O'BRIEN & GERE ENGINEERS, INC.
CITY OF SALISBURY
January 11, 2016.
[Copyrighted Material Omitted]
Certiorari to the Court of Special Appeals (Circuit Court for
Wicomico County) David B. Mitchell JUDGE.
BY Bruce F. Bright (Ayres, Jenkins, Gordy & Almand, P.A. of
Ocen City, MD) on brief FOR PETITIONER
BY Howard G. Goldberg (Kevin M. Kelly, Goldberg & Banks,
P.C.; Paul D. Wilber, Chris S. Mason, Webb, Burnett,
Cornbrooks, Wilber, Vorhis, Douse & Mason, LLP of Salisbury,
MD) on brief FOR RESPONDENT
C.J., Greene, Adkins, McDonald, Watts, Harrell, Glenn T., Jr.
(Retired, Specially Assigned), Wilner, Alan M. (Retired,
Specially Assigned), JJ. Opinion by Adkins, J. Harrell, J.
concurs and dissents.
Md. 398] Adkins, J.
litigation privilege immunizes a party for statements made in
a judicial proceeding and is fundamental to the courts'
truth-finding mission. We have previously analyzed this
privilege only in the defamation context. Today we address
two distinct questions that arise out of a dispute between a
city and a design engineer's settlement agreement to,
among other things, not disparage one another. Can the
litigation privilege immunize a party from a claim for breach
of a non-disparagement clause? If so, can a party waive that
privilege? We examine these questions to determine whether a
trial court correctly granted a motion to dismiss a complaint
for failure to state a claim for breach of contract.
Md. 399] FACTS AND LEGAL PROCEEDINGS
Maryland Department of the Environment required the City of
Salisbury (" the City" ) to upgrade its wastewater
sewage treatment plant (" WWTP" ). The City then
embarked on an $80 million large public works project by
hiring O'Brien & Gere Engineers, Inc. (" OBG" )
as its design engineer and Construction Dynamics Group
(" CDG" ) as its construction manager. The project
failed because the WWTP did not work as expected and
it did not get what it bargained for, the City sued OBG and
CDG, among others, for various torts and breach of contract
(" the WWTP Litigation" ).
the advice of their respective attorneys, the City and OBG
settled their dispute pursuant to an agreement (" the
Settlement Agreement" ) in June 2012. In pertinent part,
OBG agreed to pay the City $10 million in exchange for the
City's promise to release OBG from all claims relating to
City also made promises to OBG in the Settlement Agreement so
that " OBG [would] not hav[e] to expend any further
monies in connection with" the WWTP Litigation and would
be protected " from any liability and expense associated
with any [of the City's] claims" relating to the
WWTP. First, the City agreed to defend, indemnify, and hold
OBG harmless if any party (whether in the WWTP Litigation or
in any future claim the City might bring) were to sue OBG
" relating to the design or
construction of or equipment supplied for [the WWTP]."
Second, the City agreed to indemnify and hold OBG harmless if
any such party obtained a judgment against OBG. Third, the
City agreed that it would reduce any damages it recovered if
OBG was " determined to be a joint tortfeasor"
because of any final judgment. In exchange for these
promises, OBG agreed to release the City from all of its WWTP
the City also agreed not to disparage one another about the
WWTP upgrade. The non-disparagement clause states:
[447 Md. 400] The City and OBG mutually agree that they will
not make, or cause or encourage other persons or entities to
make, any disparaging remarks or comments about each other
relating to any matter having occurred prior to the effective
date of this Settlement Agreement or in the future relating
directly or indirectly to the Salisbury wastewater treatment
plant through any means, including without limitation, oral,
written or electronic communications, or induce or encourage
others to publicly disparage the other settling party. For
purposes of this paragraph, the term " disparaging"
means any statement made or issued to the media, or other
entities or persons that adversely reflects on the other
settling party's personal or professional reputation
and/or business interests and/or that portrays the other
settling party in a negative light.
parties agreed that, in the event of a breach of this
provision, the non-breaching party " shall be"
entitled to injunctive relief and reasonable attorney's
fees. OBG believes that the City committed such a breach.
the City released OBG from all claims relating to the WWTP
Litigation, the City pursued a claim for breach of contract
against CDG (" the CDG Lawsuit" ).
