Maryland Court Digest: July 2, 2007

Paper: Daily Record, The ( Baltimore, MD)

Date: July 2, 2007

Elections Nomination petitions BOTTOM LINE: The State Board of Elections improperly invalidated nomination petition signatures solely on the basis that such signatures appeared on petition sheets for counties in which the signatories were not registered to vote; signatories were registered voters otherwise eligible to vote in the State of Maryland and their signatures should have been counted. CASE: Nader For President 2004, et al. v. Maryland State Board of Elections, CA No. 76, September Term 2004 (decided June 21, 2007) (Judges BELL, Wilner, Cathell & Battaglia) (Judges Raker, Harrell & Greene dissented). FACTS: On August 2, 2004, the Populist Party ("the Party") filed a petition with the State Board of Elections ("State Board") seeking certification of its party, as well as of its presidential candidate, Ralph Nader. Affixed to the petition were signature sheets, broken down by county, purporting to contain the signatures of 14,991 registered voters. The State Board disseminated the signature pages to the applicable county boards for verification. On August 23, 2004, in accordance with EL §6-210, the Director of the Election Management Division of the State Board ("the Director") notified the Party that 5,631 of its petition signatures had been invalidated. On August 27, 2004, Nader for President 2004 and the Populist Party (collectively "Nader for President") filed an action in the circuit court seeking, pursuant to EL §§6-209 and 6-210(e), expedited judicial review of the State Board's determination and "declaratory judgment holding that more than 536 signatures invalidated by the Board should have been counted and certified." The State Board moved to dismiss the action, or in the alternative, for summary judgment. A hearing was held, at which it was established that the State Board had compiled a computerized list of all registered voters in the State and that a disk with those individuals' names was available to the public. The computer disk, however, did not contain a "searchable database" of registered voters on a county-by-county basis and was not officially available to the Local Boards of Elections ("LBEs"). Instead, the information on the disk was made available to the LBEs on a state-sponsored "intranet," which they could access through computer terminals, using a software program, "Power Profile." Nonetheless, some LBEs did not have access to the software program because of budget constraints that prevented the State Board from providing such access to them. Nader for President argued that the State Board's failure to use the statewide list of voters to verify the signatures on its petition was not rational. There was no reason, in Nader for President's opinion, that the State Board should have allowed the LBEs to disqualify voters solely on the basis that they signed in the "wrong county" when the use of the database could have identified those individuals as registered voters in other counties in the State. Nader for President contended, in addition, that the State Board's processes, as outlined in both the Election Law Article and the Code of Maryland Regulations ("COMAR"), were unconstitutional. The State Board did not agree. The Director testified that the procedure in place, i.e. the dissemination of signature pages to the individual LBEs, was the most effective way to count the signatures, considering that some of the LBEs could not access the statewide voter list, not having use of the required computer software. Although the state database was an alternative means of verifying signatures, the Director made clear that its use was not prohibited by any law; it simply was not the most efficient way of counting the signatures and, thus, determining the sufficiency of the petition. The State Board's main argument, however, was that the use of the database could result in a single voter being "verified" more than once if that voter signed petitions in multiple counties and each county's LBE verified the name on the database as opposed to its own list. In sum, the State Board's argument was that in permitting the LBEs to certify only their own resident voters, potential issues, such as voter mistake and voter fraud, could be avoided. The circuit court issued its order the following day, rejecting Nader for President's arguments and declaring that the "county-match" requirement, set forth in EL §6-03(b)(2) and COMAR §33.06.05.01.A was constitutional and did not violate the rights of Nader for President. Nader for President noted an appeal to the Court of Special Appeals. The Court of Appeals, on its own motion, issued a writ of certiorari prior to any proceedings in that court. Oral argument was heard on September 20, 2004, and, on that same day, the Court issued its order reversing the judgment of the circuit court and remanding the case to that court with directions to enter a judgment declaring EL §6-203 (b)(2) invalid. In this opinion, the Court set forth the reasons for that order.

LAW: The Court noted that it has indeed equated the nominating petition process to voting in this State. In Maryland Green Party v. Bd. of Elections, 377 Md. 127, 151, 832 A.2d 214, 228 (2003), the Court recognized that "if the only method left open for the members of a political party to choose their candidates is via petition, then the right to have one's signature counted on a nominating petition is integral to that political party member's right of suffrage." In the case sub judice, Nader for President was required to complete the nominating petition process in order both to become a statutorily-recognized political party and to nominate its candidate for the presidency of the United States. The Court agreed with Nader for President that the same procedural safeguards should have been afforded to them that were, and continue to be, afforded to voters who cast ballots in an election. The State Board, as did the circuit court, erroneously relied on Article I, §1 of the Constitution. It analogized that provision's proscription of voting outside of the voter's district to a voter signing a petition in the "wrong county." Based on that analogy, it asserted that no additional qualification or restrictions were imposed on voters. To be sure, the voters disqualified by the LBEs, and, thus, the State Board, were qualified registered voters in this State. The procedure for certifying the petition, stripped those qualified, registered voters of their right to be counted as valid petition signers by disqualifying their signatures merely because the signatures were on a petition for a county in which they were not registered, a "wrong county" sheet. An individual who signs a party's petition, regardless of whether the signature was on the correct "county" sheet, enjoys the same protections of his or her right to suffrage under the Maryland Constitution as any voter casting a ballot on election day. Just as an individual is protected under the Constitution from having his or her right to suffrage restricted by burdensome statutes, one who signs a petition in support of a candidate, should not find "his or her right to take part in the nomination process curtailed." Id. The State Board, in effect, imposed an additional requirement on petition signers by requiring them, for their signatures to be validated, to be registered in the county whose petition they signed, in addition to appearing on the official statewide list of registered voters. Thus, the State Board, through its validation and counting processes, improperly invalidated the "wrong county" signatures of 542 otherwise qualified voters. As a result, those voters' right of suffrage was infringed upon. The Court also agreed with Nader for President that the "county-match" requirement was unduly burdensome to the signers of the petitions, as well as to the Party itself. This is particularly so where a presidential campaign is involved. As the Supreme Court of the United States recognized in Anderson v. Celebrezze, a "[s]tate has a less important interest in regulating Presidential elections than statewide or local elections, because the outcome of the former will be largely determined by voters beyond the State's boundaries." 460 U.S. 780, 795 (1983). In that case, the Supreme Court held unconstitutional a statute requiring an independent candidate for the office of the President of the United States to file nominating petitions early in order to appear on the general election ballot. 460 U.S. at 786. The Anderson Court noted that such a requirement burdened the voting and associational rights of the supporters of the candidate. 460 U.S. at 806. Similarly, in the case sub judice, the "county-match" requirement was not necessary. The nominating petition was for a statewide office, and, thus, the specific county in which a voter was registered was irrelevant. Nader for President was correct when it asserted that the fact that it obtained the required number of Maryland voters' signatures, 10,000, entitled it to have its petition certified. In the same vein, the Court concluded that the State Board's literal, narrow reading of EL §6-203(b)(2) was troublesome. As stated earlier, the State Board posited that the LBEs were not required to do anything other that what they did - invalidate any signatures that were not on their rolls. The Court rejected the State Board's approach. It is clear that the verification of the 542 disqualified signatures was not particularly burdensome for the State Board when contrasted with the effect that invalidation of those signatures could have, and consequently did have, on Nader for President. Those 542 signatures were determinative; without them, Nader for President was unable to be certified and recognized as a political party and was not able to nominate a candidate to be placed on the general election ballot. That the State Board was able to determine that the 542 signatures at issue were not duplicates did not help its argument. It, in fact, only proved that what the State Board contended was "unworkable" at oral argument, was very possible. Even if the Court assumed, arguendo, that the use of the statewide database was unworkable or problematic, what would have stopped one LBE from notifying another LBE of an obvious wrong signature? Moreover, the State Board's processes did not allow for any checks or balances once the petitions were sent to the LBEs. The State Board did not, in any way, monitor what the LBEs did, relying solely on the summaries that the LBEs sent back when their counting was done. Although the State Board received copies of the signatures sheets with the various notations on them, it admitted to relying only on the summaries. There was, then, no way for the State Board to know if the LBEs had made any errors. The State Board's argument that the availability of the state database should not render EL §6-203(b)(2) unconstitutional was likewise unavailing. It was not disputed that, when certain provisions of the Election Law Article were adopted, a statewide database was not available to check for registered voters and that the database was a fairly new development at the time of the case sub judice. The fact is, however, that the statewide database was a resource that the State Board could have used, and obviously did use to verify the 542 signatures as belonging to Maryland voters, albeit in counties other than the one whose petition they signed. It should have been used to prevent the disenfranchisement of hundreds of voters.

COMMENTARY: In Norris v. Mayor & City Council of Baltimore, 172 Md. 667, 675, 192 A.2d 531, 535 (1937), the Court examined the language of Article I, §1, as it did in the instant case, although for a different purpose. In that case, the constitutionality of the provision that "[a]ll elections shall be held by ballot" was challenged by opponents of the use of voting machines. The opponents argued that the use of voting machines conflicted with Article I, §1 because the term "ballot" could not include voting machines, as such machines did not exist at the time of Article I, §1's adoption. Norris was analogous. In the case sub judice, the statewide database was an improvement in technology, as were the voting machines in Norris, that, in effect, facilitated the voting process. It replaced an aspect of the nominating petition process, i.e. the State Board's validation and counting procedures, while leaving the overall scheme intact. The use of the statewide database is consistent with Article I, §2 of the Constitution which calls for a uniform system of voter registry, while, it at the same time, satisfies the interests of the State Board. Unlike the "county-match" requirement, the statewide database did not in any way change the overall scheme of the nominating petition process as it only served as an alternative, and in the instant case a more effective, method by which the State Board could verify signatures. The Court did not deny that the State Board's interest in the case sub judice was compelling. It is clear that in order for there to be a fair and honest implementation of the elective franchise, regulations must be in place. Those regulations, however, cannot be inconsistent with the protections afforded under the Constitution. It was evident that the State Board's "county-match" requirement, as prescribed by EL §6-203(b)(2), could not be squared with the constitutional provisions on voter qualification and registration. Specifically, there is no provision in the Constitution requiring, for purposes of the petition process, the signers of petitions to be broken down by county, failing which the signatories are disqualified. Therefore, the disenfranchisement of voters solely based on a "county-match" requirement is inconsistent with Article I of the Maryland Constitution, as well as with Articles 7 and 24 of the Maryland Declaration of Rights.

DISSENT: The dissent agreed with SBE's position that §6-203 is reasonable, nondiscriminatory, and accomplishes a legitimate governmental objective. The asserted purpose underlying the statutory requirement prohibiting the counting of signatures of voters who are not registered in the county is to prevent counting a single voter's signature more than once. As the circuit court noted, the availability of a state-wide database should not cause the existing statutory provision instantly to become unconstitutional and to force SBE to administratively rewrite all petition verification procedures. According to the dissent, the remedy is with the Legislature, not a declaration from the Court that the statute is unconstitutional.

