F&P on the Road

Colin Bell and Andrew Stephenson presented “FREIGHT 101: The Basics  of Cargo Claims Handing” at Trucking Bootcamps for the claims professional in eight cities throughout the country from February – May.

Bert Randall and Tamara Goorevitz attended the Spring 2018 USLAW Conference in Scottsdale, AZ from April 5-7.

Tamara Goorevitz co-presented the Robert T. Franklin Award at DRI’s Trucking Law Seminar in Chicago, IL on April 26.

Andrew Stephenson presented on the reptile theory at the P&S Safety Transportation Meeting in Birmingham, AL on May 8.

Patrick Wachter attended the ArcBest Legal Conference in Fort Smith AR on June 28.

Tamara Goorevitz will be attending the USLAW Transportation Industry Summer Legal Forum in Half Moon Bay, CA on August 8 – 9 .

James Hetzel and Ellen Stewart will be attending the USLAW Trucking Claims Bootcamp in Omaha, NE on August 16 – 17 .

Andrew Stephenson and Justin Tepe will be attending the Arkansas Trucking Seminar in Rogers, AR on September 18 – 20.

 

 

ProExpress Distributors, LLC v. Grand Electronics, Inc.: Not-So-Reasonable Efforts to Maintain Secrecy in the Cloud

As many businesses look to reduce the expenses associated with their information technology services, lower cost alternatives to traditional storage are becoming more and more commonplace. The growing trend has been for businesses to opt out of expensive system hardware, and instead store their confidential data with internet storage services, such as the “cloud.”  Apart from their financial advantages, cloud-based servers also provide the benefit of easy remote access to information for any employees on whom an employer wants to bestow such a privilege (and responsibility). The growing popularity of the cloud as a place to store confidential information, including trade secrets, inevitably begs the question:  Is all proprietary information that is stored in a cloud-based server entitled to trade secret protection?  A recent decision of the Court of Special Appeals of Maryland confirms that the question is not easily answered, and there are legal risks associated with storing trade secrets in the cloud.

A brief reminder of what a trade secret is will inform the unique issues raised by cloud storage.  Under Maryland law, a trade secret is defined as information (including a formula, pattern, compilation, program, device, method, technique, or process) that:  (1) derives independent economic value from not being generally known to or readily ascertainable by others; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  So, for example, the formula for Coca-Cola creates economic value for the Coca-Cola company because the formula is secret, and not generally known.  If the company were to fail to take reasonable efforts to protect the secrecy of the formula, though, it would lose trade secret protection.

The Court of Special Appeals recently addressed the issue of what efforts are reasonable, in the context of cloud storage.   In ProExpress Distributors v. Grand Electronics, LLC, the Court of Special Appeals signaled to businesses everywhere that dangerous storms roll in when trade secrets are not properly kept in the cloud.

ProExpress Distributors, an online retailer of electronic products (“PED”), sued Grand Electronics, a competitor (“GE”), for misappropriation of trade secrets.  PED electronically stored various business records, including its purported trade secret, on various cloud-based servers such as Dropbox and Google Drive.  PED shared access to its internet storage accounts with CNEST Solutions, Inc. and its employees (a separate, non-party entity).  The accounts were password-protected, but once granted initial access, all PED and CNEST employees had free and open access to all of the accounts without having to enter any password to further access the site.  PED alleged that a former at-will employee of CNEST Solutions (a non-party with whom PED voluntarily shared its internet storage accounts (such as Dropbox and Google Drive), discovered that he had continued access to PED’s Dropbox account, and viewed PED’s trade secrets while employed by GE.

PED claimed that the trade secrets misappropriated by GE’s employee (the former employee of CNEST) provided GE with a commercial advantage, as evidenced by a significant jump in GE’s sales and a corresponding decrease in PED’s sales.

