Maryland Business Litigation Lawyer Blog

Published on: July 23, 2024

Silverman Thompson Legal Victory in Montgomery County to Allow Client to Secure Full Ownership of His Home of 64 Years

By Ned Parent

In February 2023, Silverman Thompson initiated an action in the Circuit Court for Montgomery County on behalf of its client, a 105-year-old World War II Veteran.

As alleged in the lawsuit, Silverman Thompson’s client had lived in the same home since 1960, which had been owned by his parents. Following his father’s death in 1971 (the second of his parents to pass), Silverman Thompson’s client was appointed personal representative of his father’s estate and, under Maryland’s laws of intestacy, was to deed ownership of the home to himself and his five siblings.

No such deed, however, was ever prepared. In the decades that followed, all five siblings themselves passed away, while Silverman Thompson’s client continued to live in the home and pay all property taxes, insurance, and utilities. However, in August 2022 (six weeks after the death of the last of five siblings), one of Silverman Thompson’s client’s nieces sought to re-open the father’s estate, all in an effort to allow legal title of the home to pass to her and certain of her cousins. Silverman Thompson thus asked the Circuit Court to quiet title alleging, in relevant part, that its client’s five now-deceased siblings all abandoned their equitable interest in the home in the decades following their father’s death.

William Sinclair, Esq.

Published on: July 8, 2024

The United States Supreme Court Overturns Chevron Deference

By William Sinclair and Todd Hesel

Forty years ago, the Supreme Court decided Chevron v. Natural Resources Defense, which gave deference to federal agencies to implement their charging statutes. In its latest term, the Court’s 6-3 decision in Loper Bright Enters. v. Raimondo overturned Chevron and dramatically altered the balance of power between federal agencies and the federal judiciary.

Chevron implemented a two-step approach for the interpretation of statutes. First, courts determined whether Congress had spoken to the statutory question at issue. If Congress’s intent was clear, that ended the court’s inquiry. But if the statute was ambiguous or silent, Chevron directed courts to defer to the agency’s interpretation of the provision if the agency’s reading was a permissible construction of the statute, regardless of how the court would ultimately interpret it. This two-step approach gave deference to administrative agencies concerning the laws they administer and resulted in the presumption that when Congress left ambiguity in a statute, it would be resolved by the administering agency.

The Loper majority abandoned this long-standing doctrine based on perceived conflict with the language of the Administrative Procedure Act (“APA”). Section 706 of the APA states that courts will decide questions of law arising on review of agency action and set aside actions inconsistent with the law. The majority found it significant that the APA lacks a command to defer to administrative agencies when addressing legal questions while commands existed in other areas of the APA. In addition to the language in the APA, Chief Justice Roberts justified the holding by empathizing the constitutional principle articulated in Marbury v. Madison, which states that it “is emphatically the province and duty of the judicial department to say what the law is.” 5 U.S. (1 Cranch) 137, 177 (1803).

The majority found that precedent before Chevron did not require deference to the administrative agency’s reading of an ambiguous statutory provision. This, coupled with the difficulties courts faced in implementing the Chevron doctrine, further justified the Court’s departure from precedent.

The Court made it clear that the Loper decision, standing alone, is not grounds for revisiting settled judgments that relied on Chevron. Instead, moving forward, courts will rely on the APA and exercise their independent judgment while employing the tools of statutory interpretation. Rather than deferring to the interpretation of administrative agencies when a statute is ambiguous, courts may consider executive branch input to inform their decision. Also, the presumption that ambiguity would be resolved by the agency no longer exists. However, when a statute delegates authority to an agency within constitutional limits, courts should respect such delegation and ensure that agencies act within it.

The effects of the Loper decision are yet to be seen, but in Justice Kagan’s dissent, she stated that the decision will shock the legal system. Justice Kagan emphasized that agencies (much more so than courts) have the technical expertise to better interpret ambiguous statutory provisions, and the departure from a doctrine that has become an aspect of modern government will have widespread harm to regulatory efforts such as maintaining clean air and water. In response, the Chief Justice states that judges have been responsible for legal interpretation for the last 221 years. Ultimately, the full impact of the Loper will unfold in courts, administrative agencies, and the legislature over the coming years.