PRACTICE TIPS: The State Board compiled the list of registered voters in accordance with the federal Help America Vote Act of 2002, 42 U.S.C §15301 et seq. Section 15483(a)(1)(A) of that Act provides: "Except as provided in subparagraph (B), each State, acting through the chief State election official, shall implement, in a uniform and nondiscriminatory manner, a single, uniform, official, centralized, interactive computerized statewide voter registration list defined, maintained, and administered at the State level that contains the name and registration information of every legally registered voter in the State...." (Emphasis added). Moreover, §15483(a)(1)(A)(viii) states that "[t]he computerized list shall serve as the official voter registration list for the conduct of all elections for Federal office in the State."

Elections Redistricting BOTTOM LINE: Circuit court erred in not dismissing a motion for declaratory judgment, which, on consent of the Carroll County Board of Elections, implemented a redistricting plan in the county without approval by the legislature.

CASE: Getty v. Carroll Co. Bd. of Elections, et al., No. 139, September Term, 2005 (decided June 21, 2007) (Judges BELL, Raker, Wilner, Cathell, Battaglia, Greene & Eldridge (retired, specially assigned)).

FACTS: Since its formation, Carroll County had a commissioner form of government with three county commissioners, elected at-large, as provided by Public Local Laws of Carroll County §3-101. In 2003, House Bill 290 was enacted - mandating the expansion of the Carroll County Board of Commissioners (CCBC) from three members to five; providing for election by district rather than at-large; and establishing a process for the creation of five commissioner districts in the County. The Act was then referred at the 2004 General Election, approved by Carroll County voters, and codified as revised §3-101. As required by §3-101, the incumbent members of the CCBC appointed seven members of the Commission Redistricting Committee (the Committee), whose function was to make recommendations to the Carroll County Legislative Delegation as to the boundaries of the proposed five commissioner districts for consideration at the following legislative session. The Committee drafted two alternative redistricting plans, designated Option 1 and Option 2. Following several public hearings, the Committee adopted and recommended Option 2, then completed and submitted its Final Report to the Carroll County Delegation on August 23, 2005. Following two public hearings, the Delegation rejected the Committee's recommendation of Option 2 and adopted, instead, Option 1. Option 1 was introduced, on January 30, 2006, at the following legislative session, as House Bill 491. Although the bill passed the House of Delegates and the Senate Education, Health and Environmental Affairs Committee (the Senate Committee), on sine die, the Maryland General Assembly adjourned without completing action on the bill. In response to the Delegation's failure to secure the passage of HB 491 and acting on the advice of the Attorney General, on April 17, 2006, the Board determined that the election of the five county commissioners would be conducted at-large and not by district. Having learned of the Board's decision, Dana Dembrow, a registered voter, filed in the circuit court a complaint for declaratory judgment and writ of mandamus, seeking to compel the Board to implement the directive of the voter referendum requiring the election of county commissioners by district in the 2006 election. In response to Dembrow's Complaint, the Board held two emergency meetings to discuss the pending litigation. Having heard from Dembrow with regard to the nature of his Complaint and the relief he sought, the Board unanimously voted to enter into the Consent Order with Dembrow to seek jointly an order of the circuit court authorizing the conduct of Carroll County elections using commissioner district boundaries as designed in Option 2. The Circuit Court expedited its review of the Consent Order, and based solely on the joint and abbreviated presentations by counsel, no notice to the public hearing having been given and no evidentiary hearings having been held, the court issued an order approving the Consent Order, marking the action as settled and dismissing it with prejudice. On April 25, 2006, James Harris filed a motion to intervene in the action, alleging that there was no authority to pass the Consent Order. The following day, Joseph Getty filed a motion to intervene as of right for the purpose of a post-judgment appeal. Moreover, Getty submitted that the circuit court's order unlawfully and unconstitutionally impaired the weight of his vote and the ability to protect the interests of the public in securing the lawful adoption of a commissioner redistricting plan. Both of those motions were unopposed, and the circuit court granted them on April 25, 2006. The following day, Harris noted an expedited appeal to the Court of Appeals, which was later amended as a corrective notice of appeal to the Court of Special Appeals. On May 1, 2006, Getty also noted an appeal to the Court of Special Appeals. He then filed, on May 4, 2006, a motion to stay the circuit court's order pending appeal, in which Harris joined. The circuit court denied the joint Motion to Stay. On May 15, 2006, the Court of Appeals, on its own initiative, issued a writ of certiorari. Oral argument was heard on June 1, 2006, and on the same day, the Court issued an order vacating the judgment of the circuit court and remanding the case to that court with directions to order the Carroll County Board of Elections that the 2006 elections of Carroll County Commissioners be in accordance with §3-101(a) of the Public Local Laws of Carroll County as that subsection provided immediately prior to the passage of revised §3-101, i.e., the election of three county commissioners at-large. In the instant opinion, the Court set forth its reasoning for that order.

LAW: Article III, §28 of the Maryland Constitution provides, in pertinent part, that "[n]o bill ... shall become a Law unless it be passed in each House by a majority of the whole number of members elected...." Here, House Bill 491 passed the House of Delegates, but failed to pass the Senate. Thus, there was no legislation at all to serve as the basis for the Consent Agreement. In Watkins v. Watkins, 2 Md. 341 (1852), the Court was faced with a similar situation. In that case, it was asked to issue a writ of mandamus compelling the incumbent Adjutant General to deliver all materials germane to the office to the petitioner, who was his presumed and designated, though not confirmed, successor. Article 9, §2 of the 1851 Maryland Constitution, applicable to the office of the Adjutant General, provided that, "the Adjutant General shall be appointed by the Governor, by and with the consent of the senate...." The petitioner was nominated by the Governor, but the petitioner did not receive the consent of the senate, as it failed to complete action on the nomination before the adjournment of the Legislature. The Court rejected the petitioner's argument that he was entitled to succeed to, and hold, the office and held, instead, that, as prescribed by the Constitution, absent the concurrence of both the Governor and the senate, the incumbent Adjutant General would continue his commission. The Watkins Court opined that "under the distribution of the powers of government in our State, it is not given to the judiciary to compel action on the part of a co-ordinate branch of the government. Its authority is confined to restraining the potency of its enactments when they transcend constitutional limits." Id. at 355 (emphasis in original). More than a century later, the Court of Appeals once again had the opportunity to address the separation of powers between the judiciary and the Legislature. In Maryland-Nat'l Capital Park & Planning Comm'n v. Randall, 209 Md. 18 (1956), House Bill 505 was enacted by the General Assembly, but was subsequently vetoed by the Governor. Before the bill was returned to the House in which it originated for further action - it was thought that the bill would be passed over the Governor's veto - an appeal was brought asking the Court to decide various questions of law pertaining to the bill. The Court, pointing out that legislative action had not been completed, stated, "[i]t could hardly be contended that after one House had passed a bill the courts could enjoin the submission of that bill to the other House on the allegation that the bill as passed by one House was unconstitutional or unlawful." Id. at 26-27. Accordingly, the Court dismissed the suit, holding that it lacked jurisdiction. Decisions of other states have also been in accord. In Goodland v. Zimmerman, 10 N.W.2d 180 ( Wis. 1943), the court was asked to enjoin the Secretary of State from publishing an act enacted by the Legislature. As prescribed by the Constitution of Wisconsin, a bill does not become effective as law until it is published. In denying the requested relief, the Court reasoned, "[a] court cannot deal with the question of constitutionality until a law has been duly enacted and some person has been deprived of his [or her] constitutional rights by its operation." Id. at 183; see also State ex rel. Carson v. Kozer, 270 P. 513, 516 (Or. 1928); Kuhn v. Curran, 184 Misc. 788, 792 (N.Y. Sup. 1944). Under the principles set forth in the cases cited, it follows that the General Assembly's failure to enact House Bill 491, and, thus, to adopt the redistricting plan for Carroll County, did not somehow authorize the circuit court to act. The cases make clear, in fact, that the circuit court's actions transcended its jurisdiction, usurping the Legislature's function in the process. To be sure, the circuit court, as a trial court, not being accorded any authority, either by Constitutional provision or through statutory law, has no jurisdiction to create district lines. Thus, it followed that the court could not, in light of the General Assembly's inaction, step in and create, through a consent order, a redistricting plan for Carroll County. In other words, the Consent Order could not confer jurisdiction on the circuit court where none otherwise existed. See, e.g., Montgomery County v. Bradford, 345 Md. 175, 206 (1997); Price v. Hobbs, 47 Md. 359, 378 (1877). Thus, the circuit court erred in not dismissing the motion for declaratory judgment.

COMMENTARY: In In re Legislative Districting of the State, 370 Md. 312, 319 (2002), the Court heeded the rationale underlying the "one-person, one-vote" standard, enunciated by the Supreme Court in the landmark decision in Baker v. Carr, 369 U.S. 186 (1962), that "a fairly apportioned legislature lies at the very heart of representative democracy." As such, it is imperative that the rights of the State's citizenry are particularly protected when it comes to the drawing of district lines. See Maryland Comm. for Fair Representation v. Tawes, 229 Md. 406, 411-12 (1962). The drawing of such lines is an "intensely political process;" however, due to the constitutional standards that govern the process and the redistricting plan which generally results from it, the process is also a legal one. In re Legislative Districting, 370 Md. at 320. Although the Court of Appeals is charged, "upon petition of any registered voter," to review a given redistricting plan to insure that it conforms with constitutional requirements and to grant the appropriate relief, i.e., the promulgation and adoption of the Court's own plan, if the plan does not, it is well settled that the redistricting of a territory is primarily, and ultimately, a legislative function. Id. at 326. While the legislature is charged with the crafting of the plan itself, it is the Court's responsibility, as prescribed by Article III, §5 of the Maryland Constitution, and as final arbiter, to review its constitutionality. When a redistricting plan that has been adopted, either by the Governor or the Legislature, is challenged, the Court's inquiry begins by first looking at the plan on its face and taking into consideration whether, in light of the specific challenges, both federal and state legal requirements have been met. In In re Legislative Districting, the Court articulated that when, from the petitions and answers alone, the Court perceives "deviations that do not appear to be permissible, but for which there may be some explanation that could serve to justify them," the Court has appointed a special master, thus affording the State and the petitioners the opportunity to present evidence and argument to supply that explanation. Id. at 322. Following those proceedings, if the Court concludes that the deviations are "within a permissible range or for a permissible purpose," the Court has approved the plan. Id. If, on the other hand, the opposite conclusion is reached, the Court has declared the plan unconstitutional and void. Id. To be sure, it is not the Court's charge to hold merely that a redistricting plan is invalid. If an adopted plan does not pass constitutional muster and is declared void, the Maryland Constitution requires the Court to provide a remedy. There is no one remedy that is imposed in such cases; instead, the Court evaluates the circumstances of each one on a case-by-case basis. When there is time to return the matter to the other political branches, giving them the opportunity to produce an amended, or even a new, plan, the Court has done so. When, however, there is the urgency of an upcoming election, the Court has typically chosen to fashion and adopt the redistricting plan itself.

