Simmons v. Md. Management Co.

• Court: Court of Special Appeals of Maryland
• Decided: February 4, 2022
• Docket: 1680/19
• Status: Published

Opinion

Simmons, et al. v. The Maryland Management Company, et. al., No. 1680, September Term, 2019. Opinion by Eyler, Deborah S., J.

MARYLAND CONSUMER DEBT COLLECTION ACT (MCDCA) § 14-202(8) DEBT COLLECTION BY ENFORCING RIGHT WITH KNOWLEDGE RIGHT DOES NOT EXIST - - MARYLAND CONSUMER PROTECTION ACT (MCPA) §§ 13-301(14)(iii) and 13-303(5) MISREPRESENTATION IN DEBT COLLECTION - - REAL PROPERTY § 8-208(d) PROHIBITION AGAINST ANTI-WAIVER PROVISIONS IN RESIDENTIAL LEASES - - COURTS AND JUDICIAL PROCEEDINGS ARTICLE § 5-1202(a) PROHIBITION AGAINST FILING DEBT COLLECTION ACTION BEYOND STATUTE OF LIMITATIONS - - TIPTON V. PARTNERS MANAGEMENT CO., 364 Md. 419 (2001) - - SMITH V. WAKEFIELD, LP, 462 Md. 713 (2019) - - CHAVIS V. BLIBAUM, ___Md.___(August 27, 2021).

Former Tenants of residential properties in Maryland brought putative class action against former Landlords whose leases contained clause purporting to extend the statute of limitations for actions arising out of them from 3 to 12 years and against Lawyers who on behalf of Landlords brought back-rent collection actions against Tenants in the District Court of Maryland. Tenants sued for damages for violations of the MCDCA provision barring debt collectors from enforcing or attempting to enforce a right with knowledge it does not exist; for violations of the MCPA, including the prohibition against making false representations in collecting consumer debt; and for violations of provision of Real Property Article prohibiting landlords from including a waiver of rights in a residential lease. In addition, Tenants sought declaratory and injunctive relief based on violation of a statute prohibiting filing an action to recover time-barred consumer debt. Circuit court granted motion to dismiss for failure to state a claim for which relief could be granted.

Held: Judgment vacated.

In Tipton, the Court of Appeals held that the statute of limitations for back-rent actions against residential tenants is three years and a lease with “(Seal)” next to the signature line is not a specialty to which a 12-year limitations period applies. It further stated it was “holding” that a provision so extending the limitations period could be included in the body of the lease. In Smith, in which such a provision was included in the lease, the Court held that the latter “holding” in Tipton was “dicta,” that a provision extending limitations to 12 years in a residential lease violates the anti-waiver provision of RP section 8-208(d), and that it is otherwise unreasonable and unenforceable.

The District Court back-rent actions against Tenants were brought after Tipton was decided and before Smith was decided, and more than three years after leases were breached. Tenants alleged that Landlords and Lawyers violated the MCDCA by filing suits with knowledge that the right they were seeking to enforce did not exist, i.e., that debts were time-barred and no longer collectible. Landlords and Lawyers maintained that Smith only applied prospectively, that under Tipton limitations-extending clauses were acceptable in residential leases, and that given that state of the law, they could not have acted with knowledge that they were enforcing a right they did not have by filing suits for back-rent more than 3 years after breaches. Under Chavis, however, when an area of law is unsettled, a person who makes a mistake of law by seeking to enforce a right later shown not to exist is not shielded from liability under the MCDCA but may be liable if found to have acted recklessly. Tipton did not settle the question whether a limitations-extending clause in a residential lease is legal and enforceable; the question was not settled until Smith was decided. Therefore, whether the Landlords and Lawyers violated the MCDCA depends upon whether they acted recklessly, which is a question of fact not properly resolved on a motion to dismiss.

Tenants’ MCPA claim that suits filed against them contained false representations was dismissed on the ground that the representations were not made to the consumers, i.e., the Tenants, but to the courts in which they were filed, under holding in Sayyed v. Wolpoff & Abramson, 733 F. Supp. 2d 635 (D. Md. 2010). This case differs from Sayyed, which concerned a request for attorneys’ fees made in concert with motion for summary judgment sent to counsel and to court and not to consumers. Here, complaints were served on Tenants and therefore the alleged misrepresentations were made to them as consumers. MCPA claim should not have been dismissed.

Tipton did not address the question whether the anti-waiver provision in RP section 8-208(d) applies to clause extending limitations period in residential lease. Smith held that it does. That decision applied retroactively, as it did not change an established principle of law. Tenants stated a claim based on violation of that statute.

Tenants sought declaratory and injunctive relief, including orders precluding Landlords and Lawyers from enforcing judgments obtained against Tenants in District Court back-rent actions. Landlords and Lawyers maintained that because the suits were filed in violation of CJP section 5-1202(a), which prohibits filing consumer debt collection actions after limitations has expired, the District Court lacked jurisdiction over those cases and the judgments entered were void. Judgments were not void because the District Court had fundamental jurisdiction over the actions. Under reasoning in LVNV v. Finch, 463 Md. 586 (2019), declaratory and injunctive relief, including prohibition against enforcing judgments and disgorgement of funds received, could be pursued in conjunction with claim under MCDCA. Circuit Court for Baltimore City Case No. 24-C-19-001317

REPORTED

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND

No. 1680

September Term, 2019 ______________________________________

BRITTANY SIMMONS, ET AL.

v.

THE MARYLAND MANAGEMENT COMPANY, ET AL.

______________________________________

Graeff, Berger, Eyler, Deborah S. (Senior Judge, Specially Assigned),

JJ. ______________________________________

Opinion by Eyler, Deborah S., J. ______________________________________

Filed: February 4, 2022

Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. *Kehoe, Christopher B., J., did not participate in 2022-02-04 the Court’s decision to designate this opinion for 09:42-05:00 publication pursuant to Md. Rule 8-605.1.

Suzanne C. Johnson, Clerk In this appeal, the appellants (“Tenants”1) are six people who at one time rented

Maryland residential properties either owned or managed by certain of the appellees

(“Landlords”2). The other appellees are lawyers, law firms, and the collection agency

employer of one of the lawyers (“Lawyers” 3), who sued each Tenant for back rent in the

District Court of Maryland. Those lawsuits, filed in several Maryland counties, all were

brought more than three years after the Tenants breached their leases. Although the

limitations period for an action for back rent on a residential lease is three years, the leases

governing the tenancies included a clause entitled “Statute of Limitations” that purported

to apply a twelve-year limitations period to causes of action arising from them (“Statute of

Limitations Clauses”).

In the Circuit Court for Baltimore City, the Tenants filed a putative class action

against the Landlords and the Lawyers. Various combinations of Tenants alleged that the

Statute of Limitations Clauses were invalid and unenforceable and that the actions for back

rent were time-barred. They further alleged that by including the Statute of Limitations

Clauses in the leases and acting to enforce them, the Landlords violated Maryland Code

1 The “Tenants” are Brittany Simmons, Cory Scoville, Gregory Smith, Marie Brown, Lorraine Haut, and Amanda Kelly. 2 The “Landlords” are Maryland Management Company (“MMC”), a property management company that owned, in whole or in part, all the residential properties leased to the Tenants; Woodbrook Limited Partnership (“Woodbrook”); Disney Road Limited Partnership, LLLP (“Disney”); and Wakefield, LLLP (“Wakefield”). 3 The “Lawyers” are Stuart L. Sagal, Esq. and Sagal, Filbert, Quasney & Betten, P.A. (“the Sagal Defendants”), and Robert L. Sova, Esq. and Beacon Services, LLC, a collection agency that employed Mr. Sova (“the Beacon Defendants”). (1974, 2015 Repl. Vol., 2021 Supp.) § 8-208 of the Real Property Article (“RP”); and that

by filing actions to recover time-barred debt and attempting to enforce or actually enforcing

judgments they obtained, the Landlords and the Lawyers violated Maryland Code (1973,

2020 Repl. Vol.), § 5-1202(a) of the Courts and Judicial Proceedings Article (“CJP”) and

Maryland Code (1975, 2013 Repl. Vol., 2015 Supp.), § 14-202(8) of the Commercial Law

Article (“CL”), the latter being a part of the Maryland Consumer Debt Collection Act

(“MCDCA”).4 On the same basis, the Tenants alleged that the Landlords violated CL §§

13-301(14)(iii) and 13-303(5), parts of the Maryland Consumer Protection Act

(“MCPA”).5 The Tenants sought damages for the statutory violations. In addition, various

combinations of Tenants sought declaratory and injunctive relief. Finally, the Tenants

sought attorneys’ fees.

The circuit court granted motions to dismiss all claims for failure to state a claim

for which relief can be granted. This appeal followed. We shall vacate the judgments and

remand for further proceedings not inconsistent with this opinion.

LEGAL BACKGROUND

To place the claims, the circuit court’s rulings, and the parties’ contentions in

context, we first shall describe the legal backdrop against which this case has played out.

4 The MCDCA is codified at CL §§ 14-201 – 14-204. 5 The MCPA is codified at CL §§ 13-101 – 13-501. 2 Statutes

“The MCDCA regulates the conduct of anyone who collects – or attempts to collect

– a debt arising from a consumer transaction.” Nationstar Mortgage, LLC v. Kemp, 476

Md. 149, 161 (2021). Under CL § 14-202(8), in “collecting or attempting to collect an

alleged debt[,]” debt collectors “may not . . . [c]laim, attempt, or threaten to enforce a right

with knowledge that the right does not exist.” The “with knowledge” element of this

subsection of the MCDCA “require[s] proof that a debt collector claimed, attempted, or

threatened to enforce the non-existent right ‘with actual knowledge or with reckless

disregard as to the falsity of the existence of the right.’” Chavis v. Blibaum & Assocs.,

P.A., ___Md. ___, No. 30, Sept. Term 2020, slip op. at *27 (filed August 27, 2021) (quoting

Fontell v. Hassett, 870 F. Supp. 2d 395, 407 (D. Md. 2012) (internal quotation marks and

citations in Fontell omitted)). Under CL § 14-203, “[a] collector who violates any

provision of [the MCDCA] is liable for any damages proximately caused by the violation,

including damages for emotional distress or mental anguish suffered with or without

accompanying physical injury.”

Two provisions of the MCPA also apply to consumer debt collection practices. CL

§ 13-303(5) prohibits a person from “engag[ing] in any unfair, abusive, or deceptive trade

practice . . . in . . . [t]he collection of consumer debts[.]” CL § 13-301(14)(iii) includes in

“[u]nfair, abusive, or deceptive trade practices” any “[v]iolation of [the MCDCA].” Thus,

a trade practice may violate the MCDCA and be a per se violation of the MCPA, or it may

violate the MCPA independently.