Silverman Thompson regularly handles administrative matters at the federal, state, and local levels across a wide array of fields. To learn more about our administrative practice, please contact Bill Sinclair at 410.385.9116 or bsinclair@silvermanthompson.com.

bsinclair@silvermanthompson.com

410.385.9116

Todd Hesel, Esq.

thesel@silvermanthompson.com

443.895.4195

jbuchman@silvermanthompson.com

Published on: July 1, 2024

Your Customer Filed for Bankruptcy: Now What?

By Jodie E. Buchman and Michael J. Levin

Many business creditors know that their customers are in financial distress before a bankruptcy filing. In this post, we cover two major issues that creditors must be aware of when a business or individual, perhaps a customer, borrower, or supplier, files a petition for bankruptcy protection: (1) the automatic stay and (2) the proof of claim and its firm deadline.

In football, when the referee blows the whistle, all play must stop and there can be serious penalties for “late hits.” You can think of the automatic stay the same way. When a debtor files a voluntary petition to initiate a bankruptcy case in a U.S. Bankruptcy Court, an “automatic stay” goes into effect under 11 U.S.C. § 362(a). In the legal arena, a “stay” means a pause, stop, or freeze. The courts take the automatic stay very seriously.

For example, Judge Michelle Harner of the U.S. Bankruptcy Court for the District of Maryland explains that “[t]he automatic stay is a core and critical component of the bankruptcy system.” In re Siegal, 591 B.R. 609, 621 (Bankr. D. Md. 2018). The automatic stay protects both debtors and creditors. It “provides the debtor with a breathing spell from the harassing actions of creditors, and it protects the interest of all creditors by preventing dismemberment of the debtor’s assets before the debtor can formulate a repayment plan or, in liquidation cases, the court can oversee equitable distribution of the debtor’s assets.” In re Schwartz-Tallard, 803 F.3d 1095, 1100 (9th Cir. 2015)). Therefore, “courts scrutinize, and take seriously, alleged violations of the automatic stay.” In re Siegal, 591 B.R. at 621. Note that the automatic stay is just that; it is automatic, which means it “operates without the necessity for judicial intervention” and it “remains in force until a federal court either disposes of the case or lifts the stay.” See In re Soares, 107 F.3d 969, 975 (1st Cir. 1997) (internal citations to the Bankruptcy Code omitted). This means that the debtor does not need to ask a judge to order an automatic stay.

Once the automatic stay goes into effect, creditors must cease all efforts to collect a debt from the debtor in bankruptcy. This prohibition on debt collection does not just mean that a creditor may not take formal legal action such as filing a lawsuit against the debtor or serving the debtor with a lawsuit filed before bankruptcy or serving a bank or wage garnishment, even one that was issued by a court prior to the bankruptcy filing. Courts hold that informal conduct such as sending demand letters, making phone calls or texts to a debtor, or sending bills for pre-bankruptcy petition debts, even without threats to sue the debtor, may violate the automatic stay. In re Siegal, 591 B.R. at 624 (citing In re Robinson, No. 10-12932-SSM, 2011 WL 832857, at *2 (Bankr. E.D. Va. Mar. 3, 2011)).

The penalties for violating the automatic stay are severe. Under the U.S. Bankruptcy Code (11 U.S.C. § 362(k)), a “willful” violation of the automatic stay occurs when a party knows about a bankruptcy case and acts deliberately in violation of the automatic stay. Again, the results are harsh and can cause a creditor not only to lose their leverage but to end up paying the debtor. Specifically, a willful violation may expose a creditor to a claim for compensatory damages, payment of the debtor’s attorneys’ fees, and in some cases, punitive damages. Violating the automatic stay or even being accused of a violation is a quick way to go from offense to defense.

