Volkman v. Hanover Investments

REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1595
September Term, 2014
SUSAN VOLKMAN
v.
HANOVER INVESTMENTS, INC., ET AL.
Berger,
Arthur,
Reed,
JJ.
Opinion by Berger, J.
Filed: November 25, 2015
This appeal arises out of two orders of the Circuit Court for Montgomery County. The
first denied Susan Volkman’s (“Volkman’s”), appellant’s, motion for summary judgment
against Hanover Investments, Inc.; Hanover’s shareholders; and Hanover’s wholly owned
subsidiary, One Call Concepts, Inc. (“OCC”) (collectively, “Hanover”), appellees. Secondly,
Volkman appeals the trial court’s order granting a declaratory judgment in favor of Hanover.
Volkman contends the circuit court erred in denying her motion for summary judgment and
rendering a declaratory judgment while another matter involving the same issues was
pending in the court of another state. Additionally, Volkman avers that the circuit court erred
in interpreting and applying the contractual agreement between Volkman and Hanover.
On appeal, Volkman presents three issues for our review.1 We rephrase the first issue
1
The issues, as presented by Volkman, are:
1. Did the Circuit Court err in denying Appellant
Volkman’s motion for a summary judgment of dismissal
where, at the time this Declaratory Judgment Action was
filed, there was already pending in District Court in the
State of Minnesota an action for specific performance in
which the exact same issues identified in this Declaratory
Judgment Action were to be litigated?
2. Did the Circuit Court err in holding that the Appellees
had good cause to terminate Appellant Volkman’s
employment where there was insufficient evidence upon
which a reasonable finder of fact could conclude that
Good Cause to terminate existed under either Volkman’s
Employment Agreement with Appellee One Call
Concepts or Volkman’s Shareholder’s Agreement with
Appellee Hanover Investments?
(continued...)
as follows:
Whether the circuit court erred in rendering a declaratory
judgment while an action involving the same parties and same
issues was pending before a court in Minnesota.
For the reasons set forth below, we shall reverse the judgment of the Circuit Court for
Montgomery County. As a result, we need not address the issues presented in Volkman’s
latter two questions due to our determination on the first issue.
FACTUAL AND PROCEDURAL BACKGROUND
OCC is a Maryland corporation that exists to serve utility companies and process
telephone calls from individuals who intend to undertake excavation projects. OCC
maintains contracts for its services in a number of states across the county. At the time OCC
was incorporated, it was owned by Thomas Hoff (“Hoff”). Volkman was hired by OCC in
1984. When Volkman was hired, she held the title of Director of Operations. In 1993,
Volkman entered into an employment agreement whereby Volkman would serve as vice
1
(...continued)
3. Was there substantial evidence to support the Circuit
Court’s finding that Appellee Hanover Investments acted
in good faith in recognizing that One Call Concepts had
good cause to terminate Appellant Volkman’s
employment where there was insufficient evidence upon
which a reasonable finder of fact could conclude that
Volkman’s employment with Appellee One Call
Concepts was terminated for Good Cause shown?
2
president of OCC in its corporate office in Minnesota. Under this agreement, Volkman could
only be terminated for “Good Cause,” or upon fifteen days’ prior notice.
Volkman’s responsibilities as vice president of OCC included, but were not limited
to, facilitating acquisitions, making hiring decisions, and establishing policies and
procedures. Additionally, Volkman was tasked with maintaining a contract in Minnesota
with Gopher State One Call (“GSOC”). Volkman was a longtime employee of OCC who had
worked her way up through the organization. She was highly compensated, earning in excess
of $400,000 per year.
In or around 2007, Hoff expressed an intent to divest himself of his interest in OCC
and retire. In recognition that much of OCC’s value is derived from Hoff’s association with
the company, Hoff created Hanover Investments, Inc., as a holding company that existed for
the sole purpose of owning shares of OCC. Under this arrangement, Hoff personally secured
financing for Hanover to acquire OCC. OCC shares served as collateral for the debt. As
OCC and Hanover paid down the debt, the liens on the shares were released, and the
purchase price was disbursed to Hoff. As a result, Hoff was able to gradually back away
from the company.
