Password protect your production, please!

Document production has always been an arduous task for lawyers. Collection and review for privileged information, followed by redaction and creation of privilege logs accounts for large chunks of time, and commensurate expense, in civil litigation. We are careful because it is important to protect our client's privileged communications and our own work-product. It would never occur to any civil litigation lawyer to simply invite access to a client's files without some prior review.

But mistakes happen. Years ago, when faxed transmissions were the latest in technology, a court was asked to determine if privilege had been waived when one law firm inadvertently faxed information to all opposing law firms. Care in use of the new technology was widely counseled as a result of the case.

And here we are, again.

It is increasingly common in our practice to share voluminous document productions via cloud based applications, such as Box and Dropbox. The risk of not implementing the most basic password protection, let alone proper vetting before an upload, is fully on display in the February 9, 2017 decision Harleysville Ins. Co. V. Holding Funeral Home, a federal district court case out of Virginia.

In connection with pretrial discovery the insurance company plaintiff uploaded privileged video files to Box.com for sharing among its own employees and a related entity. The link was not password protected and was later shared with the insurance company's lawyers who included the unprotected file in a larger production made to a lawyer for the other side, who further shared the link with other defense lawyers. The privileged nature of the cloud based files was recognized by the defense lawyers, who elected to review the files without making any disclosure to the producing party. The sharing and subsequent disclosure was inadvertent- the downloading, reading and further sharing by the opposing defense lawyers was not.

The insurance company's lawyers discovered the inadvertent disclosure when the protected folder was produced in a reciprocal production by the defense. A back-and-forth ensued among counsel involving demands for return and destruction of the electronic files. The dispute triggered the insurance company's motion to disqualify the defense lawyers.

A federal judge ruled that the lawyers did not have to be disqualified as their replacements would continue to have access to the inadvertently obtained files. But the court went a step further to sanction the defense lawyers for having downloaded, read and shared the clearly privileged items. Citing well known ethical obligations the court chided counsel for not having notified the insurance company's lawyers of the inadvertent disclosures. Ethically speaking, the matter should have stopped there- the material should have then been removed from circulation. But for the failure to act ethically, the court ordered payment of the insurance company's legal fees associated with the motion.

Of course, the further distribution of the inadvertently produced files would have been prevented by application of password protection to the particular folder.

Accidents happen, and careful lawyers make inadvertent disclosures. But even the most contentious cases are guided by ethical constraints on the unfair use of mistakenly disclosed information covered by privilege. In our own practice we recently received a large electronic production via Box.com. Notice was given by one of the other lawyers that the upload inadvertently contained privileged information. This was followed by a quick acknowledgement among all other lawyers in the case that no access would be made until the production was properly adjusted--no harm, no foul.

After thirty years of practice I take comfort in the high ethical standards of my peers, even where we disagree on the facts, law and likely outcome of a case. But there is no need to unnecessarily test the boundaries of your opponent's ethics, so set a password, please!

Your Maryland criminal lawyer should walk with you.

The Coast Guard Doesn't Need A Warrant.

May 21-27, 2016 is National Safe Boating Week. Coming one year after a record number of injuries and fatalities on the Chesapeake Bay, the United States Coast Guard has been actively boarding and inspecting small boats early in this boating season. Social media contains a steady stream of questions about Coast Guard authority to board and inspect small boats without probable cause or a warrant. The concept of probable cause and the Fourth Amendment to the United States Constitution are familiar to us from daily news reports about searches conducted of cars, homes and “suspects.” But every discussion thread includes some very bad information. The Coast Guard’s authority to search every nook and cranny of your boat is not the result of the misperceived government expansion in to our daily lives. The Coast Guard has simply never been restricted by the U.S. Constitution. It has operated as America’s most powerful police force for more than 200 years.

The Revolutionary war ended in 1783. The revolt had cost $400 Million in soldier’s wages, alone, and with no taxing authority the new country was deeply in debt to foreign nations. Six years later, in 1789, the first Congress imposed duties and tariffs on goods brought to the United States to retire the debt. However, the new nation had no means to enforce payment. The lack of domestic policing permitted smugglers to land goods easily along the American coast.