So, what should you do if you receive notice of a bankruptcy filing?

First, be sure not to miss the proof of claim deadline. The purpose of a proof of claim is to assert a right to receive payment in a bankruptcy case. See 11 U.S.C. 101(5) (defining proof of claim). In some Chapter 7 liquidation cases, where the debtor’s assets are liquidated to repay creditors and the debtor’s debts are discharged, there may not be a proof of claim deadline if the debtor has no assets to be sold. However, where there are assets, Rule 3003(c) of the Federal Rules of Bankruptcy Procedure requires the court to set a claims bar date, i.e., a deadline after which creditors may no longer file a proof of claim. Indeed, a case may change from a “no asset” case to one where creditors must file a proof of claim to assert their right to payment, so paying attention to bankruptcy notices is a must. One should note that Rule 9006(b)(1) gives the court discretion to enlarge the time to file claims but only “where the failure to act was the result of excusable neglect.”

At the very minimum, you should file a proof of claim before the deadline. If you fail to do so, you have likely forfeited your right to recovery in the bankruptcy case. Note, however, that there are some exceptions for a late-filed claim under the Supreme Court’s decision in Pioneer Inv. Servs., Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S 380 (1993). In that case, the Supreme Court adopted an “excusable neglect” standard for late-filed claims and guided lower courts to consider several factors in determining whether to allow a late-filed claim, including the relevant circumstances surrounding the late claim, the danger of prejudice to the opposing party, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within reasonable control of the moving party, and whether the movant acted in good faith. See Pioneer, 507 U.S. at 388. This potential safety hatch is available only in rare circumstances, so it is far better to file a proof of claim to give yourself a fighting chance at a recovery in a bankruptcy case.

Silverman Thompson’s business litigation group has decades of experience handling bankruptcy cases, related litigation, and resolving disputes between debtors and creditors. Please contact the firm toll-free for additional information and a free consultation at 800.385.2243.

Jodie Buchman, Esq.

443.909.7523

Michael J. Levin, Esq.

mlevin@silvermanthompson.com

443.909.7544

Published on: June 16, 2024

Latent Defect Discovery After Home Purchase

What if I purchase a home “as-is” and later discover latent defects that are significant and expensive to repair?

Buyers can submit to mediation through Maryland REALTORS® to recover damages associated with latent defects not disclosed at the time of sale.

In the State of Maryland, the standard Residential Contract of Sale form used by Maryland REALTORS® includes a provision that allows for mediation of disputes arising out of the sale and purchase of a residential property. Mediation is a process where parties attempt to resolve a dispute without, or before the filing of a lawsuit with the assistance of a neutral mediator. When a buyer of residential property discovers a latent defect after purchasing property and it is clear the seller knew about said defect and failed to disclose it to the buyer, mediation through Maryland REALTORS® can be an effective process to achieve a resolution. A copy of the Residential Contract of Sale form can be found here.

What is a latent defect?

In Maryland, a “latent defect” in residential property is a material defect that the seller knows about and (1) is not visible, (2) could not be reasonably expected to be uncovered by the buyer before the purchase is made, and (3) could endanger the health or welfare of the buyer.

A “material defect,” as encompassed in the term latent defect, is a significant issue with a residential property’s system or structure that adversely affects the property’s value, poses a health or safety risk, or undermines the buyer’s capacity to enjoy it. Notably, a material defect is a substantial problem, as opposed to a minor or aesthetic issue. Examples of material defects include, but are not limited to:

Major structural issues or other decay in the property’s architecture, including damaged foundation, sloped floors, bowed walls, or horizontal cracks.
Significant roof or basement leaks that require extensive repairs.
Outdated and malfunctioning plumbing or electrical issues that make the property unsafe.
The presence of asbestos, lead paint, mold, or other hazardous materials.

As you can see from the above examples, these material defects would not be visible or expected to be uncovered by a buyer before purchasing the property, and all pose significant health and safety risks.

