Tag: Major Maryland Cases

In Martens Chevrolet v. Seney, 292 Md. 328 (1982), the Court of Appeals affirmed the existence of a tort of negligent misrepresentation in Maryland separate from the tort of fraud/deceit.

The Court interpreted the record in the light most favorable to the plaintiffs in rendering its ruling, since the trial court entered on the count of negligent misrepresentation a directed verdict at trial.  In the Court’s factual summary, would-be buyers of a car dealership received from the sellers an informal financial statement to the effect that the dealership was mildly profitable and, believing that they could make a weak but technically profitable business better, agreed to purchase and ultimately purchased the dealership.  The sellers’ accountants had prepared more rigorous financial statements that showed very substantial losses, but the sellers did not provide those statements to the buyers nor any notice of their existence.  Upon learning of the true financial position of the dealership. the plaintiffs sued for inter alia deceit and negligent misrepresentation.

The Court noted that at common law, no tort of negligent misrepresentation existed; one needed to prove outright fraud or deceit in order to prevail.  In 1938, the Court of Appeals did recognize a tort of negligent misrepresentation in cases where there was a physical injury, but by implication the holding in that case, Virginia Dare Stores v. Schuman, 175 Md. 287 (1938), was limited to physical injury.  The Court allowed for pecuniary losses from negligent misrepresentation in the 1960s, but expressed some reason for doubt regarding the viability of that tort in a prior case Delmarva Drill Co. v. Tuckahoe Shopping Center, 268 Md. 417 (1973).  In this case, the Court overruled Tuckahoe to the extent that it appeared to eliminate the tort of negligent misrepresentation.

The Court proceeded to state the elements of the tort of negligent misrepresentation:

(1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement;

(2) the defendant intends that his statement will be acted upon by the plaintiff;

(3) the defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury;

(4) the plaintiff, justifiably, takes action in reliance on the statement; and

(5) the plaintiff suffers damage proximately caused by the defendant’s negligence.

and emphasized that it was permissible to plead both deceit and negligent misrepresentation in the same pleading under the Maryland Rules. The Court ruled that the Circuit Court erred in entering a directed verdict on the negligent misrepresentation tort against the plaintiffs, in that the evidentiary record was sufficient to allow a jury to find in favor of the plaintiffs and that the tort did indeed exist in this State.  The Court also entered rulings on more collateral evidentiary issues in the case on remand.

This case matters for four reasons. First, it represents the development of Maryland common law in derogation of, or supplement to, the common law of England as it stood on Independence Day 1776, which law is until changed by statute or ruling an entitlement of the people of Maryland.  Second, it represents an effort by the Court to reverse a (mis?)interpretation of its fairly recent prior precedent.  Third, it moves the public policy of Maryland away from the overall rule of caveat emptor to a rule mandating the same sorts of duties of reasonably prudent care in speech inducing reliance that we apply in the most of the rest of human endeavors.  Finally, it does a nice job (as the Court of Appeals often does in its “signaling” cases) of providing to the law student or practitioner a concise black-letter law kernel for pleadings and practice going forward.

The Court of Appeals of Maryland decided in State v. Werkheiser, 299 Md. 529 (1984), that the failure by the police to administer an alcohol test properly as mandated by statute in a drunk driving case did not mandate the dismissal of the charges, but did justify to the motorist a favorable inference about what the results would have been.

In Werkheiser, the office responding to a one-car accident did not direct a qualified medical person to administer to the unconscious driver/defendant a blood alcohol test as required by Maryland statute.  At trial in Queen Anne’s County, the presiding judge dismissed the charges, holding that the State had denied the defendant due process by violating its own mandatory requirements.  On appeal to the Court of Special Appeals, the Court of Appeals (Maryland’s highest court, for visitors to this site from out-of-state) intervened and took the case.

The Court noted that the mandatory language of the blood alcohol test statute did not provide a remedy in the event of a breach of the statute, and looked to the intent and purpose of the statute overall in determining a remedy.  The Court noted that the purpose of the statute was to facilitate the prosecution of drunk driving charges and the protection of the public, and that no provision of the law made administering the test a prerequisite of any prosecution.  It noted further that the General Assembly provided for the exclusion from evidence at a drunk driving trial of a refusal to take a breath test and of the results of a preliminary breath test (PBT) administered in the field, drawing from those provisions that had the General Assembly wanted to preclude prosecutions when a blood alcohol test was not administered properly, it could have done so and did in fact make similar provisions in other areas of criminal law.