In 1790, the first Congress created the Revenue Cutter Service specifically to collect tariffs and duties on all imported goods. The authority of the RCS was broadly stated:

[I]t shall be lawful for all collectors, and the officers of the revenue cutters herein after mentioned, to go on board of ships or vessels in any part of the United States, or within four leagues [about 12 miles] of the coast thereof, if bound to the United States, whether in or out of their respective districts, for the purposes of demanding the manifests aforesaid, and of examining and searching the said ships or vessels; and the said officers respectively shall have free access to the cabin, and every other part of a ship or vessel 

Under this law, the RCS could board, search, seize and forfeit vessels. When you consider that the Fourth Amendment to the U.S. Constitution was written one year before creation of the RCS, on September 25, 1789, this is a remarkable grant of policing authority. Even after the Fourth Amendment was ratified on December 15, 1791, the RCS authority to board, search and seize remained unchanged for the next seventy five years. 

In 1866, a new law was passed, but only to further strengthen RCS authority to prevent smuggling. It made the powers to board, search and seize even broader by eliminating the “four leagues” geographic limitation. It also gave the RCS broader authority to address "any breach or violation of the laws of the United States." And it authorized, for the first time, the arrest of persons who violated the laws of the United States. The Fourth Amendment was not seen as a limitation on this incredibly broad grant of enforcement power. 

In 1915, the RCS was combined with another agency to form the modern Coast Guard. The new law declared that "[a]ll duties now performed by the Revenue-Cutter Service and Life-Saving Service shall continue to be performed by the Coast Guard.” This included the rights to board, search, seize vessels, and arrest persons found in violation. 

In 1936, Congress adopted what has become the modern grant of authority for Coast Guard searches of your boat. 14 USC 89 (a) now reads: 

The Coast Guard may make inquiries, examinations, inspections, searches, seizures, and arrests upon the high seas and waters over which the United States has jurisdiction, for the prevention, detection, and suppression of violations of laws of the United States. For such purposes, commissioned, warrant, and petty officers may at any time go on board of any vessel subject to the jurisdiction, or to the operation of any law, of the United States, address inquiries to those on board, examine the ship’s documents and papers, and examine, inspect, and search the vessel and use all necessary force to compel compliance. When from such inquiries, examination, inspection, or search it appears that a breach of the laws of the United States rendering a person liable to arrest is being, or has been committed, by any person, such person shall be arrested or, if escaping to shore, shall be immediately pursued and arrested on shore, or other lawful and appropriate action shall be taken; or, if it shall appear that a breach of the laws of the United States has been committed so as to render such vessel, or the merchandise, or any part thereof, on board of, or brought into the United States by, such vessel, liable to forfeiture, or so as to render such vessel liable to a fine or penalty and if necessary to secure such fine or penalty, such vessel or such merchandise, or both, shall be seized.

 Your boat’s size, or its dedication to recreational use are not factors in whether the Coast Guard will board and search your boat. And more importantly, the Coasties do not require probable cause. 

In 2008, the Department of Homeland Security published its “Small Vessel Security Strategy,” which describes the joint efforts of many enforcement agencies, including the Coast Guard, to identify and limit the threat to maritime infrastructure and military vessels posed by terrorists in small boats. Small vessels are considered high risk delivery systems for contraband, including explosives, because they move so freely among our waterways, and close to sensitive infrastructure. It is no wonder we are at greater risk for unwanted, and unwarranted boarding and inspection. Of course, nobody complains when the Coast Guard renders aid in an emergency.

Author and Chesapeake Bay sailor Carolyn Sienkiewicz wrote a piece that appeared on Cruising World’s website in 2011 describing how her boat was boarded by the Coast Guard. She was sailing the Chesapeake Bay with her husband on their 42 foot sailboat when hailed by the Coast Guard for a safety inspection. She was understandably unnerved by the 25’ Defender Class boat, with machine gun mounted on the foredeck. She later interviewed an Officer from the Coast Guard station: 

A boarding usually sends two officers onto the other vessel. The rest of the crew remains on the response boat, which moves off to a safe distance. Once aboard, the boarding officers quickly assess the situation (number, size, and strength of people; weapons aboard), then proceed with the safety inspection while the other two officers aboard the Coast Guard vessel assure the overall security of the scene. 