Does a seller have a duty to disclose latent defects, even if the property is being sold “as-is”?

Yes, sellers of residential property, even if it is being sold “as-is,” have a duty in Maryland to disclose any latent defects of which the seller had actual knowledge and that a buyer (or the buyer’s home inspector) could not reasonably expect to find by a visual inspection and pose a direct threat to health or safety of the buyer. While a seller can still indicate that the property is being sold “as-is,” the seller is still required to indicate latent defects by completing the Maryland Residential Property Disclosure and Disclaimer Statement, which is included in the Residential Contract of Sale form used by Maryland REALTORS®.

What if the seller failed to disclose a latent defect and as a result, I now have significant and expensive costs to repair the property?

Our office can help you review the contract of sale to determine if you are eligible for mediation with the Maryland REALTORS®. Importantly, all claims or disputes between a buyer and seller must be submitted to mediation with the Maryland REALTORS® within one year following the closing date of the sale, so you should not delay in contacting an attorney. If a latent defect is discovered after one year, you may still have legal recourse. In Maryland, the standard statute of limitations to file a claim is three years, so if you miss the one-year mediation deadline, you should still contact an attorney to determine if you have a viable claim.

Can I skip mediation offered by Maryland REALTORS® and immediately file a lawsuit in court?

Mediation is generally faster, simpler, and often less expensive than litigation. However, mediation is a voluntary process that must be agreed to by the buyer and seller. Under certain circumstances, you may choose to bypass the mediation and immediately file a lawsuit in state court. However, the Maryland Residential Contract of Sale expressly states that if you file a lawsuit in state court and ultimately lose, you will be responsible for paying the other party’s attorneys’ fees, in addition to your own. Our office can provide advice regarding whether you should proceed with mediation or litigation based on the unique facts of your case.

If you need assistance with reviewing a Maryland Residential Contract of Sale and/or believe you have a dispute or claim to submit to mediation with Maryland REALTORS®, please do not hesitate to contact Silverman Thompson’s experienced real estate attorneys by phone or e-mail for a free consultation:

(410) 385-9113

(410) 385-9106

Published on: June 4, 2024

Federal Court Grants Motion to Remand in Putative Class Action Against Johns Hopkins Involving Maryland Wage Payment and Collection Law

By William Sinclair and Meredith McKinnon

On May 23, 2024, after nearly a year of motions practice, Judge George L. Russell III of the United States District Court for the District of Maryland granted plaintiff’s motion to remand its putative class action to state court. Serving as local counsel, Silverman Thompson filed the class action in the Circuit Court for Baltimore City on January 19, 2023. The plaintiff, who has been employed as an hourly, non-exempt worker at Johns Hopkins Hospital (“Johns Hopkins”) for over thirty years, contends that Johns Hopkins has a policy of rounding employees’ hours resulting in illegal withholding of wages, failure to pay minimum wage, and failure to pay overtime wages in violation of the Maryland Wage Payment and Collection Law.

Johns Hopkins removed the matter to federal court more than seven months after receiving the complaint on the basis of federal question jurisdiction. Johns Hopkins argued that the United States District Court for the District of Maryland had jurisdiction pursuant to Section 301 of the Labor Management Relations Act, which provides the court subject matter jurisdiction over employment disputes governed by collective bargaining agreements. Plaintiff promptly filed a motion to remand maintaining that Johns Hopkins’ removal was untimely – in accordance with 28 U.S.C. § 1446, Johns Hopkins had thirty days following receipt of the complaint to file a notice of dismissal.

In its opposition, Johns Hopkins declared that its removal was timely because it first became aware on August 11, 2023, after analyzing the plaintiff’s opposition to Johns Hopkins’s motion for summary judgment, that the resolution of the claims brought against it require interpretation of a collective bargaining agreement. Consequently, Johns Hopkins argued that it filed its notice of removal twenty days after its alleged discovery and within the time limitation prescribed in 28 U.S.C. § 1446.