The Court cited with approval a Colorado case that noted that “the State must not suppress evidence, but it need not gather evidence for the accused.”  The Court indicated that the best remedy was a favorable inference to the defendant regarding what the result of the test might have been had it been administered properly, to be weighed with all other evidence including the intention of the law enforcement officer who failed to administer the test.  The Court noted that other provisions of the law did not bar the introduction of other evidence when a alcohol test result was introduced, and that it was logical not to bar other evidence when such a test was not introduced.  Reversing the dismissal. the Court of Appeals remanded the matter for trial back to the Queen Anne’s County Circuit Court.

However, the scope of Werkheiser has been limited in recent years and it may no longer be fully good law in Maryland.

Newer Maryland attorneys, this is the case to which the “old-timers” in your office may reference as the “slug” case. Every Maryland attorney needs to know this case.

In Fellner v. Bar Association of Baltimore City, 213 Md. 243 (1957), the Court of Appeals disbarred an attorney based upon proof that he had employed slugs as a means of stealing parking meter time from the City of Baltimore in a municipal lot. Fellner stands for two main propositions valid to this day:

1)  that a criminal conviction for conduct prejudicial to the administration of justice is not necessary to disbar an attorney for that conduct; and

2) even relatively small thefts or misappropriations of money or benefits/services valued in money may result in disbarment.

In Maryland, prosecutions of attorney discipline cases now occur before the Maryland Court of Appeals after a substantial administrative process before the Attorney Grievance Commission.  The Court of Appeals generally delegates the conduct of an evidentiary hearing to a Circuit Court.  Bar Counsel exists as a state agency.  These facts were not the case in 1957; at that time, local Bar Associations had standing to prosecute attorney discipline cases before courts of general jurisdiction.  Those courts would make not only findings of fact but also specific recommendations of discipline including disbarment in certain cases; the Court of Appeals would review the proceedings and the recommendations.

In Fellner, the Supreme Bench of Baltimore City (equivalent to a Circuit Court elsewhere in the State and today named the Circuit Court for Baltimore City) made a factual finding that Fellner had used slugs as a means of stealing parking time.  While the evidence was not absolutely clear, the logical conclusion based on the operation of the parking meter was that the last coin into the meter was a valid nickel, visible through an window on the meter known as a “Scotch Eye“, but that the motorist had used quarter-sized slugs to obtain parking time.  The meters charged 5 cents per hour; two quarter-sized slugs followed by a valid nickel would cost only 5 cents for 10 hours of parking (plus the price of the slugs, whose value was not determined.

Upon investigation of several slug incidents at the meter, motorist and attorney Fellner was arrested and the vehicle in question was registered to Fellner’s wife.  (The opinion did not identify the opinion of either Mr. or Mrs. Fellner.)  Mr. Fellner was charged with a violation of the Maryland Annotated Code, Art. 27 (the old Criminal Law article before recodification), section 74.  At the time, the articles and sections of the Annotated Code of Maryland were often numbered in alphabetical order, i.e. attorneys were covered in article 10, while crimes were covered in article 27, etc.  Apparently, this method did not appear self-evidently insane to prior General Assemblies of Maryland.  Most numbered articles have been recodified into topical articles, i.e. Criminal Law article, Transportation article, etc.  It is unclear from at-hand resources what precise crime section 74 defined, though I’d be grateful for any “old-timers” with a still-intact Article 27 who can so advise; I do not believe that it was theft/larceny itself but another crime.

Regardless, Fellner did not admit to the crime and was not convicted thereof either, but instead pled nolo contendere, certainly not the last Marylander to attempt that plea with mixed success.  Maryland law at the time provided for disbarment upon a conviction of a crime of moral turpitude.  The Court of Appeals noted, however, that it was not upon the court disposition itself but rather the testimony of the same witnesses in the disciplinary proceeding that supported a finding of conduct “prejudicial to the administration of justice” which phrase later became incorporated into Maryland Rule of Professional Conduct 8.4(d) (cognate to the ABA Model Rule.)  It was not the nolo contendere plea but the actual evidence itself that demonstrated conduct prejudicial.

