Court of Appeals of Maryland Bolsters Enforceability of Settlement Agreements

Falls Garden Condominium Ass’n, Inc. v. Falls Homeowners Ass’n, Inc.,

437 Md. 422, 86 A.3d 1274 (2014).

The Court of Appeals of Maryland recently added further support for the enforceability of settlement agreements prior to trial. While the underlying facts did not involve personal injury (the case actually involved a dispute over parking spots), the Court’s decision has a profound impact on the amount of leeway that defense attorneys have to impose additional conditions after the initial settlement.

Without going into too much detail regarding the facts, the underlying case involved a feud of “Hatfields and McCoys” proportions over parking spots situated between a condo association and a homeowner’s association in Baltimore County, Maryland. During the course of the litigation, the parties were able to come to a resolution and they drafted a letter of intent memorializing the terms after numerous e-mail correspondence regarding the settlement. Despite the length of the negotiation and drafting process for the letter of intent, there was no language in the letter of intent addressing the binding nature of the agreement. As happens all too often, problems arose following the execution of the letter of intent, and the homeowner’s association was forced to file a Motion to Enforce Settlement Agreement to implement the terms of the letter of intent.

At the subsequent hearing on the homeowners association’s motion, counsel for the condominium association argued that the association’s understanding was that there was not an enforceable agreement until every term was negotiated and a document was signed and executed by both parties. The trial court disagreed and granted the motion to enforce and entered an order directing the homeowners association to prepare a settlement agreement consistent with the terms of the letter of intent. The condominium association filed an interlocutory appeal, and the Court of Special Appeals affirmed. Falls Garden Condominium Ass’n, Inc. v. Falls Homeowners Ass’n, Inc., 215 Md. App. 115, 79 A.3d 950 (2013). The condominium association then filed the present appeal.

The Court of Appeals of Maryland, in an opinion written by the Hon. Lynne A. Battaglia, affirmed the intermediate appellate court’s ruling. Following a lengthy treatise on contract law, the Court addressed the question of whether the parties intended to be bound by the letter of intent. The Court outlined two scenarios in which Maryland law dictated that the parties were bound by the letter: (1) when, after a review of the facts, it is apparent that the parties agree on all “essential” terms, omitting only those terms that can be deemed “non-essential;” or (2) when the parties explicitly address every term and explicitly agree to such terms. While the Court found that option two did not apply, it found that the underlying facts mandated the conclusion that the letter of intent memorialized all “essential” or “material” terms of the deal.

Typically, in personal injury settlements, an agreement is made over the phone for the “essential” terms of the deal; namely, an agreed upon settlement amount will be provided in exchange for the release of all claims. Savvy counsel will then memorialize the terms in an e-mail or letter, and follow up with a release that contains standard Medicare and/or other indemnification language. Under the Court’s ruling, any additional provisions in the release are seemingly deemed “non-essential,” making the oral agreement over the phone enforceable. In an effort to avoid a lengthy dispute when a settlement goes awry, it may be prudent to outline the standard provisions of your release in your letter and/or e-mail memorializing your oral agreement. It is especially important when a more unusual provision is included in your release and was not discussed at settlement, such as a confidentiality provision. RSRM has successfully argued multiple motions to enforce settlement agreements in the past and continues to be your go-to source for future enforcement of such agreements. 

Contributed by Catherine A.B. Simanski

Diminution in Value - A reliable science?

In the context of motor torts, residual diminution in value (“residual DV”) generally refers to the perceived reduction in market value for repaired automobiles involved in accidents caused by the action of a third party.  More specifically, residual DV would be the difference in market value of a vehicle immediately prior to the accident and immediately after the accident and repair.  Residual DV is a potential issue even if an automobile is repaired professionally and properly.  The claim is based on the theory that the resale value of a vehicle that has been in an accident is often diminished due to the stigma carried by a vehicle with an accident history that may have been structurally compromised. 

DV claims are more commonly made against a negligent third party that caused damage to the automobile, as diminution of property is generally not included in Maryland automobile insurance policies.  In lieu of a recognized diminution in value, most automobile insurance policies cover the actual cash value (“ACV”) of the damage or the actual cost to repair the damage.  A few insurance companies have included language in policies stating that diminution in value is not compensable, but generally it is not addressed.  Although most states, including Maryland, have not recognized an automobile insurer’s obligation to indemnify for this type of loss, the DV theory is currently gaining strength as a major consumer concern, particularly for newer or more expensive vehicles.  The Maryland Court of Appeals has recognized that if a plaintiff can prove that, after repairs, his vehicle has a diminished market value from being damaged, then he or she can recover, in addition to the cost of repairs, the diminution in market value, provided the two together do not exceed the diminution in value prior to the repairs.  Fred Frederick Motors, Inc. v. Krause, 12 Md. App. 62, 66-67, 277 A.2d 464, 467 (1971).  As such, there are certain aspects to keep in mind when reviewing residual DV claims.

