100 HARBORVIEW DRIVE CONDOMINIUM COUNCIL OF UNIT OWNERS AND ZALCO REALTY, INC.
PAUL C. CLARK
Wright, Leahy, Salmon, James P. (Retired, Specially Assigned), JJ.
LEAHY, J. [*]
In the multiplex of administrative and trial court actions and appeals involving Appellee/Cross-Appellant Dr. Paul C. Clark-owner of Penthouse 4A in the 100 Harborview Drive Condominium-and Appellants/Cross-Appellees 100 Harborview Drive Condominium Council of Unit Owners ("Harborview" or "the Council") and property manager Zalco Realty, Inc. ("Zalco"), this appeal features the Maryland Condominium Act and the extent to which it compels the production of Harborview's legal and financial records.
On January 16, 2013, Dr. Clark filed a three-count complaint in the Circuit Court for Baltimore City, alleging that pursuant to the Maryland Condominium Act ("MCA"), Maryland Code (1974, 2010 Repl. Vol.) Real Property Article ("RP") §§ 11-101 et seq. and Article X of the By-laws of 100 Harborview Drive Condominium, he was entitled to examine and copy "(a) detailed billing reports or supporting documentation for [Harborview]'s legal invoices concerning Dr. Clark, his family, and the Unit; (b) written advice of legal counsel concerning Dr. Clark, his family, and the Unit; and (c) e-mails between [Harborview] and Zalco concerning the financial well-being of the Condominium." In Count I, Dr. Clark sought a permanent injunction directing Harborview and Zalco to produce the documents; in Count II, he requested specific performance on his request to inspect the documents; and in Count III, he demanded damages for failure to provide the requested documents. On March 5, 2013, Harborview and Zalco filed an answer and a counter-complaint seeking a declaratory judgment that Dr. Clark was not entitled to inspect the detailed billing reports and written advice of counsel.
Following a two-day bench trial, the circuit court rendered its decisions on October 16, 2013. The court decided, among other things, to deny Dr. Clark's request to inspect the written advice of Harborview's counsel, but entered a permanent injunction enjoining Harborview and Zalco from denying Dr. Clark's request to inspect and copy legal invoices and billing records concerning Dr. Clark, his family, and the Unit. The Court also enjoined Harborview and Zalco from refusing to provide Dr. Clark any future e-mails between Harborview and Zalco concerning the financial well-being of Harborview, and required that they comply with any future request by Dr. Clark for e-mails concerning the financial well-being of Harborview.
For the reasons that follow, we affirm the judgments of the circuit court regarding the scope and application of the Maryland Condominium Act, and hold that RP § 11-116 does not abrogate the attorney-client privilege or the work product doctrine. We also find no error on the ancillary matter of the court's exclusion of Harborview's proffered expert testimony. We are compelled, however, to vacate the court's order enjoining Harborview and Zalco from refusing to produce future e-mail correspondence, as it is not based on any showing of a likelihood of future irreparable harm.
Context bears special significance in this appeal wherein the request for the inspection of financial and attorney-client privileged records is made by an adversary in a series of contentious law suits and administrative actions. In our unreported opinion in an earlier related action between these parties, Clark v. Zalco Realty, Inc., No. 277, Sept. Term 2012, slip op. at 2-3 (filed Apr. 24, 2013), we summarized the facts of Dr. Clark's acquisition of the property and the underlying conflict as follows:
In 2009, [Dr. Clark] learned that a penthouse unit ("the Unit") of the Harborview Building in downtown Baltimore was to be sold at auction, "as is." Appellant made a few visits to see [the Unit], the last of which was to a cocktail reception on the night before the auction. It was raining heavily, and [Dr. Clark] noticed water dripping from the ceiling into two bowls.
The next morning, [Dr. Clark] met with Gisele Rivera-the building's property manager and a Zalco employee-to discuss the leak he had seen. According to [Dr. Clark's] deposition testimony, Ms. Rivera told him that the roof was scheduled to be repaired "in the March time frame, " and she showed him "books that had construction plans and schedules."