Published on: May 24, 2024

Silverman Thompson Scores Remand in Third Circuit that Revives Client’s Complaint Against Business Rival for Tortious Interference

By William Sinclair and Todd Hesel

In fall 2021, Silverman Thompson filed suit in federal court in Pennsylvania on behalf of a provider of inmate communication services for prisons. The suit alleged that just as Silverman Thompson’s client was about to finalize a contract with a county prison, the incumbent service provider and business rival used illegal, anti-competitive tactics to scuttle the deal and secure a renewal of its contract with the prison. After extensive preliminary motions practice, the district court dismissed the complaint for failure to state a claim, but gave Silverman Thompson’s client the opportunity to amend. Confident in its claims as drafted by Silverman Thompson, the client elected to stand on the complaint and appealed the dismissal to the U.S. Court of Appeals for the Third Circuit.

After briefing and oral argument in the Third Circuit led by Silverman Thompson attorneys, the client’s choice was vindicated in December 2023 when the appeals court issued an opinion vacating the dismissal and remanding for further proceedings in the district court to more fully evaluate whether the complaint stated claims under Pennsylvania common law.

On remand, the district court re-examined whether the complaint adequately alleged “independently actionable conduct” by the business rival sufficient to state a claim for tortious interference. Finding that the complaint had adequately alleged defamation of Silverman Thompson’s client as a means of preventing it from getting the contract, the court denied the motion to dismiss the tortious interference claim. The case will now go forward to discovery.

Published on: May 21, 2024

Shielding of Nonpayment of Rent Complaints: New Maryland Landlord-Tenant Law Effective October 1, 2024

Senate Bill 19 requires the District Court to shield all court records relating to the filing of a Failure to Pay Rent Complaint within sixty (60) days after the final resolution of the nonpayment of rent case if the case did not result in a judgment for possession. Further, upon the filing of a motion by a tenant, the District Court may also shield court records relating to a failure to pay rent proceeding that did result in a judgment for possession if:

(1) The tenant demonstrates by a preponderance of the evidence that the paid the judgment amount prior to eviction and stayed in the property (i.e., the tenant exercised their right of redemption) and at least 12 months have passed since the entry of the judgment;

OR

(2) The court determines that there is otherwise good cause to shield the court records.

If there is a rent escrow case associated with a failure to pay rent case, only the records relating to the failure to pay rent case will be shielded.

The shielding of these records means that landlords will not be able to obtain information about the prior payment history of prospective tenants.

If you need assistance with understanding recent changes in Maryland landlord-tenant law or issues involving failure to pay rent complaints in Maryland, please do not hesitate to contact us by phone or e-mail:

(410) 385-9113

(410) 385-9106

Published on: May 14, 2024

Tenant Safety Act of 2024: New Maryland Landlord-Tenant Law Effective October 1, 2024

What is the Tenant Safety Act of 2024?

Pursuant to House Bill 1117, effective October 1, 2024, the statute commonly known as the “rent escrow statute” will be amended to:

Allow multiple tenants to join as plaintiffs in a Petition in Action of Rent Escrow (commonly known as a rent escrow action);
Include a rebuttable presumption that a tenant is entitled to the adjudication of a request for rent abatement;
Include a rebuttable presumption that a tenant is entitled to an abatement of prospective rent; and
Allow a court who orders any relief to a tenant in a rent escrow matter to make a claim for recovery of attorney’s fees, costs and expenses related to litigation.

Permitting multiple tenants to join as plaintiffs in the same Petition in Action of Rent Escrow against a landlord will primarily affect multi-family properties with several units, where a group of tenants may make the same allegations in a rent escrow actions such as mold, flooding, rodents, or other similar issues that affect several units.

Significantly, the changes in the law also place the burden on the landlord to prove that it has not breached the warranty of habitability, as the court will presume that a tenant is entitled to abatement of both past due and prospective rent unless and/or until the landlord convinces the court otherwise.