November 1, 2012, in his opening remarks to the jury, the
City's trial counsel, Howard Goldberg, explained that
" [the City] hired [CDG], and over the next three and a
half years paid them $2,786,462.43. And the City just simply
didn't get what they paid for." As to CDG's
obligations to the City, Goldberg stated: " [CDG was] to
advise [the City] of deficiencies which are discovered or
suspected by the construction manager [CDG] which involve the
design of the project." As to the deficiencies, Goldberg
said: " [M]ost of the problems [447 Md. 401] were design
problems created by the design engineer, [OBG]. And they
[CDG] should have been advising the City of those
used its opening statements to establish that it was not
responsible under its contract to the City for any of the
design issues at the WWTP. CDG averred
that it caused no harm to the City " because the project
was built on time, on budget, and there were no construction
the first day of trial, the City used its first witness, Dr.
Enos Stover (" Dr. Stover" ), to explain to the
jury the design problems that plagued the WWTP. On the second
day of trial, the City used its second witness, John Jacobs
(" Jacobs" ), to establish CDG's obligations to
the City, specifically, to report issues relating to
OBG's design work. (" The construction manager is to
overview any design issues, they're not to solve the
design issue, but at least raise the issue to the City so
that we can resolve it." ).
OBG caught wind of the City's statements in the CDG
Lawsuit through a newspaper article, OBG sent a " cease
and desist" letter to the City, but it was not assured,
in its view, that the City would comply with the
non-disparagement clause. OBG then filed a complaint against
the City for injunctive and monetary relief. The City filed a
motion to dismiss for failure to state a claim. The Circuit
Court for Wicomico County denied OBG injunctive relief
without issuing a ruling on the City's motion to dismiss.
The City later filed [447 Md. 402] an amended motion to
dismiss (" the Amended Motion to Dismiss" ), which
the Circuit Court granted.
OBG's timely notice of appeal, the Court of Special
Appeals affirmed. O'Brien & Gere Eng'rs, Inc. v.
City of Salisbury, 222 Md.App. 492, 530, 113 A.3d 1129
(2015). The intermediate appellate court reasoned that the
proper inquiry was " whether immunity from liability is
consistent with and will serve the public policy objectives
of the [litigation] privilege." Id. at 522.
Analyzing the facts in light of the public policy objectives,
the intermediate appellate court concluded that " [t]he
administration of justice would be served (and was served) by
applying the absolute litigation privilege to immunize the
City from liability for breaching the non-disparagement
agreement by introducing evidence and making arguments to the
trier of fact that included negative information about
OBG's design of the plant upgrade." Id. at
526. In pertinent part, the court determined that "
[e]vidence about flaws in OBG's design for the plant
upgrade and any cause and effect between flaws in the design
and the plant upgrade failure was indispensable to an
informed factual resolution of the City's contract claim
against CDG." Id. at 524-25. Judge Nazarian
OBG's appeal, we granted its Petition for Writ of
Certiorari to address the following questions:
1. Whether the Court of Special Appeals erred in expanding
the scope of the " litigation privilege" and
finding that, as an absolute matter of law and without regard
to the parties' intentions, no claim can stand for a
deliberate and voluntary breach of a binding
non-disparagement agreement when the disparaging statements
are made in legal proceedings (even when the agreement
contains no exception for statements made in legal
proceedings, and the breaching party is not compelled
[447 Md. 403] by subpoena or other compulsory process or
circumstance to make the disparaging statements).
2. Whether the Court of Special Appeals erred in deciding the
case on a preliminary Motion to Dismiss, without resolving or
allowing any exploration and litigation of important factual
questions (related to the parties' expectations and
intentions) bearing on the scope and effect of the
non-disparagement clause, including whether it waived the
think both questions presented are so intertwined as to
warrant a unified discussion, and we conclude, as to the
second question, that the Court of Special Appeals correctly
affirmed the judgment of the Circuit Court. We explain,
however, that whether the litigation privilege applies to a
breach of contract claim turns in a particular case on
whether applying the litigation privilege advances the
policies favoring the privilege.
reviewing a motion to dismiss a complaint for failure to
state a claim, we " must determine whether the trial
court was legally correct, examining solely the sufficiency
of the pleading." Ricketts v. Ricketts, 393 Md.