[Dr. Clark] won the auction for the property, and the Council had its property management contractor, Zalco Realty, prepare a resale certificate as required by [RP] § 11-135(c). The document certified that the Council had no knowledge "that any alteration or improvement to the unit or to the limited common elements assigned to the unit violates any provision of the declaration, by laws, or rules or regulations, " see [RP] § 11-135(a)(4)(ix), and no knowledge "of any violation of the health or building codes with respect to the unit, " see [RP] § 11-135(a)(4)(x). The certificate further stated that there were no "capital expenditures approved by [the Council] planned at the time of the conveyance which are not reflected in the current operating budget disclosed" to [Dr. Clark], see [RP] § 11-135(a)(4)(iv), (vi).
In the wake of a large snowstorm in 2010, the water leak in the Unit worsened. A mold expert tested the Unit for spores and recommended that it be vacated. [Dr. Clark] began remediation efforts in the summer, but they proved unsuccessful because water continued to leak in through the building's roof.
On October 20, 2010, Dr. Clark filed suit against Harborview and Zalco alleging that they had engaged in fraudulent misrepresentation and unfair or deceptive trade practices, and seeking $5 million in damages. That complaint was resolved on summary judgment in favor of Harborview and Zalco on February 23, 2012. This Court affirmed the judgment of the Circuit Court for Baltimore City on April 24, 2013.
During the interval between his purchase of the Unit and the October 20, 2010, complaint, Dr. Clark filed a number of administrative complaints related to his Unit. Following a noise complaint from downstairs neighbors and a January 19, 2010, "cease and desist" letter from Harborview advising Dr. Clark to have his child play in the downstairs recreation area or invest in soundproofing, Dr. Clark filed a complaint with the U.S. Department of Housing and Urban Development, alleging familial status housing discrimination against Harborview. That complaint, dated January 28, 2010, was dismissed for lack of probable cause. In February, the complaint was referred to the Maryland Commission on Human Relations, which, after investigation, also made a finding of no probable cause on August 17, 2010.
Dr. Clark filed three complaints with the Baltimore City Health Department during the months of May and June 2010, alleging the presence of mold in his Unit and contamination from pigeon droppings. These complaints were ultimately dismissed following evidentiary hearings. On June 15, 2010, Dr. Clark also filed a complaint against Harborview in the Maryland Office of the Attorney General, Consumer Protection Division. The complaint, alleging that Harborview failed to properly maintain the common elements of the building, was later withdrawn.
On May 8, 2013, Dr. Clark filed another complaint against Harborview in the Circuit Court for Baltimore City, along with a Petition for Order of Arbitration and Stay of Action. In his complaint for specific performance, negligence, breach of contract, and breach of fiduciary duty, Dr. Clark alleged, inter alia, that Harborview failed to retain a reasonable repair and replacement reserve fund and breached its duty to remediate damage caused to his Unit from water infiltration and mold contamination. Dr. Clark demanded, and the circuit court ordered, arbitration of that complaint. Harborview appealed, contending that the circuit court erred by not finding that Dr. Clark had waived his right to arbitration because he improperly split his claims (arising from the same facts) by litigating to judgment less than all of his legal theories in a prior action before bringing the subject suit. In an unreported opinion, Harborview v. Clark, No. 1314, Sept. Term 2013 (filed April 8, 2015), we affirmed the judgment of the circuit court.
While Dr. Clark's first appeal to this Court was pending, and prior to filing the case underlying the second appeal, the events leading to the instant appeal were developing.