The Court of Special Appeals focused its analysis on whether PED demonstrated efforts that were “reasonable under the circumstances to maintain secrecy,” and examined a 2004 Court of Appeals decision, LeJeune v. Coin Acceptors, Inc.  In LeJeune, the Court of Appeals found that a company had taken reasonable steps to safeguard secrecy by:  negotiating non-disclosure agreements with its customers to prevent price disclosure, marking all important documents as “confidential,” and communicating the secret nature of its methodology to its employees through an employee handbook.

Applying the LeJeune Court’s rationale, the Court of Special Appeals found that PED failed to produce any evidence that it took reasonable efforts to protect its purported trade secrets.  First, PED did not change the password to its Dropbox account after a group of its employees left to found GE.  Furthermore, PED failed to limit access on a “need to know” basis within the company, as all employees had free and open access once granted initial access.  Finally, PED provided Dropbox access not only to all of its own employees, but also to all CNEST employees without the protections of confidentiality or non-disclosure agreements.  In short, PED took almost no steps to protect the secrecy of its supposed trade secret.  The Court easily and correctly found that PED’s supposed efforts were not reasonable under the circumstances, and that its supposed trade secret was not entitled to protection.

As the Court’s decision demonstrates, businesses that utilize cloud-based servers risk losing trade secret protection when valuable data is not properly kept on a third-party server.  Maryland case law on the issue remains sparse.  Nonetheless, the ProExpress decision suggests that traditional principles of trade secret law will still apply in the context of cloud storage.  In other words, courts will continue to focus on a company’s own actions to maintain confidentiality in determining whether use of cloud-based servers is a reasonable way to store trade secrets.  As a practical matter, businesses that are utilizing cloud storage should engage in efforts such as limiting access to trade secrets to only those with a need-to-know, maintaining written trade secret policy that guides employees, and requiring employees and third party service providers to sign confidentiality or non-disclosure agreements.

 

Buyer Beware: A Hidden Legal Risk of Interstate Transactions

As the explosion of e-commerce shrinks the world, a business owner can often buy just as easily from a vendor in Pasadena, California as from one in Pasadena, Maryland.   Interstate purchases, though, carry with them a particular legal risk that purely intrastate transactions do not – the possibility of having to chase the other party into its home state if things go badly.

The problem is what’s called jurisdiction.  Jurisdiction is the legal authority that a court or other judicial body has to render decisions.  Maryland courts certainly have jurisdiction –power and authority – to decide cases concerning, and render decisions affecting, defendants who live or regularly conduct business within our state.  However, this power and authority are less certain when a potential defendant neither resides nor does business in the state.   A Maryland court will not usually have, and probably should not have, authority to enter a judgment that binds a California resident or corporation that has never had any connection with Maryland.

If your business elects to buy from an out-of-state vendor, and the transaction does not go as planned, you may well be forced to chase the vendor in the courts of its home state.  (Of course, jurisdiction is often addressed in any written contract that may govern the transaction).  Whether or not you will be able to sue your vendor in Maryland depends on whether a Maryland court can exercise jurisdiction over the vendor.  Maryland law extends Maryland’s jurisdiction over out-of-state defendants as far the limits of the U.S. Constitution will allow.

Jurisdiction over an out-of-state defendant will depend on whether the vendor has enough sufficient “minimum contacts” with Maryland that a Maryland court considers it fair to exercise jurisdiction over the vendor.  Generally speaking, the vendor must have sufficient contacts with Maryland to make it reasonable for the vendor to expect to be dragged into court here.

There is no bright-line test, but greater connections and more frequent contact increase the likelihood that an out-of-state individual or company will be subject to jurisdiction here.  Merely advertising in Maryland, or selling via direct mail or the internet to Maryland residents almost certainly will not suffice to allow jurisdiction.  On the other hand, people or companies that have substantial contacts within Maryland, such as an office or offices, employees, real or personal property, and/or accounts in Maryland banks will likely be easy to sue here.  Likewise, voluntarily becoming registered or qualified to do business in Maryland, or becoming licensed under a state statute, will almost always subject a defendant to suit in Maryland.