These changes will impact all Maryland landlords.

If you need assistance with understanding recent changes in Maryland landlord-tenant law or issues involving rent escrow cases filed against landlords in Baltimore City, Baltimore County or the surrounding counties, please do not hesitate to contact us by phone or e-mail:

(410) 385-9113

(410) 385-9106

Published on: May 6, 2024

What Constitutes Constructive Eviction for Commercial Property in Maryland?

What is constructive eviction?

An actual eviction occurs when a commercial landlord brings legal action seeking possession of leased premises from a commercial tenant, is awarded possession in Court, schedules an eviction of the tenant with the sheriff’s office, and the eviction is carried out by the sheriff.

A constructive eviction occurs when a commercial landlord does not physically or legally evict a commercial tenant, but rather acts, or fails to act, in a manner that interferes with a tenant’s use and enjoyment of the leased premises significantly enough to constitute an eviction in fact. For there to be a “constructive eviction,” a commercial tenant must be deprived of possession or beneficial use of the leased premises, which results in the tenant’s abandonment of the premises within a reasonable time.

To establish that there has been a constructive eviction in a commercial tenancy, a commercial tenant must prove that:

The commercial landlord acted, or failed to act, in a way that substantially interfered with the tenant’s use and enjoyment of the leased premises;
The landlord’s actions or inactions cause the leased premises to be unusable for the purpose it was rented;
The commercial tenant gave the commercial landlord notice of the problem that led to the interference with the tenant’s use of the premises, and the landlords failed to respond and/or resolve the problem; and
The tenant vacated the premises in a reasonable amount of time after the landlord failed to resolve the problem.

What are examples of circumstances that may constitute constructive eviction in a commercial lease?

The scope or magnitude of the landlord’s interference necessary to constitute a constructive eviction must go to the essence of what the landlord is to provide. There must be evidence that the landlord substantially interfered with the tenant’s use of the premises. While there are many acts or situations that would constitute a breach, common ones include:

Eliminating a significant number of parking spots.
Permitting persistent, loud construction (except if for necessary repairs).
Routinely playing loud, intrusive music in common areas.
Failure to provide electricity.
Failure to provide operable elevator service.
Failure to furnish adequate heat or air conditioning.
Failure to furnish sanitary restroom facilities.
Structural defects, such as persistent leakage of water through the roof, ceiling, or walls because of landlord’s fault.
Serious defects in the sewer, plumbing, or drainage.
Actions that deny customers access to the premises.

Notably, there are times when disturbances to quiet enjoyment are out of the landlord’s control, or permitted by the commercial lease, which would not constitute a constructive eviction, such as:

Construction conducted by the city in which the building is located.
Aesthetic issues inside the building and/or premises, such as the need to repaint or replace carpet.
Aesthetic issues outside the building, such as the need to clean windows, power wash the building, or maintain decorative landscaping.
Neighboring businesses that create unnecessary noise.
Major renovations to the building and/or premises.

**When would a commercial tenant claim that a constructive eviction has occurred?**

When a commercial tenant is unable to use its leased premises in the manner for which it was leased, the tenant does not receive the benefit of its bargain. In those circumstances, if a commercial tenant believes there has been a constructive eviction, the commercial tenant must vacate the premises in a reasonable amount of time, as the failure to do so results in a waiver of any potential constructive eviction claim. After vacating, a commercial tenant may argue that the landlord has constructively evicted them and then may withhold rent and vacate the leased premises. If a commercial landlord seeks the rent owed under the commercial lease from the tenant, the commercial tenant may raise a constructive eviction as a defense to the rent owed. If the facts justify a legal finding of a constructive eviction, a commercial tenant will be released from liability under the lease.

If you have questions regarding constructive eviction or would like assistance in reviewing a commercial lease, please do not hesitate to contact us by phone or email:

(410) 385-9113

Erin Donohue Brooks, Esq.

(410) 385-9106

edonohuebrooks@silvermanthompson.com

(410) 385-9101