Tuesday, December 26, 2006

Max's of Camden Yards, LLC v. A.C. Beverage (Ct. of Special Appeals)

Decided December 26, 2006 -- Opinion by Judge James R. Eyler.

Plaintiff in underlying case (Burger) brought suit for injuries he sustained when he drank beer that had been drawn through "tainted" lines at a bar. The plaintiff sued the party responsible for maintaining the lines (A.C. Beverage) and the owner of the bar (Max's). A.C. Beverage settled the case, and obtained a release for both Max's and itself. Nevertheless, Max's subsequently brought suit against A.C. Beverage seeking indemnification for the legal fees and other costs it had expended in defending the suit brought by Burger as well as in bringing the instant suit. Finally, Max's sought a declaratory judgment that A.C. Beverage would be responsible for any other injuries suffered by other patrons as a result of the tainted beer lines.

Held: Maryland recognizes the distinction between "active" and "passive" negligence. A party liable for "active" negligence cannot obtain tort indemnification regardless of whether the other party was also guilty of "active" negligence.

Maryland does recognize that, when an innocent party is forced into litigation with a third party by the wrongful conduct of another, the innocent party can recover fees and costs incurred in defending itself from the culpable party.

Despite general rule to the contrary, it is "highly doubtful" whether, and if so to what extent, Maryland would allow fees and costs as part of an indemnification claim based on the "active-passive" distinction. Generally, an alleged tortfeasor has no duty to defend another alleged tortfeasor.

Even assuming Maryland would allow costs and fees as compensable element under indemnity action based on "active-passive" distinction, they are not compensable under the facts of this case. When the implied indemnity claim is for counsel fees and costs, fees are unrecoverable when the tort plaintiff’s complaint alleged primary or active negligence, in whole or in part, against the alleged tortfeasor seeking indemnity, and the underlying case was dismissed prior to any factual findings.

Note: The Court explicitly confined its decision to the facts in this case and declined to issue any "general" rules. Thus, this decision is strictly limited to the facts of this case. For example, the outcome might have been different if the case had been tried and there were a finding of fact that Max's was only passively negligent.

The Court also declined to award the fees and costs of the present action. This would have been true even if the Court had allowed fees and expenses in the underlying case.

Finally, the Court determined that the request for declaratory judgment as to future actions did not present an actual and justiciable case in controversy. "One thing is clear, however: 'In a declaratory judgment proceeding, the court will not decide future rights in anticipation of an event which may never happen, but will wait until the event actually takes place, unless special circumstances appear which warrant an immediate decision.'"

This case is available in WPD and PDF formats.

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