The Present Case
The opening act was Dr. Clark's November 20, 2012, request, sent by letter through counsel, to examine and copy Harborview's books and records relating to the financial welfare of the Condominium, including "all of the Condominium's legal bills from October 2009 through the present[.]" The letter advised that Dr. Clark had entered into a common interest agreement with James W. Ancel, Sr., the owner of Penthouse 4C at 100 Harborview Drive. Penthouse 4C, LLC, whose sole member is James W. Ancel, Sr., had filed a complaint (similar to, though entirely separate from this appeal) on April 8, 2011, requesting the production of books and records pursuant to RP § 11-116. That complaint went to arbitration, and on January 5, 2012, the arbitration panel found, among other things, that RP § 11-116 "provides unit owners with a broad right to inspect the books and records of the Condominium[, ]" including "any written advice of legal counsel if the requesting unit owner is the subject of that advice." Dr. Clark's November 20, 2012, letter to Harborview cited the Penthouse 4C, LLC arbitration award as binding precedent, and further instructed that "the Council may not redact the Condominium's legal bills unless one of the limited circumstances set forth in § 11-116(c)(3) of the Maryland Condominium Act apply."
On December 5, 2012, Harborview responded, instructing Dr. Clark to contact Zalco to schedule a time to inspect the requested documents. After scheduling a date to inspect the documents, Dr. Clark sent another letter to Harborview expanding his records inspection request to include "any written advice of legal counsel that relates to or concerns [Dr. Clark], Rebecca Delorme [Dr. Clark's spouse], or Penthouse 4A." Harborview responded by letter dated December 18, 2012, stating that legal invoices would be made available for inspection, but that detailed billing reports from legal counsel would not be made available because they were considered privileged and, therefore, were not maintained as regular financial books or records of Harborview. Further, Harborview asserted that in any case, legal documents that constituted a financial book or record would only be produced as they pertained to the requesting unit owner, so the requests for records pertaining to Rebecca Delorme and Penthouse 4A would not be produced.
On December 19, 2012, Rebecca Delorme-acting as Dr. Clark's agent-inspected and copied documents at Zalco's office in Silver Spring, Maryland. She was refused access to the detailed billing reports or written advice of counsel. Ms. Delorme did, however, review four boxes of documents, and she received copies of all available legal invoices from 2009 to 2012. Two days later, Dr. Clark notified Harborview by letter that Ms. Delorme had not been given access to all the books and records requested, and renewed his requests for detailed billing reports (including any other supporting documentation for legal invoices) and for "legal opinions or the written advice of legal counsel."
Dr. Clark filed the underlying suit on January 16, 2013, seeking preliminary and permanent injunctions, specific performance, and damages for breach of contract in the amount of $30, 000.00. He argued that the By-laws constituted a contract between him and Harborview, as well as between him and Zalco as Harborview's managing agent. He alleged that Harborview and Zalco breached their contractual obligations by refusing to permit him to inspect the documents at issue, and that unless his request for preliminary injunction was granted, he faced the "fact" that Harborview would move to compel his claims to arbitration under Article XV of the By-laws, thereby requiring him to "go through the same time-consuming and costly arbitration process that a separate unit owner [Penthouse 4C] recently did." Dr. Clark also alleged that due to the extensive problems that he encountered in owning the Unit, including that it was uninhabitable because of mold contamination, he needed the requested documents "immediately to see the impact on how his important investment is being treated."
Harborview and Zalco filed a joint answer on March 5, 2013, admitting that they "refused to make the requested documents available to [Dr. Clark] because they constitute privileged attorney-client communications and privileged attorney work product in several adversarial matters including an ongoing lawsuit brought by [Dr. Clark] against the Council and Zalco." As an affirmative defense, they claimed that Zalco was no longer in contractual privity with Harborview and, therefore, Zalco could not comply with any injunctive order regarding future books or records. That same day, Harborview and Zalco filed a verified counterclaim seeking a declaratory judgment as to whether RP § 11-116 required them to provide Dr. Clark access to written legal advice and detailed billing reports that Harborview received from its attorneys in connection with the representation of Harborview and Zalco in various investigative matters, claims, and litigation brought by Dr. Clark.
