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Maryland Court of Appeals Recognizes a Cause of Action for Breach of Fiduciary Duty

In a newly issued opinion, the Court of Appeals of Maryland has clarified existing law and expressly recognized an independent cause of action for breach of fiduciary duty.  In William H. Plank, II, et al. v. James P. Cherneski, et al., Misc. No. 3, September Term, 2019. the Court observed that whether Maryland recognizes an independent cause of action for breach of fiduciary duty is a question that “Courts and commentators have been asking … for 23 years since this Court articulated its holding in Kann v. Kann, 344 Md. 689 (1997).”   In Kahn, the Court declared that there was “no universal omnibus tort for the redress of breach of fiduciary duty,” but noted that “[t]his does not mean that there is no claim or cause of action available for breach of fiduciary duty.”  344 Md. at 713.  In its new decision, the “Court recognizes an independent cause of action for breach of fiduciary duty.  To establish a breach of fiduciary duty, a plaintiff must demonstrate: (1) the existence of a fiduciary relationship; (2) breach of the duty owed by the fiduciary to the beneficiary; and (3) harm to the beneficiary.  The recognition of an independent cause of action for breach of fiduciary duty is pertinent to the operations of condominium and homeowner associations, and, in particular, may impact the potential liability of developers during the period of time when they are in control of an association’s board.

U.S. District Court Allows Association’s Claims To Proceed For Actions During Period of Developer Control

The United States District Court for the District of Maryland has denied a motion to dismiss filed on behalf of a developer, and allowed claims of a property owner’s association to proceed that concern actions taken while the board was under the control of the developer’s agents.  In Greenspring Quarry Association, Inc. v. Beazer Homes Corp., Civil No. JKB-17-646, the association’s suit relates to charges for common area maintenance costs.  The assoication alleged that the developer was to be responsible for such charges until title transferred to the association, and claimed that, during the period that the developer controlled the board, the management company had been instructed to bill the association for common area maintenance for several years before title was transferred.  The court denied the developer’s motion to dismiss all claims, finding that there were sufficient allegations of an independent duty of care and reasonable reliance on the representations made, and that the claims were stated with sufficient particularity.  Notably, the court found that the developer’s agents on the board assumed fiduciary duties to the association when they occupied the board seats.

Maryland’s Highest Court Holds That Condos May Not By Rule Suspend A Unit Owner’s Access To Common Elements For Delinquent Assessments

The Maryland Court of Appeals has invalidated a rule adopted by a condominium to suspend access to common elements for unit owners who are delinquent in paying assessments.  In an opinion issued on June 23, 2017 in the case of Elvation Towne Condominium Regime II, Inc. v. Rose, No. 33, Sept. 2016, the Court held that, in order to restrict access to the common elements as a means of enforcing payment of condominium assessments, such a restriction must be provided in the condominium’s declaration.  It may not be adopted by rule promulgated by the board of directors.  The ruling affirmed prior rulings in the case by the Circuit Court for Anne Arundel County and the Maryland Court of Special Appeals. (more…)

Maryland Federal Court Approves Residential Sales Contract Provision Creating a One-Year Period of Limitations

In Daniels v. NVR, Inc., t/a Ryan Homes, the United States District Court for the District of Maryland upheld the validity of a contractual provision in a residential home purchase agreement that reduced the normal period of limitations for filing suit to one-year, despite the fact that the parties had entered into a tolling agreement.  In Maryland, the general period of limitations applicable to most civil claims is the three-year period established in Md. Cts. & Jud. Proc. Code Ann. Sec. 5-101.  This case involved construction defect claims concerning a newly constructed home.  The NVR purchase agreement contained a provision that made claims and disputes subject to a one-year period of limitations. The Court, which had jurisdiction on diversity found that this was not inherently unreasonable, and, therefore, was fully enforceable.

Interestingly, the parties had entered into a tolling agreement, which suspended the running of limitations during attempts to come to a resolution of the issues.   However, NVR successfully argued that the tolling agreement only suspended “statutes of limitations,” and did not toll a “contractual limitations period.”

No Contract – No Tort Claim – My Article in the August Edition of “Building Baltimore

Please see the August edition of Building Baltimore Magazine for my article on the Maryland Court of Appeals decision in Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kalh, LLP.  The case established that the economic loss doctrine precludes claims for alleged negligent design by a contractor against a design professional where there is no contract between them.   Building Baltimore Magazine is a publication of Associated Builders & Contractors, Inc. – Baltimore.  You can also read the entire article here by clicking the “more” button. (more…)

The Law In Maryland Does Not Recognize A Scientifically Established Causal Connection Between Exposure To Conditions In Water Damaged Buildings and Human Illness

I frequently receive questions about illnesses related to exposure to microbial growth and other conditions in water damaged buildings, and whether such medical conditions can form the basis of a personal injury claim.  Molds, of course, are generally recognized as allergens that can trigger respiratory symptoms in certain individuals.  For that reason, mold in buildings is considered an environmental issue that requires proper remediation.  Moreover, mold damages building components if left unaddressed.  However, repairs needed to remediate a water damaged building, and proof of a causal connection between exposure to specific molds and a particular symptom in an individual, are very different matters.   In the case of Montgomery Mutual Insurance Co. v. Chesson, , 206 Md.App. 569 (2012), the Maryland Court of Special Appeals found “that there is a genuine controversy within the scientific community with regard to whether exposure to water damaged buildings causes human health effects.”  As a result of the Court’s determination that “there is no consensus in the relevant scientific community that exposure to mold causes” medical injury, the testimony of a physician that mold exposure had caused illness was deemed to be inadmissible. (more…)