First, the residual DV should not exceed the combined repair costs and gross DV of the vehicle – gross DV being the difference in market value of your vehicle immediately before and immediately after the accident.  In other words, after the vehicle has been repaired, any residual DV award should certainly not exceed the gross DV of the vehicle.  By way of example, and without going into valuation methods, if a vehicle is worth $50,000.00 before an accident, and only $30,000.00 after being damaged from the accident, the gross DV would be $20,000.00.  If after $15,000.00 in repairs, the vehicle is valued at $40,000, then the residual DV is $10,000.  Even though the cost of repairs ($15,000.00) and the residual DV ($10,000.00) total $25,000.00, the maximum DV could only be $20,000.00 (the gross DV).  Should the residual DV award be more than $20,000.00, there would be double recovery, not to mention that the vehicle would have been considered a total loss based on those values.

Second, proof of residual DV can be difficult to prove, as there is no standard methodology in Maryland for determining the perceived loss in value.  Often property valuation experts will opine that the only absolute measure of a diminution of value loss is an actual vehicle sale that includes complete disclosure of the damage history.  At that point, a discrete number can be reached from the deduction of proceeds of the sale from the pre-loss value  of the car.    Because the circumstances of a DV claim usually involve the claimant retaining the subject vehicle, there would be no actual sale.  Even if there was an actual sale of the vehicle, there could have been other factors not reflected from the sale price, such as continued use and natural depreciation, which could have affected the purchase price of the vehicle at the time of sale.

Finally, as obvious as this may sound, an expert in a residual DV claim must actually formulate an independent opinion concerning residual DV.  Because determining residual DV is a continually evolving theory among Maryland courts, with no clearly delineated approach, it is common for expert appraisers and property valuation professionals to outsource the diminished value calculation to a valuation service prior to providing expert testimony.  Formulations of diminished value solely based on outsourced determinations of residual DV would generally not be admissible at trial as expert opinion for evidentiary reasons.

Despite the lack of what some may refer to as a “reliable calculation,” residual DV claims are a constant presence, typically in District Court. It is important for the attorneys handling those claims to have a firm grasp on applicable Maryland law related to the calculation of DV. The attorneys at RSRM are experienced at handling residual DV claims.  

Rules Are Meant to Be Broken: The U.S. District Court for the District of Columbia Denies Motion to Strike Experts for Discovery Failures

Federal Rule of Civil Procedure 26, subsection (a)(2) provides that “a party must disclose to the other parties the identity of any witness it may use at trial to present evidence." Ordinarily, this disclosure must be supplemented by a written report, prepared and signed by the witness, which includes “the facts or data considered by the witness,” “any exhibits that will be used,” and the substance of the expert’s opinions and the “basis and reasons for them.” Id. Doing so prevents unfair surprise at trial, and provides the opposing party the opportunity to prepare rebuttal reports, depose the expert in advance of trial, and prepare for depositions and cross-examination at trial. Minebea Co., Ltd. v. Papst, 231 F.R.D. 3, 5-6 (D.D.C. 2005); see also Muldrow ex rel. Estate of Muldrow v. Re-Direct, Inc., 493 F.3d 160, 167 (D.C. Cir. 2007).

In Robinson v. District of Columbia, 2014 U.S. Dist. LEXIS 166660 (2014), the United States District Court for the District of Columbia denied Plaintiff's motion to strike Defendants' accident reconstruction expert’s testimony for its failure to obey disclosure requirements by not providing its expert's curriculum vitae or a list of cases in which he was involved by trial court's scheduling order's deadline, and for not providing its expert's photographs and models prior to his deposition.

The Court ruled that striking an expert was "too draconian" for Defendants' alleged discovery failures - although Defendants failed to meet the disclosure deadlines, they did ultimately provide the expert's curriculum vitae and list of cases several weeks in advance of the expert's deposition, so there was no apparent harm to Plaintiff. 

In regard to the expert's failure to provide his diagrams and models prior to the deposition, the Court still found that striking Defendants’ expert was too harsh a penalty, and, instead, allowed the Plaintiff to reopen the expert's deposition for questioning regarding the accident reconstruction models.

The facts of the case are not relevant to the analysis. For those interested, this case was brought against the Metropolitan Police Department and the District of Columbia by Mr. Robinson's family after Mr. Robinson died in a collision with an unmarked District of Columbia Police Department police car on March 6, 2009.  

Despite the Court’s lenient ruling in the above matter, best practices mandate that the above described materials be turned over in a sufficient period of time prior to a deposition or trial to provide opposing counsel with sufficient time to review the materials. No one particularly “won” in this situation, and reopening depositions cost additional time and money to both sides. While this case highlights the Court’s desire to reach a reasonable and fair outcome for all parties involved by permitting the expert testimony despite belated discovery when there was no actual prejudice to the plaintiff, it is prudent not to push the limits of a court’s patience with unnecessary discovery violations if it can be avoided.