Boardings typically fall into one of three categories,” says [Petty Oficer 2nd Class David] Carrier. “A response to a marine incident, such as a tanker grounding or a boating accident. A boat operating in an unsafe fashion. And preventive, in which we check for safety equipment and compliance with U.S. Coast Guard rules and regulations.”… The boardings can be of any type of vessel, whether recreational, commercial (say, a passenger-carrying vessel or workboat), and yes, even dinghies and kayaks. The Coast Guard won’t hesitate to stop or board a sailboat that’s under full sail.

 The Coasties Are Coming, Carolyn Sienkiewicz, posted March 21, 2011 (http://www.cruisingworld.com/how/coasties-are-coming)(last checked 5/19/2016) 

Your boat may feel like home, and it may feel like a very private oasis. But in reality, you have far less Constitutional protection against government intrusion on your boat than you do walking along a sidewalk in downtown Baltimore. The government has long reserved to itself absolute entitlement to board and inspect every nook and cranny of your boat, without reasonable suspicion of a crime, and without a warrant.

So stay sober, wear your life jacket, and keep your other safety gear up to date, and happy boating!

Maryland doubles down to permanently cap Vessel Excise Tax.

The Gambler’s Fallacy is the mistaken belief that if a coin-flip comes up “heads” ten times in a row, then it is more likely to come up “tails” on the eleventh flip.  It is a trap that ignores how probability operates. Our legislature is falling victim to a similar fallacy this session, as it works to make permanent the $15,000 cap on Maryland’s Vessel Excise Tax ("VET"). As of this writing, the bill has passed all hurdles in the legislature and is well on its way to becoming law by June.

The cap operates as a subsidy on vessel purchases over $300,000. The cap has no direct impact on the majority of Maryland boaters who buy and sell, as our boats are much less expensive. It will directly benefit a slim number of wealthy boaters.  This issue has been hotly debated among many sectors of the State’s marine industry since 2005. Supporters argue the cap will promote increased spending by the wealthiest boaters, and thus benefit the entire industry. Detractors say the cap will simply deplete income needed to support the Waterway Improvement Fund (“WIF”) and that the cap is a poor bet on an uncertain economic return.

Excise taxes are as old as our Country. Ten years after the British surrender at Yorktown, and only two years after the United States Constitution was adopted, the Congress passed the Distilled Spirits Tax of 1791, an excise tax on whiskey. The federal government had assumed war debt of the thirteen states and sought to offset the burden by taxing grain and spirits. The tax was unpopular, as whiskey was often used for direct trading, like currency. Larger distillers could easily pass the tax to consumers, but smaller distillers and frontier grain producers were directly burdened by the cash payment that could be as much as thirteen cents per gallon. Over three years simmering revolt roiled the frontier, particularly in southwestern Pennsylvania where tax collectors were attacked. President Washington dispatched a militia of close to 13,000 men, including many Marylanders, to preserve order and enforce the tax.

Maryland has collected a vehicle excise tax since 1933, largely without incident. Since 1966, the WIF has been the recipient of the 5% VET collected on the value of watercraft purchased or used in Maryland waters, and a smaller tax on all motor fuels. Through the WIF, our government improves and maintains the infrastructure necessary for safe public boating. The necessity and benefit of the WIF is not disputed by either side of the cap debate. Today, the WIF is funded solely by the VET. A cap on the tax is described as either revenue neutral, or a downright revenue drain. Only one side can be correct.

In 2011, excise taxes generated $15.4 Million for the WIF. In 2012, this declined to $14.2 Million. By 2013, the State Legislature adopted a temporary cap on the VET, with the bald hope of increased registration of high valued boats. In August 2015, the University of Maryland Environmental Finance Center issued an analysis of the cap, with only one concrete conclusion- the cap resulted in $588,000 of lost revenue over 2013 and 2014.