3 Several statutes governing time periods for filing suit are relevant. Generally, civil

actions are governed by a three-year statute of limitations. CJP § 5-101. The limitations

period for actions that are “specialties” is twelve years, CJP § 5-102, and a “[c]ontract

under seal” is a specialty. CJP § 5-102(a)(5). CJP § 5-1202, entitled “Statute of limitations

applicable to consumer debt collection action[,]” states at subsection (a):

A creditor or a collector may not initiate a consumer debt collection action after the expiration of the statute of limitations applicable to the consumer debt collection action.

CJP § 5-1202 became effective on October 1, 2016.

Finally, RP § 8-208(d)(2), pertaining to residential leases, is what commonly is

referred to as an “anti-waiver” provision. It prohibits a landlord from using “a lease or

form of lease containing any provision that . . . has the tenant agree to waive or to forego

any right or remedy provided by applicable law[.]” Under subsection (g)(1) and (2) of the

statute, a landlord may not enforce such a lease provision; and, if a landlord includes such

a provision in a residential lease and tenders the lease to the tenant, or if a landlord attempts

to enforce the provision or makes known an intent to enforce it, the tenant may recover

actual damages caused thereby, including reasonable attorneys’ fees.

Court of Appeals Cases on the Limitations Period for Back-Rent Actions on Residential Leases

In Tipton v. Partner’s Management Co., 364 Md. 419 (2001), Tipton’s landlord

sued him for back rent seven years after he breached the lease. Tipton raised the three-year

statute of limitations in CJP § 5-101 as a defense. The landlord countered that because the

word “(SEAL)” appeared next to the signature line, the lease was a “contract under seal,”

4 to which the twelve-year limitations period in CJP § 5-102(a)(5) applied. The District

Court agreed with the landlord and entered judgment against Tipton.

Eventually, the case reached the Court of Appeals, which reversed. It explained that

for centuries all leases executed in Maryland were required to be made under seal,

“primarily to create presumptions of consideration and validity.” 364 Md. at 431. During

that same time, however, Maryland law had established that the limitations period for

actions for back rent is three years. Article 57, § 1 of the Maryland Code (1957, 1972 Repl.

Vol.), the immediate predecessor to CJP § 5-101, specified all forms of action subject to

the three-year limitations period, including an action ‘“brought to recover rent in arrear,

reserved under any form of lease[.]”’ Id. at 437 (emphasis omitted). And the Court of

Appeals had construed Article 57, § 3, the immediate predecessor to CJP § 5-102, which,

as noted, sets forth the twelve-year limitations period for specialties, as not applying to

leases. Id. at 438 (citing Henry’s Drive-In, Inc. v. Pappas, 264 Md. 422, 430 (1972)).

The Court further explained that, upon codification of the Courts and Judicial

Proceedings Article in 1973, CJP § 5-101 took its current form as ‘“a blanket three-year

limitation covering all civil causes of action for which no other limitation is specifically

provided.”’ Id. at 440 (quoting Report by the Governor’s Commission to Revise the

Annotated Code of Maryland). By creating CJP § 5-101, the General Assembly clearly

intended “to cover the causes of action that it had been the intent of the legislature to cover

with Article 57 section 1, just in a more simplistic form.” Id. at 441-42. The following

year, the requirement that all leases be made under seal was eliminated in the codification

of the Real Property Article. The practice of putting the word “Seal” next to the signature

5 lines on residential leases remained widespread as a vestige of prior times, however. Id. at

433.

The Tipton Court reasoned that because Maryland law before codification of the

Courts and Judicial Proceedings Article applied a three-year limitations period to an action

for back rent “under any form of lease” and the General Assembly did not express an intent

to change that in creating CJP § 5-101, the three-year limitations period applies to actions

for back rent, even for leases made under seal. Accordingly, Tipton’s lease was not a

specialty, even though “(SEAL)” appeared at the end of the signature line. Moreover,

“[t]here was no language in the lease in respect to statutes of limitation[,]” much less any

evidence that “the parties specifically agreed to a twelve-year period of limitations[.]” Id.

at 423-24. The parties in Tipton raised the question whether applying the statute of

limitations for a specialty to a residential lease would contravene the anti-waiver provision

in RP § 8-208(d)(2), but the Court did not address it.

The Tipton Court set forth its “holding” three times. At the beginning of its opinion,

the Court said: “We hold that a residential lease agreement, even if the lease agreement has

the word seal affixed, is subject to the three-year limitation period enunciated in [CJP § 5-

101].” Id. at 422. To that it added a footnote: “Any statute of limitations can be waived

by agreement of the parties. Generally, the affixation of a seal, alone, will not constitute

such a waiver.” Id. at n.3. At the outset of its “Discussion” section, the Court reiterated:

“We hold that actions for rent arrears under any kind of residential lease must be filed in

compliance with [CJP] section 5-101.” Id. at 425. In a footnote to that sentence, the Court

6 cross-referenced its earlier footnote about waiver of the statute of limitations by

agreement.6

Finally, in the last paragraph of the opinion, the Tipton Court stated:

We hold that claims for arrearages of rent under a residential lease, even a lease to which a seal is affixed, must be filed within the three-year limitation period unless the parties to the lease agree, in the body of the lease, that the lease is subject to the twelve-year limitation period of section 5-102.

Id. at 445 (emphasis added).

Eighteen years later, the Court of Appeals decided Smith v. Wakefield, 462 Md. 713

(2019). Like Tipton, Smith had been party to a residential lease and was sued for back rent

seven years after he breached the lease.7 Smith’s lease, unlike Tipton’s, included a Statute

of Limitations Clause:

STATUTE OF LIMITATIONS: This lease is under seal and is subject to the twelve-year limitation period of Section 5-102 of the Courts and Judicial Proceedings Article of the Annotated Code of Maryland.

Id. at 722. Smith took the position that the clause was not effective and therefore the back-

rent action was barred by the three-year limitations period in CJP § 5-101. The landlord

took the position that the action was not time-barred as it was governed by the twelve-year

limitations period designated in the Statute of Limitations Clause. The District Court

6 The hard copy of the Tipton opinion in the bound Maryland Reports cross- references footnote 3, but the electronic versions mistakenly cross-reference footnote 2, which pertains to the version of the Courts and Judicial Proceedings Article referenced throughout the opinion. As the Court of Appeals later noted in Smith v. Wakefield, 462 Md. 713, 719 n.2 (2019), the cross-reference in the electronic versions of the Tipton opinion is a typographical error. 7 Smith is one of the Tenants in this case. 7 agreed with the landlord and entered judgment in its favor. The circuit court affirmed in a

de novo appeal.

The Court of Appeals granted Smith’s petition for writ of certiorari on July 12,

2018.8 In a 5-2 decision filed on February 27, 2019, the Court reversed. Just as it had in

Tipton, it made clear that Maryland actions for back rent on residential leases always have

been subject to a three-year limitations period. The Court explained that it had decided in

Tipton that a residential lease could not be converted into a contract under seal by including

the word “(Seal)” at the end of the signature line. It had not decided whether a residential

lease can be converted into a specialty by including language to that effect in its body; and

“whether application of the 12-year period of limitations would conflict with provisions of

the State landlord-tenant law[,]” specifically, RP § 8-208(d)(2). Id. at 718.

The Smith Court reviewed what it had called “holdings” in Tipton and explained as

follows. The “first two iterations . . . simply state that actions for back rent are subject to

the three-year period of limitations in CJ § 5-101, that limitations periods may be waived,

and that a seal does not suffice to effect such a waiver.” Id. at 720. The third iteration

restated that holding and added a phrase, prefaced by the word “unless,” addressing a

8 The issues on which the writ of certiorari was granted were:

1) Can a single sentence in a form residential lease grant a landlord an extra 9 years to bring a claim against a tenant? 2) Does Md. Code Ann. Real Prop. (“RP”) § 8-208(d)(2) prohibit the extension of the statute of limitations to 12 years in a residential lease? 3) Even if RP § 8-208 does permit an extension of the statute of limitations, must the extension be reasonable? 4) If a reasonable extension is permitted, is it reasonable to extend the statute of limitations in a month-to month residential lease from 3 years to 12 years? 8 question not directly before the Court in Tipton: “whether a lease could be converted into

a contract under seal and thus be made subject to the 12-year period of limitations in CJ §

5-102.” Id. Thus, rather than being part of its holding in Tipton, the “unless” phrase

seemed to predict the Court’s opinion about a hypothetical lease that might appear in a future case – the kind of prediction that is often referred to as dicta, as it was unnecessary to the decision in Tipton.

Id. at 720. The leases in the case before it were like the lease the Court hypothesized about

in Tipton.

The Smith Court reemphasized that even though for centuries residential leases were

required to be made under seal, actions for back rent always have been subject to a three-

year limitations period, and “there is no legislative history suggesting that the Legislature

had intended to change that longstanding period of limitations.” Id. at 732. Tipton did not

hold to the contrary, the Court said, and its analysis “all but closed the door to the

possibility that residential leases could ever become a specialty without further legislative

action.” Id. Thus, the Court concluded, the Statute of Limitations Clause in Smith’s lease

did not convert the lease into a specialty. Rather, “actions for back rent under residential

leases are subject to a three-year period of limitations . . . regardless of whether the lease

includes provisions that purport to convert it into a contract under seal.” Id. at 716.

The Court next addressed a separate question: was the Statute of Limitations Clause

an enforceable agreement between the parties to alter the three-year limitations period on

actions for back rent? In answering that question, the Court took guidance from Ceccone

v. Carroll Home Servs., LLC, 454 Md. 680 (2017), in which it had declared invalid a clause

in a service contract for a residential heating system that purported to reduce the limitations

9 period for a civil action by the consumer against the contractor. The Ceccone Court held

that a “contractually-shortened limitations period[]” for a consumer debt collection action

is “valid only if (1) there is no statute to the contrary; (2) the provision is not the result of

fraud, duress, misrepresentation, or the like; and (3) the provision is reasonable in light of

all pertinent circumstances.” Id. at 684.