In pursuit of Hoff’s objective to maintain the successive management of OCC, Hoff
sold shares of Hanover to certain longtime OCC employees, including Volkman, at nominal
prices. Hoff sold a 19% interest, the single largest interest, to Volkman. In consideration
for her shares in Hanover, Volkman entered into a shareholders’ agreement and paid $190
3
for her interest in Hanover.2 Under the terms of the shareholders’ agreement, shareholders
subscribed to a voting trust agreement whereby the shareholders could not vote their shares
until Hoff’s financial interest in Hanover was terminated. Additionally, Hoff encouraged
successive management by requiring Hanover to redeem the shares of any OCC employee
who is terminated for good cause at a 90% discount. The shareholders’ agreement provides,
“[i]f a Shareholder’s employment with OCC is terminated for Good Cause and the Board of
Directors of the Company agrees that OCC terminated the Shareholder for Good Cause, the
Company shall redeem . . . [the] Shareholder’s Common Stock.”
Notably, the shareholders’ agreement provides that “‘[g]ood [c]ause’ shall be
construed to mean, but not be limited to, the following:”
(a) dishonesty of a Shareholder in a material matter;
(b) the use of narcotics or alcohol by Shareholder to an
extent which materially interferes with Shareholder’s
performance of his duties as an employee as he normally
performs such duties;
(c) repeated failure by Shareholder to devote proper time and
attention to his duties as an employee of OCC or the
Company;
2
The record is silent as to the value of Hanover’s shares when Volkman acquired
them. It is apparent, however, that the Hanover shares would significantly increase in value
after the issuance of those shares. It stands to reason that because of the manner in which
Hanover was structured, there is a negative correlation between the value of Hanover’s
shares and the debt incurred by Hoff. That is, as the debt secured by the OCC shares
decreases, the OCC shares become unencumbered thereby raising the value of Hanover’s
shares.
4
(d) material and repeated failure by Shareholder to carry out
the directions, instructions, policies, rules, regulations or
decisions of the Board of OCC or the Company;
(e) conviction of a crime involving moral turpitude or
reflection upon the reputation of the Company, but
excluding minor traffic violations and similar offenses;
(f) repeated and unexcused absenteeism after reasonable
notice from the Board of OCC or the Company; or
(g) the material breach by Shareholder of any of his
obligations or agreements contained in the Agreement,
his or her employment agreement with the Company, the
Voting Trust Agreement of the Company, the Employee
Restriction Agreement or any other agreement to which
the Company or OCC and the Shareholder are parties.
On January 8, 2010, OCC terminated Volkman’s employment. The parties disagree
as to whether the termination was for good cause. Hanover avers that Volkman’s termination
was warranted because she failed to properly manage the operation of OCC’s call center in
Minnesota, which contributed to the loss of the GSOC account. Hanover further alleges that
under Volkman’s leadership, the Minnesota center failed to record approximately 8,400
phone calls resulting in a breach of the GSOC contract, and Volkman’s subordinates were
uncomfortable with her management techniques.
Volkman, for her part, argues that she was not responsible for the lost call records, and
her difficult relationship with GSOC was the result of an unreasonable personal vendetta on
the part of the management at GSOC. Further, Volkman argues that her relationship with
GSOC could not have been a significant contributing factor to the termination of that
5
contract, because by the time GSOC terminated the contract, Volkman had already been
removed from Minnesota operations. Finally, Volkman denied that her relationship with any
of her subordinates was strained or unduly strenuous. Indeed, Volkman maintains that she
was not terminated because of her job performance, but rather because her supervisors
succumbed to pressure from an influential client to have her terminated.
On February 3, 2010, Hanover sent notice to Volkman that it was redeeming
Volkman’s stock. Thereafter, Hanover commenced an arbitration proceeding to determine
the appropriate redemption price for Volkman’s stock under the shareholders’ agreement as
a result of OCC terminating her employment. At that time, Volkman’s stock was determined
to be valued at $19,000. Hanover further maintained that pursuant to the shareholders’
agreement it was entitled to redeem Volkman’s stock at a 90% discount, or $1,900.