The circuit court held a bench trial on October 8 and 9, 2013. The circuit court summarily granted Dr. Clark's pre-trial motion to exclude Harborview's expert witness who was expected to testify, based on his review of the relevant documents and his familiarity with RP § 11-116, that the books and records that Harborview is required to maintain and provide for inspection do not include the detailed billing reports of legal counsel. At trial, the parties presented lay witnesses' testimony on the issue of the disclosure of detailed billing reports and written advice of counsel. Dr. Clark, for example, testified on cross-examination:
[Dr. Clark]: I believe that in order for me to assess how my money is being spent and the use of attorneys or I think most would agree, the overuse of attorneys, I have the right to review what they are having you guys do.
[Defense Counsel]: When you say over use of attorneys, what do you mean Sir?
[Dr. Clark]: I mean there's been nearly $2 Million the last few years spent on legal bills. That's insane.
[Defense Counsel]: And do you expect when you sue Harborview that Harborview will retain Counsel?
[Dr. Clark]: No, I would expect not to have to sue them in fact.
[Defense Counsel]: Did you know that Harborview retained Counsel to defend the lawsuits that you brought against them?
[Dr. Clark]: I did.
[Defense Counsel]: And did you expect that the law firm that was defending Harborview would be paid for its services?
[Dr. Clark]: I would expect that they would be paid, but I want to know what they are being paid to do.
Dr. Clark continued, characterizing his need to inspect the detailed billings reports provided to Harborview from legal counsel as a need to ensure the "responsible use of funds, " and denying that the attorney-client privilege was applicable to those billing reports. However, as the circuit court noted later in its opinion, Dr. Clark admitted that the attorney-client privilege is applicable to the written advice of legal counsel.
Harborview and Zalco offered testimony from Council President John Cochran and Zalco property managers Richard Brandis and Peter Fabreziani, Jr. Mr. Cochran testified that since April of 2009, the Harborview management files have been kept in locked cabinets: "I mean we have bars and padlocks on all the file cabinets and we have our Detailed Billing Reports that are kept in a fire proof safe in the manager's office that only the On-site Manager has the key to." Mr. Cochran testified to the precautions he implemented to avoid inadvertent disclosures of the billing records, stating that "I understood them to be confidential." Former Zalco employee and Harborview property manager, Mr. Fabreziani, also testified to his understanding that detailed billing reports submitted to Harborview were confidential in nature.
At the conclusion of trial, the court granted the defendants' motion for judgment on Count III for breach of contract, finding that there was no evidence presented to support Dr. Clark's damages claim. Later, on October 16, 2013, the circuit court issued its Order and Memorandum Opinion on the remaining judgments. Following a thorough examination of the history and purpose of § 11-116 of the Maryland Condominium Act, and after corresponding analysis of the attorney-client privilege and work product doctrines as applied in Maryland, the circuit court decided:
Section 11-116 allows [Dr. Clark] to inspect and copy the e-mails requested by him concerning the financial well being of Harborview. The language of Section 11-116 indicates that "books and records" under that section relate to financial information, as it makes reference to "accounting practices" and "audits." Md. Code Ann., Real Prop., § 11-116(a)-(b). [Harborview and Zalco] do not dispute this interpretation. Indeed, [President of the Harborview Council of Unit Owners, John] Cochran produced these e-mails to [Dr. Clark]. Cochran uncontrovertedly described his process of sifting through thousands of e-mails and supplying all of those fitting the description of [Dr. Clark's] request.
[Dr. Clark] is additionally entitled to inspect and copy the detailed billing reports or supporting documentation for Harborview's legal invoices concerning him, his family, and his unit. Although [Harborview and Zalco] have asserted the attorney-client privilege and work product doctrine with respect to this information, they have not demonstrated the applicability of either of these. [Harborview and Zalco's] blanket assertion is insufficient to overcome the presumption that information contained in detailed billing reports is generally unprotected.