The Smith Court applied those factors to determine whether the Statute of

Limitations Clause was a valid agreement between landlord and tenant to increase the

limitations period for actions on the lease from three to twelve years. On the first Ceccone

factor, Smith argued that the clause was contrary to the anti-waiver provision in RP § 8-

208(d)(2), which, as noted, prohibits a landlord from including a term in a residential lease

by which a tenant “agree[s] to waive or to forego any right or remedy provided by

applicable law[.]” The Court observed that although the general three-year statute of

limitations for actions for back rent “does not appear to fit the ordinary definition of

‘remedy[,]’” it “may be considered a ‘right,’… in the sense that it confers on a potential

defendant the right to be free of litigation based on the particular cause of action.” Smith,

462 Md. at 735.

The Court went on to explain that even if the agreement to extend the statute of

limitations was not precluded by RP § 8-208(d)(2), it was unreasonable under the

circumstances. Id. In other words, if the clause satisfied the first factor in Ceccone, it still

would fail because it did not satisfy the third factor in Ceccone. The criteria for assessing

reasonableness, as discussed in Ceccone, include “the length of the modified period of

limitations, its relation to the statutory period, the relative bargaining power of the parties,

10 the subject matter of the contract, and whether the modification is one-sided in effect,

among other things.” Id. (citing Ceccone, 454 Md. at 697-98). As to those criteria, the

Smith Court reasoned: (1) the clause quadrupled the limitations period, making it unlikely

that Smith still would have the records necessary to defend against the claim; (2) ordinarily

a landlord in a residential tenancy has greater bargaining power than the tenant, and, in that

case, the language altering the limitations period was in a pre-printed addendum that did

not include an opt-out provision; (3) the altered limitations period facially applied to both

parties to the lease but in effect offered a benefit to the landlord without a similar benefit

to the tenant;9 and (4) the subject matter of the contract did not create a need for an extended

limitations period given that the basis for an action would be known immediately and

damages would be capable of certain determination.

At the conclusion of the majority opinion, the Court summarized its holdings as

follows:

[W]e hold: (1) The three-year period of limitations set forth in CJ § 5-101 governs actions for back rent under residential leases, regardless of whether the lease includes provisions that purport to convert it into a contract under seal. (2) The three-year period of limitations that applies to a back rent action under a residential lease is not subject to waiver, in light of RP § 8-208(d)(2).

Id. at 736-37.10

9 The Court noted that it was unlikely that a tenant would be bringing a cause of action against a former landlord 12 years after the lease was terminated. Thus, although facially even-handed, in practicality the clause increasing the limitations period would be used by landlords and not tenants. 462 Md. at 736. 10 Although the Court had said that the three-year statute of limitations in CJP § 5- 101 “may be considered a right” under RP § 8-208(d)(2), and even if it were not, the Statute of Limitations Clause failed under the third Ceccone factor, the Court made clear in its (continued…) 11 Judge Getty, now Chief Judge, joined by Judge Adkins, dissented. He opined that

the Statute of Limitations Clause indeed made the lease a contract under seal and, therefore,

a specialty subject to the twelve-year statute of limitations in CJP § 5-102, and that Tipton

had held as much in the third iteration of its holding. The Majority opinion, he wrote, was

a judicial revision of that statute to insert an exception the General Assembly had not

included. Moreover, it was “undisputable” that in Tipton the Court “clearly set forth

guidance . . . for those that wished to establish a residential lease under seal” and now “the

Majority concludes that any reliance upon this language is ultimately unjustified.” Id. at

740.

After the Smith opinion was filed, the landlord moved for reconsideration. Among

other things, its counsel argued that the opinion made new law and the Court should clarify

that even though it had determined that the “penultimate sentence in Tipton is dicta,”

reliance upon that language by landlords and their agents had been justified and should not

form the basis for future liability. The Court denied the motion without comment. The

mandate issued on April 18, 2019.

Recent Cases Interpreting CL § 14-201(b) (MCDCA Claim)

On August 27, 2021, while this appeal was pending, the Court of Appeals issued

opinions in Chavis v. Blibaum & Assoc., supra, and Nationstar Mortgage, LLC v. Kemp,

supra, both of which concern the “with knowledge” element of a claim under CL § 14-

conclusion that it was holding that the Statute of Limitations Clause violated RP § 8- 208(d)(2). 12 201(b). In addition, on November 24, 2021, this Court issued its opinion in Newsom v.

Brock & Scott, PLLC, et al., __ Md. App. __, No. 532, Sept. Term 2019 (filed Nov. 24,

2021), on the same topic. We shall address these cases in our discussion of the issues.

THE CASE AT BAR

Five days after the Court of Appeals filed its opinion in Smith, Tenants Simmons

and Scoville brought the instant putative class action suit. The operative complaint is the

Third Amended Complaint, which added four more Tenants as plaintiffs. Each Tenant had

entered into a standard form residential lease with one of the Landlords sometime after the

Court of Appeals decided Tipton but before it decided Smith. Each lease contained the

same Statute of Limitations Clause as in Smith, stating that the lease is a contract under

seal and is subject to a twelve-year limitations period.

Each Tenant had been sued in the District Court by a Landlord, represented by one

of the Lawyers, for breach of lease by non-payment of rent, and in each such case, back

rent was sought. In some cases, other losses, fees, and costs also were sought. All the

cases were filed more than three years after the Tenants breached their leases but before

Smith was decided by the Court of Appeals. Except for the suit against Smith, which was

filed in 2015, all the suits were filed after the October 1, 2016 effective date of CJP § 5-

1202(a), and after the Ceccone opinion was filed on July 28, 2017.

Judgments for back rent were entered against Tenants Smith, Simmons, and Kelly

in the District Court cases against them. As recounted above, Smith prevailed on appeal

and the judgment against him was reversed. Simmons appealed the judgment against her

to the circuit court. Initially her case was stayed pending a decision by the Court of Appeals

13 in Smith. Subsequently it was stayed pending our decision in the case at bar. Kelly did not

appeal the judgment against her, but when her Landlord filed interrogatories-in-aid-of-

enforcement, she sought and received a stay pending our decision in this case.

The other cases did not result in judgments for back rent. The District Court case

against Cory Scoville was stayed before judgment, pending our decision in this case.11

Marie Brown’s motion to dismiss the case against her on limitations was granted and the

Landlord did not appeal. Finally, the back-rent action against Lorraine Haut, f/k/a Lorraine

Albert, was voluntarily dismissed with prejudice by the Landlord after the Court of Appeals

filed its opinion in Smith.

In the Third Amended Complaint, the Tenants alleged, in essence, that the holdings

in Smith reflected the state of the law when Tipton was decided and afterward. They

asserted that back-rent actions on residential leases are and always have been subject to a

three-year limitations period that cannot be increased to twelve years by language

purporting to make the lease a contract under seal. Nor can the three-year limitations period

be increased to twelve years by an agreement within the lease, as that runs counter to the

anti-waiver provision of RP § 8-208(a)(2). What is more, they alleged, by 2016, the

General Assembly had enacted CJP § 5-1202(a), prohibiting consumer debt collectors from

initiating actions to recover time-barred debt.

11 At first, the case was stayed pending the Court of Appeals decision in Smith. It then was dismissed on January 6, 2021, for lack of jurisdiction pursuant to Rule 3-507. On January 26, 2021, the dismissal order was vacated, and the case was reinstated and again stayed. 14 The Third Amended Complaint included allegations seeking class action status for

the plaintiffs and identifying various subclasses. The “Lease Subclass,” to which all

Tenants belong, consists of those individuals who entered into a lease with a Statute of

Limitations Clause purporting to make the lease a specialty to which a twelve-year

limitations period applied. The “Tenant Subclass,” which includes all the Tenants except

Smith, consists of those individuals against whom a debt collection effort was directed, or

a suit was filed after October 1, 2016. The “Judgment Subclass,” comprised of Tenants

Simmons, Smith, and Kelly, consists of those individuals against whom a judgment was

entered on a suit filed for back rent. Finally, the “Payment Subclass,” also consisting of

Tenants Simmons, Smith, and Kelly, is comprised of those individuals who paid money or

incurred an obligation to pay money, including attorneys’ fees, due to the suits having been

filed against them.12

In Count 1, Tenants Simmons, Scoville, Brown, Haut, and Kelly, on behalf of the

Tenant Subclass, sought a declaration that the District Court suits against them were

“beyond the jurisdiction of the courts in which they were filed” because they were “debt

collection actions” initiated contrary to CJP § 5-1202(a). They sought disgorgement of

monies collected and “appropriate” injunctive relief. In Count 2, Tenants Simmons and

Kelly, on behalf of the Judgment Subclass, sought a declaration that the judgments against

them were void and unenforceable, based on CJP § 5-1202(a), and sought disgorgement,

12 The Tenants also sought certification of a defendant class. Because the circuit court dismissed all counts, it did not rule on the request for class certification as to plaintiffs or defendants.

15 an order enjoining enforcement of the judgments, and “appropriate” injunctive relief. In

Count 3, all the Tenants, on behalf of the Lease Subclass, sought a declaration that the

Statute of Limitations Clauses in their leases were contrary to Maryland law and

unenforceable and sought injunctive remedies including requirements that other tenants

who entered into leases with Statute of Limitations Clauses be informed that they are

invalid. They also sought disgorgement and attorneys’ fees and costs.

In the next three counts of the Third Amended Complaint, the Tenants sought

damages for statutory violations. In Count 4, brought under the MCDCA by all the Tenants

on behalf of the Tenant, Judgment, and Payment Subclasses, the Tenants, quoting Spencer

v. Henderson-Webb, Inc., 81 F. Supp. 2d 582, 594-95 (D. Md. 1999), alleged that the

Landlords and Lawyers had filed the District Court actions against them with “actual

knowledge or reckless disregard” of the existence of their right to do so, given that it was

established that the three-year limitations period to file suit to collect on debts had expired.

In Count 5, Tenants Simmons, Smith, and Scoville, on behalf of the Tenant, Judgment, and

Payment Subclasses, alleged as to the Landlords that these MCDCA violations were per

se violations of the MCPA, and that by filing the District Court suits the Landlords made

false representations that constituted violations of the MCPA as well. In Count 6, Tenants

Simmons, Smith, and Kelly, on behalf of the Payment Subclass, alleged that by including

the Statute of Limitations Clauses in the leases and attempting to enforce them, the

Landlords violated RP §§ 8-208(d)(2) and (g)(1)-(2), and caused actual damages. Finally,

in Count 7, all the Tenants sought attorneys’ fees, citing Rule 2-703(b). The Tenants

demanded a jury trial.

16 Three separate motions to dismiss were filed: one by the Sagal Defendants, one by

the Beacon Services Defendants, and one by the Landlords. All agreed that, ordinarily, the

statute of limitations for an action for back rent on a residential lease is three years. All

took the position, however, that when the leases were drafted, when the suits were filed,

and when judgments were obtained and pursued for enforcement, the law was settled, under

Tipton, that a residential lease could include a clause making it a specialty governed by a

twelve-year limitations period. Until Smith was decided, they maintained, such a clause

did not violate RP § 8-208(d)(2), and therefore the limitations period for actions for back

rent under the leases was twelve years. Because the back-rent debts were not time-barred,

the Landlords and Lawyers could not have violated the MCDCA, as they did not claim,

attempt, or seek to enforce a right they knew not to exist; nor could they have violated CJP

§ 5-1202(a), as the suits were filed within the applicable limitations periods. For the same

reasons, the Landlords did not violate the MCPA. The claims for declaratory and

injunctive relief failed for those reasons as well (and others).

