Metro Ready Mix, Inc. v. Essroc Cement Corp. (Maryland U.S.D.C.)(Not Approved for Publication)

Order Signed April 25, 2006--Judge Catherine C. Blake. Not approved for publication.

Metro Ready Mix, Inc. claims damages in a case arising out of contracts for the supply of cement. Metro initially filed a complaint in this court against Essroc Cement Corp. alleging breach of contract and breach of warranty; subsequently it amended the complaint to add allegations of intentional misrepresentation, intentional concealment, negligence, and negligent misrepresentation and to seek punitive damages. This ruling deals with Essroc's motion to dismiss the added claims.

Metro is in the business of supplying and placing ready mix concrete for construction jobs. Cement is a necessary ingredient in order to mix concrete, and for the years leading up to and including 2004, Metro obtained much of its cement from Essroc. In late 2004, Metro bid for, and was awarded, several large contracts for various projects all requiring high-strength concrete. At unclear times between November 2004 and March 2005, Metro and Essroc allegedly entered into oral contracts for the delivery of cement sufficient to cover Metro's needs for these projects. In December 2004 and January 2005, Metro, using cement supplied by Essroc, created concrete mix designs for its large projects. These mix designs received approval from the contractors and from independent testing agencies, certifying that the concrete met strength and other testing requirements.

Beginning in May 2005, Metro began to receive complaints about the strength of its concrete. In December 2005 and January 2006, Metro had its concrete tested, and the tests revealed that the cement supplied by Essroc was defective. As a result of the defective cement, Metro alleges that its customers began terminating their contracts and charging Metro for remedial costs caused by the problematic concrete. Because of the terminated contracts, Metro had to sell off some equipment at a loss, and pay for the cancellation of other leased equipment. Apparently Metro has since been forced to close its business.

Metro alleges that Essroc made misrepresentations inducing Metro to contract with Essroc. Metro representatives met with Essroc representatives in the fall of 2004 and early 2005. At these meetings, Metro alleges that Essroc stated it could provide Metro with the quality and quantity of cement it needed. Metro alleges that when Essroc made these assurances, however, it knew it was not capable of providing safe and suitable cement.

Metro's complaint included claims for intentional misrepresentation, intentional concealment, negligence, and negligent misrepresentation. Metro alleged that Essroc's two main plants were experiencing severe maintenance and quality control problems in the spring of 2005, which brought Essroc's cement in violation of the standards for cement manufacturing established by the American Society for Testing and Materials (ASTM). In its intentional misrepresentation claims, Metro alleges that in 2004 and February 2005, Essroc falsely represented that it was capable of supplying Metro with suitable cement that would meet ASTM standards, and did so "with actual malice, ill will, and spite towards Metro."

In its intentional concealment claim, Metro alleges that Essroc knew and did not disclose the problems at its manufacturing plants. In its negligence claim, Metro alleges that Essroc had a duty to exercise ordinary care in the production of cement, and breached that duty by selling substandard cement. Lastly, in its negligent misrepresentation claim, Metro alleges that Essroc falsely represented that the cement would be safe and suitable for Metro's needs. Essroc moved to dismiss the added claims.

As to the fraud allegations, the Court found that there appears to be no specific evidence or allegation that Essroc did not believe it could fulfill the contracts at the time they were entered or that it was attempting to deceive or defraud Metro with its representations. Thus, it dismissed Metro's claims for fraudulent misrepresentation and fraudulent concealment for failure to meet the specificity requirements of Rule 9(b). Because Metro did not proffer in its opposition or at the hearing any evidence that would support these claims, the Court ruled that no further leave to amend would be granted.

Because it found that the "application of the somewhat uncertain contours of Maryland law" pertaining to negligence and negligent misrepresentation in the context of a business dispute might be assisted by further factual development, and discovery will be proceeding on the contract claims in any event, Essroc's motion to dismiss the negligence and negligent misrepresentation claims were denied, subject to renewal if warranted as a summary judgment motion at the close of discovery.

