URS Corporation, et al.
Fort Myer Construction Corporation
Argument: December 2, 2016
Court for Montgomery County Case No. 369478V
Barbera, C.J. Greene Adkins McDonald Watts Hotten Battaglia,
Lynne A. (Senior Judge, Specially Assigned), JJ.
appeal concerns the application of two rules. One rule is
critical to the determination of appellate jurisdiction. The
other sets the standard for imposing monetary sanctions when
a litigant prosecutes a case in bad faith or without
Maryland-National Capital Park and Planning Commission
("the Commission") contracted with Respondent Fort
Myer Construction Corporation ("Fort Myer") to
build a pedestrian bridge in accordance with design documents
provided by the Commission. After running into several issues
that delayed construction of the bridge, Fort Myer sued the
Commission claiming that the design documents were at fault.
The Commission impleaded Petitioner URS Corporation
("URS"), the engineering firm that created the
design documents, on the theory that URS was contractually
obligated to defend the Commission against Fort Myer's
claims and would be liable for any damages. URS, in turn,
countersued the Commission for contract payments that the
Commission had withheld from URS.
Myer's original complaint was eventually dismissed by the
Circuit Court without prejudice, but the claims between the
Commission and URS went to trial. URS and the Commission each
prevailed on their claims against each other. Both the
Commission and URS asked the court to award monetary
sanctions against their common adversary - Fort Myer - under
Maryland Rule 1-341 on the basis that the construction
company had litigated its original complaint "without
substantial justification." The Circuit Court did so.
three parties appealed those rulings. The timing of the
appeals of URS and the Commission, and its effect on
appellate jurisdiction, became the dispositive issue for
those appeals. The Court of Special Appeals initially
dismissed the appeals by URS and the Commission for being
too late and then, after reconsidering the matter,
decided that their appeals were, in fact, too early.
On the other hand, the intermediate appellate court
determined that Fort Myer's appeal of the sanctions
awards was just right - both temporally and
substantively - and reversed the Circuit Court's
the Commission ask us to reverse the decision of the Court of
Special Appeals on the sanctions awards, proposing both
procedural and substantive grounds for doing so.
procedural issue turns on the requirement of Maryland Rule
2-601 that a final judgment - ordinarily necessary to trigger
appellate jurisdiction - be incorporated in a "separate
document." In its revised opinion, the intermediate
appellate court explained that the appeals by URS and the
Commission were too early because the Circuit Court
had not incorporated its judgment in favor of the Commission
against URS in a separate document. Adopting that reasoning,
URS and the Commission argue that Fort Myer's appeal of
the sanctions awards was no more ripe for decision than their
own appeals and, accordingly, the Court of Special Appeals
should not have decided it.
substantive issue turns on the merits of the Circuit
Court's conclusion that Fort Myer had prosecuted its
complaint "without substantial justification." The
Court of Special Appeals found that conclusion to be
unsupported by the factors cited by the Circuit Court and
therefore clearly erroneous - which rendered the Circuit
Court's award of sanctions an abuse of discretion. URS
and the Commission argue that, even if there was appellate
jurisdiction of Fort Myer's appeal, the Court of Special
Appeals should be reversed because the Circuit Court acted
within its discretion in awarding sanctions.
that the Court of Special Appeals properly exercised
jurisdiction to decide the appeal of Fort Myer (and in fact
had jurisdiction to decide those of URS and the Commission).
Because the separate document requirement is intended to
clarify the deadline for filing an appeal - not to create
delay for its own sake - the separate document requirement
may be waived when waiver does not prejudice appeal rights.
Such is the case in this appeal. As for the sanctions awards
against Fort Myer, we agree with the Court of Special Appeals
that the Circuit Court's explanation of its reasoning did
not support a finding that Fort Myer's pursuit of its
claim was "without substantial justification."
Proceedings in the Circuit Court
Bridge Contract Beset by Delays
2008, Fort Myer contracted with the Commission to build a
pedestrian bridge over Veirs Mill Road in Montgomery County.