In response, the Tenants maintained that Smith applied retroactively to their cases,

as it did not announce a change in the Court’s interpretation of statutory or common law,

and therefore at all relevant times a clause purporting to convert a residential lease into a

specialty subject to a twelve-year limitations period was invalid and unenforceable; the

Landlords and Lawyers were knowingly filing claims for time-barred debt, in violation of

the MCDCA; the Landlords thereby violated the MCPA and also violated the MCPA

17 independently because their pursuit of judgments constituted deceptive trade practices 13;

the clauses in the leases violated the anti-waiver provision of RP § 8-208(a)(2); and the

suits were filed contrary to CJP § 5-1202(a).

The circuit court heard argument on the motions and thereafter issued a 43-page

memorandum opinion granting the motions on all counts, for a variety of reasons. The

Tenants noted a timely appeal, presenting four questions for review,14 which we have

condensed, rephrased, and reordered:

I. Did the circuit court err by dismissing the statutory claims on the ground that the actions taken by some or all of the Landlords and Lawyers in entering into leases with the Tenants and to collect back rent against them could not subject them to liability for violations of the MCDCA, the MCPA, or RP § 8-208(d)?

II. Did the circuit court err by dismissing the claims for declaratory and injunctive relief on the ground that the Tenants were not entitled to such relief as a matter of law?

III. Did the circuit court err by dismissing the claim for attorneys’ fees?

13 The Lawyers were included as defendants in the MCPA claims. 14 As posed by Tenants, the questions are:

1. Did the Court of Appeals decision in Smith v. Wakefield, LP, 462 Md. 713 (2019) only apply prospectively?

2. Are misleading, deceptive, unfair, or abusive statements prohibited by the MCPA actionable if made in the course of debt collection litigation?

3. Does Maryland law permit collectors and their attorneys to assert the defense of legal error in claims arising under [CL] § 14-202(8)?

4. May a Circuit Court enjoin enforcement of a judgment entered in a Consumer Debt Collection Action filed in violation of [CJP] § 5-1202? 18 STANDARD OF REVIEW

We review the grant of a motion to dismiss de novo. Reichs Ford Rd. Joint Venture

v. State Rds. Comm’n, 388 Md. 500, 509 (2005). In so doing, ‘“we must assume the truth

of the well-pleaded factual allegations of the complaint, including the reasonable

inferences that may be drawn from those allegations.”’ Gasper v. Ruffin Hotel Corp. of

Md., 183 Md. App. 211, 226 (2008) (citation omitted). We likewise review a circuit court’s

“interpretation and application of Maryland statutory and case law” for legal correctness.

Breslin v. Powell, 421 Md. 266, 277 (2011) (quotation marks and citation omitted).

DISCUSSION

Because it makes sense to do so, we shall review the dismissal of the statutory claims

before reviewing the dismissal of the claims seeking declaratory and injunctive relief.

I.

STATUTORY CLAIMS

Counts 4, 5, and 6 of the Third Amended Complaint set forth claims for violations

of the MCDCA (CL § 14-202(8)), the MCPA (CL §§ 13-301(14)(iii) and 13-303(5)), and

the anti-waiver provision in RP § 8-208(d)(2), respectively. As argued below and on

appeal, these claims rested either fully or in part on the premise that the various holdings

of the Court of Appeals in Smith v. Wakefield applied retroactively to events occurring

before that opinion was filed. Rejecting that premise, as some or all of the defendants

below had asked it to do, the circuit court ruled that Smith effected a change in the law

from what the Court of Appeals had announced in Tipton, and therefore the holdings in

Smith only applied prospectively and not to the events in these cases.

19 In essence, the circuit court determined that until Smith was decided, Maryland law

had not established that a residential lease provision purporting to make the lease a contract

under seal is invalid and unenforceable; nor had Maryland law established that a residential

lease provision purporting to increase the statute of limitations from three to twelve years

is invalid and unenforceable as contrary to the anti-waiver provision of RP § 8-208, and is

unreasonable. On the contrary, the court ruled, the Tipton Court had communicated by

language characterized as a “holding” that the parties to a residential lease could agree, in

the body of the lease, to make the lease a specialty, increasing the applicable statute of

limitations for claims arising out of the lease to twelve years. The Landlords and Lawyers

had drafted their leases using language seemingly approved by the Court of Appeals in

Tipton and had pursued their claims for back rent, obtained judgments, and sought to

enforce them with the understanding that the law allowed them to do so.

Claim under the MCDCA – CL § 14-202(8)

On August 27, 2021, while this appeal was pending, the Court of Appeals filed its

opinion in Chavis v. Blibaum, in which it interpreted CL § 14-202(8), on which the Tenants

base their MCDCA claim.15

Like the MCDCA claim in this case, the CL § 14-202(8) claim in Chavis turned on

the effect of a prior decision of the Court of Appeals. In 2018, the Court held in Ben-Davies

15 Nationstar Mortgage, LLC v. Kemp, supra, filed the same day as Chavis, states many of the same propositions of law. Likewise, this Court’s decision in Newsom v. Brock & Scott, PLLC, supra, filed a few months later, relied on the principles announced in Chavis and Nationstar to hold that a circuit court erred by granting a motion for judgment at a jury trial on a claim arising under the MCDCA (and one under the Maryland Mortgage Fraud Protection Act). 20 v. Blibaum & Associates, P.A., 457 Md. 228 (2018), that the legal rate of interest on a

judgment for back rent on a residential lease is six percent. Not long before then, several

plaintiffs in Chavis had filed a putative class action seeking a declaratory judgment and

alleging claims for violation of CL § 14-202(8), related per se violations of the MCPA, and

unjust enrichment. The defendants in Chavis were lawyers who, before Ben-Davies was

decided, obtained judgments for back rent that included language stating that post-

judgment interest could be charged at the “legal rate.” The lawyers charged ten percent

interest and pursued garnishments to collect on the judgments. The Chavis plaintiffs

alleged that the defendants had done so with knowledge that they had no right to charge

more than six percent interest on the judgments. The putative class of plaintiffs expanded

in 2018, after Ben-Davies was decided.

The circuit court in Chavis dismissed the complaint for failure to state a claim for

which relief could be granted. After this Court affirmed, see Chavis v Blibaum, 246 Md.

App. 517 (2020), the Court of Appeals granted a petition for writ of certiorari. Before that

Court, the Chavis plaintiffs argued that their CL § 14-202(8) claim should not have been

dismissed because they sufficiently alleged that when the defendants, who were debt

collectors, charged ten percent interest on judgments for back rent and then sought to

collect that amount of interest, they acted with knowledge that they did not have the right

to do so, as the legal rate of interest was six percent. The defendants could not seek refuge

by claiming ignorance of the law, the plaintiffs asserted, as they were duty bound to be

knowledgeable of the governing law.

21 The Chavis defendants countered that the plaintiffs could not allege facts to prove

that the defendants had acted with knowledge that they had no right to charge ten percent

interest on the judgments because they had charged that percentage interest before Ben-

Davies was decided, when the proper legal rate for post-judgment interest in actions for

back rent was an undecided legal issue. That issue did not become decided, they asserted,

until the Court of Appeals filed its opinion in Ben-Davies. The defendants maintained that

because the law was undecided at the relevant time, they could not have acted with

knowledge that they were pursuing a non-existent right.

The Chavis Court reversed on that issue. Its analysis proceeded from the general

proposition that “the remedial nature of the MCDCA requires [the Court to] interpret § 14-

202(8) broadly to reach any claim, attempt, or threat to enforce a right that a debt collector

knows does not exist.” __ Md. at __, slip op. at *23. As we have mentioned, the Court in

Chavis held that the “with knowledge” element of that statute means the defendant acted

with actual knowledge that the right it was pursuing did not exist or with reckless disregard

of the existence of the right. Id. at __, slip op. at *27. See also Nationstar Mortgage, 476

Md. at 192 (“In short, to adequately allege the requisite knowledge for purposes of

subsection (8), a plaintiff must allege that the defendant either actually knew that it did not

possess a right it claimed as part of its debt collection efforts, or recklessly disregarded the

falsity of that claim.”); Newsom, __ Md. App. at __, slip op. at *27 (explaining that the

Chavis Court “noted its agreement with cases that had held the knowledge element required

either actual knowledge or reckless disregard as to the falsity of the existence of the right”)

(emphasis in original).

22 The Chavis Court explored how the settled or unsettled state of the pertinent area of

law affects the knowledge element of CL § 14-202(8). Professional debt collectors and

their lawyers must be held to be aware of laws relating to the validity of their collection

efforts: “[W]here the law is settled at the time a collector takes a contrary position in

claiming a right, the collector’s recklessness in failing to discover the contrary authority is

equivalent to ‘aware[ness]’ (i.e. actual knowledge) of the authority.” __ Md. at __, slip op.

at *30-31 (emphasis omitted) (quoting Spencer, 81 F. Supp. 2d at 595).

“[W]here the law is unsettled at the time the collector claims a right that later turns

out not to exist[,]” its impact on the knowledge element of CL § 14-202(8) is not as

straightforward. Id. at __, slip op. at *31. Recklessness becomes key. Depending on the

circumstances, “a debt collector’s claim of a nonexistent right in an unsettled area of the

law may or may not be reckless.” Id. Importantly, it is not a given, as the Chavis

defendants had argued, that a debt collector cannot have acted with reckless disregard

merely because the pertinent area of law was not settled. As the Court put it, a debt

collector “does not escape liability under § 14-202(8) whenever, in the absence of

controlling authority, the collector makes a mistake of law.” Id. at __, slip op. at *33.

Rather, liability will depend on whether the debt collector made the mistake of law

recklessly. There is a “crucial” “distinction” between the collector’s making a “non-

reckless mistake as to a claimed right” and the collector’s acting with “reckless disregard

of the nonexistence of a claimed right[.]” Id. Whether a defendant acted recklessly is a

question of fact. Therefore, to prevail at a stage of the case that tests the evidence, i.e.,

either to withstand a motion for summary judgment or to succeed at trial, the plaintiff “must

23 produce facts from which the trier of fact reasonably may infer that the defendant acted

recklessly in claiming the right.” Id. at __, slip op. at *31.16

The Chavis Court emphasized that, having been dismissed for failure to state a claim

for which relief could be granted, the MCDCA claim was not decided at an evidentiary

stage of litigation. Accordingly, the proper question on appeal was whether the plaintiffs

had adequately pleaded facts from which a trier of fact could find the defendant had acted

with reckless disregard of the nonexistence of the right it had claimed. In other words,

would the facts alleged, if supported by evidence, allow a trier of fact to find that the

lawyers acted recklessly by disregarding the non-existence of their asserted right to charge

ten percent interest on judgments? The Court concluded that the allegations in the

complaint were sufficient under that standard, and the plaintiffs had stated viable claims

for violations of the MCDCA. Because their claims under the MCPA rested on their claims

under the MCDCA, they were viable as well.