In some cases, even where the potential defendant is not licensed, registered, or qualified, and has no office, employees, property or accounts in Maryland, a single contract or commercial transaction might be enough.  If the customer or vendor initiates contact with a Maryland resident or company, signs the contract here, and the goods are to be delivered, or the services are to be performed here, a Maryland court would likely allow the customer or vendor to be sued here.

The extra costs of litigating out-of-state can, of course, be significant.  Out-of-state litigation will require new counsel, travel costs, and probably substantially more time away from your business than would be required to bring the same claim locally.  Unfortunately, the question of Maryland’s jurisdiction over a particular out-of-state party is often unsettled, and may be difficult to predict in advance of a transaction.  A contractual provision in which the parties agree to the jurisdiction of Maryland courts will eliminate the issue at the outset and potentially save significant money in the event of litigation later in the parties’ dealings.

“Hey! Get That Off My Lawn!” Trespass, Ejectment and Abandoned Property on Your Premises

It is often said that possession is 9/10 of the law.  While that’s a catchy phrase, possession does not always mean that you have a right to do whatever you wish with another’s property.

Most business owners rely on the services of other businesses to make their operations run smoothly.  For instance, many companies lease printers, copiers and other technology.  Some businesses, like mechanics, builders, manufacturers, and restaurants, need to dispose of large quantities of hard waste, and as a result, engage a vendor to remove that waste on a regular basis.  As we have all seen, those waste disposal companies leave their dumpsters (which represent a significant initial investment) on the property of the business owner, and make frequent stops with their own equipment to haul the waste away.

In commercial relationships, as in all relationships, circumstances change and relationships, with vendors and others, end.   Sometimes, as in the case of the waste removal contract discussed above, one party will leave personal property on the real property of the other party.  While it’s certainly tempting to simply remove the property, care must be taken to avoid infringing on the rights of the interloper.

In Maryland, there are several different legal relationships which can develop when a landowner allows another to place property on their land.  In some instances, an easement can be created which allows another to build on or have use of the property.  Such relationships are usually created by a formal legal document.  In other scenarios, such as the case of the dumpster, a landowner will grant permission for another to store their personal property on the owner’s land.  In that case, a “license,” or permissive use, is established.  A license does not need to be written, and is often times implied from a contract or business dealing which necessitates one storing their personal property on the real property of another.  Just like a driver’s license, a license to store property on land of another can be revoked.  It is the process of the revocation of the license and the removal of the then-offending property that can create legal issues for the landowner.

There are several legal considerations at play.  First, once a land owner revokes its license or terminates its business relationship with the owner of the stored property, then the person storing the property is effectively trespassing on the land of the owner.  The land owner, however, does not automatically have the right to simply dispose of or remove the trespasser’s property.  In fact, courts have routinely held landowners liable for unlawful or improper removal of such property.

To avoid this risk, landowners should almost never resort to “self-help” (i.e. removing trespassing property on their own).  Instead, a landowner should sue for trespass (seeking damages for the unwelcome storage of the property) or ejectment (seeking a court order that the property must be removed).

While that level of formality might at first seem unnecessarily expensive,  proactively seeking help from a court will likely prove less expensive than defending against a claim for damages brought by a vendor.

The best risk avoidance mechanism, of course, is communication, agreement, and documentation.  Before allowing a customer, vendor, or other third-party to store personal property in or around your land or property, discuss the terms for delivery, storage, maintenance, and removal.   Reach agreement on as much as possible, and document (with assistance from qualified counsel) any agreement that is reached.  Without a agreement in advance, you will be best protected by seeking court intervention before resorting to self-help to get rid of unwelcome personal property.

A Lifetime to Build and Seconds to Destroy: Treat a Trademark Like a Reputation

Your business is taking off and work is showing results. You have built a reputation over the years and, until now, you have turned a blind eye toward registering a company trademark. Maybe that thought comes into focus now, when your business gathers visibility and suddenly has a reputation to uphold. Countless business disputes result from a business owner’s failure to take care of the little things early on – before they present a real threat. Consider the benefits of registering a trademark and the consequences of not doing so. Like your reputation, your business has likely taken years to build. Its reputation can be altered, perhaps irrevocably, if a competitor registers your trademark first and markets itself under your company’s brand.