The analysis is coupled with several “may have” conclusions, which amount to little more than wishful thinking:

• The cap “may have” lead to increased registration of vessels worth $350,000 to $399,999, although “the net impact on VET revenue is estimated to be negative.”
• The increase in registration of vessels worth $400,000 or more “is likely due” to the cap, but “was not enough to offset the loss in VET revenue.” The increase is attributed to 60 additional registrations in this category.

The cap is justified largely for its claimed trickle down economic effect- it “may have” generated $1 Million in direct spending in the overall economy (citing a survey of “high valued” boat owners who averaged 25 trips per season), with a multiplier effect of $2.5 Million over two years. Instead of reading the data as a general negation of the benefits attributed to the cap, our Legislature has simply doubled down on the initial bet, making the cap permanent on the assurance that good things “may have” resulted from the temporary cap, and they may happen in the future.

With annual VET receipts between $14 Million and $15 Million, it is indisputable that the bulk of WIF revenue is derived from the purchase and registration activities involving vessels well below the $300,000 cap threshold. The cap can only be reasonably construed as a tax break for the wealthiest of boaters who already bear the least economic responsibility for maintaining our waterways. Meanwhile, the loss of revenue intended for the protection of public boating facilities and infrastructure will continue to decline, and the majority of State boaters will suffer.

On your next visit to play the slots, kindly nudge the legislator on the stool next to you. Suggest that it is time for him to go home-he’s playing with your money in a game where the odds remain unreasonably long.

Voided reverse mortgage generates free money for poor Mrs. Black.

Lien priority disputes in Maryland courts are often resolved with the almost automatic application of equitable subrogation- where a lender pays off prior liens but fails to record a new lien it will be granted the prior lien status. This operates to defeat intervening liens, including federal tax liens, other mortgage liens and judgment liens. It is predicated on fairness. The property owner is encumbered by no greater lien than he had before, and the intervening lien holders do not receive a windfall because of another's mistake.

Our appellate courts have said that negligence on the part of the lender or settlement company in conducting a title search will not bar application of equitable subrogation. Some lawyers in our office joke that the bar is low enough that settlement companies could send a blind pig to conduct a title search and the lender would still prevail over intervening liens by the application of equitable subrogation.

And so the September 30, 2015  Nutter v. Black opinion by the Maryland Court of Special Appeals arrived on my desk like a cup of black triple espresso- I was wide awake even at page thirty-five, where the court slaughtered the blind pig. Where I fully expected equitable subrogation to save the lender, the appellate court declared "no." Most surprising was that the lender in this decision paid off a prior mortgage lien, gave the borrower cash, promptly recorded its own lien and then lost it all.

James B. Nutter & Co. gave Mrs. Black a reverse mortgage. But whomever searched title failed to pick up that Mrs. Black was the subject of a guardianship dating from 1989. Not only did the title search miss the guardianship in the court dockets, but it missed reference to the guardianship in a deed and deed of trust granted by Mrs. Black's guardian to the prior lender.

Mrs. Black was allowed to back out of her reverse mortgage!

Mrs. Black's court appointed guardian found out about the reverse mortgage by accident- he received notice from Bank of America of the payoff. The guardian then discovered the reverse mortgage, and found further that over $57,000 in cash had been deposited in Mrs. Black's personal accounts.

The resulting circuit court conflict between the reverse mortgage lender and Mrs. Black's guardian centered on Mrs. Black's capacity to make a mortgage. The lender took the position that Mrs. Black may have been incompetent but that it was the guardian's duty to promptly ratify or avoid the deal.  The lender argued that the guardian waited over a year, to the great prejudice of the lender. After all, the prior mortgage was paid, its lien was released, and Mrs. Black received a lot of cash.

The guardian held firm that because Mrs. Black had been adjudicated disabled she thus had no ability to make any agreements with the lender. He refused to ratify the reverse mortgage or to even return money paid by the reverse mortgage lender to payoff the Bank of America lien. And he demanded that the lien be declared void.

