JAMES CATLER, ET AL.
ARENT FOX, LLP, ET AL. HERSCHEL M. BLUMBERG, ET AL.
ARENT FOX, LLP, ET AL.
Matricciani, Kehoe, Plitt, Emory A., Jr., (Specially Assigned), JJ.
These consolidated appeals arise from a central factual situation but raise wholly disparate legal issues. In the interests of clarity, we begin by noting that the underlying dispute began on October 27, 2010, when Herschel Blumberg,  on his behalf, for the estate of his wife, for his daughter Marjorie Blumberg, and for the corporate entities that they control, filed suit against appellees Arent Fox LLP, Arent Fox PLLC, and Gerard Leval, (collectively, "Arent Fox") in the Circuit Court for Montgomery County. The five-count complaint alleged legal malpractice, breach of fiduciary duty, breach of contract, fraudulent concealment, and constructive fraud.
During pre-trial discovery, appellees sent subpoenas duces tecum to non-parties James Catler, Mark Blumberg, and Susan Blumberg Levin in an effort to obtain relevant documents. The non-parties objected to certain requests for document production on the grounds of protective privilege. The circuit court found that no privilege applied to the documents in question and ordered their production. As permitted by statute, the non-parties noted timely appeals from the various orders of the circuit court. That appeal is reflected in the caption to this opinion.
The contested documents were then produced, and, based on the discovery, the Arent Fox appellees proceeded to file a number of motions seeking summary judgment in the case. In total, appellees filed one motion to dismiss (which the court treated as a summary judgment motion under Maryland Rule 2-322(c)) and nine motions for summary judgment, each pertaining to a separate theory or issue. At the close of a two day hearing on the motions, the circuit court granted all of appellees' motions for summary judgment. Appellants noted a timely appeal from those orders. That is the second appeal now before us. On February 13, 2012, this court ordered that the appeals be consolidated.
The non-party appellants present eight questions for our review which we combine and rephrase for clarity as:
I. Did the circuit court err in ordering the production of documents over which the non-parties asserted a claim of privilege?
For the reasons that follow, we answer no and affirm the decisions of the circuit court.
The real party appellants present seven questions for our review with respect to the grants of summary judgment. We combine the questions and rephrase them as:
II. Did the circuit court err by awarding summary judgment on all isses in favor of appellees Arent Fox?
For the reasons that follow, we answer no and affirm the decisions of the circuit court.
Factual and Procedural History
Herschel Blumberg, as appellants note, "was a revered Prince George's County real estate developer and internationally recognized philanthropist." By 1971, with appellees acting as outside counsel, appellants had successfully developed the cornerstone of their holdings–a three-building office complex called Prince George's Metro Center. In 1998 and 1999, appellants began work on a long envisioned plan to expand the Prince George's Metro Center development. The expansion plan included two condominium towers, a fifth office building,  a student housing facility to be called Student Towers, retail space, a movie theater, a parking garage, and a plaza space. The new development also implemented a name change from Prince George's Metro Center to University Town Center. As part of the development plan for University Town Center, appellants decided on a scheme for refinancing certain loans, for accessing equity in existing properties and transferring it to the new project, and for incurring new debt obligations. During the financial restructuring that took place, appellants entered into a series of inter-company loans and received the proceeds from two externally sourced loans.
By the end of 2005, appellants were in the midst of constructing University Town Center. In appellees' words, "it had always been the appellant entities['] plan to start construction using their own funds and then, once substantial progress has been made, to obtain bank financing to continue and complete the project." By refinancing the mortgages on the buildings comprising Prince George's Metro Center, the Blumberg entities drained 40 million dollars of their own equity. The equity available through the refinancing was distributed through, and alternatively taken from, an entity called the Blumberg Family Limited Partnership. Monies were loaned among the companies, ultimately financing the early stages of development. After the internal money was exhausted, the Blumberg entities searched for external funds to continue with construction.
To supplement the internally sourced funds, the companies negotiated, through former Vice President of Finance and Chief Financial Officer Samuel Tucker, the terms of an 83 million dollar loan from Wells Fargo, and a 57 million dollar loan from Key Bank. In May of 2006, the Blumberg entities began negotiating with Wells Fargo, closing the resulting loan on November 9, 2006. The Key Bank loan closed on April 30, 2007.