On April 17, 2012, Volkman filed an action (the “employment action”) against OCC
and Hoff in Montgomery County. The record reflects only that the parties stipulated to a
dismissal with prejudice of this action on March 22, 2013. Hanover avers that Volkman was
terminated for good cause and that this determination was pivotal in both the employment
action and the declaratory judgment action which is the subject of this appeal. Aside from
the stipulated dismissal, however, the record is silent as to the substance of the claims or any
adjudications rendered in the employment action.
On January 16, 2013, while the employment action was pending, Volkman filed a
breach of contract action in Minnesota alleging that Hanover violated the shareholders’
6
agreement by redeeming her stock at a 90% discount. In the breach of contract action
Volkman sought specific performance of the shareholders’ agreement. In response to the
Minnesota breach of contract action, Hanover filed a motion to dismiss Volkman’s case in
Minnesota for lack of personal jurisdiction on March 15, 2013. On April 25, 2013, the
Minnesota trial court denied Hanover’s motion to dismiss. Hanover filed an interlocutory
appeal challenging the denial of its motion to dismiss. Thereafter, on March 3, 2014, the
Minnesota Court of Appeals affirmed the trial court’s denial of Hanover’s motion to dismiss
the Minnesota action and remanded the case back to the trial court. See Volkman v. Hanover
Inv., Inc., 843 N.W.2d 789 (Minn. Ct. App. 2014).
On June 26, 2013, while Hanover’s Minnesota appeal was pending, Hanover filed a
declaratory judgment action in the Circuit Court for Montgomery County seeking to have the
circuit court declare that Hanover fulfilled its obligations with regard to the redemption of
Volkman’s shares under the shareholders’ agreement. Volkman and Hanover filed
cross-motions for summary judgment. Neither party requested a hearing on their cross-
motions for summary judgment. The parties both argued that they were entitled to judgment
as a matter of law, but Volkman also argued that it was improper to render a declaratory
judgment while the matter in Minnesota was still pending. Both motions for summary
judgment were denied. Because no hearing was requested or held, the record contains no
reasons why the cross-motions were denied. On June 16 and 17, 2014, the circuit court
entertained a trial on the merits.
7
On August 18, 2014, after the Minnesota appeal had been decided, but before the case
was heard by the Minnesota trial court on remand, the circuit court rendered judgment in
favor of Hanover, finding that Volkman was properly terminated for cause pursuant to the
shareholders’ agreement.3 Thereafter, Volkman filed this timely appeal. Additional facts
will be discussed as necessitated by the issues presented.
DISCUSSION
I. The Trial Court Erred In Issuing A Declaratory Judgment While An Action
Involving The Same Parties And Issues Was Pending In Minnesota.
A. Standard of Review
Maryland Code (1973, 2013 Repl. Vol.), § 3-409(a) of the Courts and Judicial
Proceedings Article (“CJP”) provides: “a court may grant a declaratory judgment . . . if it will
serve to terminate the uncertainty or controversy giving rise to the proceeding . . . .”
(emphasis added). For the most part, because “[a] court ‘may grant a declaratory judgment;’
[the] declaratory judgment generally is a discretionary type of relief.” Converge Servs. Grp.,
LLC v. Curran, 383 Md. 462, 477 (2004) (quoting CJP § 3-409(a)). “Thus, we generally
3
On January 29, 2015, on remand in Minnesota, Hanover filed a motion for summary
judgment in the Minnesota trial court. The Minnesota trial court gave preclusive effect to
the declaration made by the Circuit Court for Montgomery County and dismissed the
Minnesota action with prejudice. We observe, however, that the Minnesota court
“specifically retains jurisdiction for the purposes of . . . reopening its judgment pending
resolution of [this appeal].” On appeal, because we determine only whether the trial judge
erred in denying Volkman’s summary judgment motion or rendering a declaration in
Hanover’s favor, we do not consider the effect of the ruling by the Minnesota trial court that
occurred after the circuit court’s decision in the instant case.
8
review a trial court’s decision to grant or deny declaratory judgment under an abuse of
discretion standard.” Sprenger v. Pub. Serv. Comm’n of Md., 400 Md. 1, 21 (2007); Tanner
v. McKeldin, 202 Md. 569, 577 (1953) (“[I]t is clear that the exercise of declaratory
jurisdiction is within the sound discretion of the court.”).