PRACTICE TIPS: While the Court agreed with the appellants that the circuit court's order should be vacated, thus, rejecting the adoption of Option 2, it did not, in doing so, grant them the relief they sought, i.e., the adoption of Option 1, or, in the alternative, permitting the election of five commissioners at-large. Because House Bill 491 was never enacted, the Court considered all actions thus far - including those on behalf of the Committee, the Delegation, and the parties to the suit - to be mere recommendations. There was simply no plan for the Court to review; thus, the resolution of the matter was entrusted exclusively to the Legislature. That being so, the Court was required, under the separation of powers doctrine, to give deference to the General Assembly's action, or, as in this case, inaction. Thus, three Carroll County commissioners were to be elected at-large, pursuant to Public Local Laws of Carroll County §3-101 as it provided immediately prior to the enactment of Chapter 417, 2003 Laws of Maryland.

Evidence Hearsay and "bad acts" evidence BOTTOM LINE: The circuit court's admission into evidence of hearsay and of other "bad acts" was erroneous.

CASE: Boyd v. State of Maryland, CA No. 30, September Term 2006 (filed June 7, 2007) (Judges Bell, Raker, Wilner, Cathell, Harrell, Greene & ELDRIDGE (retired, specially assigned)).

FACTS: Ronald Boyd and Cathleen Weaver are the parents of Lyric Weaver-Boyd who was born on May 7, 2003. Mr. Boyd and Ms. Weaver had not expressly agreed upon custody or a visitation schedule after Lyric's birth, and Lyric lived with Ms. Weaver. Until February 2004, Mr. Boyd visited his daughter whenever he wanted. On February 17, 2004, Mr. Boyd attempted to visit his daughter, and Ms. Weaver refused to permit the visit because Lyric was sleeping. This led to an argument between the two, with Mr. Boyd allegedly threatening Ms. Weaver. The next day, February 18, 2004, Mr. Boyd came to Ms. Weaver's place of employment and allegedly threatened her. On February 19, 2004, Ms. Weaver filed a petition in the district court for a protective order, and an interim protective order was issued on that date. The protective order was based on the February 17th and February 18th incidents. On February 23, 2004, with Mr. Boyd's consent, a final protective order was entered by the district court. Pursuant to Mr. Boyd's request, the district court on April 14, 2004, modified the final protective order to provide specific hours for visitation. The modified final protective order specified visitation hours for Mr. Boyd every Sunday from 9:00 A.M. to 9:00 P.M. and every other Monday from 9:00 A.M. to 9:00 P.M. Until July 11, 2004, Mr. Boyd's visitation with his daughter, pursuant to the modified order, took place without any problems. On Sunday, July 11, 2004, however, another argument occurred. As scheduled according to the visitation arrangements in the modified protective order, Mr. Boyd on July 11th picked up Lyric from the home of Ms. Weaver's mother, Barbara Fowlkes. He returned her that evening 50 minutes late. Upon returning his daughter, Mr. Boyd and Ms. Fowlkes engaged in an argument. Mr. Boyd attempted to leave with Lyric, but several neighbors and a police officer prevented him from doing so. On the following Sunday, July 18, 2004, Ms. Weaver decided not to permit visitation, although she failed to inform Mr. Boyd of this decision. Ms. Weaver instead decided to take Lyric to Artscape, a cultural arts festival in Baltimore City. Mr. Boyd, along with his friend Pam Wilson, went to Ms. Fowlkes's home to pick up Lyric for his scheduled visitation, but no one answered the door. He subsequently telephoned Ms. Fowlkes twice, but she hung up on him each time. Ms. Weaver testified that, on her way to Artscape, she saw Mr. Boyd riding in a truck driven by Pam Wilson. According to Ms. Weaver's testimony, she continued for several more blocks, eventually using her cell phone to call the police because the truck was following her. A police car pulled alongside Ms. Weaver, and an officer told Ms. Weaver that he would follow her to a parking place for Artscape and then accompany her to Artscape. Once she found a parking place, Ms. Weaver put Lyric in her stroller and started walking toward the police car. Ms. Wilson, who was driving the truck, testified that Mr. Boyd "was upset because his daughter has chronic asthma and she had [his] daughter out in the pouring down rain." Ms. Wilson parked the truck nearby, and Mr. Boyd "went over to the police officer with his visitation papers that he had gotten from the court." The police officer told Mr. Boyd to wait in the truck, and Mr. Boyd then returned to the truck. The officer "ran him for a warrant check," and thereafter arrested Mr. Boyd on an unrelated, open warrant. At no time on July 18th did Mr. Boyd approach or talk to Ms. Weaver. The State later charged Mr. Boyd with violating the February 23, 2004, final protective order. The charge was based entirely upon the events on July 18, 2004. Before trial, the State filed a motion in limine seeking a ruling on the admissibility of evidence, including Ms. Weaver's petition for the protective order, testimony concerning the February incidents, and testimony relating to the July 11, 2004, incident. At the pretrial hearing on the motion, the State argued that the petition itself, and testimony about the incidents, were relevant to understand why Ms. Weaver sought protection from Mr. Boyd. According to the State, the information in the petition for a protective order and the proposed testimony required a "prior bad acts analysis." The pertinent Maryland Rule of Evidence states: " Evidence of other crimes, wrongs, or acts ... may ... be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, common scheme or plan, knowledge, identity, or absence of mistake or accident." The State asserted that the petition for a protective order and evidence regarding the February incidents fell under the special relevance exception of "absence of mistake." The defense agreed that the protective order itself was admissible, but argued against the admissibility of the petition and other evidence concerning the February incidents, asserting that the evidence did not fall under any Rule 5-404(b) exception. Mr. Boyd's attorney argued that "the nature of the acts that are alleged by Ms. Weaver that support her seeking protection are again, Your Honor, prior bad acts. And unless that-they don't seem to be relevant to the case and they seem greatly prejudicial to Mr. Boyd and not relevant-not probative-not helpful to the jury in deciding whether Mr. Boyd violated the final protective order which we concede was in place on February 23rd." The court granted the motion in limine, ruling in favor of the State on the admissibility of the petition for the protective order, testimony about the February incidents described therein, and testimony concerning the July 11th incident. Over defense counsel's objections, the jury heard evidence about the February incidents and the July 11th incident. The jury also was given the petition for the protective order. The jury found Mr. Boyd guilty of violating the protective order. Mr. Boyd appealed to the Court of Special Appeals, which affirmed in an unreported opinion. Mr. Boyd filed in the Court of Appeals a petition for a writ of certiorari. The State did not file a cross-petition for a writ of certiorari. The Court granted Mr. Boyd's petition and reversed the judgment of the Court of Special Appeals and remanded to that court with directions to reverse the judgment of the circuit court and remand the case for a new trial.

LAW: The State's argument that the challenged out-of-court statements, contained in the petition for the protective order and testified to by witnesses, were admissible for the non-hearsay purpose of showing the "validity of the issuance of the protective order," was entirely without merit. There was never any issue, or hint of an issue, concerning the validity, propriety, or admissibility of the protective order itself. Petitioner Boyd never challenged the reasons for or the validity of the protective order, never claimed that the order was erroneously issued, and consistently took the position, beginning with the pre-trial hearing, that the protective order was admissible in evidence. In fact, Mr. Boyd expressly consented to the final protective order of February 23, 2004, and Mr. Boyd sought the modified final protective order of April 14, 2004. Similarly misplaced was the State's reliance upon the other alleged "non-hearsay purpose" of the out-of-court statements, namely to explain Ms. Weaver's "state of mind in effectively denying [Mr.] Boyd visitation July 18, 2004," and "to show that Ms. Weaver was justified in not making her daughter available for visitation." The issue in this case did not involve Ms. Weaver &s state of mind on July 18, or whether she violated the terms of the protective order by denying visitation on that date, or whether Ms. Weaver's denial of visitation was "justified." The prosecution's entire theory was that Mr. Boyd violated the protective order by following Ms. Weaver on July 18. The only issue before the jury was whether Mr. Boyd's conduct on July 18, 2004, constituted a violation of the protective order. It was not the function of the jury to weigh Ms. Weaver's degree of fault, if any, against Mr. Boyd's degree of fault, if any, and then ascertain the proper balance. Ms. Weaver's conduct was not on trial; Mr. Boyd's conduct on July 18 was on trial. The claimed non-hearsay purposes of the challenged out-of-court statements were not relevant to the material issue in the case. Even if was assumed, arguendo, that these non-hearsay purposes might have a slight degree of relevance, such relevance was clearly outweighed by the prejudicial effect of Mr. Boyd's alleged threats and other statements on February 18, 19, and July 11, 2004. Under these circumstances, courts exclude the evidence on hearsay grounds. Thus, the out-of-court statements, which defense counsel objected to, should have been excluded as hearsay. The State's contention that evidence of Mr. Boyd's conduct on July 11, 2004, was admissible "to show that Ms. Weaver was justified in not making her daughter available for visitation" on July 18, 2004, had the same infirmity as the State's argument that evidence of Mr. Boyd's statements was relevant to show that Ms. Weaver's July 18th actions were "justified." The only issue in the case was whether Mr. Boyd's conduct on July 18 violated the protective order. Whether Ms. Weaver's denial of visitation was justified was immaterial. The State's argument in the circuit court, the Court of Special Appeals, and the Court of Appeals, in favor of admitting the evidence under Rule 5-404(b), was solely that the evidence was admissible under the "absence of mistake" provision in Rule 5-404(b). According to the State, the evidence was relevant so that Mr. Boyd "could not claim that he was mistaken on July 18th, in thinking that he was permitted to follow Ms. Weaver in her car in order to enforce his visitation right." A major problem with the State's theory, however, was that Mr. Boyd, who did not testify at trial, never asserted or defended on the ground that his conduct on July 18th, if it was inconsistent with the protective order, was permitted or was based on a mistake or a mistaken belief. Judge Cathell for the Court in Wynn v. State, 351 Md. 307, 718 A.2d 588 (1998), extensively discussed the general admissibility of other crimes or bad acts evidence, and specifically dealt with the "absence of mistake" exception. After reviewing numerous cases and other authorities, Judge Cathell explained: "In order for the exception to apply, the defendant generally must make some assertion or put on a defense that he or she committed the act for which he or she is on trial, but did so by mistake." Wynn, 351 Md. at 330-31, 718 A.2d at 599-600. Boyd "made no assertion or put forward no defense that he ... mistakenly committed the act for which he … was on trial." In affirming the conviction, the Court of Special Appeals stated that the evidence of prior wrongful conduct was admissible under Rule 5-404(b) because it was "relevant to show whether he [Mr. Boyd] intended to harass Weaver…." If the intermediate appellate court was referring to the crime of "harassment" prohibited by CL §3-803, Mr. Boyd was not charged with such crime. The only alleged crime for which he was tried was violation of the protective order. If the Court of Special Appeals meant that the evidence demonstrated a criminal intent rather than mistaken conduct, Wynn v. State, supra, was dispositive. Mr. Boyd at no time claimed that he acted mistakenly. He at no time asserted that he lacked knowledge of the protective order or misunderstood it. Moreover, there was no contention that Mr. Boyd intended anything other than what he did on July 18th. The facts concerning July 18, 2004, were basically undisputed. The defense was simply that Mr. Boyd's July 18th conduct was not a violation of the protective order. Finally, if there were some merit in the State's contention that the evidence of prior wrongful conduct was somehow relevant to absence of mistake, the relevance would be slight compared to the prejudicial effect of the evidence. The possibility that the jury may have convicted Mr. Boyd because of his conduct on February 17 and 18, and July 11 and 18, 2004, rather than just his conduct on July 18th, was not farfetched.