479, 492, 903 A.2d 857 (2006). Our review of the
pleading may extend to " its incorporated supporting
exhibits, if any." Id. at 491 (citations and
internal quotation marks omitted). As we stated in Allied
Investment Corp. v. Jasen, when a trial or appellate
court reviews a motion to dismiss for failure to state a
claim, it is necessary to " assume the truth of all
well-pleaded, relevant, and material facts in the complaint
and any reasonable inferences that can be drawn therefrom.
'Dismissal is proper only if the alleged facts and
permissible inferences, so viewed, would, if proven,
nonetheless fail to afford [447 Md. 404] relief to the
plaintiff.'" 354 Md. 547, 555, 731 A.2d 957 (1999)
the City dispute whether the City violated the
non-disparagement clause in the Settlement Agreement because
of the City's statements during the CDG Lawsuit.
Conceding that the litigation privilege is absolute with
respect to " defamation and other torts arising from
statements made in legal proceedings," OBG argues that
we should adopt a different approach with respect to its
breach of contract claim. Because of the public policy
favoring settlements, OBG contends, parties can waive the
litigation privilege by contract. OBG views the proper
question, then, as whether " the intentions and
expectations of the parties or the particular factual context
of the case" reveal a waiver of the litigation
privilege. Remand is necessary, in OBG's view, because
the Circuit Court granted the City's Amended Motion to
Dismiss without a sufficient record to answer this question.
City contends that OBG's focus is off because the nature
of the claim--tort or contract--does not matter. In reading
our defamation case law, the City deduces that "
Maryland has always 'struck heavily in favor of the free
disclosure of information during a judicial
proceeding'" because of strong public policy
reasons, which are just as relevant to OBG's breach of
contract claim. (Quoting Imperial v. Drapeau,
351 Md. 38, 45, 716 A.2d 244 (1998)). Moreover, the City
argues that the Circuit Court committed no error because the
available facts supported the court's grant of the
Amended Motion to Dismiss: (1) all allegedly disparaging
statements were made in a courtroom and (2) the Settlement
Agreement did not forbid the City from discussing OBG's
design of the WWTP in the CDG Lawsuit.
we address these substantive arguments, we first consider the
City's position that this case is moot. " This [447
Md. 405] Court does not give advisory opinions; thus, we
generally dismiss moot actions without a decision on the
merits." Dep't of Human Res., Child Care Admin.
v. Roth, 398 Md. 137, 143, 919 A.2d 1217 (2007)
(citation omitted). " 'A case is moot when there is
no longer an existing controversy between the parties at the
time it is before the court so that the court cannot provide
an effective remedy.'" Clark v.
O'Malley, 434 Md. 171, 192 n.11, 73 A.3d 1086 (2013)
Settlement Agreement states that, in the event of a breach of
the non-disparagement clause, " the non-breaching party
shall be entitled to equitable relief." The City argues
that, even if it breached the non-disparagement clause, we
cannot grant OBG the injunctive relief it sought because
" the acts sought to be enjoined have ceased."
(Quoting State v. Ficker, 266 Md. 500, 507, 295 A.2d
a doubt, injunctive relief is unavailable. OBG sought
injunctive relief to prevent the City from making negative
statements about OBG during the CDG Lawsuit. That lawsuit is
over, with a verdict favorable to the City. As the City is no
longer making negative statements about OBG that we could
enjoin, injunctive relief is off the table. Yet, as OBG
contends, " any mootness in regard to the claim for
injunctive relief (arising from the termination of the WWTP
Litigation) has no bearing" on OBG's claims for
money damages and attorney's fees.
fast, the City responds. In its view the Settlement Agreement
precludes OBG from pursuing money damages. In pertinent ...