Contrary to the permissive ‘may’ language used in CJP § 3-409(a),
we have historically enforced the provisions of the Declaratory
Judgment Act and insisted that courts declare the rights of
parties when presented with an action properly susceptible to a
declaratory judgment. Rarely, we have held, is it permissible to
dismiss an action for declaratory judgment in lieu of declaring
the rights of the party seeking the judgment.
Post v. Bregman, 349 Md. 142, 159-60 (1998). Additionally,
This Court has emphasized, time after time, that dismissal “is
rarely appropriate in a declaratory judgment action.” Popham
v. State Farm, 333 Md. 136, 140 n. 2, 634 A.2d 28, 30 n. 2
(1993), quoting Broadwater v. State, 303 Md. 461, 465, 494
A.2d 934, 936 (1985). See, e.g., Turnpike Farm v. Curran, 316
Md. 47, 49, 557 A.2d 225, 226 (1989); Boyds Civic Ass'n v.
Montgomery County, 309 Md. 683, 687 n. 2, 526 A.2d 598, 600
n. 2 (1987); Jennings v. Government Employees Ins., 302 Md.
352, 355, 356, 488 A.2d 166, 167–168 (1985); State v. Burning
Tree Club, 301 Md. 9, 17, 481 A.2d 785, 789 (1984); Koontz v.
Ass'n of Classified Emp., 297 Md. 521, 529, 467 A.2d 753, 758
(1983); Carroll Co. Educ. Ass'n v. Bd. of Educ., 294 Md. 144,
155–156, 448 A.2d 345, 351 (1982); East v. Gilchrist, 293 Md.
453, 461 n. 3, 445 A.2d 343, 347 n. 3 (1982); Mauzy v.
Hornbeck, 285 Md. 84, 90–92, 400 A.2d 1091, 1095 (1979),
and cases there cited.
Christ by Christ v. Md. Dept. of Natural Res., 335 Md. 427, 435 (1994).
It is, however, “within the discretion of the circuit court to ‘refuse a declaratory
9
judgment when it does not serve a useful purpose or terminate controversy.’” Polakoff v.
Hampton, 148 Md. App. 13, 27 (2002) (quoting Staley v. Safe Deposit & Trust Co., 189 Md.
447, 457 (1947)); see Edwin M. Borchard, The Uniform Declaratory Judgments Act,
18 Minn. L. Rev. 239, 267 (1934) [hereinafter Borchard, The Uniform Declaratory
Judgments Act] (“the declaration is an instrument of practical relief and will not be issued
where it does not serve a useful purpose.”). The question presented in this case is whether
the issuance of a declaratory judgment is inappropriate notwithstanding the applicant
otherwise satisfies the conditions of CJP § 3-409(a).
B. Propriety of A Declaratory Judgment While A Similar Action is Pending
One such instance where a declaratory judgment does not generally serve a useful
purpose or terminate controversy is when there is another action pending in a different court
involving the same parties and the same issues. Indeed, generally “courts will not entertain
a declaratory judgment action if there is pending, at the time of the commencement of the
action for declaratory relief, another action or proceeding involving the same parties and in
which the identical issues that are involved in the declaratory action may be adjudicated.”
Waicker v. Colbert, 347 Md. 108, 113 (1997). This rule rests on the principle that, “[w]here
an action or proceeding is already pending in another forum involving the same issues, it is
manifestly unwise and unnecessary to permit a new petition for a declaration to be
initiated . . . .” Edwin Borchard, Declaratory Judgments 350 (2nd ed. 1941) [hereinafter
Borchard, Declaratory Judgments].
10
This rule can be traced back to the equity courts of England, where principles of
comity between the high Court of Chancery and the Court of Exchequer required “that where
they have both an entirely concurrent jurisdiction of the same matter, that court is entitled to
retain the suit, in which it has been first commenced.” Brown v. Wallace, 4 G. & J. 479,
496-97 (1832); see also Brooks v. Delaplaine, 1 Md. Ch. 351 (1848) (“When two courts have
concurrent jurisdiction over the same subject matter, the court, in which the suit is first
commenced, is entitled to retain it. This rule is vital to the harmonious movement of the
courts; and, any other would unavoidably, lead to perpetual collisions, and be productive of
the most calamitous results.”); accord Withers v. Denmead, 22 Md. 135, 145 (1864) (quoting
Brooks, supra, 1 Md. Ch. 351).