COMMENTARY: The State injected an issue that had not previously been raised in the case. The State for the first time argued that defense counsel's objections to the admission of evidence at trial "did not constitute general objections." The State did not file a cross-petition for a writ of certiorari challenging the Court of Special Appeals' holding that defense counsel made general objections at trial and that a general objection ordinarily "preserves for appellate review all grounds upon which the evidence could be deemed inadmissible." In fact, in its answer to Mr. Boyd's petition for a writ of certiorari, the State expressly acknowledged "that there was a general objection to the admission of the protective order." Under the circumstances, the contention that defense counsel's objections at trial were not general objections was not before the Court. See Maryland Rule 8-131(b). Even if the issue were before the Court, it would have rejected the State's argument. The State relied on the trial judge's reference to his "prior ruling" when defense counsel objected to the testimony of Ms. Fowlkes, and upon the trial judge's reference to the "pre-trial," when defense counsel objected to Ms. Weaver's testimony, and defense counsel's reply, "Yes, Your Honor, but I just need to make a record at the bench please." According to the State, this shows that the objections "did not constitute general objections" but were "based on the prior bad acts or other crimes arguments that [defense counsel] asserted pre-trial." In the Court's view, these vague references to the pretrial hearing did not amount to a specific ground for defense counsel's objections at the trial. At no time during the trial did the trial Judge ask defense counsel to delineate the grounds for the objections, and at no time did defense counsel specify the grounds. A somewhat similar factual situation was present, and a similar argument by the State was made, in von Lusch v. State, 279 Md. 255, 263-64, 368 A.2d 468, 473 (1977). The Court's response in von Lusch was applicable to the present case: "In the instant case, we do not believe that the statements by petitioner's attorney were attempts to express specific reasons for the objection. Instead, they appear to be mere responses to the remarks of the trial court. Both statements by counsel appear to have been prompted by remarks made by the trial court and not an attempt to delineate specific grounds for the objection."

PRACTICE TIPS: The Court also rejected the State's argument and the Court of Special Appeals' holding that a general objection to evidence at trial does not preserve all grounds for inadmissibility when specific grounds had been the focus at a pretrial hearing on a motion in limine. The State's argument and the intermediate appellate court' s holding would create a new exception to the Maryland evidence principle regarding the sufficiency of a general objection. It is an exception which finds no support in the Maryland Rules or case law. Thus, defense counsel's objections to evidence at trial preserved for appellate review all grounds upon which the evidence might be deemed inadmissible.

U.S. Supreme Court

Civil Procedure Reviewability of remanded state claim BOTTOM LINE: Section 1447(d) bars appellate consideration of petitioner's claim that it is a foreign state for purposes of the Foreign Sovereign Immunities Act. CASE: Powerex Corp. v. Reliant Energy Services, Inc., No. 05-85 (decided June 18, 2007) (Justices Roberts, SCALIA, Kennedy, Souter, Thomas, Ginsburg & Alito) (Justices Kennedy & Alito, concurring) (Justices Stevens & Breyer, dissenting).

FACTS: Plaintiffs-respondents filed state-court suits alleging that various companies in California's energy market had conspired to fix prices in violation of state law. Some of the defendants filed cross-claims seeking indemnity from, inter alios, two United States Government agencies (BPA and WAPA); a Canadian corporation (BC Hydro) wholly owned by British Columbia and thus a &foreign state' under the Foreign Sovereign Immunities Act of 1976 (FSIA); and petitioner Powerex, a wholly owned subsidiary of BC Hydro. The cross-defendants removed the entire case to federal court, with BC Hydro and petitioner relying on the FSIA. Plaintiffs-respondents moved to remand, arguing that petitioner was not a foreign state and that the cross-claims against BPA, WAPA, and BC Hydro were barred by sovereign immunity. The District Court agreed and remanded. As relevant here, petitioner appealed, arguing that it was a foreign sovereign under the FSIA, but plaintiffs-respondents rejoined that the appeal was jurisdictionally barred by 28 U.S.C. sec. 1447(d), which provides that &[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.' The 9th Circuit held that sec. 1447(d) did not preclude it from reviewing substantive issues of law that preceded the remand order, but affirmed the holding as to petitioner's foreign-state status. The Supreme Court vacated in part and remanded.

LAW: Appellate courts' authority to review district-court orders remanding removed cases to state court is substantially limited by statute. Section 1447(d) is read in pari materia with sec. 1447(c), so that only remands based on the grounds specified in the latter are shielded by the review bar mandated by the former. Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336. For purposes of this case, it is assumed that the grounds specified in sec. 1447(c) are lack of subject-matter jurisdiction and defects in removal procedure. Cf. Quackenbush v. Allstate Ins. Co., 517 U.S. 706. Given the proceedings below, review of the remand order is barred only if it was based on lack of subject-matter jurisdiction. Nothing in sec. 1447(c)'s text supports the claim that a case cannot be remanded for lack of subject-matter jurisdiction within the meaning of that provision if the case was properly removed in the first instance. Indeed, statutory history conclusively refutes the argument that sec. 1447(c) is implicitly limited in such a manner. When a district court remands a properly removed case because it nonetheless lacks subject-matter jurisdiction, the remand is covered by sec. 1447(c) and shielded from review by sec. 1447(d). The District Court relied upon a ground that is colorably characterized as subject-matter jurisdiction and so sec. 1447(d) bars appellate review. As an initial matter, it is clear from the record that the court was purporting to remand for lack of subject-matter jurisdiction. Even assuming that sec. 1447(d) permits appellate courts to look behind a district court's characterization of the basis for the remand, such review is hereby limited to ascertaining whether the characterization was colorable. In this case, the only plausible explanation of the District Court's remand was that it believed that it lacked the power to adjudicate the claims against petitioner once it had determined that petitioner was not a foreign state and that the other cross-defendants had sovereign immunity. It is unnecessary to determine whether that belief was correct; it was at least debatable. Petitioner contends instead that the District Court was actually remanding based on Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, which authorizes remand when a district court declines to exercise supplemental jurisdiction. This is implausible. The District Court never mentioned the possibility of supplemental jurisdiction, and petitioner does not appear to have argued that the claims against it could be retained based on supplemental jurisdiction. The 9th Circuit held that sec. 1447(d) does not preclude reviewing a district court's substantive determinations that precede a remand order, a holding that appears to be premised on Waco v. United States Fidelity & Guaranty Co., 293 U.S. 140. Waco, however, does not permit an appeal when, as here, there is no order separate from the unreviewable remand order. Petitioner's contention that Congress did not intend sec. 1447(d) to govern suits removed under the FSIA is flatly refuted by the Court's longstanding precedent that &[a]bsent a clear statutory command to the contrary, [the Court] assume[s] that Congress is &aware of the universality of th[e] practice' of denying appellate review of remand orders when Congress creates a new ground for removal.' Things Remembered, Inc. v. Petrarca, 516 U.S. 124.

Criminal Procedure Fourth Amendment seizure BOTTOM LINE: When police make a traffic stop, a passenger in the car, like the driver, is seized for 4th Amendment purposes and so may challenge the stop's constitutionality.

CASE: Brendlin v. California, No. 06-8120 (decided June 18, 2007) (Justices Roberts, Stevens, Scalia, Kennedy, SOUTER, Thomas, Ginsburg, Breyer & Alito).

FACTS: After officers stopped a car to check its registration without reason to believe it was being operated unlawfully, one of them recognized petitioner Brendlin, a passenger in the car. Upon verifying that Brendlin was a parole violator, the officers formally arrested him and searched him, the driver, and the car, finding, among other things, methamphetamine paraphernalia. Charged with possession and manufacture of that substance, Brendlin moved to suppress the evidence obtained in searching his person and the car, arguing that the officers lacked probable cause or reasonable suspicion to make the traffic stop, which was an unconstitutional seizure of his person. The trial court denied the motion, but the California Court of Appeal reversed, holding that Brendlin was seized by the traffic stop, which was unlawful. Reversing, the State Supreme Court held that suppression was unwarranted because a passenger is not seized as a constitutional matter absent additional circumstances that would indicate to a reasonable person that he was the subject of the officer's investigation or show of authority. The Supreme Court vacated and remanded.

LAW: A person is seized and thus entitled to challenge the government's action when officers, by physical force or a show of authority, terminate or restrain the person's freedom of movement through means intentionally applied. Florida v. Bostick, 501 U.S. 429; Brower v. County of Inyo, 489 U.S. 593. There is no seizure without that person's actual submission. See, e.g., California v. Hodari D., 499 U.S. 621. When police actions do not show an unambiguous intent to restrain or when an individual's submission takes the form of passive acquiescence, the test for telling when a seizure occurs is whether, in light of all the surrounding circumstances, a reasonable person would have believed he was not free to leave. E.g., United States v. Mendenhall, 446 U.S. 544 (principal opinion). But when a person "has no desire to leave" for reasons unrelated to the police presence, the "coercive effect of the encounter" can be measured better by asking whether "a reasonable person would feel free to decline the officers' requests or otherwise terminate the encounter." Bostick, supra at 435-436. Brendlin was seized because no reasonable person in his position when the car was stopped would have believed himself free to "terminate the encounter" between the police and himself. Bostick, supra at 436. Any reasonable passenger would have understood the officers to be exercising control to the point that no one in the car was free to depart without police permission. A traffic stop necessarily curtails a passenger's travel just as much as it halts the driver, diverting both from the stream of traffic to the side of the road, and the police activity that normally amounts to intrusion on "privacy and personal security" does not normally (and did not here) distinguish between passenger and driver. United States v. Martinez-Fuerte, 428 U.S. 543. An officer who orders a particular car to pull over acts with an implicit claim of right based on fault of some sort, and a sensible person would not expect the officer to allow people to come and go freely from the physical focal point of an investigation into faulty behavior or wrongdoing. If the likely wrongdoing is not the driving, the passenger will reasonably feel subject to suspicion owing to close association; but even when the wrongdoing is only bad driving, the passenger will expect to be subject to some scrutiny, and his attempt to leave would be so obviously likely to prompt an objection from the officer that no passenger would feel free to leave in the first place. It is also reasonable for passengers to expect that an officer at the scene of a crime, arrest, or investigation will not let people move around in ways that could jeopardize his safety. See, e.g., Maryland v. Wilson, 519 U.S. 408. The Court's conclusion comports with the views of all nine Federal Courts of Appeals, and nearly every state court, to have ruled on the question. The State Supreme Court's contrary conclusion reflects three premises with which this Court respectfully disagrees. First, the view that the police only intended to investigate the car's driver and did not direct a show of authority toward Brendlin impermissibly shifts the issue from the intent of the police as objectively manifested to the motive of the police for taking the intentional action to stop the car. Applying the objective Mendenhall test resolves any ambiguity by showing that a reasonable passenger would understand that he was subject to the police display of authority. Second, the state court's assumption that Brendlin, as the passenger, had no ability to submit to the police show of authority because only the driver was in control of the moving car is unavailing. Brendlin had no effective way to signal submission while the car was moving, but once it came to a stop he could, and apparently did, submit by staying inside. Third, there is no basis for the state court's fear that adopting the rule the Court applies would encompass even those motorists whose movement has been impeded due to the traffic stop of another car. An occupant of a car who knows he is stuck in traffic because another car has been pulled over by police would not perceive the show of authority as directed at him or his car. The state courts are left to consider in the first instance whether suppression turns on any other issue.