We return to the case at bar. The Chavis opinion elucidates the standard for

assessing the “with knowledge” element of CL § 14-202(8), and we must apply that

16 The Court in Nationstar summarized these concepts as follows:

As explained today in Chavis, we agree that the knowledge element is met when the law is settled, because the debt collector’s recklessness in failing to discover that law is the equivalent of knowledge. However, we do not agree that the existence of a “potentially meritorious” argument as to the existence of the right necessarily negates knowledge. As also explained in Chavis, the question whether a debt collector acted recklessly is a question of fact, to be determined in light of the particular circumstances.

476 Md. at 191-92 (citations omitted). 24 standard on review of the circuit court’s dismissal of the MCDCA claim. As mentioned,

in arguing the motions below and in pursuing this appeal, the parties have focused on

whether Smith v. Wakefield applies retroactively or prospectively. Retroactive application

is the norm: “In the overwhelming majority of cases, a judicial decision sets forth and

applies the rule of law that existed both before and after the date of the decision.” Am.

Trucking Ass’ns, Inc. v. Goldstein, 312 Md. 583, 591 (1988). Decisions that apply ‘“settled

precedent to new and different factual situations”’ ‘“always appl[y] retroactively.’” Id.

(quoting Potts v. State, 300 Md. 567, 577 (1984)). Only when “a court overrules a prior

interpretation of a constitutional or statutory provision,” id., or “change[s] the common

law,” Julian v. Christopher, 320 Md. 1, 10 (1990), does the question arise whether the

decision only should apply prospectively.17

In dismissing the Third Amended Complaint, the circuit court concluded that Smith

only applied prospectively, i.e., that the principles it stated were not the law when the

Landlords drafted and entered into these leases, when the Lawyers filed the actions for

back rent on the Landlords’ behalf, and when the judgments for back rent were obtained

and enforced. Rather, it reasoned, Tipton was the law at those relevant times. Because the

17 Ordinarily, prospective application is selective, that is, the “new pronouncement applies to the case in which it is made and not solely to cases arising after the pronouncement” but does not apply to “‘all other[ cases] arising on facts predating the pronouncement.’” Polakoff v. Turner, 385 Md. 467, 486 (2005) (quoting James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 537 (1991) (plurality opinion)). In the very unusual case, a decision may be given purely prospective application, meaning that the newly announced rule of law not only does not apply to events occurring before the decision but also does not apply to the parties in the case before the court. Id. (citing Beam, 501 U.S. at 536). We shall use the word “prospective” to mean any prospective application. 25 third stated “holding” in Tipton condoned the use of language in residential leases declaring

them to be contracts under seal to which a twelve-year statute of limitations applies, and

the Landlords included exactly that language in their leases, the Landlords and the Lawyers

could not have brought the actions for back rent more than three years after the breaches

“with knowledge” that the right to do so did not exist.

On appeal, the parties argue opposite positions on the issue of retroactive versus

prospective application of Smith v. Wakefield. It is now clear from the Court of Appeals

analysis in Chavis, however, that the prospective/retroactive distinction drawn by the

parties and the circuit court is not the correct analysis for deciding whether the Tenants

have stated claims for which relief may be granted under CL § 14-202(8) of the MCDCA.

We explain.

An appellate decision only will apply prospectively if it changes settled law, either

in the judicial interpretation of a statute or the application of the common law. Julian v.

Christopher is a good example in the common law realm. There, the Court of Appeals

held that a landlord of a residential property must act reasonably in exercising discretion

to withhold consent to sublease. In doing so, the Court overruled the holding in Jacobs v.

Klawans, 225 Md. 147 (1961), that a landlord of such a property could withhold consent

to sublease arbitrarily or capriciously. The Julian Court recognized that it was changing

settled common law on the issue of consent to sublease and noted that landlords had been

drafting their leases in reliance upon the holding in Jacobs v. Klawans. In that

circumstance, the Court explained, it was fair and appropriate for the Julian decision to

26 apply prospectively only, as “[t]he courts must protect an individual’s right to rely on

existing law when contracting.” 320 Md. at 10.

In cases like Julian, whether the decision applies prospectively or retroactively

becomes an issue because the decision discards a settled principle or interpretation of the

law and in its place adopts a new and different principle or interpretation. See Houghton

v. Cnty. Comm’rs of Kent Cnty., 307 Md. 216, 220 (1986) (“the question of whether a

particular judicial decision should be applied prospectively or retroactively, depends . . .

on whether or not the decision overrules prior law and declares a new principle of law”);

see also Walker v. State, 343 Md. 629, 639 (1996) (“[T]he mere correction of prior

incorrect dicta does not represent ‘a clear break with the past’ generating the question of

‘prospective only’ application.”).

The law pertinent to the case at bar was not settled by Tipton, however. We know

that because that was among the holdings of the Court in Smith. The Smith Court

specifically identified the areas of law that Tipton did and did not settle. Tipton settled any

dispute over the limitations period for actions for back rent on residential leases – it is three

years – and further settled any dispute over whether affixing “(SEAL)” after the signature

lines on a residential lease converts it into a specialty to which a twelve-year limitations

period applies – it does not. Notwithstanding the Tipton Court’s use of the word “hold” in

its last stated “holding,” the phrase “unless” the parties expressly agree “in the body of the

lease” to be bound by the “twelve-year limitation period of [CJP] section 5-102” was not a

holding. It was “dicta” that left open the question whether including such a phrase in a

residential lease could make the lease a specialty. And, as the Smith Court noted, Tipton

27 did not address the question whether a landlord violates the anti-waiver provision in RP §

8-208(d)(2) by including a clause in a residential lease lengthening the time for it to sue

the tenant for back rent. The holdings of the Court in Smith make plain these two legal

issues were unsettled before Tipton was decided and remained unsettled after it was

decided. Thus, Smith did not change a settled statutory interpretation. Rather, it interpreted

the pertinent statutes for the first time.

The Smith Court’s pronouncement on what questions of law the Tipton Court did or

did not settle is binding precedent. It establishes the state of the law in areas relevant to

the case at bar after Tipton was decided but before Smith was decided.18 With respect to

the Tenants’ MCDCA claim, under Chavis, to prove that the Landlords and Lawyers acted

or attempted to claim, threaten, or enforce the right to sue for back rent with knowledge

that the right did not exist because the debt was time-barred, the Tenants must produce

evidence that the Landlords and Lawyers made a mistake of law and did so recklessly. As

the Court in Chavis made clear, recklessness is a factual issue and whether there is

sufficient evidence to prove it will be tested in any summary judgment proceeding or trial

in this case.

The language used by the Court in Tipton, how the Court’s words reasonably were

understood by the Landlords and Lawyers, and whether the Landlords and Lawyers sought

to apply their understanding of Tipton in drafting their leases and in pursuing claims for

back rent all will be relevant to the factual question of recklessness. Likewise, how other

18 Obviously, the Tipton opinion did not address the meaning and impact of CJP § 5-1202(a), which was enacted 15 years later. The Smith Court did not address that statute. 28 courts treated Tipton and the Landlords’ and Lawyers’ knowledge of those cases, will be

pertinent. See, e.g., Mercantile Place #1 Ltd. P’ship v. Renal Treatment Centers-Mid Atl.,

Inc., 2017 WL 5171120 at *3-4 (D. Md. Nov. 8, 2017) (relying upon Tipton for the

proposition that a lessor must adduce evidence of “a clear intent to waive the three year

limitations period in favor of the twelve year limitations period” and that affixing a seal

alone is insufficient to accomplish that); Hampt v. Chernow, 2013 WL 4176959 at *4 n.7

(D. Md. Aug. 13, 2013) (noting, in reliance upon Tipton, that an action for unpaid rent is

subject to a three-year limitations period “[u]nless the parties to the lease in the body of the

lease agreed it is subject to the 12-year limitation period in [CJP] § 5–102”).

On a motion to dismiss for failure to state a claim for which relief may be granted,

however, sufficiency of the allegations, not of the evidence, is at issue. In the case at bar,

for purposes of the MCDCA count, we must decide whether the facts alleged in the Third

Amended Complaint, if supported by evidence as the litigation unfolds, could allow a trier

of fact to find the knowledge element of that statutory claim. Could the facts alleged

support a finding that the Landlords and Lawyers acted recklessly by pursuing actions for

back rent beyond the three-year limitations period based on a limitations-extending lease

clause the Smith Court later held was invalid and unenforceable, so as to violate the

MCDCA?

The allegations in the Third Amended Complaint meet that challenge. The Tenants

alleged that when the Landlords and Lawyers demanded payment and filed the lawsuits, in

2016 (except for Smith) and after, they knew that the statute of limitations for back rent is

three years; that the three-year limitations periods on all the back rent actions had expired;

29 and that, unless the Statute of Limitations Clauses in the leases were valid and enforceable,

they had no right to collect that debt and doing so was prohibited by CJP § 5-1202(a).

Furthermore, the Tenants alleged, the Landlords and Lawyers knew there was no statutory

authorization to extend the statute of limitations by the addition of clauses making the

leases contracts under seal; and that the Tipton Court had not addressed whether a provision

extending limitations in a residential lease would violate the anti-waiver provision of RP §

8-208(d)(2). From July 12, 2018 forward, they also knew that the Court of Appeals had

granted certiorari in Smith v. Wakefield to address issues not decided in Tipton. The

Tenants specifically alleged that the Landlords and Lawyers “knowingly intentionally or

recklessly disregarded the facts and the law” and made demands for payment and filed the

suits to recover back rent nevertheless, and that the Tenants suffered damages as a result.

For a claim based on CL § 14-202(8), these allegations are sufficient to withstand a motion

to dismiss for failure to state a claim for which relief can be granted.

Claims under the MCPA – CL §§ 13-301 and 13-303

CL § 13-303 prohibits a person from “engag[ing] in any unfair, abusive, or

deceptive trade practice” in, among other things, “(5)[t]he collection of consumer debts[.]”

CL § 13-301 defines “unfair, abusive, or deceptive trade practices.” A violation of the

MCDCA is an unfair, abusive, or deceptive trade practice. CL § 13-301(14)(iii).

Accordingly, for the same reasons the circuit court erred in dismissing the MCDCA claim,

it erred in dismissing the Tenants’ per se MCPA violation claim.