This rule survives in the context of a declaratory judgment action out of recognition
that the declaratory judgment is distinguishable from other judgments because “courts are
empowered to adjudicate upon disputed legal rights whether or not further relief is or could
be claimed.” Borchard, The Uniform Declaratory Judgments Act, supra, at 239. In order for
declaratory judgments to retain the procedural requisites of justiciability:
two principal criteria guid[e] the policy of rendering declaratory
judgments . . . (1) when the judgment will serve a useful purpose
in clarifying and settling the legal relations in issue, and
(2) when it will terminate and afford relief from the uncertainty,
insecurity, and controversy giving rise to the proceeding. It
follows that when neither of these results can be accomplished,
the court should decline to render the declaration prayed.
11
Id. at 265. Pursuant to these principles, Maryland courts have generally held that the
practical purposes of the declaratory judgment are ill-served when a court makes a
declaration while an action involving the same issues and the same parties is pending before
another court.
As an initial matter, Hanover averred at oral argument that with respect to the
Maryland and Minnesota actions, neither the parties nor the issues presented are truly the
same. We are unpersuaded. First, in both actions Volkman argues against the actions made
by Hanover Investments. Whether the Hanover shareholders or directors are named as
parties to the action is an immaterial distinction where all the parties interact through the
conduit of the Hanover corporation. Further, Hanover attempts to distinguish the actions by
arguing that the declaratory judgment action is merely an attempt to legitimize its process for
redeeming shares under their shareholders’ agreement, whereas the Minnesota action seeks
to adjudicate whether Volkman was properly terminated for cause. While we agree that the
Maryland and Minnesota actions are not completely identical actions, our analysis merely
inquires whether “identical issues . . . are involved” in the two actions. Waicker, supra,
347 Md. at 113. While the specific causes of action, legal theories, and objectives of
litigation may differ between the declaratory judgment action and the Minnesota action, an
adjudication with respect to the interpretation of the shareholders’ agreement and the
performance of that agreement are necessary issues common to both actions. Accordingly,
12
for the purpose of this analysis, the declaratory judgment action and the Minnesota action
involve the same parties and the same issues.
Although, for our purposes, this declaratory judgment action and the Minnesota action
involve the same parties and same issues, the question remains as to if it was appropriate for
the circuit court to issue a declaratory judgment notwithstanding the pending Minnesota
action. In A. S. Abell Co. v. Sweeney, 274 Md. 715 (1975), the Court of Appeals quoted
Professor Borchard in analyzing when a declaratory judgment may be appropriate
notwithstanding the pendency of another similar action. Id. at 721. The Court commented
that “‘[w]here an action or proceeding is already pending in another forum involving the
same issues, (absent very unusual and compelling circumstances,) it is manifestly unwise and
unnecessary to permit a new petition for a declaration to be initiated.’” Id. (quoting
Borchard, Declaratory Judgments, supra, at 350). Notably, the parenthetical in the rule
expressed in A. S. Abell Co. (i.e. “absent very unusual and compelling circumstances”), was
absent from Professor Borchard’s treatise. Critically, the Court of Appeals’ opinion in A.S.
Abell Co. represents the first instance when the “unusual and compelling” language entered
our jurisprudence. Compare A. S. Abell Co., supra, 274 Md. at 721, with Borchard,
Declaratory Judgments, supra, at 350.
The Court of Appeals’ analysis in A. S. Abell Co., relied on its holding six years prior
in Grimm v. Cnty. Comm’rs of Washington Cnty., 252 Md. 626 (1969). A. S. Abell Co.,
supra, 274 Md. at 719-21. Grimm involved a criminal defendant who was charged with
13
violating a county ordinance regarding the “fencing, burning and stacking of motor vehicles.”