Although Arent Fox provided legal advice to the Blumberg entities throughout the time they negotiated with Wells Fargo, Mr. Leval, the Arent Fox partner chiefly responsible for appellants' representation, only ran a conflicts check in July of 2006–months after negotiation of the loan's terms was underway–uncovering the fact that Arent Fox represented Wells Fargo in unrelated transactions. Wells Fargo executed a written waiver of the conflict, but it is contested whether or not Mr. Tucker, on appellants' behalf, executed a sufficient waiver. Appellants contend, moreover, that the loans required most of the Blumberg entities' property to be pledged as collateral. For example, Dewey LLC, one of appellants' entities owned by the Blumberg children, was required to pledge its land holdings as collateral, even though it did not directly receive the proceeds of the loan distribution. The loans ultimately fell into default, the collateral was foreclosed upon, and the expansion project was not completed to appellants' expectation or satisfaction.
Possibly predating, but definitely running concurrent to the financing and construction, was appellants' concern for Mr. Blumberg's mental state. As appellants contend, "in the early 2000[']s, as planning for the [University Town Center] project proceeded, Mr. Blumberg began to show troubling signs of a cognitive decline." The record is replete with examples like that provided by former Senior Vice President and Chief Operating Officer Christopher Hanessian–"I voiced concerns about [the risks of construction, Mr. Blumberg's mental state, and undertaking the loans] to Messers. Leval, Blumberg and Tucker on numerous occasions prior to the Wells Fargo loan in 2006 and prior to the companies' own investment of capital in the project." In April and June of 2007, Mr. Blumberg visited medical professionals about his condition, resulting in a diagnosis of dementia on June 8, 2007.
In their five count complaint filed on October 27, 2010, appellants alleged malpractice on behalf of appellees, arguing generally that appellees had a duty to prevent their incompetent client from entering into the loan transactions, or alternatively had a duty to have a guardian appointed for Mr. Blumberg. Specifically, appellants state that because of appellees' "roles as attorneys for the [appellants], [appellees] owed [appellants] a duty of diligence, competence, honesty and loyalty, and to remain free of conflicts that could compromise [appellees'] ability to at all times act in the best interest of [appellants]." Appellants contend that appellees breached their fiduciary duties by "deviati[ng] from the standard of loyalty generally afforded to clients by other similarly situated lawyers." Additionally, appellees allegedly breached their contract with appellants by "failing to diligently and competently provide legal services, and to protect [appellants'] interests above all others." Appellants made the further allegation that appellees "had a duty to disclose the existence" of letters of intent ("LOI") by various developers to buy one of the University Town Center buildings, Student Towers but did not do so.
At the close of pre-trial discovery, appellees filed nine motions for summary judgment and one motion to dismiss. Each motion pertained to a separate theory: (1) the statute of limitations bars appellants' claims; (2) Arent Fox had no duty to provide business advice; (3) Arent Fox did not breach a duty to have a guardian appointed for Mr. Blumberg; (4) appellants' claims are barred by contributory negligence and the doctrine of in pari delicto; (5) the conflicts alleged by appellants are either "illusory" or waived; (6) Arent Fox did not conceal any letters of intent; (7) Arent Fox did not conceal from appellants knowledge of their financial status; (8) there is no distinct cause of action for breach of fiduciary duty; (9) the claim for malpractice does not support a breach of contract claim; and (10) appellants failed to prove causation. After a two day motions hearing, the circuit court orally granted appellees' motions in their entirety.
The Interlocutory Discovery Disputes
The Catler Appeal
In advance of filing the lawsuit, on October 5, 2009, Marjorie Blumberg and non-party appellant,  James Catler, ("Catler"), her long-time companion, retained the law firm of Shulman, Rogers, Gandal, Pordy, and Ecker, P.A. ("Shulman Rogers") to advise them on an "investigation of liability and recovery in Wells Fargo Bank and Key Bank loans."
Thereafter, Catler began reviewing 52 boxes of source documents containing information potentially relevant to future litigation. Catler and appellees dispute how to treat the fruit of his document review. Catler argues that Shulman Rogers engaged him as a litigation support consultant, thereby cloaking his work with the protections of attorney-client privilege and the work product doctrine. Appellees take the position that Catler never enjoyed a privilege from document production. Alternatively, appellees argue that Catler waived his claim to privilege by giving in-depth deposition testimony.