This Court recognizes that, pursuant to Section 11-116(c)(3), [Dr. Clark] is unambiguously granted the right to inspect the written advice of Harborview's legal counsel if he, his family, and his unit are the subject of that information. . . . Notwithstanding that statutory language, [Dr. Clark] may only obtain such information if the statute clearly abrogated the common law privilege and doctrine. . . . The language of Section 11-116 displays no express abrogation of the above-described common law privilege and doctrine.
(Internal citations omitted). The court also decided that RP § 11-116 does not impliedly abrogate the common law attorney-client privilege and work product doctrine because it found that the existence of the privilege and the doctrine did not have the effect of "depriving the statute's efficacy and rendering its provisions nugatory." The circuit court explained:
[S]ection 11-116 is read as being in harmony with the common law privilege and doctrine: it allows a unit owner who is the subject of the written advice of the condominium's legal counsel to inspect that information, provided that it is not protected by the common law attorney-client privilege or the work product doctrine.
(Internal citations omitted).
The court granted Dr. Clark's prayer for injunctive relief and specific performance with respect to detailed billing reports and supporting documentation for legal invoices; however, Dr. Clark's request for the written advice of legal counsel was denied. In granting the request for a declaratory judgment, the court proclaimed that RP § 11-116 "does not invalidate the common law attorney-client privilege and work product doctrine, which safeguard [written advice of legal counsel] from public view." The court declared, therefore, that RP § 11-116 does not require Harborview to make the written advice of legal counsel regarding Dr. Clark, his family, or his unit available for inspection and copying by Dr. Clark, the unit owner.
Finally, the court noted that as of the date of the trial, it was uncontradicted that Harborview and Zalco had produced all prior e-mail correspondence regarding the financial well-being of the condominium. Accordingly, the circuit court denied injunctive relief for existing communications. However, the court enjoined Harborview and Zalco from refusing to produce any future e-mails between them concerning the financial well-being of the condominium.
Harborview and Zalco filed a timely motion to alter or amend and request for hearing as well as a motion to stay the enforcement of the circuit court's orders. The court denied both motions without a hearing on December 10, 2013. On December 17, 2013, Harborview and Zalco filed a notice of appeal from the circuit court's orders of September 20 (excluding expert witness), October 16 (final judgment), and December 10, 2013 (denying reconsideration).
Appellants present the following issues, which we have slightly rephrased, for review:
I. Did the circuit court err by excluding the testimony of Harborview's expert, Gehrig Cosgray, CPA?
II. Did the circuit court err by concluding that the detailed billing reports of Harborview's counsel are "books and records" subject to inspection by Clark under section 11-116 of the Condominium Act?
III. Did the circuit court err in not accepting Harborview's claims of attorney-client privilege and work product in the detailed billing reports?
IV. Did the circuit court err by entering injunctive relief against Zalco because Zalco's management contract ended on December 31, 2012, and Zalco returned all of Harborview's records and materials?
V. Did the circuit court err by enjoining Harborview to comply with future requests for e-mails between Harborview and Zalco concerning Harborview's financial well-being?
On December 26, 2013, Dr. Clark noted his cross-appeal from the Order of October 16, 2013, and presents the following question for review:
Was the circuit court legally correct in holding that § 11-116(c)(3)(v) of the [Maryland Condominium Act] does not require Harborview to make written advice of legal counsel for Harborview concerning Dr. Clark, his family, and his Unit available for inspection by Dr. Clark when he is the subject of the written legal advice?
We include additional facts in the discussion relevant to the issues there examined.
Dr. Clark argues that both Article X of the Harborview By-laws and RP § 11-116 allow a unit owner to inspect and copy the detailed billing reports and the written legal advice of counsel without regard for whether any of the material is privileged. However, as the circuit court recognized in constraining its analysis primarily to the application of RP § 11-116, the statutory provision is more specific in defining ...