Securities Application of antitrust laws BOTTOM LINE: The securities law implicitly precludes the application of the antitrust laws to the conduct alleged in this case.

CASE: Credit Suisse Securities (USA), LLC v. Billing, No. 05-1157 (decided June 18, 2007) (Justices Roberts, Scalia, Souter, Ginsburg, BREYER & Alito) (Justice Stevens, concurring) (Justice Thomas, dissenting).

FACTS: Respondent investors filed suit, alleging that petitioner investment banks, acting as underwriters, violated antitrust laws when they formed syndicates to help execute initial public offerings (IPOs) for several hundred technology-related companies. Respondents claim that the underwriters unlawfully agreed that they would not sell newly issued securities to a buyer unless the buyer committed (1) to buy additional shares of that security later at escalating prices (known as "laddering"), (2) to pay unusually high commissions on subsequent security purchases from the underwriters, or (3) to purchase from the underwriters other less desirable securities (known as "tying"). The underwriters moved to dismiss, claiming that federal securities law impliedly precludes application of antitrust laws to the conduct in question. The District Court dismissed the complaints, but the 2nd Circuit reversed. The Supreme Court reversed.

LAW: Where regulatory statutes are silent in respect to antitrust, courts must determine whether, and in what respects, they implicitly preclude the antitrust laws' application. Taken together, Silver v. New York Stock Exchange, 373 U.S. 341; Gordon v. New York Stock Exchange, Inc., 422 U.S. 659; and United States v. National Assn. of Securities Dealers, Inc., 422 U.S. 694 (NASD), make clear that a court deciding this preclusion issue is deciding whether, given context and likely consequences, there is a "clear repugnancy" between the securities law and the antitrust complaint, i.e., whether the two are "clearly incompatible." Moreover, Gordon and NASD, in finding sufficient incompatibility to warrant an implication of preclusion, treated as critical: (1) the existence of regulatory authority under the securities law to supervise the activities in question; (2) evidence that the responsible regulatory entities exercise that authority; and (3) a resulting risk that the securities and antitrust laws, if both applicable, would produce conflicting guidance, requirements, duties, privileges, or standards of conduct. In addition, (4) in Gordon and NASD the possible conflict affected practices that lie squarely within an area of financial market activity that securities law seeks to regulate. Several considerations - the underwriters' efforts jointly to promote and sell newly issued securities is central to the proper functioning of well-regulated capital markets; the law grants the SEC authority to supervise such activities; and the SEC has continuously exercised its legal authority to regulate this type of conduct - show that the first, second, and fourth conditions are satisfied in this case. This leaves the third condition: whether there is a conflict rising to the level of incompatibility. The complaints here can be read as attacking the manner in which the underwriters jointly seek to collect "excessive" commissions through the practices of laddering, tying, and collecting excessive commissions, which according to respondents the SEC itself has already disapproved and, in all likelihood, will not approve in the foreseeable future. Nonetheless, certain considerations, taken together, lead to the conclusion that securities law and antitrust law are clearly incompatible in this context. First, to permit antitrust actions such as this threatens serious securities-related harm. For one thing, a fine, complex, detailed line separates activity that the SEC permits or encourages from activity that it forbids. And the SEC has the expertise to distinguish what is forbidden from what is allowed. For another thing, reasonable but contradictory inferences may be drawn from overlapping evidence that shows both unlawful antitrust activity and lawful securities marketing activity. Further, there is a serious risk that antitrust courts, with different nonexpert judges and different nonexpert juries, will produce inconsistent results. Together these factors mean there is no practical way to confine antitrust suits so that they challenge only the kind of activity the investors seek to target, which is presently unlawful and will likely remain unlawful under the securities law. Rather, these considerations suggest that antitrust courts are likely to make unusually serious mistakes in this respect. And that threat means that underwriters must act to avoid not simply conduct that the securities law forbids, but also joint conduct that the securities law permits or encourages. Thus, allowing an antitrust lawsuit would threaten serious harm to the efficient functioning of the securities market. Second, any enforcement-related need for an antitrust lawsuit is unusually small. For one thing, the SEC actively enforces the rules and regulations that forbid the conduct in question. For another, investors harmed by underwriters' unlawful practices may sue and obtain damages under the securities law. Finally, the fact that the SEC is itself required to take account of competitive considerations when it creates securities-related policy and embodies it in rules and regulations makes it somewhat less necessary to rely on antitrust actions to address anticompetitive behavior. In sum, an antitrust action in this context is accompanied by a substantial risk of injury to the securities markets and by a diminished need for antitrust enforcement to address anticompetitive conduct. Together these considerations indicate a serious conflict between application of the antitrust laws and proper enforcement of the securities law. The Solicitor General's proposal to avoid this conflict does not convincingly address these concerns.

U.S. 4th Circuit Court of Appeals

Bankruptcy Dismissal of bankruptcy petition BOTTOM LINE: The debtor's bankruptcy petition was properly dismissed where substantial evidence supported the bankruptcy court's findings of both objective futility and subjective bad faith by the debtor.

CASE: Maryland Port Administration v. Premier Automotive Services, Inc., No. 06-2207; Premier Automotive Services, Inc. v. Flanagan, No. 06-2208 (decided June 15, 2007) (Judges WILKINSON, Gregory & Duncan).

COUNSEL: Charles Samuel Fax, Rifkin, Livingston, Levitan & Silver, L.L.C., Greenbelt, for Appellant. Philip P. Whaling, Office of the Attorney General, Baltimore, for Appellees.

FACTS: This dispute arose out of a commercial lease of approximately six and one half acres of land (Lot 90) owned by the Maryland Port Administration (MPA), located on Dundalk Marine Terminal on the Baltimore waterfront. Premier Automotive Services is an import-export motor vehicle company which processes trucks, as well as heavy military, agricultural, and construction equipment through Dundalk Marine Terminal. Premier has been operating on Lot 90 for over 40 years under a variety of leases and is the current possessor of Lot 90. At the beginning of its occupancy, Premier constructed a 27,500 square-foot building on Lot 90 which contains an office, body shop, paint shop, and washline. Premier Automotive Services' most recent lease for Lot 90 was executed in July 1992 and expired on June 30, 2002. Before the July 1992 lease expired, MPA met with Premier to discuss lease renewal, and tendered to Premier a five-year lease. Premier objected to a vehicle throughput requirement, which required Premier to guarantee that it would move 1700 vehicles per acre per year through Lot 90, and the lease was never executed. Premier remained in possession of Lot 90 as a holdover tenant on a month-to-month basis. In February 2004, following a year and a half of unsuccessful negotiations over a long-term lease, MPA offered Premier a month-to-month lease. Premier again rejected MPA's proposal. In April of 2004, after further lease negotiations, MPA offered Premier a three-year lease with two one-year renewal options. In response to Premier's throughput objection, MPA informed Premier that it had committed every vehicle tenant at the Dundalk Marine Terminal and other facilities to a throughput. MPA requested that Premier execute the lease by April 15. The parties, however, failed once again to reach agreement. On January 4, 2005, MPA entered into a five-year lease with Pasha Automotive Services (Pasha) for acreage on the Dundalk Marine Terminal, and, on June 15, 2005, Lot 90 was designated for Pasha. Pasha committed to a minimum throughput of 1,700 vehicles per acre (on each of Lot 90's 6.54 acres) and also agreed to a relocation clause, which gave MPA the discretion to move Pasha to another location on the Dundalk Marine Terminal at MPA's expense. In March 2005, the Maryland Department of Transportation advised Premier that MPA had entered into a long term lease with another tenant - Pasha - for Lot 90. And, on March 29, 2005, MPA sent Premier a letter which terminated Premier's month-to-month tenancy effective May 1, 2005. On April 29, 2005, Premier filed a Chapter 11 bankruptcy petition in federal bankruptcy court in the district of Maryland. Premier invoked the automatic stay provisions of 11 U.S.C. §362(a), and alleged, in a related adversary proceeding, a variety of constitutional violations against MPA, then-Secretary of the Maryland Department of Transportation Robert L. Flanagan, and MPA Executive Director F. Brooks Royster, III. The bankruptcy court granted MPA's motion for summary judgment in the adversary action, ordered the automatic stay lifted, and dismissed Premier's Chapter 11 petition. While the bankruptcy proceedings were pending, Premier filed a complaint with the Federal Maritime Commission (FMC) based upon the same facts underlying the bankruptcy case. Premier alleged a number of violations of the Federal Shipping Act. The Administrative Law Judge dismissed the petition on sovereign immunity grounds. Premier appealed that decision to the FMC, where it remains pending. Following dismissal of its FMC petition, Premier filed its second action in federal district court seeking injunctive relief pending final judgment on the FMC appeal pursuant to 46 U.S.C. App. §1710(h)(2). The district court consolidated the bankruptcy appeal and the FMC complaint. The district court then affirmed the bankruptcy court's grant of summary judgment against Premier, dismissed the bankruptcy petition, and lifted the automatic stay. Finally, the district court dismissed Premier's Shipping Act complaint for injunctive relief. The 4th Circuit affirmed.