Grimm, supra, 252 Md. at 628. After the county issued warrants for the violation of the
ordinance, Grimm pursued a declaratory judgment action requesting that the court declare
the ordinance unconstitutional. Id. In light of the pending criminal action, the trial judge
refused to issue a declaratory judgment and dismissed the action. Id. at 630.
In affirming the trial court’s finding that a declaratory judgment was inappropriate,
the Court of Appeals in Grimm noted:
there appears to be a division of authority between those
jurisdictions which hold that it is an abuse of discretion to grant
a declaratory judgment when there is a pending criminal
prosecution involving the same parties and same issues, and
those which hold that in a proper case, it is within the trial
judge’s discretion to grant such relief. We are not convinced,
however, that the two lines of authority may not be reconciled
on the basis of differences in local procedure or the types of
interests threatened . . . .
Grimm, supra, 252 Md. at 639.
We, then, are tasked with addressing the “local procedures or the types of interests”
that make a circumstance unusual and compelling so as to warrant issuing a declaratory
judgment when an action involving similar issues is pending before another court. Id. When
a litigant initiates a declaratory judgment under such circumstance, the trial court generally
does not abuse its discretion by refusing to issue a declaration. Sprenger v. Pub. Serv.
Comm’s of Md., 400 Md. 1, 33 (2007) (holding that trial judge is legally correct in dismissing
declaratory action when two actions are substantially the same, issues were identical, and the
14
identical action was still pending); accord Popham, supra, 333 Md. at 140 n.2; Haynie v.
Gold Bond Bldg. Prods., 306 Md. 644, 653-54 (1986); Brohawn v. Transamerica Ins. Co.,
276 Md. 396, 405-06 (1975); Grimm, supra, 252 Md. at 640; Polakoff v. Hampton, 148 Md.
App. 13, 39 (2002).
The question then arises whether the same standard applies when a trial judge fails to
dismiss a declaratory judgment and elects to issue a declaratory judgment when the parties
and issues are substantially the same as an action that is pending in a court of concurrent
jurisdiction. We are cognizant that the Court of Appeals has expressly held that the failure
to dismiss a declaratory action is, under many circumstances, an abuse of discretion when a
similar action is pending. See, e.g., Waicker, supra, 347 Md. 108; Tpk. Farm Ltd. P’ship,
supra, 316 Md. 47 (reversing, in per curiam decision, a declaration made by a trial court
because similar action involving same issues was pending in the same court).
The Court of Appeals has repeatedly “made clear that, as a general rule, courts will
not entertain a declaratory judgment action ‘if there is pending, at the time of the
commencement of the action for declaratory relief, another action or proceeding involving
the same parties and in which the identical issues that are involved in the declaratory action
may be adjudicated.’” Post, supra, 349 Md. at 160 (quoting Waicker, supra, 347 Md. at 113).
Similarly, in Brohawn, supra, the Court of Appeals held that “where, as here, the question
to be resolved in the declaratory judgment action will be decided in pending actions, it is
inappropriate to grant a declaratory judgment.” 276 Md. at 406; see also Aetna Cas. & Sur.
15
Co. v. Kuhl, 296 Md. 446, 450 n.1 (1983) (observing that “a declaratory judgment action
brought by an insurer is inappropriate where the same issue is pending in another
proceeding”). Moreover, when the circuit court exercises its discretion to affirmatively
render, as distinguished from abstaining from rendering, a declaration while another similar
action involving the same parties and same issues is pending, we are to reverse the judgment
absent “unusual and compelling circumstances.” Waicker, supra, 347 Md. at 113.
In Waicker, the Court of Appeals adopted a narrow construction of the term “unususal
and compelling” when addressing the appropriateness of entertaining a declaratory judgment
action notwithstanding a pending action involving the same issues in another forum.