The contract required Fort Myer to construct the bridge
according to design documents that had been prepared for the
Commission by URS under a separate, earlier contract between
the Commission and URS. Several problems arose during
construction, and completion of the bridge was delayed by
more than four months.
Myer Sues the Commission
that the construction issues and delay resulted from problems
with the design documents, Fort Myer sued the Commission on
October 12, 2012, in the Circuit Court for Montgomery County.
In Count I of the complaint, Fort Myer asserted breach of
contract and sought $876, 822.03 in damages related to Fort
Myer's increased costs and lost profits. In Count II,
Fort Myer asked for a declaratory judgment requiring the
Commission to pay Fort Myer $315, 000 in contractual payments
that the Commission was withholding as liquidated damages for
Commission Impleads URS; URS Counterclaims
months later, on March 27, 2013, the Commission filed a
third-party complaint against URS pursuant to Maryland Rule
2-332, seeking indemnification and contribution for any
amount for which the Commission might be found liable to Fort
Myer. The Commission also alleged that, under the design
contract, URS had a duty to defend the Commission against
Fort Myer's claims, and that URS had refused to do so.
answered the third-party complaint, asserting various
defenses to the claims of both the Commission and Fort
Myer. URS also asserted a counterclaim against
the Commission, alleging that the Commission owed URS $103,
420, which was due for services URS had provided to the
Commission, but which the Commission had withheld in light of
the impending claim by Fort Myer.
the parties engaged in pretrial discovery. Various discovery
disputes arose, which resulted in requests for sanctions. The
Circuit Court referred some of those disputes to a special
master, and ultimately adopted the recommendations of the
master, which did not include sanctions.
of Fort Myer's Complaint without Prejudice
February 26, 2014, after more than a year of litigation, URS
moved to dismiss Fort Myer's complaint, or, in the
alternative, for summary judgment. URS argued that Fort
Myer's complaint was deficient under a State statute
because Fort Myer had not filed a certificate of a qualified
expert ("CQE") in conjunction with its complaint.
See Maryland Code, Courts and Judicial Proceedings
Article ("CJ"), §3-2C-01 et seq. That
statute requires a plaintiff to file a CQE within 90 days of
filing a malpractice claim against a licensed professional
engineer. If a plaintiff fails to file a timely CQE,
the statute provides for dismissal of the complaint without
prejudice. See CJ §3-2C-02(a).
Myer initially opposed the URS motion. In its response, it
noted that, given the statutory definition of "claim,
" the CQE requirement applies only when a claim is
"filed ... against a licensed professional
[engineer] or the employer, partnership, or other entity
through which the licensed professional [engineer] performed
professional services ... [and] based on the licensed
professional's alleged negligent act or omission in
rendering professional services...." CJ §3-2C-01(b)
(emphasis added). Fort Myer argued that this requirement did
not pertain to its complaint because its claims were asserted
against the Commission, and not URS (which presumably
employed the licensed professional engineers who created the
design documents at issue).
meantime, URS and the Commission filed several summary
judgment motions, seeking to dispose of the case on various
March 11, 2014, a few days after the summary judgment motions
were filed and shortly before the scheduled trial, Fort Myer
withdrew its opposition to URS's motion to dismiss,
implicitly agreed that the CQE requirement applied to its
complaint, and consented to dismissal of its complaint
without prejudice. In a subsequent filing and at two pretrial
hearings, counsel for Fort Myer explicitly agreed that the
CQE statute applied and stated that the court was required to
dismiss its complaint without prejudice. Unsurprisingly, URS
and the Commission agreed that the complaint should be
dismissed, but argued that the dismissal should be with
prejudice. (The Commission took the position that the
CQE statute did not apply to Fort Myer's claim,
but that its complaint should be dismissed with prejudice for
other reasons set out in its summary judgment motion).
motions hearing on March 31, 2014, the Circuit Court decided
to dismiss Fort Myer's complaint without prejudice. The
third-party claim of the Commission against URS and URS's
counterclaim against the Commission survived the dismissal of
Fort Myer's complaint and remained pending, however.