LAW: The right to file a Chapter 11 bankruptcy petition is conditioned upon the debtor's good faith - the absence of which is cause for summary dismissal. Carolin Corp. v. Miller, 886 F.2d 698, 702 (4th Cir. 1989); Mich. Nat'l Bank v. Charfoos (In re Charfoos), 979 F.2d 390, 392 (6th Cir. 1992). "[A] good faith requirement &prevents abuse of the bankruptcy process by debtors whose overriding motive is to delay creditors without benefitting them in any way or to achieve reprehensible purposes.'" Id. (quoting In re Little Creek Dev. Co., 779 F.2d 1068, 1072 (5th Cir. 1986)). In the 4th Circuit, a lack of good faith in filing a Chapter 11 petition requires a showing of "objective futility" and "subjective bad faith." Id. at 700-01. The objective test focuses on whether "there exists the &realistic possibility of an effective reorganization.'" See Carolin, 886 F.2d at 698 (quoting In re Albany Partners, Ltd., 749 F.2d 670, 674 (11th Cir. 1984)). The subjective test asks whether a Chapter 11 petition is motivated by an honest intent to effectuate reorganization or is instead motivated by some improper purpose. Carolin, 886 F.2d at 702. Subjective bad faith is shown where a petition is filed "to abuse the reorganization process," or "to cause hardship or to delay creditors by resort to the Chapter 11 device merely for the purpose of invoking the automatic stay." Id. There was substantial evidence in the record that supported the bankruptcy court's findings of both objective futility and subjective bad faith. With respect to Carolin's objective futility inquiry, Premier clearly had no "realistic possibility of an effective reorganization." Id. at 698. Premier in fact never filed a proposed plan of reorganization. Indeed, even if Premier were somehow to get the relief it requests, that relief would not lead to an effective reorganization. With respect to Carolin's second prong of subjective bad faith, the record also supported the bankruptcy court's finding that Premier filed its petition for an impermissible purpose. Premier had no demonstrable need to reorganize when it filed the petition. Indeed, Premier's bankruptcy filings revealed a solvent business entity with no unsecured creditors and few, if any, secured creditors. This fact alone justified dismissal of Premier's Chapter 11 petition. See In re SGL Carbon Corp., 200 F.3d 154, 166 (3d Cir. 1999). Furthermore, Premier's adversary claims against MPA were dependent upon its right to a lease of Lot 90 - a matter of state contract law. Premier did not, however, choose to avail itself of the obvious state law remedies before bringing its Chapter 11 petition, providing further evidence of bad faith. The eleventh-hour filing of Premier's bankruptcy petition also supported the bankruptcy court's ruling. Premier filed its petition on April 29, 2005 - just one day before the company was legally obligated to quit the premises. In light of all this evidence, the bankruptcy court concluded that Premier filed the bankruptcy case for the sole purpose of halting and/or delaying its ultimate eviction from the Terminal by MPA, to compel the MPA to execute a new lease to it on terms more favorable than those the State found acceptable, and as a means to the end of tying up the State in endless, fruitless litigation. Chapter 11 is not a procedural vehicle which may be commandeered solely for "the purpose of invoking [its] automatic stay." Carolin, 886 F.2d at 702.

COMMENTARY: The first count of Premier's adversary complaint alleged that MPA denied it a property interest without due process of law in violation of the 14th Amendment. Premier claimed a constitutional property interest in the right to fair negotiations with the state in the leasing of state owned property and in the right to do business. "Property interests are not created by the Constitution." Bd. Of Regents v. Roth, 408 U.S. 564, 577 (1972). Rather, they must arise "from an independent source such as state law - rules or understandings that secure certain benefits and that support claims of entitlements to those benefits." Id. It is anything but clear that Maryland would recognize a right to fair negotiation in the absence of an existing contract. See, e.g., ABT Assocs., Inc. v. JHPIEGO Corp., 104 F. Supp. 2d 523, 534 (D. Md. 2000); Parker v. Columbia Bank, 604 A.2d 521, 531 (Md. Ct. Spec. App. 1992) (Motz, J.). In all events, there is no "property right" in one negotiating party to have another agree to contract on commercially disadvantageous terms. The essence of Premier's claim was simply that MPA would not agree to what it wanted - that, at most, is "a unilateral expectation" which the Supreme Court has held does not create a constitutional property interest. See, e.g., Roth, 408 U.S. at 577. And even if Maryland law were construed to compel some sort of supervised negotiation, the most Premier could claim would be a right to process. But process is not property. Indeed, procedural rights have not been held "property right[s] in the constitutional sense." Lim v. Cent. Dupage Hosp., 871 F.2d 644, 648 (7th Cir. 1989); Walentas v. Lipper, 862 F.2d 414, 419 n.1 (2d Cir. 1988). Premier also argued that the right to pursue a lawful business is a constitutionally protected interest. The only interference with the so-called "right to do business" that Premier ever identified, however, was MPA's failure to lease Lot 90 to Premier. But as found Premier has no legitimate entitlement to a new lease for Lot 90. The company was not, therefore, constitutionally entitled to do business on Lot 90. See, e.g., Groos Nat. Bank v. Comptroller of Currency, 573 F.2d 889, 897 (5th Cir. 1978). Premier claimed that MPA violated the Equal Protection Clause of the 14th Amendment. More specifically, Premier challenged as unreasonable two terms which were included in the long-term lease proposals tendered by MPA - the 1,700 vehicle per acre throughput and the forced-relocation provisions. Because Premier is not a member of any suspect class and alleged no burden of any fundamental right, it had to prove that it had "been intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment." Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000); City of Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432, 440-42 (1985). Clearly the lease provisions challenged by Premier were rationally related to a legitimate governmental objective. See FCC v. Beach Communications, Inc., 508 U.S. 307, 313 (1993). The MPA's primary mission, for example, is to "increase the waterborne commerce of the ports in this State and, by doing so, benefit the people of this State." TP §6-102(c)(1). MPA's lease proposals were rationally related to this purpose. In any case, Premier's claim that it was "treated differently" from other similarly situated loan applicants who sought leases on the Baltimore waterfront failed on its own terms. First, Premier's competitor Pasha was willing to enter a long term lease, accepting provisions that are more favorable for MPA than those that were rejected by Premier. Second, Premier did not identify any evidence of purposeful discrimination. See Sunrise Corp. v. City of Myrtle Beach, 420 F.3d 322, 329 (4th Cir. 2005).

COMMENTARY: Premier's bankruptcy petition was properly dismissed on the particular grounds that property of the estate does not include, and the automatic stay does not apply to, an expired lease of nonresidential property. A mere possessory interest under an expired lease is insufficient to trigger an automatic stay under 11 U.S.C. §362(a). See 11 U.S.C. §362(b)(10). Section 362 excludes from its protections nonresidential real property leases that expire "before the commencement of or during a case." See id. Moreover, 11 U.S.C. §541(b)(2) excepts from "property of the estate" any interest a debtor has in a nonresidential lease that has "terminated at the expiration of the stated term of such lease." 11 U.S.C. §541(b)(2). Because Premier's month-to-month tenancy expired on May 1, 2005, the bankruptcy estate "cease[d] to include any interest" that Premier had in the Lot 90 lease on that day. Since an expired lease is neither property of the estate nor subject to §362(a)'s automatic stay provisions, see 11 U.S.C. §§362(b)(10), 541(b)(2), the district court's dismissal of the bankruptcy petition and its order lifting the automatic stay was affirmed.

Civil Procedure Amount in controversy

BOTTOM LINE: Although the plaintiff/appellee sought to enforce an arbitration award of less than $60,000, the federal court had subject matter jurisdiction because the good-faith amount in controversy in the original complaint exceeded the threshold of $75,000.

CASE: Choice Hotels Intl., Inc. v. Shiv Hospitality, L.L.C., et al., No. 06-1043 (decided June 20, 2007) (Judges Widener, WILLIAMS & Shedd).

COUNSEL: Onkar Nath Sharma, Silver Spring, for Appellants. Jeremy W. Schulman, Shulman, Rogers, Gandal, Pordy & Ecker, P.A., Rockville, for Appellee.

FACTS: In 1998, Choice Hotels and Shiv Hospitality, Bhagirath Joshi, and Alaknanda Joshi (collectively "Shiv"), entered into a franchise agreement authorizing Shiv to use Choice Hotels' brand name, Quality Inn, for a hotel in Denham Springs, Louisiana. Shiv began operating the hotel in April 1999. Soon thereafter, Shiv defaulted on payments of various franchise fees, and Choice Hotels ultimately terminated the franchise agreement on June 8, 2000. On November 22, 2000, Choice Hotels filed suit for breach of contract in the U.S. District Court for the District of Maryland, seeking $116,432.28 in money damages as well as interest, attorney fees, and costs. Shiv thereafter filed a motion to dismiss, contending that the district court lacked personal jurisdiction over Shiv and subject matter jurisdiction over the dispute. Shiv further argued that venue was improper and that Choice Hotels' claims had to be dismissed because of the franchise agreement's arbitration provision. On April 30, 2001, the district court denied Shiv's motion to dismiss. Shiv promptly noted an appeal and was prepared to argue that Choice Hotels' claims were required to proceed to arbitration. While Shiv's appeal was pending, the Court decided Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707 (4th Cir 2001), which concerned a nearly identical arbitration agreement. In that opinion, the Court rejected Choice Hotels' "extremely broad reading" of the arbitration exceptions that would result in excluding from arbitration "all claims (by Choice) seeking monetary damages." Id. at 711. In light of the BSR Tropicana opinion, the Court remanded the Shiv appeal to the district court for further consideration. Upon remand, the district court interpreted BSR Tropicana as requiring the parties to proceed with arbitration with most of their claims. Accordingly, the court issued an order on November 28, 2001, staying the case "pending resolution of the arbitration proceedings." The parties then proceeded to arbitration, where they both made claims against one another. The arbitration hearing began on March 17, 2003. The arbitration resulted in an award granting Choice Hotels' claims for: (1) franchise and service charges, (2) communications agreement charges, and (3) interest of 1.5% on the awards. The arbitrator also denied Choice Hotels' claims for lost profits due to early termination and trademark infringement and Shiv's counterclaim for breach of contract. Finally, the arbitrator denied both parties' claims for attorney fees and costs. The total arbitration award to Choice Hotels was $59,208.75 plus 1.5% interest each month until paid. The award was final on December 9, 2003. On September 15, 2004, approximately nine months after the award was finalized, Choice Hotels returned to the district court and asked it to reopen the case to confirm the arbitration award. On October 4, 2004, Shiv filed an opposition to Choice Hotels' application to confirm and further contended that the award should be vacated. Shiv also asked for $36,935.00 in attorney fees and costs. The district court rejected Shiv's arguments and confirmed the award. Shiv timely appealed to the 4th Circuit, which affirmed.