What Is a Trademark?

Generally, trademarks are symbols, words or images that indicate a product’s source or origin, and distinguish it from similar products.  This helps prevent a competitor from using your company’s rising visibility to their advantage.

What Is Common Law Trademark Protection?

There are two sources of trademark protections: 1)  common law rights; and 2) federal rights.

Common law rights are created by mere use of your trademark and its association with a product or service you sell.  Since actual use of the trademark is required to create a common law rights in the trademark, a company often must spend significant time and money marketing and building a brand before those protections are created.

Fortunately, common law protections apply without a company taking any other action aside from using the trademark – no registration of any trademark is necessary. Under common law, your trademark will be protected by use from a competitor within a certain geographic area around your company. Ultimately, if you found a competitor was using your company’s trademark, your company could enforce common law protections on that trademark to the extent your company could show the competitor’s trademark was likely to cause confusion about the source of the product being sold. Upon the showing of such confusion, your company could use the court system to stop the competitor’s use of the trademark.

What Are the Federal Protections and Why Are They Better?

Federal trademark protections are created when you register your trademark with the U.S. Patent and Trademark Office (USPTO).

The only requirement, aside from fees, is that the application be made in good faith. Specifically, the registrant (you or your business) must show intent to use the mark in connection with the marketing of a product or service.

The ease of filing with the USPTO creates a problem – a third party can file an application for the same trademark you use, possibly creating significant hardship and expense for your company in the future. For instance, if someone else registers the same trademark before you do, that person or company is given advantages if you ever decide you need to sue that party for improper use of “your” brand. Suddenly, your business’ reputation is at risk. If your brand grows and you dispute the rights your competitor has in the trademark, there is a good chance the ensuing disagreement will be more expensive and difficult than if you had simply registered your trademark first.

Filing an application to register your trademark with the USPTO places the whole country on notice of your trademark use. Thus, if someone attempts to register the same trademark later, you are given priority due to the earlier filing date. Accordingly, moving quickly and early will provide significant protection and peace of mind.

Additionally, federal registration provides more benefits than common law trademark protections. Among other perks, federal registration provides: 1) a legal presumption that the registrant has exclusive rights to use the mark nationwide in connection with the goods and services listed in the registration; 2) significant limitation on competitors’ ability to argue against your ownership of the mark after five years of registration; and 3) a basis to sue a competitor in federal court for trademark infringement.

If you have already registered all of the trademarks that are associated with your business, congratulations.  You have taken a critical step in protecting your business’ reputation in the marketplace.  If not, you should consider doing so promptly.  Registration generally requires only a small investment of time and money, and the return on that investment can be substantial.  Registration will not prevent infringement or misuse of your marks, but it should serve as a substantial deterrent to potential infringers, and should also make defending your marks easier and less expensive if necessary.

 

 

 

West Virginia Supreme Court of Appeals Limits the Scope of the Consumer Credit Protection Act

As many of you know, the West Virginia Consumer Credit Protection Act (“WVCCPA” or “Act”) is a remedial statute designed to protect West Virginia citizens from oppressive, unreasonable, and abusive conduct from debt collectors.  In recent years, the downturn in the economy has led to an increase in WVCCPA litigation, especially cases involving out of state lenders/creditors.  In Young v. EOSCCA (January 2017 Term No. 16-0151), the West Virginia Supreme Court of Appeals was faced with the issue of who constitutes a consumer under the WVCCPA in an appeal from the Circuit Court’s granting of summary judgment in favor of the creditor, EOSCCA.  Specifically, Ms. Young alleged that she received numerous phone calls at her home from EOSCCA; however, Ms. Young did not have any specific debt in connection with the calls that EOSCCA made to her home phone. Rather, the calls EOSCCA made to Ms. Young were in an attempt to locate a customer who was delinquent on his account.