In addition to their per se violation claim, the Tenants alleged that the Landlords

violated the MCPA in collecting consumer debts by making false or misleading oral or

30 written statements or representations having the “capacity, tendency or effect of deceiving

or misleading consumers,” see CL § 13-301(1), and by failing to state a material fact, with

the intent to deceive, see CL § 13-301(3). Specifically, they alleged that all the

representations by the Landlords to the Tenants that collection of their alleged debts, i.e.,

back rent, were subject to a twelve-year statute of limitations were false; all the statements

made by the Landlords in attempting to collect the debts, including by pursuing litigation

in the District Court, were misleading, as they were made with the implicit representation

that they had the right to do so; and beyond that, the Landlords omitted the material fact

that they did not have the right to pursue collection of these debts as they were time-barred.

The Tenants alleged that they had suffered damages as a result.

The circuit court dismissed the independent claim under the MCPA on two grounds.

First, consistent with its MCDCA ruling, it ruled that when the alleged misrepresentations

were made, they were not false, and therefore the Landlords could not have known they

were false. Specifically, the court reasoned that because Smith applied prospectively only,

the Landlords could not have known that the representations they made were false. We

note that, “[t]o violate the MCPA, a defendant need not intend to deceive the consumer.”19

Allen v. Bank of America, N.A., 933 F. Supp. 2d 716, 730 (D. Md. 2013) (citing Consumer

Prot. Div. v. Morgan, 387 Md. 125, 211 (2005) & Golt v. Phillips, 308 Md. 1, 10-11

19 Under CL § 13-301(a), in which the type of prohibition against unfair and deceptive trade practices is equivalent to common law fraud, scienter must be proven. Unfair and deceptive trade practices prohibited by CL §§ 13-301(1) and 13-301(3) are not the equivalent of common law fraud and scienter is not an element. See McCormick v. Medtronic, 219 Md. App, 485, 529-30 (2014). 31 (1986)). In any event, if knowledge of falsity were required, the reasoning that there could

be no proof of such knowledge because Smith did not apply retroactively does not

withstand scrutiny as we have explained in our discussion of the MCDCA claim.

Second, the court dismissed the independent MCPA claim because the allegedly

false and misleading representations were made to the court, not to a consumer. In so

ruling, the court relied upon Sayyed v. Wolpoff & Abramson, LLP, 733 F. Supp. 2d 635,

648 (D. Md. 2010). The Tenants assert that this reliance was misplaced, and that Andrews

& Lawrence Pro. Servs., LLC v. Mills, 467 Md. 126 (2020), establishes that

misrepresentations made in court filings may be a basis for liability under the MCPA.

In Sayyed, Discover Bank, represented by a lawyer with Wolpoff & Abramson

(“W&A”), sued Sayyed in District Court to recover $13,983.50 in credit card debt. Sayyed

prayed a jury trial and the case was transferred to the circuit court. The lawyer representing

Discover Bank filed interrogatories followed by a motion for summary judgment. When

Sayyed filed a counterclaim for several torts, the W&A lawyer withdrew his appearance

and another lawyer entered his appearance for Discover Bank. Eventually, the case

between Sayyed and Discover Bank was settled. The release retained Sayyed’s right to

bring claims against W&A.

Not long thereafter, in the federal district court for Maryland, Sayyed filed suit

against W&A alleging, among other things, that it had violated the federal Fair Debt

Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, in its defense of Discover Bank.

Of pertinence to the case at bar, Sayyed asserted that in the motion for summary judgment

W&A filed on behalf of Discover Bank, it asked the court to award it attorneys’ fees, but

32 his agreement with Discover Bank did not provide that he would be responsible for fees.

For that reason, he alleged, the request for attorneys’ fees was a false representation by

W&A that it lawfully could recover attorneys’ fees from Sayyed in the litigation, and

therefore was a violation of the FDCPA. W&A responded that the agreement in fact

provided for the recovery of attorneys’ fees but, more centrally, the prayer for attorneys’

fees was a request to the court, not a demand to the consumer (Sayyed), and therefore was

not actionable under the FDCPA.

The federal district court agreed with W&A. It ruled that the fee request in Discover

Bank’s motion for summary judgment in the District Court collection case was “a request

directed to the court, not a communication directed to the debtor, and certainly not a

misrepresentation to Sayyed’s attorney, who could and in fact did easily take issue with

it.” 733 F. Supp. 2d at 649.

The situation facing the federal district court in Sayyed is not comparable to that

facing the circuit court in this case, and not only because the claim was brought under the

FDCPA, which differs substantially from the MCPA. In Sayyed, the prayer for attorneys’

fees was an item of relief requested by Discover Bank, the debt collector, at the conclusion

of its motion for summary judgment made at a stage in the litigation when Sayyed, the

debtor, was represented by counsel. The motion was mailed to counsel for Sayyed, not to

Sayyed himself. The Sayyed court agreed that a prayer for attorneys’ fees is not a demand

to the debtor but is a request for consideration by the court that “‘ultimately rests upon the

discretion of the court and a determination of applicability at a later stage of the litigation.’”

33 Id. at 648 (quoting Argentieri v. Fisher Landscapes, Inc., 15 F. Supp. 2d 55, 61-62 (D.

Mass. 1998)).

Here, the Tenants’ allegations under the MCPA are not restricted to statements made

in the complaints filed against them in the District Court. The Statute of Limitations

Clauses in the leases themselves could satisfy the allegations of false or misleading

representations that deceived or misled the Tenants that are necessary to state such a claim

under the MCPA. And the complaints filed in District Court were served on the Tenants,

not on counsel, and thus were demands made directly to them, as debtors, for payment of

debts that, as the Tenants alleged, they were not obligated to pay. The complaints were not

requests made by the Landlords to the court to exercise discretion to grant fees; they were

demands for payment by the Landlords to the Tenants. The analysis in Sayyed is not

applicable here.

As noted, the Tenants argue that Anderson & Lawrence Professional Services, LLC

v. Mills, supra, supports their position that a claim under the MCPA can be based on

assertions made in a complaint filed in court. The primary issue in that case was the scope

of the professional services exemption of the MCPA. See CL § 13-401(1). Attorneys

Anderson & Lawrence (“A&L”) engaged in debt collection practices on behalf of a

homeowners association (“HOA”) against certain homeowners who were delinquent in

their assessments. Its debt collection practices spanned years and included filing lawsuits

against the delinquent homeowners. Ultimately, the homeowners sued A&L and the HOA

for engaging in debt collection practices that, among other things, violated the MCPA. The

circuit court dismissed the MCPA claim against A&L on the ground that its actions

34 constituted the rendering of professional services, which are exempt under the MCPA. The

court dismissed the MCPA claim against the HOA on the ground that it could not be

vicariously liable for its attorneys’ acts when those acts were exempt.

The Court of Appeals reversed. It held that when a lawyer engages in debt collection

activity that could be undertaken by a debt collector who is not a lawyer, the lawyer is not

exempt from liability under the MCPA. On the issue of vicarious liability, it held that the

exemption does not “flow to the client.” 467 Md. at 134. Thus, when a lawyer engages in

professional services to which the exemption applies, such as filing a lawsuit to recover

delinquent fees or filing a statement of lien under the Maryland Contract Lien Act, the

lawyer’s client does not benefit from the exemption. In applying its decision to A&L, the

Court explained:

Of course, some of the activities undertaken by [A&L] would be considered professional services of a lawyer, which would be exempt from the application of the CPA. For example, [A&L’s] actions in filing lawsuits or filing liens under the MCLA would constitute professional services that only a licensed attorney could undertake. These actions were undertaken by [A&L] as the agent of [the HOA]. Although [A&L] may be exempt from the CPA for any deceptive or unfair trade practices arising from such professional services, we hold in this case that its client is not.

467 Md. at 155, n.7 (emphasis added).

The Tenants maintain that the Court’s explanation of legal activities for which a

lawyer will be exempt from liability under the MCPA but the lawyer’s client will not shows

that filing a lawsuit is not an activity that is outside the scope of the MCPA as being a

request to a court, not a demand to a consumer. This was not the issue before the Court,

although the Court’s holding is not inconsistent with the Tenants’ position on the issue.

35 We feel confident, however, that the allegations of misrepresentations in the leases and the

lawsuits, being distinguishable from the request for attorneys’ fees made in Sayyed, are

sufficient to support a claim for an independent violation of the MPCA.20

Claim under RP § 8-208

As we have recounted, although the Court in Tipton did not address whether a

provision in a residential lease increasing the statute of limitations to twelve years runs

contrary to the anti-waiver provision of RP § 8-208(d)(2), the Court in Smith did. It held

that the Statute of Limitations Clause in the lease in that case, which is the same clause

used in all the leases in this case, in fact violates that anti-waiver provision. Employing

the same retrospective versus prospective application analysis it used for the MCDCA

claim, the circuit court dismissed Count 6, the Tenants’ claim against the Landlords under

RP § 8-208, on the theory that Smith marked a change in the law and therefore only applies

prospectively.

Assuming that is the correct framework for analysis, we disagree. As explained

above, prospective application of an appellate court’s decision only is appropriate when

the court is announcing a clear change in the law and is rejecting a previously settled legal

principle. Here, there was no previously settled legal principle to reject. Both before and

20 In one sentence in their brief, the appellees state that “although this issue received little attention below, Appellants’ MCPA claims properly were dismissed because Appellants failed to allege any actual damages resulting from the purported statutory violations.” Count 5 includes an allegation that damages were incurred as a result of the Landlords’ violations of the MCPA; whether the damages are such as to satisfy the proof required under the MCPA is a question of fact not properly addressed on a motion to dismiss. 36 after Tipton, the question whether a clause purporting to extend the statute of limitations in

a residential lease by making it a contract under seal would violate the anti-waiver

provision of RP § 8-208(d)(2) was unaddressed and unsettled. Plainly, the Smith holding

that the Statute of Limitations Clause identical to that used in all the leases in these cases

is contrary to the anti-waiver provision in RP § 8-208(d)(2) applies retroactively to the

events in the case at bar. Because the Tenants alleged facts that, if backed by evidence,

could support a jury finding that the Landlords violated the anti-waiver provision, Count 6

should not have been dismissed.

II.

DECLARATORY AND INJUNCTIVE RELIEF

In Counts 1 and 2, the Tenants sought declaratory and injunctive relief for alleged

violations of CJP § 5-1202(a), which, they claimed, stripped the District Court of

jurisdiction over the back-rent actions brought there, rendering the judgments entered by

the District Court void. We shall address those counts together. Count 3 is based solely

on the Statute of Limitations Clauses in the leases, and we shall address it separately.