Waicker, supra, 347 Md. at 116. There, the defendant in a civil tort case, a court appointed
property manager, filed a declaratory judgment action in the same court to resolve an issue
that would be outcome determinative of the pending tort lawsuit. Id. at 110. The circuit
court issued a declaration against the property manager, and the property manager appealed
the judgment. Id. The Court of Appeals raised the issue, sua sponte, of whether issuing a
declaration was appropriate in light of the pending tort action. Id. at 112-13. The Court
articulated that a strong public policy in favor of resolving litigation in a single action, as
well as a policy against “interlocutory orders and against piecemeal appeals” weighed against
rendering a declaration under those circumstances. Id. at 115-16 (quoting Haynie, supra, 306
Md. at 653-54). The Court of Appeals, therefore, held that there were no unusual or
compelling circumstances so as to permit the issuance of a declaratory judgment when an
16
action was pending involving the same issue. Id. at 116. Accordingly, the Court reversed
the declaratory judgment issued by the trial court.4 Id.
Similar to Waicker, in State v. 91st St. Joint Venture, 330 Md. 620 (1993), the Court
of Appeals, in a per curiam order, vacated an interlocutory injunction ordered by the Circuit
Court for Baltimore City, while the same parties were litigating the same issues in the Circuit
Court for Worcester County. 91st St. Joint Venture, 330 Md. at 623. In that case, the State
Department of Natural Resources (“DNR”) filed an action to enjoin the defendants from
constructing a gazebo in a protected area in Ocean City, Maryland. Id. at 623-24. Rather
than respond to the action, the defendants filed a complaint in the Circuit Court for Baltimore
City seeking declaratory and injunctive relief. Id. at 624. The Circuit Court for Baltimore
City, then, issued an injunction prohibiting the DNR from enforcing its regulations and
prohibiting the DNR from proceeding with the action in Worcester County. Id. at 625.
On appeal, the Court of Appeals held that “the Circuit Court for Baltimore City
abused its discretion when it enjoined the [DNR] from proceeding with the Worcester County
action previously filed.” Id. at 632. The Court’s decision rested on the principle that when
4
Notably, Judge Chasanow wrote a dissenting opinion in Waicker, arguing that the
majority failed to afford sufficient deference to the trial judge’s determination to exercise
jurisdiction. 347 Md. at 119-20. Further, the dissent recognized that whether principles of
judicial economy create unusual and compelling circumstances often cuts both ways. Id. at
122-23. For example, in Waicker, Judge Chasanow in his dissent argued that the declaration
at issue would serve to resolve multiple pending and future actions. Id. Accordingly, the
dissent posited that principles of judicial economy actually supported finding unusual and
compelling circumstances in that case. Id. at 124.
17
one court exercises jurisdiction over an action that is already subject to the jurisdiction of
another court, “‘the danger of collision is so imminent, that public policy as well as judicial
comity requires that the court of co-ordinate jurisdiction, first in possession of any portion
of the subject-matter, should not be disturbed by any other court.’” Id. at 629 (quoting
Withers, supra, 22 Md. at 146). We recognize that 91st St. Joint Venture deals with the grant
of an injunction rather than a declaration. Nevertheless, in our view, the Court’s reliance on
principles of comity between courts of concurrent jurisdiction is instructive as we aim to
interpret and apply the term “unusual and compelling circumstances” to this case.
The meaning we ascribe to the term “unusual and compelling” is further informed by
the Court of Appeals’ decision in Brohawn, supra, 276 Md. 396. In Brohawn, the Court of
Appeals determined that a trial court’s discretion as to whether to issue a declaration should
be guided by:
several factors including the effect of granting a judgment on the
rights of all parties to the action. If the granting of the judgment
would unduly inconvenience or burden the parties, or allow one
party to wrest control of the litigation from another and cause a
confusing alteration of the burden of proof, the court should
refuse to grant the relief sought. Employers’ Fire Insurance
Company v. Beals, supra, 240 A. 2d at 401. Under such
circumstances, granting a declaratory judgment would constitute
an abuse of discretion.
Brohawn, supra, 276 Md. at 406.
In Brohawn, a physical altercation arose between Brohawn and another individual that
resulted in Brohawn pleading guilty to criminal assault charges. Id. at 399. Subsequently,
18
the other party to the altercation filed an action against Brohawn seeking damages for
intentional torts and negligence. Id. at 399-400. Transamerica, Brohawn’s insurer, refused
to defend Brohawn on the grounds that her coverage contained a policy exclusion whereby
Transamerica was not responsible for intentional conduct. Id. at 400. Thereafter,
Transamerica initiated a declaratory judgment action, in the same court, seeking to have the
court declare that Brohawn’s conduct was intentional, and, therefore, fell within the policy
exclusion. Id. at 401. The circuit court dismissed the declaratory judgment action because
“the question of coverage would be ‘determined by the jury’s verdict (in the tort suits). . . .”