On appeal, Ms. Young contends that she should be permitted to pursue a cause of action under the Act against EOSCCA despite the fact that the communications were not related to a debt she personally owed.  Thus, Ms. Young argued that she is a “consumer” in a generic fashion based on debts she owes to creditors other than EOSCCA’s client, and as such, the Act allows a claim when abusive debt collection practices are being made in connection with the debt owed by a third party.

In its analysis, the Court stated the two statutory definitions of consumer in the Act are “a natural person who incurs debt pursuant to a consumer credit sale or a consumer loan, or debt or other obligations pursuant to a consumer lease,” and “any natural person obligated or allegedly obligated to pay any debt.”  The Court stated that Ms. Young could not hold herself out as an “alleged debtor” based on repetitive calls to her home, as no evidence was submitted that EOSCCA ever identified Ms. Young as a debtor or sought to communicate that she personally owed money, and as such, she was unable to show that she was obligated to pay.  In turn, the Court disagreed with Ms. Young’s position that she is a “generic” consumer based on the fact that she owes money to other creditors by holding that the Legislature designed the Act in terms of connecting the prohibited debt collection practices to the specific debt at issue.

Finally, the Court held that under the Act, the term “consumer” has a specific definition and only those persons meeting that definition may bring a private cause of action, and that by limiting the right to recover for a violation of the Act to those persons defined as “consumers,” the Legislature has expressly prohibited any persons falling outside the definition of “consumer” from seeking damages and statutory penalties pursuant to the provisions of the Act.

In closing, although the holding of the Court in this matter may not seem significant, it is a positive case for creditors in the state of West Virginia, who must always be cognizant of the very long reach of the Act and its severe penalties and fee shifting results.

For more information about this article, please contact Greg Kennedy at 304.596.2277or gkennedy@fandpnet.com

 

Discovery Deadlines and the Importance of Court Approval

The Delaware Supreme Court has long valued the civility fostered within the Delaware Bar, and has encouraged Delaware attorneys to resolve discovery disputes without the need for court involvement.  While these aspects of Delaware practice remain alive and well, the issues facing civil attorneys in granting extensions to trial scheduling orders and the process of doing so, was raised in Christian v. Counseling Resource Associates, Inc.

In Christian, the Delaware Supreme Court determined that the Superior Court erred in precluding the testimony of Plaintiffs’ expert based on Plaintiffs’ failure to provide their expert reports in accordance with the applicable trial scheduling order.  Plaintiffs, the widow and children of the Decedent, brought suit against the Decedent’s health care providers for medical negligence resulting in the Decedent’s suicide.  The trial scheduling order required Plaintiffs’ expert report to be filed by December 3, 2010 in anticipation of an August 1, 2011 trial date.  As the case progressed, Plaintiffs were required to retain new counsel and, in November of 2010, the parties stipulated to extend the relevant expert deadlines.  Although Plaintiffs’ counsel wrote to the court in February of 2011 requesting a teleconference to discuss the discovery schedule, the court refused and informed the parties the trial date would not be altered.

After a number of delays, Plaintiffs’ experts were made available for depositions in late July 2011.  Shortly thereafter, Defendants filed a motion to preclude Plaintiffs’ expert testimony.  The trial court granted that motion and a related motion for summary judgment, which effectively barred Plaintiffs’ claims as a matter of law in light of the lack of expert testimony. On appeal, the Delaware Supreme Court found the trial court abused its discretion in refusing to hold a scheduling conference and in ultimately precluding Plaintiffs’ expert testimony.

In so holding, the Supreme Court reviewed six (6) factors that must be considered by the trial court in determining whether a case should be dismissed for the attorneys’ failure to abide by scheduling orders.  These factors include:

(1) the extent of the party’s personal responsibility; (2) the prejudice to the dversary caused by the failure to meet scheduling orders and respond to discovery; (3) a history of dilatoriness; (4) whether the conduct of the party or the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal…; and (6) the meritoriousness of the claim or defense.

Although a review of the factors suggested dismissal was warranted, the Supreme Court reviewed the case in light of the trial court’s failure to hold a scheduling conference when requested by Plaintiffs’ counsel, and at a time where dismissal could have been avoided.