Counts 1 and 2

The plaintiffs in Count 1, all the Tenants except Smith, alleged that they entered

into leases with the Landlords, were sued for back rent after the statute of limitations had

expired and after the effective date of CJP § 5-1202(a), and the suits against them were not

37 dismissed with prejudice.21 They sought a declaration that the suits were filed in violation

of CJP § 5-1202(a) and for that reason the District Court lacked jurisdiction over the claims.

They requested damages in the form of disgorgement of “all sums and profits realized from

the Named Plaintiffs and Tenant Subclass Members”; injunctive relief “to prevent further

violations of law or providing benefits to them from illegal activities,” “reasonable

attorney’s fees, litigation expenses, and costs”; and further “appropriate declaratory relief.”

In Count 2, Tenants Simmons and Kelly made the same allegations but added that

judgments had been entered against them in the District Court cases. They sought a

declaration that those judgments are void and unenforceable. In addition to the injunctive

relief sought in Count 1, they sought an injunction prohibiting the Landlords and Lawyers

from acting to enforce those judgments.

CJP § 5-1202(a) is part of Title 5, Subtitle 12 of the Courts and Judicial Proceedings

Article, entitled “Consumer Debt Collection Actions.” Subtitle 12 consists of four sections.

Section 5-1201 recites “Definitions.” Subsection 5-1202(a), which we are concerned with,

states that “[a] creditor or collector may not initiate a consumer debt collection action after

the expiration of the statute of limitations applicable to the consumer debt collection

action.” Subsection (b) generally provides that certain acts do not revive or extend a

limitations period for a debt collection action after the statute of limitations has expired.

21 In the Third Amended Complaint, there is an inconsistency between this allegation and the facts alleged with respect to plaintiff Lorraine Haut. It states in the complaint that the District Court action against Haut was voluntarily dismissed with prejudice. We discuss below particular arguments the appellees make regarding Haut and two other plaintiffs. 38 Section 5-1203, “Consumer debt collection action,” specifies certain documents and other

evidence that a debt collector must possess and use when bringing and pursuing such an

action. Finally, section 5-1204, “Construction of subtitle,” states that the “subtitle may not

be construed to alter any licensing requirement under federal or Maryland law applicable

to debt buyers or collectors.”

The definition of “Consumer debt collection action” specifies that it “does not

include an action brought under § 8-401 of the Real Property Article by a landlord or an

attorney, a property manager, or an agent on behalf of a landlord.” CJP § 5-1201(f)(2).

RP § 8-401, broadly titled “Nonpayment of rent,” creates an action for repossession of

property for non-payment of rent, otherwise known as a “summary ejectment” action. See

Cane v. EZ Rentals, 450 Md. 597, 602 (2016). The suits filed against the Tenants in the

District Court were not summary ejection actions.

Nothing in Subtitle 12 addresses any consequence to a creditor or collector for

initiating a consumer debt collection action after the statute of limitations for that action

has expired, as CJP § 5-1202(a) states it may not do. With respect to that subsection, the

Fiscal and Policy Note for Senate Bill 771 (2016), which is the legislation that resulted in

Subtitle 12, simply repeats its wording and points out the exemption in subsection (b) for

summary ejectment actions. There is no case law in Maryland interpreting the statute.

The reasoning of the Court of Appeals in LVNV Funding LLC v. Finch, 463 Md.

586 (2019), leads us to conclude that CJP § 5-1202(a) does not divest any Maryland court

of its otherwise-existing fundamental jurisdiction over time-barred claims for back rent. In

Finch, in the District Court, LVNV Funding LLC (“LVNV”) filed a multitude of consumer

39 debt collection actions and obtained judgments against debtors. Two debtors brought a

class action against LVNV alleging that it was a collection agency and had been unlicensed

when it obtained the judgments. The debtors sought disgorgement of all sums LVNV had

received on the judgments and an injunction prohibiting it from taking action to enforce

the judgments. LVNV responded that it was not a collection agency; that the suit was an

improper collateral attack on the judgments it had obtained; that only a void judgment may

be collaterally attacked; and that its judgments were not void.

The Court of Appeals concluded that, at the relevant times, LVNV was a collection

agency within the meaning of Maryland Code (1992, 2015 Repl. Vol., 2021 Supp.), § 7-

101(d) of the Business Regulations Article (“BR”), and therefore was required to be

licensed to engage in debt collection activity in Maryland. See BR § 7-301(a). It was not

licensed when it brought the suits and obtained the judgments at issue, all of which were

enrolled, i.e., had been entered for 30 days or more. The Court explained that an enrolled

judgment only may be collaterally attacked “when the court that rendered the judgment

had no jurisdiction to do so[,]” and therefore the judgment is void ab initio. 463 Md. at

608 (emphasis in original). Jurisdiction in that sense means fundamental jurisdiction, or

the “‘power to act with regard to a subject matter.’” Id. at 609 (quoting Cnty. Comm’rs v.

Carroll Craft, 384 Md. 23, 44 (2004)). “‘[T]he main inquiry in determining “fundamental

jurisdiction” is whether or not the court in question had general authority over the class of

cases to which the case in question belongs.’” Id. (quoting Carroll Craft, 384 Md. at 45).

The Court held that the judgments LVNV obtained when it was an unlicensed collection

agency were not void and could not be collaterally attacked.

40 In the case at bar, the District Court suits filed by the Landlords and Lawyers against

the Tenants were debt collection actions. Specifically, they were breach of contract actions

to recover unpaid rent, i.e., back rent, and other costs allegedly associated with the Tenants’

breaches of their leases. There is no assertion that the amounts sought by the Landlords

were above the prevailing jurisdictional limit of civil actions in the District Court. See CJP

§ 4-401(1) (District Court has exclusive original jurisdiction over an action on a debt not

exceeding $30,000, exclusive of interest, costs, and fees). Nor is it alleged that these cases

did not fall within the classes of cases over which the District Court has authority. Clearly,

they did. The Tenants seem to be maintaining that ordinarily the District Court would have

fundamental jurisdiction over actions for back rent but its jurisdiction ceases to exist when

such an action is filed after the applicable statute of limitations had run.

No Maryland case addressing time limits for filing civil actions supports the

Tenants’ position. The statute of limitations for an action is a defense that must be pleaded

in the answer to the complaint and, as an affirmative defense, must be proven by the

defendant. See Md. Rule 2-323(g)(15) (enumerating affirmative defenses that must be

pleaded in an answer); McClure v. Lovelace, 214 Md. App. 716, 742-43 (2013) (a

defendant bears the burden of proving a statute of limitations defense). It does not affect

the defendant’s liability but restricts the plaintiff’s right to obtain a remedy for the wrong

committed. Anderson v. United States, 427 Md. 99, 118 (2012); Waddell v. Kirkpatrick,

331 Md. 52, 59 (1993). The defense of limitations will be waived if not asserted, or if not

timely asserted. Waddell, 331 Md. at 59. A statute of limitations runs from the time the

wrong is “complete and actionable,” which can be delayed by the judicially created

41 discovery rule, see Poffenberger v. Risser, 290 Md. 631, 636 (1981), and can be tolled by

fraud under CJP § 5-203. Mathews v. Cassidy Turley Md., Inc., 435 Md. 584, 612 (2013).

There are other statutory time limits for filing suit that are not statutes of limitation

but are statutes of repose. Unlike a statute of limitations, a statute of repose “runs from a

date that is unrelated to the date of injury” and “can sometimes foreclose a remedy before

an injury has even occurred and before any action could have been brought.” Mathews,

435 Md. at 611-12. And sometimes, a time limit for filing an action is embodied in a statute

creating the cause of action. In that situation, compliance is a condition precedent to

bringing the action. For example, the Wrongful Death Act includes at CJP § 3-904(g)(1)

a proviso that, with certain exceptions, “an action under this subtitle shall be filed within

three years after the death of the injured person.” The Court of Appeals has interpreted

this time limit for commencing an action for wrongful death to be a condition precedent

that restricts not only the right to a remedy but also the right to a determination of liability.

Waddell, 331 Md. at 57-59; see also Spangler v. McQuitty, 449 Md. 33, 67 (2016) (the

limitations period in the Wrongful Death Act is a condition precedent to bringing an action

for wrongful death).

Whether a time limit is a statute of limitations, a statute of repose, or a condition

precedent to bringing an action may affect the process for raising it to the court, whether it

can be waived, whether the court may take notice of it when not raised, and so forth. See

Mathews, 435 Md. at 611-12; Waddell, 331 Md. at 57-59; Anderson, 427 Md. at 118. In

no circumstance, including when the right to pursue a claim in court is conditioned upon

an action being filed in time, has the failure to adhere to the time period affected the

42 fundamental jurisdiction of the court over the action. If a judgment has been entered and

is challenged on appeal on the ground that a time limit was waived or had expired, the

judgment will be reversed or vacated if the court is shown to have erred in its ruling on the

time limit. In such a case, the court will have committed error in exercising the jurisdiction

it has; it will not have acted without jurisdiction.

Accordingly, in the case at bar, the District Court had jurisdiction over the back-rent

cases, even if they were filed in violation of CJP § 5-1202(a). The judgments entered

against some of the Tenants in those cases are not void and cannot be collaterally attacked.

The question remains, however, whether the Tenants still may obtain an injunction

directing the Landlords and Lawyers to disgorge monies received as a consequence of the

suits and prohibiting them from enforcing the judgments they obtained that have not been

executed upon. To answer that, we again turn to LVNV v. Finch.

After determining that the judgments obtained by LVNV against the debtors were

not void and could not be collaterally attacked, the Court went on to hold that the plaintiff

debtors were not without any remedy; indeed, they had paths to recover damages and to

obtain declaratory and injunctive relief. The plaintiff debtors could pursue LVNV under

CL § 14-202(8) of the MCDCA, for bringing the debt collection actions with knowledge

that they did not have the right to do so. If they prevailed, then under CL § 14-203 they

could collect “any damages.” With respect to declaratory and injunctive relief, the Court

looked to BR § 7-401, which makes it a misdemeanor for a person to knowingly and

43 willfully do business in Maryland as a collection agency without a license.22 The Court

held that “BR § 7-401, read in conjunction with § 7-101(c), would permit declaratory and

injunctive relief precluding LVNV from taking any action to enforce those judgments and

for any damages incurred by the plaintiffs as the result of LVNV’s collection efforts.” 463

Md. at 612 (second emphasis in original). Two years later, the Court in Cain v. Midland

Funding, LLC, 475 Md. 4 (2021), summarized as follows the pertinent holding in Finch:

Although an enrolled judgment obtained by an unlicensed debt buyer is not void, a judgment debtor may still have a cause of action under the Maryland consumer protection statutes governing debt collection . . . for declaratory and injunctive relief precluding the debt buyer who obtained the judgment while unlicensed, from enforcing those judgments and for any damages incurred by the plaintiff as a result of the collection efforts.

Id. at 23.