As a back up legal position the lender requested application of equitable subrogation. This would have given the lender the same lien position held by the bank paid off by the reverse mortgage.  And it would have left Mrs. Black in no worse position- she had a mortgage before, and she would have a mortgage after.

The trial court and the appellate court began their analysis at the same legal point. Both started with an examination of Mrs. Black's status as a legally disabled person. Surprisingly, Maryland has very little precedent discussing whether contracts with incompetent persons are "void" (like it never happened) or "voidable" at the election of the disabled person or the guardian. In fact, we have to search back to 1926 to find another similar case. But once this appellate panel answered the question, the remaining issues fell against the lender.

This opinion makes clear that once a disabled person is adjudicated incompetent, and awarded a guardian of person and property, then a contract to make a loan in exchange for a mortgage lien is void. It is a non-event. The documents have absolutely no legal value, and the lender who mistakenly contracted for the loan has nothing to enforce against the borrower or the property.

The position follows a simple declaration contained within the Maryland Estates & Trusts Code that upon adjudication all property of the disabled person vests in the guardian.  And so, in this case Mrs. Black was deemed not to have any property rights at the time she contracted for the loan. Having no property rights, she was without any ability to pledge the real property as security for the reverse mortgage.

At this point within the appellate court's analysis a title lawyer would reasonably expect application of equitable subrogation to salvage a partial victory for the lender- the court should have awarded a partial lien for the money loaned at least to the extent of the prior payoff. The apparent negligence exhibited by the lender in not finding guardianship records, or even the signatures of the guardian on the prior lien documents, should not have barred application of equitable subrogation.

So were my expectations as I turned to page 23 of the opinion, where I fully expected the warm blanket of equitable subrogation to safely swaddle the lender.

But this appellate panel determined the lender had no rights to receive anything in exchange for paying off the prior Bank of America loan. Quoting prior cases, the panel explained that:

It is undisputed that once properly yoked with the label of "mere volunteer" or "officious payor," a plaintiff is prohibited from recovering under theories of unjust enrichment or subrogation. It is less clear, however, precisely when a plaintiff's payment to a third party satisfying the liability of the defendant renders a plaintiff a volunteer and casts him or her "into legal outer darkness."

Once again, it was Mrs. Black's status as a legally adjudicated disabled person that drove the court to cast the lender "into legal outer darkness." Having no property rights, herself, Mrs. Black was not obligated to any lender. Only her guardian had any rights to contract, and thus only he had legal obligations relating to Mrs. Black's property.

The lender argued for application of equitable subrogation, saying that it had committed a reasonable mistake, even though the court records and title documents identified the guardianship. To this the panel said:

Because a disabled person lacks he capacity to enter into contracts and cannot encumber property...no mortgage lender exercising even an iota of diligence and prudence would extend a loan to an adjudicated disabled person.

And there it is- the three judge panel drop their microphones and exit, stage right, leaving the lender with no loan, no lien, and no cash.

UPDATE:  On January 29, 2016, the Maryland Court of Appeals denied a petition for writ of certiorari (a permissive appeal to the highest appellate court on matters of public policy). The decision will thus remain, undisturbed, as the current statement of law in Maryland.

Several Maryland appellate decisions have recited that the neglect of a lender will not prevent equitable subrogation from saving at least a partial lien to the extent of the payoff to the prior lender. And within the last year a federal appellate court interpreting Maryland law correctly noted that equitable subrogation operates automatically, as a matter of law, at the very moment of payment. The lack of diligence or prudence of the lender is not the determining factor.

As the law of the land, we expect ongoing efforts by intervening lien holders to chip away at the automatic application of equitable subrogation by urging courts to more closely examine the relative lack of diligence or prudence of the lender.

Common sense still applies, even to Maryland shareholder disputes.