Finally, because Metro has not alleged facts to show that Essroc acted with "actual malice," the Court dismissed any claim for an award of punitive damages.

The opinion and order are available in PDF.

Guttman v. Liberty Mutual Fire Insurance Co. (Maryland U.S.D.C.) (Not Approved for Publication)

Signed February 22, 2007. Memorandum opinion and order by Judge J. Frederick Motz. (Not approved for publication.)

The defendant ("Liberty Mutual") had issued an insurance policy to a homeowner ("Proctor"). After the end of the policy period, Proctor was sued by an individual ("Robinson") who claimed Proctor's daughter had shot him in the eye with a BB pistol during the policy period. Proctor failed to notify Liberty Mutual as required by the terms of the policy, and a default judgment was subsequently entered against Proctor. Almost nine months after the default judgment, Proctor finally notified Liberty Mutual, who disclaimed coverage based on the untimely notice.

Proctor then filed for Chapter 7 protection, and this action was brought by Proctor's trustee in bankruptcy ("Guttman") against Liberty Mutual, asserting "insurance bad faith," based upon Liberty Mutual's failure to defend Proctor and to settle the claim in the Robinson suit, and seeking compensatory and punitive damages on the bad faith claim and the policy limit in a breach of contract claim.

Liberty Mutual filed a motion for partial judgment on the bad faith claim. The judge found Maryland law to be clear that a bad faith claim does not lie when an insurer erroneously takes the position it has no contractual liability as to a particular claim, but only when it has proceeded on the basis that the contractual obligation exists, and has undertaken the obligation in violation of the appropriate standard of care, citing Mesmer v. MAIF.

In this case, notwithstanding Guttman's claim that Liberty Mutual had in fact assumed the responsibility for providing a defense, Guttman's pleadings included a statement that this was not in fact so, and the several contacts between Liberty Mutual and counsel for Robinson were evidently initiated by counsel for Robinson in order to extend an offer to vacate the default judgment if Liberty Mutual would appoint counsel, which Liberty Mutual declined to do. Consequently, the judge granted judgment on the pleadings to Liberty Mutual on Guttman's "insurance bad faith" claim, and struck Guttman's request for punitive damages.

The opinion and order are available in PDF.

Drummond v. Freeland (In re Wilbert H. Freeland, Sr. and Christine E. Freeland) (Maryland U.S. Bankr. Ct.)

Decision entered December 21, 2006--Opinion by Judge James F. Schneider.

The Court summarized its opinion as follows:

This opinion stands for the following propositions: (1) that certain debts that arose as a result of undue influence are nondischargeable pursuant to 11 U.S.C. §523(a)(2)(A), where the plaintiff proves by a preponderance of evidence that undue influence was exerted fraudulently; and (2) that in an adversary proceeding brought in the bankruptcy court to determine a debt to be nondischargeable, where no prior judgment has been awarded in a nonbankruptcy forum, the bankruptcy court may liquidate the damages, enter a nondischargeable judgment, and may also, where appropriate, award punitive damages as part of the nondischargeable judgment, where the plaintiff also proves actual malice in the commission of fraud by clear and convincing evidence. For the reasons stated, the instant complaint will be granted and a nondischargeable judgment in the amount of $200,000, will be entered jointly against both defendants, and the Court will enter an additional nondischargeable judgment for punitive damages against one of the defendants in the amount of $500,000.

The case involved a caretaker of a very elderly woman suffering from Alzheimer's disease and dementia. The caretaker and her husband stripped the elderly woman in her care of all of her financial assets and, perhaps, actually hastened her death. The following passaged gives one a flavor of the facts of the case:

It is obvious that between the two defendants, Mrs. Freeland was the most culpable as the leading force in the perpetration of the fraud in this case. She was the better educated of the two, and despite her advanced degree in ethics, the overwhelming evidence presented demonstrates that she was guilty of the following unethical and atrocious misconduct that was so malicious, shocking, evil, vile and reprehensible that it justifies the imposition of significant punitive damages against her individually:

(1) Mrs. Freeland isolated Mrs. Drummond from family members and friends and told Mrs. Drummond that they had abandoned her, in breach of her duty as a caregiver of the elderly to treat Mrs. Drummond with compassion.