In reviewing the case before it, the Delaware Supreme Court advised litigants that “if they act without court approval, they do so at their own risk.”  The Court further iterated that, “[i]f one party misses a discovery deadline, opposing counsel will have two choices – resolve the matter informally or promptly notify the court.”  Should a party choose not to involve the court, that party will be deemed to have waived the right to contest any late filings by opposing counsel from that time forward.  The Court counseled that parties may continue to agree to reasonable extension requests, but a proposed amended scheduling order for the trial court’s signature must be promptly filed.

In the post-Christian landscape, the determination of motions to dismiss based not on the merits, but on discovery violations are less likely to succeed.  Counsel can still agree to extensions of trial scheduling deadlines, but doing so requires the blessing of the court.

For more information about this article, please contact Noelle Torrice at 302.594.9780 or ntorrice@fandpnet.com.

 

F&P Launches New Office in Richmond, VA

On May 1, 2017, Franklin & Prokopik (F&P) announced the official opening of a new office in Richmond, Virginia.  The new office is F&P’s seventh office, and second location in Virginia.  Extending the firm’s geographic reach, the Richmond location focuses on serving clients in Central and Southeastern Virginia, including the Richmond Metropolitan and Hampton Roads areas.  This conveniently located office allows F&P to more efficiently represent existing clients in these areas and to serve new clients in the region.  The office’s grand opening was on June 15, 2017.

Led by Lindsey Lewis, the Richmond location brings extensive civil litigation experience in the areas of automobile/commercial transportation, business, construction, employment, premises, and professional liability, including defense of medical malpractice and nursing home claims and the representation of health care professionals before the Virginia Department of Health Professions.  The office provides individually-tailored legal services for F&P’s diverse clients.  These services include risk management consulting and counseling, as well as emergency response and crisis management as part of F&P’s 24-hour Emergency Response Team.
For more information about this article, please contact Lindsey Lewis at 804.932.1996 or llewis@ fandpnet.com.

Virginia Supreme Court Finds Expert’s “Process of Elimination” Opinion Lacking

The Virginia Supreme Court has overturned a jury verdict in a medical malpractice case based on the improper admission of expert testimony into evidence.  The Court’s April 13th unanimous decision in Toriash v. Lee, on appeal from the Fairfax County Circuit Court, will require the parties to try the case anew.  It is expected the court’s ruling will have an effect on all expert testimony going forward, particularly in cases requiring medical testimony.

In 2012, otolaryngologist Dr. James J. Lee performed outpatient tonsillectomy and adenoidectomy surgery on five-year-old Adam Traish, who suffered from severe obstructive sleep apnea.  After monitoring in the post-anesthesia care unit, Adam was discharged from the hospital.  Later that afternoon, Adam’s mother, Miriam Toraish, found him unresponsive and he was eventually pronounced dead at the hospital.

An autopsy concluded that the cause of death was “cardiac arrhythmia of unknown etiology.”  Adam’s mother instituted a medical malpractice action on behalf of his estate, alleging that Adam was at a high risk for post-operative respiratory complications and that Dr. Lee violated the standard of care by failing to monitor Adam overnight.

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At trial, the defense called Dr. Simeon Boyd, a pediatric geneticist, as an expert on genetics and the cause of Adam’s death.   Over Plaintiff ’s objection, Dr. Boyd testified that Adam died of cardiac arrest due to Brugada syndrome, a rare hereditary disease.  When questioned on cross examination about the basis for his opinion, Dr. Boyd stated that in arriving at his conclusion he either excluded all likely causes of death himself or “relied on the expertise of people who are qualified to exclude them.”

On appeal, Plaintiff argued that Dr. Boyd was not qualified to testify definitively as to cause of death because the differential diagnosis was not based on adequate foundation.  The Virginia Supreme Court agreed.  The autopsy report on which Dr. Boyd partially relied did not rule out respiratory compromise as a cause of death, the Court held.  Similarly, the pulmonologist’s deposition that Dr. Boyd also cited for support was not taken until after Dr. Boyd rendered his findings.  In sum, the Court held that Dr. Boyd’s testimony was based on assumptions that were not in evidence and the trial court judge abused his discretion in allowing Dr. Boyd to testify as to the cause of death.