LAW: Shiv argued that the district court erred in finding that subject matter jurisdiction existed, and the reviewing court, therefore, had to dismiss for lack of jurisdiction. The court reviews de novo questions of subject matter jurisdiction. Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 260 (4th Cir. 2005). As a court of limited jurisdiction, the 4th Circuit is obligated to satisfy itself of its jurisdiction as well as that of the district court. See, e.g., United States v. Hadden, 475 F.3d 652, 659 (4th Cir. 2007). "When the lower federal court lacks jurisdiction, [the Court] ha[s] jurisdiction on appeal, not of the merits but merely for the purpose of correcting the error of the lower court in entertaining the suit." Arizonans for Official English v. Arizona, 520 U.S. 43, 73 (1997) (internal quotation marks omitted). If federal jurisdiction was proper in this case, it had to be under the diversity of citizenship statute, 28 U.S.C. §1332 (West 2006), as no federal question existed and the Federal Arbitration Act does not itself create federal-question jurisdiction. See, e.g., Moses H. Cone Mem'l Hosp. v. Mercury Constr. Co., 460 U.S. 1, 25 n.32 (1983). Under §1332, district courts "shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... citizens of different States." 28 U.S.C. §1332. Here, the parties were completely diverse: Shiv Hospitality is a Louisiana company and the Joshis are Louisiana citizens whereas Choice Hotels is a Delaware corporation. Shiv, however, argued that because Choice Hotels sought only to confirm the arbitrator's award of $59,208.75, the amount in controversy was equal to exactly that sum, and the $75,000 threshold was therefore not met. The 4th Circuit disagreed. Courts have taken different approaches when determining the amount in controversy at issue in an application to confirm or vacate an arbitration award. For example, some courts have held that the amount in controversy is equal to the amount of the award regardless of how much was sought at the beginning of the arbitration proceeding. See Baltin v. Alaron Trading Corp., 128 F.3d 1466, 1472 (11th Cir. 1997). Other courts appear to measure the amount in controversy by examining the amount sought in arbitration, as opposed to the actual amount awarded. See Am. Guar. Co. v. Caldwell, 72 F.2d 209, 211 (9th Cir. 1934). Finally, most courts appear to adopt a mixed approach when confronted with an application to vacate an award and reopen the arbitration. Under such an approach, "the amount in controversy in a suit challenging an arbitration award includes the matter at stake in the arbitration, provided the plaintiff is seeking to reopen the arbitration." Sirotzky v. N.Y. Stock Exchange, 347 F.3d 985, 989 (7th Cir. 2003). Thus, the amount in controversy in such situations is the amount awarded in arbitration in addition to the amount that would be at play if arbitration was reopened. Although the 4th Circuit had not yet opined on this interesting question, it had no occasion to do so here, as these cases were inapposite to its inquiry. In the aforementioned cases, the parties filed actions in the district court after a final award by an arbitrator. Choice Hotels, on the other hand, filed its initial complaint in late 2000 and its amended complaint in early 2001, and its federal action was stayed pending arbitration. The 4th Circuit was therefore presented with a situation quite different from one in which the parties proceed directly to arbitration and then file a complaint in district court seeking confirmation or vacatur of an arbitration award. Here, Choice Hotels first filed a complaint in district court, and the district court then stayed the complaint until after arbitration. It was only after the arbitrator issued its award that Choice Hotels asked the district court to reopen the original case. The black letter rule "has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed in &good faith.'" Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 353 (1961). Thus, for example, jurisdiction is not suddenly lacking over an appeal simply because the judgment awarded by a district court is less than $75,000. Likewise, parties deciding to settle a suit for less than $75,000 do not suddenly divest a district court of jurisdiction to approve the settlement. Choice Hotels demanded well over $75,000 in its complaint, and there was no allegation that claim was not in good faith. That Choice Hotels did not win a judgment in arbitration for that amount is irrelevant in this context. "Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289-90 (1938); see Hood v. Bell, 84 F.2d 136, 137 (4th Cir. 1936). Because the district court simply stayed this action, and then reopened it to confirm the award, the Court determined the amount in controversy from the complaint itself. The 4th Circuit therefore held that the district court had subject matter jurisdiction under §1332 because the good faith amount in controversy contained in Choice Hotels' complaint well exceeded the $75,000 threshold.

COMMENTARY: Shiv further contended that the arbitrator exceeded its authority and disregarded the court's prior precedents and the law in granting an award to Choice Hotels. The court reviews de novo the district court's decision to confirm an arbitration award. Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141, 145 (4th Cir. 1993). Federal courts must give "great deference" to an arbitration award. Id. The Supreme Court has explained that because parties have authorized an arbitrator "to give meaning to the language of [an] agreement, a court should not reject an award on the ground that an arbitrator misread the contract." United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38 (1987). "As long as the arbitrator is even arguably construing or applying the contract," a court may not vacate the arbitrator's judgment. Id. Therefore, an award may be reversed only "when arbitrators understand and correctly state the law, but proceed to disregard the same." Upshor Coals Corp. v. United Mine Workers, 933 F.2d 225, 229 (4th Cir. 1991) (internal quotation marks omitted). The district court found that Shiv's claims contesting confirmation were time barred. The 4th Circuit agreed. Under the Federal Arbitration Act, "[n]otice of motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered." 9 U.S.C. § 12 (West 1999). The arbitration award here was issued on December 9, 2003. This gave Shiv until March 9, 2003 to contest the award. Shiv missed this deadline by approximately six months. In Taylor v. Nelson, the court was faced with a case nearly identical to this case. 788 F.2d 220 (4th Cir. 1986). Nelson sought confirmation of an arbitration award. Five months after the award was issued, Taylor sought to vacate it, and the district court complied. The Court reversed, holding that "once the three-month period has expired, an attempt to vacate an arbitration award could not be made even in opposition to a later motion to confirm." Id. at 225. In Taylor, the court assumed for the sake of argument that due diligence or tolling were exceptions to the three-month bar. Id. Nevertheless, the court held that Taylor was not entitled to any reprieve because Taylor chose "to wait longer than three months before he made a motion to vacate, and ... that has proven fatal to his attempt to overturn the arbitration award. Taylor remained free at all times to pursue the statutory remedy of §12 within the time limits set out by that statute, and he is not entitled to the benefit of any due diligence or tolling exceptions to the three-month rule, even if such exceptions exist." Id. at 226. Shiv, likewise, offered no reason for why it chose to wait until Choice Hotels sought to confirm the award before attempting to vacate the award. In a confusing manner, it appeared to argue that it chose not to file within three months because the award was obviously contrary to 4th Circuit law. But this made no sense. If the award was without-a-doubt ultra vires, Shiv should have been jumping at the chance to return to federal court and have the award vacated. Instead, it chose to do nothing. The Federal Arbitration Act gives a party one year to confirm an award, but mandates that any issue concerning vacatur be filed within three months of the award. This is a sensible policy that allows the confirmation process to be streamlined. Instead of filing within three months, however, Shiv decided to sleep on its rights and presumably hope that Choice Hotels would not timely file for confirmation. This was poor strategy, as Shiv offered no reason, compelling or otherwise, for why it did not file to vacate the award within three months. Accordingly, the 4th Circuit affirmed the district court's confirmation of the award.

U.S. District Court, Maryland

Criminal Procedure Violation of motor vehicle laws BOTTOM LINE: In cases arising out of use of roads on federal installations, U.S. District Court certified question of law to the Maryland Court of Appeals concerning interpretation of ambiguous terms under the state Transportation Article.

CASE: United States v. Lewis, et al., (dated June 15, 2007) (Judge Titus).

FACTS: In separate cases against Diannah Lewis, William Crews, Aubrey Lewis, and Carl Tilghman, a magistrate judge dismissed various citations issued under the Assimilative Crimes Act (ACA), for alleged traffic violations occurring on the grounds of Andrews Air Force Base, Maryland. The Government appealed those dismissals to the district court. Julian Ambrose was convicted after a bench trial before a different magistrate judge of driving on a suspended driver's license on the ground of the U.S. Army Medical Institute for Infectious Diseases located at Fort Detrick, Maryland. The magistrate judge denied Ambrose's motion for judgment of acquittal, and Ambrose appealed to the district court. On March 26, 2006, the Court heard consolidated oral arguments in those cases, the outcome of which turned on the question of whether the roadways on various federal installations constituted "highways" or "private property used by the public in general" under Maryland law. The district court certified the questions raised by the appeals to the Court of Appeals of Maryland under the Maryland Uniform Certification of Questions of Law Act.

LAW: The ACA provides, in pertinent part, that any person who "is guilty of any act or omission" within the boundaries of a federal reservation which, although not made punishable by any enactment of Congress, "would be punishable if committed or omitted within the jurisdiction of the State ... in which such place is situated, by the laws thereof in force at the time of such act or omission, shall be guilty of a like offense and subject to a like punishment." 18 U.S.C. §13(a). The ACA "assimilates state law pertaining to the elements of an offense and its punishment. See United States v. Torbit, 1988 WL 6824 at *2 (4th Cir. 1988). Maryland law contains a number of provisions penalizing various acts committed on "highways." Pursuant to TR §11-127, "highway" is defined as "the entire width between the boundary lines of any way or thoroughfare of which any part is used by the public for vehicular travel, whether or not the way or thoroughfare has been dedicated to the public and accepted by any proper authority." Certain traffic offenses may also be committed on roadways deemed to be "private property used by the public in general," in light of TR §21-202.1, which provides that "[a] person may not drive a motor vehicle in violation of any provision of this title on any private property that is used by the public in general." It did not appear that the Court of Appeals of Maryland had ever addressed the interpretation of a "highway" or "private property used by the public in general." However, the Court of Special Appeals had addressed the issue in three opinions: Walmsley v. State, 35 Md. App. 148 (1977); Akins v. State, 35 Md. App. 155 (1977); and Locklear v. State, 94 Md. App. 39 (1992). In Locklear, the Court of Special Appeals reiterated its view that the "test to be applied [in interpreting the words &used by the public'] is the right of the public to travel on the road ... not the actual exercise of that right. Locklear, 94 Md. App. at 44-45. In United States v. Robson, 391 F. Supp.2d 383 (D. Md. 2005), the defendant was charged under the ACA with various weapons offenses, including a charge of carrying a handgun in a vehicle on a road or parking lot generally used by the public or a highway of the State, at Andrews Air Force Base (AAFB). At trial, testimony was adduced that the Base Commander at AAFB had the authority to bar the public from coming onto the base at any time, and that generally, access was limited to employees and those with authorized business. At the close of the trial, the defendant moved for judgment of acquittal. In granting the defendant's motion, the Robson Court held that an access road leading up to AAFB was not a "highway" pursuant to TR §11-127. Applying Walmsley, Akins, and Locklear, the court concluded that the degree of control the private owner exercises over the property was determinative of whether the property was "used by the public," and that it was clear that "in order to be considered &used by the public' that open access to all members of the public is necessary." Id. at 389. In United States v. Patrick, No. 05-3950M, 2006 WL 83505 (D. Md. Jan. 12, 2006), the defendant was issued a citation for driving with a revoked license at the National Institutes of Health (NIH). At trial, the testimony adduced that in order to enter the grounds of NIH, a motorist needs to produce identification. While anyone with business at NIH may enter the premises, access was restricted to those who could produce such identification. Like Robson, the Patrick Court ultimately concluded that, based on Maryland case law, the dispositive question was whether the public had the right to travel on the roads at NIH. In answering that question, the court found it "apparent that the public [did] not have a right to travel on the roads at NIH ... [i]nstead, NIH grants the public the privilege to travel on its roads provided the public has a bona fide purpose and complies with NIH's security procedures." Id. at *5. Accordingly, the court granted Patrick's Motion for Judgment of Acquittal. On July 31, 2006, the district court issued an opinion in United States v. Taylor, 441 F. Supp.2d 748 (2006). In that case, the defendant was cited under the ACA with driving with a suspended license at the gate of Aberdeen Proving Ground (APG). The Court noted that APG is considered an "open post," although drivers and passengers without a federal ID card must provide a driver's license or valid picture ID, and state a legitimate reason for entering the premises. Id. at 750. He further determined, however, that the defendant's convictions should stand, because even if the roads at APG were not highways, they did qualify as "private property used by the public in general" under TR §21-101. A literal reading of the holdings of Walmsley, Akins, and Locklear would lead one to conclude that a road is not "used by the public" unless the public has the right to do so, even though it is in fact using it, albeit with some mild restrictions. The embellishment of a public entitlement to use on the statutory term "used by the public" has clearly been embraced by the Court of Special Appeals, but never by the Court of Appeals of Maryland, occasioning varying results reached by the Magistrate Judges of the District Court in interpreting Maryland laws.