In the case at bar, we must determine whether, upon proof of any of their claims

under the MCDCA or MCPA, the Tenants may obtain relief of the same type recognized

as recoverable by the Court in Finch: orders directing the Landlords and Lawyers to

disgorge monies they received as a consequence of initiating the debt collection actions in

violation of CJP § 5-1202(a) and prohibiting them from enforcing the judgments they

received.

The Maryland case law addressing the circumstances in which a party may obtain

injunctive relief prohibiting the opposing party, a judgment creditor in another case, from

enforcing the otherwise enforceable enrolled judgment in that other case, is sparse. The

22 These statutes are part of the Maryland Collection Agency Licensing Act (“MCALA”), codified at BR §§ 7-101 through 7-502. The definition of collection agency currently appears at BR § 7-101(d). 44 cases all predate 1984, when the circuit courts of law and equity were combined. See

Higgins v. Barnes, 310 Md. 532, 540 (1987) (discussing the “comprehensive rules change”

effective July 1, 1984 that accomplished the merger of law and equity). They establish that

it is, in fact, within a circuit court’s equity power to restrain against an ongoing proceeding

in a court of law or activity to enforce a judgment entered by a court of law. Cf. Michael

v. Rigler, 142 Md. 125, 137 (1923) (“the right of courts of equity to restrain proceedings

in courts of law in a proper case has been recognized since the reign of Edward IV (1 High

on Injunctions, sec. 112), and has, in the courts of this state, at least, been uniformly

recognized throughout its history.”).

With respect to judgments, for example, in Norris v. Campbell, 27 Md. 688 (1867),

the Court of Common Pleas for Baltimore City, a law court, entered a judgment against

Campbell and three years later, Norris commenced attachment proceedings. Campbell

filed suit in the Circuit Court for Baltimore City, an equity court, for an injunction

prohibiting Norris from pursuing the attachment on the judgment. Campbell argued that

he had been out of state when the judgment was entered against him. The court granted

the injunction and Norris appealed. The Court of Appeals reversed on the ground that

Campbell was not prevented from defending the suit by any fraud or accident committed

by Norris. It explained:

Courts of Chancery do not lightly interfere with judgments at law; they only interfere for prevention of fraud; never merely for the correction of informalities or irregularities in legal or judicial proceedings.

Id. at 692.

45 Even before then, in Gott v. Carr, 6 G. & J. 309, 312 (1834), the Court of Appeals

stated:

The well settled general rule being, that a court of equity will not relieve against a recovery in a trial at law, unless the justice of the verdict can be impeached by facts, or on grounds, of which the party seeking the aid of Chancery, could not have availed himself at law, or was prevented from doing it by fraud or accident, or the act of the opposite party, unmixed with any negligence or fault on his own part.

Cases using similar language include: Easter v. Dundalk Holding Co., 199 Md. 303, 306

(1952) (affirming denial of injunction by equity court to restrain against enforcement of

judgment for ejection entered by law court) and Redding v. Redding, 180 Md. 545 (1942)

(affirming grant of injunction by equity court prohibiting defendant from enforcing

confessed judgment she entered in law court, transferred to another court, and sought to

execute upon all the time knowing the underlying debt had been paid).23

In Kardy v. Shook, 237 Md. 524 (1965), the Court explained with respect to a suit

in equity seeking to restrain an ongoing judicial proceeding, which also would apply to a

request for an injunction against enforcing a judgment:

When the jurisdiction of an equity court which pertains to the restraint of judicial proceedings is invoked, the injunction is directed not to the presiding judge of the court, but to the parties litigant, and in no manner denies the jurisdiction of the legal tribunal. An injunction of this nature controls the course of conduct of the person, or persons, to whom it is addressed, and is utilized to prevent him, or them, from using the process of courts of law where it would be contrary to good conscience to allow the party, or parties,

See also MD-ENC JUDGMENTS 59 stating: “On a showing of proper 23

circumstances, and when required by the ends of justice, appropriate relief against a judgment may be had in equity, the power of equity in this connection being inherent, and existing irrespective of any statute authorizing such relief. Nevertheless, a court’s inherent equity power to entertain independent equitable actions has been preserved by statutory and regulatory provisions governing relief from judgments.” 46 to proceed. This class of injunctive relief is based upon the ground that some unfair advantage is being obtained, or has been obtained, in the law court, which, under the circumstances, equity alone can prevent from becoming effective.

Id. at 532-33.

In Finch, LVNV obtained the judgments against the debtors by knowingly and

willfully doing business as a debt collector when unlicensed, in violation of a statute

criminalizing such activity. To be sure, the statutory limitation against filing debt

collection actions for time-barred debt in CJP § 5-1202(a) is not a criminal violation.

Nevertheless, the prohibition was enacted as part of legislation affording a number of

procedural protections to debtors in litigation, and one of the General Assembly’s clear

intentions in doing so was to safeguard debtors from being pursued in court for time-barred

debt. See 2016 Md. Laws Ch. 579 (S.B. 771) (“FOR the purpose of prohibiting a creditor

or a debt collector from initiating or filing a certain consumer debt collection action under

certain circumstances[.]”). While CJP § 5-1202(a) did not make it illegal for a collector to

file suit in an attempt to recover time-barred debt, it made it wrongful for it to do so. Just

as it would be unjust to allow a debt collector to enjoy the proceeds of a judgment obtained

in violation of the licensing law, it would be unjust to allow a debt collector to benefit from

a judgment it obtained on time-barred debt. Indeed, unlike the debts in Finch, the debts

here, if shown to be time-barred, no longer were recoverable by any collector, licensed or

unlicensed.

If the Tenants succeed in proving, pursuant to CL § 14-202(b), that the Landlords

and Lawyers brought the District Court actions for back rent with actual knowledge that

47 they were time-barred, the court may direct that monies obtained as a consequence shall be

disgorged and that all judgments so obtained may not be enforced. In its ruling, the circuit

court took the position that, as a court in Baltimore City, it would not have the power to

direct that a judgment in another county is not to be enforced. This is incorrect, as it rests

on the premise that the court lacks jurisdiction to allow a collateral attack on a judgment

of another court. An injunction directing a party before the court not to take action to

enforce a judgment is not a collateral attack on the judgment. It is an injunction prohibiting

a party over whom the court has personal jurisdiction in a case over which it has subject

matter jurisdiction from taking certain actions. See Kardy, 237 Md. at 532-33 (“An

injunction of this nature controls the course of conduct of the person, or persons, to whom

it is addressed, and is utilized to prevent him, or them, from using the process of courts of

law where it would be contrary to good conscience to allow the party, or parties, to

proceed.”). The court has the power to do so.

Count 3

In Count 3, the Tenants asked the circuit court to declare that the Statute of

Limitations Clauses in the leases purporting to extend the limitations period to twelve years

“are contrary to Maryland law and are unenforceable in any court.” The Landlords and

Lawyers moved to dismiss this count on the ground that the Court of Appeals addressed

this issue in Smith and it would serve no useful purpose for the circuit court to render a

declaratory judgment that merely reiterates a holding of the Court of Appeals. The circuit

court agreed.

48 Pursuant to CJP § 3-409(a), a court may issue a declaratory judgment if doing so

“will serve to terminate the uncertainty or controversy giving rise to the proceeding[.]”

Ordinarily, in a declaratory judgment action the court “must declare the rights of the parties

in light of the issues raised.” Jennings v. Gov’t Emp. Ins. Co., 302 Md. 352, 355 (1985).

As a general rule, it rarely is appropriate for a court to grant a motion to dismiss a

declaratory judgment action without declaring the rights of the parties. Allied Inv. Corp.

v. Jasen, 354 Md. 547, 556 (1999). However, when “the controversy is not appropriate for

resolution by declaratory judgment,” the court may dismiss the claim. Converge Servs.

Grp. v. Curran, 383 Md. 462, 477 (2004). For example, absent “unusual and compelling

circumstances,” “a trial court should not entertain a declaratory judgment action when there

is already pending another action between the same parties concerning substantially the

same issues[.]” Hanover Inv., Inc. v. Volkman, 455 Md. 1, 4 (2017). Moreover, a motion

to dismiss may lie when a case is moot, Broadwater v. State, 303 Md. 461, 468 (1985), or

when the same issues are awaiting decision in another common-law proceeding. Haynie

v. Gold Bond Bldg. Prods., 306 Md. 644, 650-54 (1986). In these circumstances, the

declaratory judgment action would serve no useful purpose.

The Landlords and Lawyers first argue generally that it will serve no purpose for

the circuit court to state by declaratory judgment a principle that the Court of Appeals

already has spoken on. We do not find merit in this argument. A principle of law need not

be new and unaddressed to be a proper subject of a court’s declaration by declaratory

judgment.

49 The second argument the Landlords and Lawyers advance pertains to certain of the

plaintiffs. They maintain that with respect to Marie Brown and Lorraine Haut, the circuit

court properly dismissed this claim, and their claim for declaratory and injunctive relief in

Count 1, because their District Court cases were dismissed to their benefit. With respect

to Cory Scoville, they maintain that the circuit court likewise properly dismissed this claim

and the claim in Count I because the District Court back rent action against him was stayed

pre-judgment, pending our decision in this appeal. Accordingly, the same issues are

pending in another forum and should not be addressed by way of a declaratory judgment

in the instant case.

The status of the District Court case for back rent against a Tenant as resolved in

the Tenant’s favor or unresolved and pending does not necessarily mean that there is no

useful purpose to the Tenant’s claim for declaratory and injunctive relief in this case.

Brown and Haut may be entitled to damages in the case at bar in the form of costs and

expenses they incurred in defending the suits against them; and even assuming the pending

case against Scoville is decided in his favor under Smith, he may also be entitled to pursue

relief of that sort. At this early stage of litigation, we do not see these declaratory and

injunctive claims as falling in the rare category of cases warranting dismissal.

50 III.

ATTORNEYS’ FEES

Finally, the Tenants’ claim for attorneys’ fees in Count 7 was attendant to their

substantive claims in the preceding counts. Because we are vacating the judgments

dismissing those claims, we shall vacate the judgment dismissing this claim as well.24

JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY VACATED. CASE REMANDED FOR FURTHER PROCEEDINGS. COSTS TO BE PAID BY THE APPELLEES.

24 The Lawyers and Landlords maintain that if this Court should reverse and remand, as we are in fact doing, we should do so with instructions that the circuit court must “assess each Appellant’s standing to sue each Appellee at the pleading stage” because this was an alternative basis upon which they sought dismissal of the Third Amended Complaint and the circuit court deferred decision on that issue, ruling that it was appropriate for determination at the class certification stage. The Lawyers and Landlords are free to renew this argument before the circuit court on remand, but we decline to direct the circuit court to consider it. 51