Arent Fox served Catler with a subpoena and notice of deposition duces tecum on March 17, 2011. He responded by filing timely objections. Catler then produced some responsive documents and withheld those over which he asserted a protective privilege. In order to solidify his position with respect to privilege, he filed an emergency motion for protective order, hoping to "prevent the disclosure of all documents identified on the privilege log, as protected by the attorney-client privilege and the work-product doctrine."
At a two day motions hearing, the circuit court denied the emergency motion and ordered Catler to produce "all remaining documents responsive to the Subpoena Duces Tecum . . . including all documents listed on [Catler's] privilege log for the James Catler Production, except the last eleven (11) documents listed on the log, which eleven (11) documents shall be provided . . . to the [c]ourt for in camera review." After the court's review, it ordered the production of all but 24 pages of the eleven documents. Catler appealed, also moving to stay enforcement of the order,  claiming that "[f]orcing compliance with the orders under appeal would render the appeal largely moot and irreparably prejudice the [m]ovants' rights." Ultimately, however, the documents were produced pursuant to court order.
Invocation of Privilege
The attorney-client privilege "is a rule of evidence which prohibits the disclosure of the substance of a communication made in confidence by a client to his attorney for the purpose of obtaining legal advice." Levitsky v. Prince George's County, 50 Md.App. 484, 491 (1982). The related but distinct work product doctrine "protects from discovery the work of an attorney done in anticipation of litigation or in readiness for trial." E.I. du Pont de Nemours & Co. v. Forma-Pack, Inc., 351 Md. 396, 407 (1998). Catler argues that the attorney-client privilege and the work product doctrine entitled him to withhold certain documents that were responsive to appellees' requests for documents. Appellees counter-argue that Catler was not a client of Shulman Rogers with respect to the lawsuit against Arent Fox and that his retention to provide litigation support was artificially constructed to meet the desired end of avoiding production.
"Once the attorney-client privilege is invoked, the trial court decides as a matter of law whether the requisite privilege[d] relationship exists, and if it does, whether or not any such communication is privileged." E.I. du Pont de Nemours & Co., 351 Md. at 415 (internal quotation and citation omitted). Although the court makes a legal determination about the existence of a protective privilege, "[t]he burden of substantiating non-discoverability is upon the party to whom the discovery request is directed,  and the burden cannot be met by conclusory allegations or mere assertions." Gallagher Evelius & Jones, LLP v. Joppa Drive-Thru, Inc., 195 Md.App. 583, 598 (2010) (internal quotation omitted). The circuit court makes a factual determination with respect to satisfaction of the burden. Id. ("Whether a document is subject to withholding from discovery as a result of some privilege is essentially a question of fact to be determined by the trial court."). But "the burden of establishing the privilege is on the party asserting the privilege." Maxima Corp. v. 6933 Arlington Dev. Ltd. Partnership, 100 Md.App. 441, 456 (1994).
We conclude that Catler was not a client of Shulman Rogers for the purpose of the litigation against Arent Fox. Accordingly, no attorney-client privilege attached to the documents that were withheld. We explain. First, the letter retaining Shulman Rogers on behalf of Catler and Ms. Blumberg insufficiently identifies the purpose for the representation to be a potential lawsuit against Arent Fox. Second, Catler was unable to provide testimony about when, or if, Shulman Rogers was representing him and in what capacity.
The subject line of the October 5, 2009 engagement letter signed by Catler and Ms. Blumberg reads "Investigation of Liability and Recovery in Wells Fargo Bank and Key Bank Loans." We consider the terms of the engagement letter objectively. Towson Univ. v. Conte, 384 Md. 68, 78 (2004) ("Maryland courts follow the law of objective interpretation of contracts, giving effect to the clear terms of the contract regardless of what the parties to the contract may have believed those terms to mean."). The objective terms of the retention letter never state that Shulman Rogers was being retained for the purposes of a suit against Arent Fox. "Investigation of Liability and Recovery in Wells Fargo and Key Bank Loans" objectively refers to investigation only. Assuming arguendo that the investigation also includes litigation, within the ambit of the engagement letter may be future litigation against not only the appellees here, but also against the banks themselves and/or the agents that played supporting roles at any point from inception of the ...