COMMENTARY: Maryland has adopted the Uniform Certification of Questions of Law Act, which is codified at Title 12, Subtitle 6 of the Courts and Judicial Proceedings Article. Under CJ §12-603, the Court of Appeals is authorized to answer a question of law certified to it by a court of the United States or by an appellate court of another state or a tribe, "if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling appellate decision, constitutional provision or statute of this state." There was considerable uncertainty as to the status of Maryland law as evidenced by the inability of the Magistrate Judges of the district court to reach a single conclusion with respect to the federal installations at issue. The Court also had reservations concerning the approach taken by Maryland's intermediate appellate court in Walmsley, Akins, and Locklear by engrafting on the legislative term "used by the public" a requirement that the public have an entitlement to use, as opposed to the fact of use. Thus, the matter was a question that was most appropriately answered by Maryland's highest court, a court that had never addressed the issue, rather than an individual district judge. Accordingly, the district court certified the questions raised by the appeals to the Court of Appeals under the Maryland Uniform Certification of Questions of Law Act.

PRACTICE TIPS: Since the time of the arguments in the instant case, the Maryland General Assembly has passed, and Governor Martin O'Malley has signed into law, SB 35, amending TR §11-127. The amended bill provides, in pertinent part, that "[f]or purposes of the application of state laws, the entire width between the boundary lines of any way or thoroughfare used for purposes of vehicular travel on any property owned, leased, or controlled by the United States Government and located in the State" is considered a "highway." While the bill clearly sought to correct a perceived gap in the law relating to federal enclaves, the amendment was not retroactive. It, therefore, had no effect on the instant cases, and others currently pending before the district court.

Insurance Rescission of life insurance policy BOTTOM LINE: Insurer's claim to rescission of a life insurance policy, obtained by the insured through fraud, was barred by the incontestability provision of the policy.

CASE: First Penn-Pacific Life Insurance Company v. Evans, Civil No. AMD 05-444 (decided June 21, 2007) (Judge DAVIS).

FACTS: In September 1997, Stanley Moore, a 51-year-old resident of Arizona, undertook a scheme designed to enable him falsely to represent that he suffered from a terminal illness, thus permitting him to "viaticate" numerous insurance policies he purchased on his own life. At the commencement of the scheme, Moore underwent an examination by his personal physician, Dr. Michael Hovan, in the course of which he asked Dr. Hovan to falsify his medical records to state he had a terminal illness. Dr. Hovan refused Moore's request but noted the request in Moore's medical records. Moore also asked Dr. Hovan to complete a form (Physician's Letter of Competency) available on the Internet, needed to sell a life insurance policy to a viatical settlement company. Thereafter, Moore began to apply for life insurance policies. On November 13, 1997, Moore applied for a $2 million life insurance policy from First Penn-Pacific Life Insurance Company (First Penn) and an additional $2 million in life insurance from Transamerica Occidental Life Insurance Company (Transamerica). The agent for both of these applications was Stuart Daniels, a general agent, who was affiliated with the brokerage firm of Total Financial and Insurance Services, Inc. (Total Financial). Several weeks later, Moore applied for two additional life insurance policies. He did not fully disclose his other pending applications in those applications. Then, on or about December 15, 1997, Moore applied for three additional policies. In connection with his First Penn application, Moore faxed his medical records to First Penn. Moore removed Dr. Hovan's note and the Physician's Competency Statement (which Dr. Hovan had refused to falsify) from the records. First Penn declined Moore's application on the basis of an unfavorable blood screen. Meanwhile, also in December 1997, two of the other companies approved Moore's applications and issued policies to Moore. On December 30, 1997, a representative of Total Financial called First Penn on Moore's behalf and informed First Penn that Moore had applied for a policy with Transamerica. The caller told First Penn's underwriter that the lab results for the Transamerica application were more favorable than those relied on by First Penn and requested that First Penn reconsider Moore's application. First Penn reconsidered Moore's application as requested and, on January 5, 1998, First Penn approved Moore's application, but with a "standard" rating rather than the "preferred" rating contemplated in the November 13, 1997, application. Thus, Moore was required to amend his November 13, 1997, application to reflect that a policy was being offered at a higher premium. Moore executed the amendment on January 27, 1998, but before he did so, two additional policies that Moore had applied for in December 1997 had been issued. On the same day that First Penn approved his amended application, Moore met with a viatical broker, Laura Clarkson, for the purpose of negotiating the sale of all or some of his policies. By early February 1998, Clarkson had found a buyer, Kelco, Inc., for two of the policies. Kelco's agreement to purchase those policies was contingent upon Moore converting those policies from 10-year level term policies to 20-year level term policies. The next day, Moore requested the re-issuance of the First Penn policy as a 20-year level term policy. First Penn agreed to do so and re-issued the policy on February 5, 1998. Moore also converted his other policies to 20-year level term policies. Kelco purchased the First Penn policy, which it then sold to Answer Care, Inc. (Answer Care), a Maryland viatical settlement company, for whom one of the agents was William R. Evans, Chartered, an insurance brokerage. Evans became the owner of the First Penn policy for the benefit of Answer Care and promptly effected a change of beneficiary. In all, between November 13, 1997, and December 15, 1997, Moore applied for at least seven life insurance policies, all of which were issued between December 19, 1997, and February 20, 1998, and thereby he obtained a total of $8.5 million in coverage. Moore viaticated six of these policies having a total face value of $8 million. In May 1999, First Penn learned that the Transamerica policy had been transferred to a viatical settlement company. First Penn investigated whether Moore was terminally ill and discovered that Moore had altered and omitted medical records during the underwriting process, including Dr. Hovan's note. First Penn discovered no evidence of terminal illness. On October 12, 1999, First Penn sent letters to Evans and to Moore giving notice of rescission and tendering a check refunding all premiums paid on the policy. Moore died of gunshot wounds to the head in May 2004. First Penn sought recission of Moore's policy. The district court denied summary judgment to First Penn and granted summary judgment to Evans.

LAW: The parties agreed that under the principle of lex loci contractus, which requires that the construction and validity of a contract be determined by the law of the place where the contract is made, Arizona law applied to this case. Furthermore, where, as here, a federal court exercising its diversity of citizenship jurisdiction must determine an issue of state law in the absence of binding precedent from the state's highest court, the federal court must "predict" how a state's supreme court is most likely to rule on the issue. Doe v. Doe, 973 F.2d 237, 240 (4th Cir. 1992). Arizona law provides that a challenge to the validity of an insurance contract is barred two years after the policy issue date. Ariz. Rev. Stat. §20-1204. The First Penn policy mirrors the statutory language, providing that "[e]xcept for nonpayment of premiums, the validity of this Policy will not be contestable after it has been in force during the lifetime of the Insured for 2 years from the Issue Date." The parties agreed that the issue date of the First Penn policy was February 5, 1998. Thus, First Penn was statutorily and contractually obligated to "contest" the policy, if at all, on or before February 5, 2000. It was undisputed that First Penn did not file a judicial action seeking rescission of the policy until March 6, 2001, well outside the two year period of contestability. However, upon learning of Moore's fraudulent scheme and that its policy had been issued in consequence of that scheme, First Penn sent letters dated October 12, 1999, within the two year period of contestability, to Moore, purporting unilaterally to rescind the policy, and to the then owner of the policy, Evans, giving notice of the purported rescission and enclosing a check for $21,574.98, representing the amount of paid premiums plus interest. The Arizona Supreme Court has never considered whether the existence of a judicial action within the period of contestability is an absolute precondition to a "contest" under the Arizona incontestability doctrine. Nat'l Life & Cas. Ins. Co. v. Blankenbiller, 360 P.2d 1030 ( Ariz. 1961), is the most salient precedent, but is of scant authoritative value. First Penn emphasized that the Blankenbiller court observed that, to avoid the bar of an incontestability provision, an insurer need only "take such action as will protect its rights" within the period of contestability. Any commonsense understanding of this language would comfortably encompass an insurer's use of a letter (accompanied by a tender of premiums plus interest) giving notice that the policy was rescinded. But the above language was mere obiter dicta in Blankenbiller because in that case, the insurer "raised the issue of fraud over two years after ... the incontestability statute [barred the defense]." See id. at 1032. Ultimately, the court affirmed a judgment in favor of the plaintiff/beneficiary who had sued the insurer, holding that the incontestability statute barred the defense of fraud. There are many cases arising under the law of jurisdictions other than Arizona (or Maryland) that embrace the majority rule holding that an insurer must either initiate a judicial action within the period of contestability, or, alternatively, respond appropriately within the period of contestability to such a suit instituted against it on the policy, to protect its right to avoid liability on the policy. See Annotation, What Amounts to Contest Within Contemplation of Incontestable Clause, 95 A.L.R.2d 420, §2; and see e.g., Franklin Life Ins. Co. v Bieniek 312 F.2d 365, 95 (3rd Cir.1962). The Supreme Court of Arizona is most likely to join those courts which have adopted the majority rule. "The insurer, within the period prescribed by the policy, must contest the policy, that is, must set up its invalidity in some judicial proceeding, by way either of attack or of defence [sic]." Protective Life Ins. Co. v. Sullivan, 682 N.E. 2d 624, 633 ( Mass. 1997) (quoting Metropolitan Life Ins. Co. v. DeNicola, 317 Mass. 416, 418, 58 N.E.2d 841 (1944)). Accordingly, First Penn's claim to rescission was barred by the incontestability provision of the policy.

PRACTICE TIPS: The Court of Appeals of Maryland seems to be the only court to have considered the issue and yet opted for the "minority rule." In Steigler v. Eureka Life Ins. Co., 127 A. 397, 400-02 (Md. 1925), the Court held that a communication was sufficient if, without unreasonable delay after the fraud was discovered, the insurer sent notice to the insured that the policy was rescinded, and attempted to refund all premiums. See id. "This court is unable to agree that the recission of a contract procured by deceit in a material matter cannot be effected on its discovery by the defrauded party except through litigation, unless the defrauded party obtain the consent of the wrongdoer. The doctrine of recission does not depend upon such an illusory and unstable basis as the concurrence of the defrauding party, but is the personal right of the victim of the fraud to be exercised or not of his own independent volition. A proceeding at law or in equity to enforce the rescission of a contract is not of itself a rescission, but is the result of a precedent act or election to rescind, and is a method of communicating that fact to the defendant." Id. at 401. Of course, the substantive law of Maryland did not apply in this case.

Copyright, 2007, The Daily Record ( Baltimore, MD)

Author: The Daily Record

Copyright, 2007, The Daily Record ( Baltimore, MD)