It's been the law in Maryland since the 1800's that corporate shareholders have an absolute right to inspect the books and records of the company. It is set down in our statute books and is akin to a Bill of Rights for shareholders. But a request for inspection is often the first skirmish in conflict between shareholders and the governing board and its members. The request is not always an innocent search for information, but often is an attempt to harass or even to gain competitive advantage. And if not handled properly by both sides, this initial request can birth lengthy and costly litigation.

On August 28, 2015 Maryland's Court of Special Appeals gave voice to common sense when it slapped down an minority shareholder's request for unfettered access to corporate records where he also owned a stock in a direct competitor. The initial request for information was innocent enough-- the minority shareholder sought only the information and records described in the Maryland corporations statutes. The corporation, however, asked that the requesting shareholder sign a confidentiality agreement before certain information was released, and that is where the litigation grew out of control. The request was made because the requesting shareholder also owned a separate and competing business.

The trial court judge heard argument on the requesting shareholder's demand that access under the corporation statute must be unfettered, and not subject to any limitations. He took the hard stand that his status as a potential competitor was not enough to require his written promise of confidentiality, to which the trial judge replied:

My ruling is based on a reasonable interpretation of the statute. And that is I cannot let a stockholder go into a company just because they own more than 5 percent of the stock and take the confidential records and books to a competing company. Not gonna let it happen

The unhappy shareholder appealed and received a second dose of common sense when the panel wrote:

We agree with the trial court’s “exercise [of] sound discretion” in requiring that appellant sign a confidentiality agreement. ..... A corporation may not deny a stockholder the right to inspect the books of account... A corporation may, however, require the stockholder to sign a confidentiality agreement where the confidentiality agreement and its terms advance the purpose of “protect[ing] the corporation against disclosure and misuse of confidential documents and information by the stockholder.” ...Here, the confidentiality agreement advances that purpose, because the requesting stockholder is also the owner of a company that is in competition with the corporation.

A request for corporate books and records is a powerful tool for the minority shareholder, but Maryland's courts will not close one eye when the requesting party seeks only access to competitive information. Common sense can still apply, even in the hand-to-hand combat of daily business life.

Kill your ground rent! Once and for all time.

If you own or lend against property in the Baltimore metropolitan area, it is very likely that you are involved in a ground rent- where there are two chains of title for the same property, one for the leasehold (the ground rent tenant), and one for the reversion (the ground rent landlord). There are currently almost 90,000 registered with the State of Maryland, and likely thousands more that are not yet registered.

Effective July 1, 2015, there are new rules in effect for the payment, foreclosure and redemption of ground rents. All triggered by the 2014 Goldberg decision of the Maryland Court of Appeals invalidating 2007 legislation which had gutted existing rules for ground rents.

Here is a brief summary:

• .Ground rents must be registered. 
• Very strict notice requirements must be met by landlords both before and after rents become due.
• All lien holders shown in the land records must receive notice from the landlord.
• Redemptions are much easier, and can be made at several points in the process, including for six months after a court order foreclosing a ground rent.
• Claims for attorneys fees and added expenses are greatly limited.
• Secured lenders may now independently redeem a ground rent.

While the new rules largely reinstate vested property rights wrongly stripped by the Legislature, the creation of a redemption right for lenders is the most significant addition. Under the old rules a lender could not redeem a ground rent, directly. The forms submitted to the State Department of Assessments and Taxation included an affidavit from the ground rent tenant. Often, this person was either absent or in the midst of a loan default or foreclosure. And so, he rarely cooperated to redeem where it merely paved the way to his own foreclosure.

The new law permits a lender to redeem when the mortgage loan to goes to default.  The bank can now "clear the decks" of a ground rent. That's pretty handy, if you're a bank or foreclosure trustee.

But most importantly, the cost to an owner for a ground rent redemption is relatively low.  The formula is contained in the statutes, and so there is no uncomfortable negotiations. And it doesn't even require knowledge of who owns the ground rent- the statutory redemption amount can merely be paid to the State Department of Assessments and Taxation. 

And so our advice to you owners and lenders is pretty simple-- kill your ground rent.

Maryland stops frivolous foreclosure defense motions.

Maryland's intermediate appellate court provided clarity to a confusing rule, but at the same time made it more difficult to stop a residential foreclosure.