Awards against Fort Myer
the Commission pursued an award of sanctions against Fort
Myer with respect to the ill-fated complaint that had been
dismissed without prejudice. Their respective motions were
brought under Maryland Rule 1-341(a), which authorizes a
court to require a party or the party's attorney to pay
the costs of a proceeding and reasonable expenses, including
attorney's fees, incurred by an adverse party when the
court finds that a party acted "in bad faith or without
substantial justification" in maintaining or defending a
motion, the Commission alleged, among other things, that Fort
Myer had failed to retain expert witnesses despite
representing that it had done so; that Fort Myer's
witnesses failed to appear for properly-noticed depositions;
and that Fort Myer proceeded with depositions of Commission
witnesses despite "full knowledge that its complaint was
fatally flawed" because of the failure to file a CQE.
The Commission sought recovery of the costs and
attorney's fees incurred in defending against Fort
Myer's complaint, which it computed to be $376, 597.68.
URS joined in the Commission's motion and sought recovery
of its attorney's fees and costs incurred in the amount
of $248, 638.31. Fort Myer opposed the motions, arguing that
its claims were made neither in bad faith nor without
Circuit Court held a hearing on the motions for sanctions on
April 28, 2014. Ruling from the bench at the hearing, the
Circuit Court granted the motions of the Commission and URS.
The court stated that its decision was not based on Fort
Myer's failure to file a CQE, but rather on the "the
posture of the entire case." The court then expressed
its frustration with what it referred to as "blatant
violations of the discovery rules" that had caused it to
take the unique step, in its experience, of referring the
discovery disputes to a special master.
explaining its reasoning, the court stated that it was
"not a question of whether [Fort Myer] had a right to
pursue [its] case, " but rather whether it had "a
legal obligation to do it without fatal flaws." The
court reiterated that it believed that the failure to file a
CQE by itself would not merit sanctions, but that the failure
to do so, when coupled with the discovery violations, the
dismissal of the complaint on the eve of trial, and Fort
Myer's subsequent motion seeking sanctions against the
Commission, had led the court to conclude that a sanctions
award against Fort Myer was appropriate. The court summarized
that "there has been a [Rule] 1-341 violation taking
place in its entirety, discovery violations, conduct of
counsel, lacking substantial justification." While the
court stated that there was "lack of substantial
justification, " it conceded that Fort Myer's
underlying claim "may be a cause of action in some other
court, some other day, for some other judge to decide."
The court explicitly declined to find that Fort Myer had
acted in bad faith.
hearing the court awarded $376, 597.68 to the Commission and
$248, 638.31 to URS - the total amounts requested by each.
The court incorporated its oral ruling in a written order
dated May 29, 2014, which included a finding that the
"conduct of Fort Myer in maintaining [its] case was
without substantial justification." The court clerk
entered two separate written documents, each entitled Notice
of Judgment, on June 2, 2014 - one memorializing the award in
favor of URS and the other the award in favor of the
of Claims Between the Commission and URS
meantime, the Commission and URS had continued to litigate
their claims against one another. The Circuit Court held a
bench trial on those claims on April 7 and 8, 2014. In an
Order and Opinion issued on May 5, 2014, the Circuit Court
decided in URS's favor on its counterclaim against the
Commission and found that the Commission owed URS $103, 420
with respect to the contract payments that the Commission had
withheld from URS. The clerk entered a separate document in
the record entitled Notice of Judgment in that amount.
same opinion, the Circuit Court also decided in the
Commission's favor on its third-party claim against URS
concerning the URS's contractual duty to defend the
Commission against Fort Myer's claims. The court did not
compute the amount of damages at that time or enter a
separate document incorporating its judgment.
months later, on December 18, 2014, the Circuit Court held a
hearing on the amount of damages owed by URS to the
Commission on the duty-to-defend claim. At that hearing,
the Circuit Court ruled from the bench that URS owed the
Commission $352, 355.68 on that claim. That judgment was
entered on the court's docket that same day in the
following words: "Court enters judgment in favor of the
defendant Maryland-National Capital Park and Planning
Commission against the defendant URS Corporation-Maryland in
the amount of three hundred fifty-two thousand, three hundred
fifty-five dollars and sixty ...