(2) Mrs. Freeland denied Mrs. Drummond's family members and friends access to her, preventing them from socializing with her and from assessing her condition and from verifying that she was receiving proper care, in violation of her duty as a caregiver of an elderly and mentally-disabled person to communicate with her family members and friends.

(3) Mrs. Freeland denied medical treatment to Mrs. Drummond to alleviate her mental condition by not taking her to appointments, in violation of her duty to Mrs. Drummond as a care giver to an elderly and mentally-disabled person who was in need of continuing medical supervision, as required by the After Care Plan prepared by Bon Secours Hospital. The Court finds that Mrs. Freeland lied in her testimony at trial when she stated that the reason she did not take Mrs. Drummond to her appointment at Brighter Visions was because Mrs. Drummond refused to go. This directly contradicted her testimony in the Orphans Court to the effect that she had never heard of Brighter Visions at the time Mrs. Drummond was in her care.

(4) Mrs. Freeland removed Mrs. Drummond, an aged, infirm, mentally deficient person from the nursing home to which the hospital released her without any notice to or authorization from family members or trained medical personnel, which this Court finds was ultimately detrimental to Mrs. Drummond's well-being.

(5) Mrs. Freeland forged Mrs. Drummond's signature on a will and a power of attorney, whereby Mrs. Freeland fraudulently made herself a fiduciary in fact of Mrs. Drummond. She then abused her fiduciary position as personal representative and attorney in fact by transferring Mrs. Drummond's property to herself for her own benefit and that of her husband, Mr. Freeland, thereby depriving the plaintiff of her rights as the natural object of Mrs. Drummond's bounty.

(6) Mrs. Freeland obtained possession of Mrs. Drummond's house by use of the forged and fraudulent will, which she and her husband only returned to Taryn Drummond as personal representative of Mrs. Drummond's estate after the will was invalidated by the Orphans Court of Anne Arundel County, at great expense to Mrs. Drummond's estate and Ms. Taryn Drummond personally.

(7) Mrs. Freeland obtained possession of Mrs. Drummond's money in her bank accounts by having Mrs. Drummond make her the joint owner, in violation of her duty of trust to the disabled person and to her family and heirs.

(8) Mrs. Freeland dispossessed Mrs. Drummond's heirs by taking possession of Mrs. Drummond's house and money. She cheated Taryn Drummond, Mrs. Drummond's granddaughter, out of her rights to the money in Mrs. Drummond’s bank accounts by having Mrs. Drummond remove Taryn Drummond as joint owner of the accounts.

(9) Mrs. Freeland made false and misleading statements to Mrs. Drummond's attending physician who completed the death certificate when she told him that she was Mrs. Drummond's "foster daughter."

(10) Mrs. Freeland's misrepresentation to the physician that she was Mrs. Drummond’s "foster daughter" placed her in a false position as a member of the family to decline the performance of an autopsy on the body of Mrs. Drummond. This is highly relevant in light of the next finding.

(11) This Court views as highly suspicious the death of Mrs. Drummond just days after she was stripped of all of her assets by Mr. and Mrs. Freeland, while they kept her incommunicado in a childlike state in their personal residence, outside of the nursing facility and in their exclusive custody and control, away from her family and friends, who were completely ignorant of her whereabouts until Mrs. Freeland advised them of her death.

(12) After becoming Mrs. Drummond's fiduciary by fraud and deception, Mrs. Freeland misappropriated her funds, shared them with Mr. Freeland, and failed to account for their disposition or to remit them to Mrs. Drummond's rightful heirs.

The full opinion is available in PDF.