In today’s misconduct rule 8.4, conduct that involves deception or deceit is misconduct even if it does not involve prejudice to the administration of justice, per se.  The Court of Appeals has, however, interpreted a number of forms of conduct as prejudicial to the administration of justice even if that conduct does not implicate either deceit or the court system itself, such as willful failure to file federal income tax returns.

Back to Fellner.  The Court also addressed the point regarding the arguably trivial size of the amount of damage to the Mayor and City Council of Baltimore and the severity of the sanction, namely disbarment.  Citing its prior Meyerson decision, the Court of Appeals reaffirmed that no “… moral character qualification for Bar membership’ is more important than truthfulness and candor.”  The Court noted that Mr. Fellner gave a fictitious name to law enforcement and denied in his disciplinary pleadings any involvement in the offense up through the disciplinary proceeds themselves, but was found with a bag of slugs inside the car in question.  Fellner refused to take the stand in the disciplinary hearing, however, a fact that the Court of Appeals noted as adverse to his disciplinary case since, unlike in a criminal proceeding, an attorney-respondent has no right to practice law or to remain silent within the attorney disciplinary context.  Finding the recommendation of the Supreme Bench well-reasoned and amply justified by precedent and evidence, the Court of Appeals disbarred Fellner.

This case is fairly well known as the “slug case” but Mr. Fellner’s bad acts included more than just stealing parking time with one 25 cent slug; he lied to the police, formed an apparent scheme by which to continue to steal parking time and refused to take the stand in his own defense at the disciplinary proceeding even after the Court had accepted a nolo contendere plea in his criminal case.  Fellner is still good law and the Court of Appeals has cited it many times even in recent decades (you can Shepardize the case to confirm this.)  The triviality of the size of the theft – literally mere coins’ value of parking time – did not in any way mitigate the wrongful character of the attorney’s acts.

If you have a law license, and especially if you supervise other attorneys’ conduct, you should read Fellner as, despite major procedural changes since 1957, it is still good law in this State.

In Owens-Illinois, Inc., et al., v. Zenobia, et al.,  325 Md. 420 (1992), the Maryland Court of Appeals enunciated a “malice” standard for punitive damages in Maryland.

Plaintiffs Zenobia and Dickerson in the original cases were victims of asbestos exposure and sued several defendants who produced, supplied or installed products containing asbestos.  At trial, the only theory of liability was strict liability. The jury awarded both compensatory damages against five defendants for Dickerson and four defendants for Zenobia and awarded further punitive damages against three defendants in favor of Dickerson and against two Defendants in favor of Zenobia. Pursuant to a stipulation, all defendants were considered to have cross-claimed against each other,  and one defendant with whom Plaintiffs had struck a settlement found itself in bankruptcy.  The procedural posture of these cross-claim awards is relevant to the case but not to the ultimate precedential value of this case as a major Maryland case.

On appeal by the five of the Defendants to the Court of Special Appeals, that Court upheld all of the compensatory damage awards but did reverse the punitive damages against one defendant only, Porter-Hayden Co.  Zenobia and Dickerson cross-appealed

Owens-Illinois, Inc, Porter-Hayden Co. and defendant MCIC petitioned the Court of Appeals for certiorari on several issues involving improper jury instructions on duties to warn, improper admission of deposition evidence and, in the case of Owens-Illinois, the propriety the punitive damage award.  Zenobia and Dickerson filed conditional cross-petitions for certiorari on the issues of contribution and indemnification among the Defendants, issues that they had raised before the Court of Special Appeals; the petitions were conditional upon the granting of the prior certiorari petitions.  In response to Zenobia’s and Dickerson’s conditional cross-petitions, Anchor Packing Co. then filed a petition for certiorari on four issues.

Confused yet?  The Court of Appeals granted all petitions for certiorari.

The Court’s opinion addressed issues involving the admission of deposition testimony and the denial of a motion for a new trial in its first three sections, but those issues do not constitute the primary precedential value of the case i.e. what makes this case a “Important Maryland Case.”  In section IV of the opinion, the Court engaged in a lengthy discussion of the standards for punitive damages in a strict liability products liability case, with the intent to examine the characterization of a trial defendant’s conduct in such cases, define precisely the standard which in a non-intentional tort case may give rise to punitive damages and in fact to heighten that standard.