In Buckingham v. Fisher the Maryland Court of Special Appeals was asked to make clear what must be alleged in motions to dismiss filed in foreclosure cases.  Since 2009, the rules have separated motions to enjoin and dismiss foreclosures from the old rules on traditional injunctions. Among the requirements of the new rule is that the homeowner (or any other interested party seeking to dismiss or enjoin a foreclosure) must allege a defense that "on its face state[s] a valid defense." Absent this core requirement, the motion will be denied, and the foreclosure will proceed.

In Buckingham, the allegation was forgery.  The Personal Representative of one homeowner alleged that the signature of the other long-dead homeowner was forged. He alleged that the forgery made the deed of trust void from its inception.

For us lawyers, the most important part of this decision is the appellate court's direction that a motion to dismiss in a foreclosure case is scrutinized much differently than an ordinary complaint.  When a new case is filed, the complaint will survive a motion to dismiss if there is any basis from which the court may infer a valid claim. But in foreclosure cases, the allegations made against the deed of trust must be made with "particularity." And that is the highest civil pleading standard.

In short, the motion to dismiss a foreclosure case must meet the same pleading standards as cases alleging fraud.

The Buckingham decision illustrates how high the bar has been set.  Where the motion to dismiss alleged forgery, the motion failed for lack of pleading on one key element- the forger's intent to defraud.  The court did not leave open the possibility that this element could be filled in by future discovery. Instead, it upheld the trial court's outright denial of the motion.

The pendulum continues to swing away from the very liberal use of various procedural rules by those seeking to stop or delay the foreclosure process. The courthouse door still remains open to the truly aggrieved.

Limited representation arrives in Maryland!

Here is the current reality in Maryland if you are served with a court summons and complaint:

• You didn't choose to get sued, and now you are forced to defend yourself and also assert your own claims against the folks suing you.
• Your money is tight, and legal fees are not part of your budget. And this is true whether you are an individual or owner of a corporate entity.
• You want to hire a lawyer to help through critical parts of your case, like drafting a court document or appearing for a deposition, settlement conference or motion hearing, but the lawyers you interview only quote fees to take over your entire case until the end--and you can't afford it!

Maryland's current court rules simply do not permit a lawyer to enter his appearance in your case for only one limited event- that one deposition or one court hearing.  The rules require entry of a general appearance which commits the lawyer to remain in your case to the end, unless he formally withdraws under a sometimes complicated process. The current rules do not guarantee against a lawyer being forced to continue in the engagement despite not getting paid by you. There are many examples where judges have required lawyers to stay in a case despite requesting to withdraw for non-payment.

As a result, you currently cannot hire a lawyer to appear with you for one limited event.

This will change on July 1, 2015 when the current rule is amended to permit the entry of a limited appearance under certain circumstances.  The guts of the new rule say that

[a]n attorney, acting pursuant to an agreement with a client for limited representation that complies with Rule 1.2(c) of the Maryland Lawyers' Rules of Professional Conduct, may enter an appearance limited to participation in a discrete matter or judicial proceeding...

 This is a huge deal for you, the consumer of legal services.  You may now  hire a lawyer to appear in court for one event.

How does it work?  First, you will have a written fee agreement with the lawyer that describes the limited purpose of the engagement. By way of example, an agreement may say "attorney agrees to appear for and with client at the motion hearing now scheduled for Monday..." And make sure the agreement anticipates some preparation time by the lawyer in advance of the hearing. You might also include language that covers unanticipated rescheduling of a hearing because of weather or illness.

Second, you will sign a form that gets filed in the court case which describes the limited engagement. The rule describes exactly what must be in the form, and you will just check a box and sign at the bottom. This form gives notice to everyone else involved in the case that your lawyer will only appear for a limited purpose at one event.

Third, you must pay your lawyer the agreed fee!  This part of the lawyer/attorney relationship does not change. But with the agreed limitation on the scope of his engagement, you will pay less!

