it’s hard to argue that your compensation is a return to your capital (i.e. no employment taxes) rather than to your labor (i.e. taxed for FICA) unless your business is unusual, heavily capitalized or relies heavily on passive income such as rent or royalties. For many businesses, the S-corp doesn’t provide much help. Professional service corporations that organize under subchapter C do get some tax advantages in terms of benefit plans but their profits are subjected to brutally high federal taxation rates above the ordinary subchapter C rate brackets.

One advantage of a corporation is that for some taxpayers, the business may look less attractive for an audit. A self-employed person netting pre-tax $120K off of $190K gross looks “juicier” for an IRS audit than does an employee making $100K salary and a minimal K-1 profit, and a business corporation paying her maybe $7-8K in profits (after employment taxes) off of $190K in gross revenue. But for many start-ups, this is not the likely profile.

For professionals, it’s unlikely (though conceivable) that a purchase price exists practically for the solo practice, incorporated or not, when it’s even permitted ethically; more likely is a merger with another practice and even more likely in many professions is the abandonment by the professional of the prior solo practice entity and joining with the new one, stripping the “portable” client work and maybe bringing some physical assets from the professional corporation or LLC along for the ride. A limited liability entity makes this process more complex in terms of accounting and wind-up.

For entrepreneurs looking to build up their businesses and get bought out, LLCs and C-corporations are the best bet; S-corporations are limited in their number of owners and cannot be owned by non-resident foreign corporations or individuals. But many small businesses don’t have that as a goal for a number for reasons and for many of those businesses, corporate or LLC formation is not particularly useful. Even for businesses that have limited liability protection, nothing beats insurance that covers the business, its owners and the officers/directors (so-called “D+O” coverage.) That coverage should be a priority for any business that actually cares about limited liability.