The court discussed and, for non-intentional tort purpose, ultimately dismissed the “Testerman-Wedeman” standard, named after two prior cases.  In those cases, the Court of Appeals had ruled that in the context of a contractual relationship, conduct occurring before the formation of a contractual relationship could give rise to punitive damages on a finding of “implied malice”, i.e. wanton or reckless disregard, whereas under that prior standard punitive damages for conduct occurring after the formation of a contractual relationship could lie only on a showing of “actual malice,” that is, “evil motive, intent to injure, fraud, or actual knowledge of the defective nature of the products coupled with a deliberate disregard of the consequences.”  The Court of Appeals explicitly abandoned that rule in this case because the purpose of punitive damages is to punish heinous conduct by a defendant, regardless of when that heinous conduct occurred.

The Court proceeded to examine the historical standard of “actual malice” for punitive damages, noting that in one 1972 case involving a motor vehicle accident the Court had allowed punitive damages upon a showing of mere implied malice, i.e. gross negligence, but warned in that case against the broader application of a more liberal standard.  Notwithstanding the limitation warning, a number of subsequent cases in Maryland relied on Smith v. Gray Concrete Pipe Co., 267 Md. 149 (1972), more liberal standard outside of motor vehicle cases.  The Court proceeded explicitly to overrule Smith upon a review of the policy arguments against the inconsistent results that had occurred in facts with similar cases and after examining how Maine’s Supreme Court had recently modified its implied malice standard in similar cases.

The Court proceeded to note that in a products liability case, it is difficult to show “actual malice” by a manufactureras previously defined as evil intent, intent to injure, ill will, or fraud.  The Court then stated that actual knowledge of a defect and associated danger connected therewith, and a conscious or deliberate disregard of that danger to consumers, together constituted the product liability standard for “actual malice.” The Court emphasized that mere constructive knowledge or “substantial knowledge” are not enough to meet this standard.  The Court stated further that a punitive damages claim was possible from a strict liability or negligence-based tort theory, if the facts otherwise met the punitive damages standard.  Perhaps most significantly, the Court followed the reasoning of several other U.S. courts in applying a heightened standard of “clear and convincing evidence” to any tort claim for punitive damages, reflecting their penal nature and potential for debilitating harm.

The Court noted that its change of the evidentiary standard for punitive damages was a change to the common law within the Court’s constitutional jurisdiction, and would apply prospectively to all trial started from that day forward.  On the other hand, the Court deemed its overturning of Smith and the Testerman-Wedeman standard not to be a change to the common law but rather an overruling of decisions that were decided erroneously, and therefore the law would apply retroactively to any case where the issue had been properly preserved for appeal.  The Court remanded the plaintiffs’ claims back for a new trial under the narrowed legal standard and the heightened evidentiary burden, to the extent applicable under the evidence presented by all parties that the new trial.

Judges McAuliffe and Bell (the latter later Chief Judge) issued separate opinions.  Judge McAuliffe concurred in the result of the majority opinion but urged that in cases where a defendant met a standard of depraved indifference short of “intent” which could satisfy the “malice” standard for common-law murder, punitive damages should be at least theoretically available since in both cases the intent of the law was to punish.  Judge Bell concurred with the majority in the overruling of Smith and the Testerman-Wedeman doctrine but dissented strongly as to the raising of the standard for punitive damages to “actual malice”:

“In cases where there is no actual malice, the totality of the circumstances may reveal conduct on the part of a defendant that is just as heinous as the conduct motivated by that actual malice and, so, for all intents and purposes is the same.”

Zenobia‘s influence on tort law in Maryland has been rather strong.  One year after Zenobia, the Court of Appeals went on to hold in Komornik v. Sparks (which this Important Maryland Cases series will cover at a later date) that even in cases involving drunk driving – which criminal courts can punish with incarceration – punitive damages cannot lie in the absence of a finding of actual malice.  A cautious person may ask: if a court can punish a wrongdoer with punitive jail to prevent a harm, why not with punitive civil damages that go to an actual human victim of the conduct which the criminal statute seeks to deter, restrain and punish?  Regardless of one’s opinion of the opinion, Zenobia is a mandatory read for any Maryland tort litigator and definitely qualifies as one of the most Important Maryland Cases.