The holding in Toraish v. Lee affects not just medical malpractice claims, but all cases in which medical expert testimony is necessary to the prosecution or defense of the case.  In personal injury claims where causation of the injury is in dispute, parties should be aware that Virginia courts will take a stringent view of the foundation required for expert testimony, disallowing conclusions that appear to be based on assumptions rather than factual findings.

What You Should Know Before Settling Claims in Maryland

What is a settlement?

A settlement agreement is a contract which parties enter into for settlement of previously existing claims by substituted performance, and its interpretation is governed by ordinary principles of contract law. The agreement is typically memorialized by a Final Release and Settlement Agreement. The Agreement typically is not filed with the court unless it needs to be approved by statue (i.e. minors). A settlement “order” which becomes a part of the Court record either by stipulation, or read into the record, is presumed to be an “executory accord”, which is an agreement for the future discharge of an existing claim by a substituted performance. In Maryland, a settlement agreement is a binding contract as long as the basic elements of a contract are present. Public policy considerations strongly encourage the settlement of controversies.

How do you enforce a settlement agreement?

If the breach of the agreement goes to an essential element the party aggrieved has two options: 1) rescind the agreement and proceed with the original cause of action; or 2) sue on the agreement for breach by compelling specific performance and securing any damages caused by the delay. Maryland courts adhere to the objective theory of contract interpretation and will give effect to the clear terms of the agreement, regardless of the intent of the parties at the time of formation.

The non-breaching party may not rely on an “invalid” provision in a settlement agreement to excuse the party’s failure to perform its obligations. Generally, when parties settle a case with the assistant of their attorneys and the settlement agreement sets forth unambiguous language expressing their mutual agreement for a stipulated remedy in the event of a breach, the court must have a compelling reason to justify refusing to enforce such a stipulated remedy.

Is the settlement agreement reached enforceable and final?

Generally, a failure to agree to an essential term means that there is no contract, however, if the parties unambiguously express their intent to “settle a lawsuit” this is considered a definite expression of their intent, and assent, to achieve a state of litigation peace. What constitutes “litigation peace” is a factually specific inquiry.

Practical scenario:

Defense counsel: “I will ask my client for $7,000 if I knew it would be accepted.” Plaintiff ’s counsel: “My client will accept and not counter if $7,000 is offered.” Defense Counsel: “We are settled at $7,000, please provide documents to carry out payment.” The next day, defense counsel sent a Release agreement containing language that Plaintiff would indemnify the released parties for any future recovery sought by Medicare. Plaintiff ’s counsel sought to strike the indemnification provision as to Medicare. The case was dismissed from the Court’s docket while the parties remained at an impasse regarding the terms of the written agreement. Defense counsel ultimately filed a Motion to Enforce Settlement.

A recent unreported opinion Court of Special Appeals, Julie Ward v. Marjorie L. Lassiter, No. 1823 (January 13, 2017) addressed this precise factual scenario. The Court of Special Appeals held that by agreeing to settle a case at a certain amount, litigants entered into an enforceable agreement to execute mutual releases, including an agreement for Plaintiff to indemnify the released parties from any claims made by third parties. Even though the parties did not discuss a release or its terms, the Court of Special Appeals found that it was clear that “an agreement to settle pending litigation includes an agreement to execute mutual releases.” The Court agreed with the Defendant that to the extent that Medicare, or anyone else would have a future claim against the Defendant or its insurance company for the funds expended to the Plaintiff as a result of the accident in issue, the Plaintiff agreed to take responsibility for those claims by virtue of settling the case. Therefore, this was not, in the Court’s review, a “failure to assent to a material settlement term.” As a best practice however, the enforcement of this contract could have been avoided had the Medicare provisions been discussed and memorialized in advance of the draft Release.