We do anticipate some issues that the new rules cannot address, including how notices of limited engagement will be handled by the court clerks. The new rule means that the court's computer systems will have to change to track limited entries of appearance.  Even now, the court's computer system will continue to mail court notices to lawyers who have formally been withdrawn from cases, and so we do not expect the problem to lessen with this new rule. In fact, limited engagement lawyers should expect to receive continued court notices of events even when the limited engagement has ended.

And our beloved judges are another wild card.  They do have the authority (or, they believe they have the authority) to hold lawyers in cases to avoid prejudice to clients and the justice system, even when they have not been paid and requested to withdraw. It is conceivable that even where a proper limited engagement has been entered that a lawyer could be forced to continue in a case.

But these risks are slight, and we applaud Maryland's attempt to make civil justice more accessible and affordable to a broader range of folks.  You will still have to pay legal fees to hire a good lawyer suited to your limited event,  and you should expect to pay for the time a lawyer needs to prepare for the event. But with this new rule you may avoid having to shell over a traditionally large retainer that anticipates a long engagement.

Will your family steal your home?

Thanks to the generosity of over 5,000 online supporters from across the globe, a 91-year-old Ohio man, John Potter, has successfully overcome his daughter’s attempts to evict him from the home he built 56 years ago.

In 2004, while battling a serious illness, World War II veteran John Potter gave the general power of attorney to his daughter, Janice Cottrill.  Unbeknownst to Potter, Cottrill exploited this power to convey his home’s deed to herself.

Potter learned of the deed transfer in 2010 and promptly switched power of attorney to his granddaughter.  He then sued to reclaim the one-story house, arguing that his daughter’s deed transfer was illegal because as the power of attorney, she cannot transfer assets to herself from the estate she oversees.

He initially won in the county court, but in 2012, an appeals court overturned the decision.  It stated that the four-year statute of limitations had passed on the accusation of breach of fiduciary duty.  Thus, the deed could not be returned to Potter.

Earlier this year, the family dispute culminated in Cottrill’s eviction notice to her father, informing that she had terminated his “existing lease.”  Yet, she, in agreement with her attorney, offered to allow Potter to remain in the house if he bought it.

Potter’s only income is his pension, making it nearly impossible for him to afford the $125,000 price tag for the home he once owned outright.  This prompted Jaclyn Fraley, his granddaughter and current power of attorney, to launch an online campaign to raise the necessary funds.  The news outlets picked up the story, and in just a month, Fraley and Potter have already exceeded their expectations, earning over $135,000.  Impressively, donations continue to pour in, giving Potter additional finances to continue to care for the home.

Through grit, persistence, and several thousand generous friends, John Potter scraped his way back from a power of attorney gone terribly awry.

Horror stories such as this nightmare can and do happen—but they do not always end so favorably.  Powers of attorney are often necessary, but it is imperative to understand this role’s authorities and responsibilities before you assign one or become one.  Or, perhaps you will learn all of this in the course of complex probate litigation?


UPDATE 6/20/13: 
 

John Potter once again finds himself facing a looming eviction.  Due to price disagreements, Janice Cottrill rejected her father’s recent offer on the home.

An independent market appraisal conducted on the home revealed its value is $47,000 with a tract of land worth $2,830.  Through his attorney, Potter offered to pay his daughter this market value, but he instead received a counter-offer around $85,000 plus $4,000 and $11,500 for the eviction process and attorney fees, respectively.  Potter attempted a second offer of $60,005.23 on June 13, but Cottrill declined without a counter-offer, issuing a letter through her lawyer informing that she finds “the offer unacceptable and decline[s] the same.”

Potter’s attorney, Tim Gleeson, says that he and his client are open to conducting another appraisal but admits that without a counter-offer, the best move is to look for new housing for Potter.

With his eviction hearing scheduled for June 26, Potter fears the judge will have no choice but to force him out of the home.  Jaclyn Fraley says that she will help her grandfather purchase a new house with the generous donations from thousands of internet donors. 

He will not be homeless but John Potter will most likely never again live in the home he built 56 years ago— all because of a power of attorney gone wrong.