Id. at 401-02.
Brohawn then appealed the circuit court’s decision where we, sitting en banc in a 7-2
decision, reversed the dismissal of the declaratory judgment action. Transamerica Ins. Co. v.
Brohawn, 23 Md. App. 186, 201 (1974). We reasoned that because the very harm
Transamerica sought to avoid was having to defend Brohawn in the pending tort litigation,
a declaration stating the rights of the parties was appropriate, notwithstanding the pending
tort litigation. Id. Accordingly, we reversed the circuit court’s dismissal of the declaratory
judgment so that the issue of Transamerica’s liability may be resolved before it underwent
the effort and expense of defending Brohawn. Id. The case did not end there, however, as
the Court of Appeals granted Brohawn’s writ of certiorari. Brohawn, supra, 276 Md. at 402.
The Court of Appeals acknowledged that if the issue between Brohawn and
Transamerica were not the ultimate issue to be determined in the underlying action, then a
19
declaratory judgment might have been appropriate. Id. at 406. When, however, “the
question to be resolved in the declaratory judgment action will be decided in pending actions,
it is inappropriate to grant a declaratory judgment.” Id. (citing Watson v. Dorsey, 265 Md.
509, 512 n.1 (1972)). Further, the Court determined that it would be inherently unfair to
permit Transamerica to monopolize not only its litigation with Brohawn, but also the
litigation between Brohawn and the plaintiff in the underlying tort litigation because of the
preclusive effect the declaration may have on the pending litigation. Id. at 407. Accordingly,
the Court of Appeals reversed our decision and held that the circuit court did not abuse its
discretion by declining to render a declaratory judgment. Id. We recognize that Brohawn
is distinguishable from this case because there the Court sought to prevent a declaratory
judgment action from being used to prejudice a plaintiff in the underlying tort action who
was not a party to the declaratory judgment action. Id. at 407-08. Nevertheless, we find
Brohawn persuasive to the extent that it articulates one of many considerations that weigh
on the question as to whether a declaratory judgment action is proper.
We further find persuasive decisions arising from the courts of other jurisdictions that
have refused to endorse the usurping of the jurisdiction of a court with concurrent
jurisdiction through the failure to permit the matter to be resolved in its original forum. See,
e.g., First Midwest Corp. v. Corp. Fin. Assoc., 663 N. W. 2d 888, 892-93 (Iowa 2003)
(holding that it was an abuse of discretion to deny stay while matter was pending in
neighboring state) (citing Waicker, supra, 347 Md. at 115); Woodmen of the World Life Ins.
20
Soc’y, 549 N.W.2d 172, 176 (Neb. 1996) (holding that “entertaining [a] declaratory judgment
action was an abuse of discretion” when the same issue was pending in an action in West
Virginia); Simmons v. Superior Court in and for L.A. Cnty., 214 P.2d 844, 848-49 (1950)
(“The fruits of the recognition of the rule of comity have been so beneficient, when applied
to courts of concurrent jurisdiction created by different sovereignties, as to justify the
conclusion that it is not only a rule of comity, but one of necessity.” (internal quotations
omitted)). These persuasive authorities buttress our reliance on the principle that it is
inherently unwise to render a declaratory judgment while an action is pending involving the
same issues in a court of concurrent jurisdiction.
Some jurisdictions, however, have been more willing to disregard this rule, viewing
the general prohibition on issuing declarations while a similar action is pending not as a rule
of necessity only to be violated in the most exceptional circumstances, but as “a willingness
to grant a privilege, not as a matter of right, but out of deference and good will.” Quiring v.
GEICO Gen. Ins. Co., 953 N.E.2d 119, 128 (Ind. Ct. App. 2011); see also Medtronic, Inc. v.
Advanced Bionics Corp., 630 N.W.2d 438, 449 (Minn. Ct. App. 2001) (“Comity is not a
formal rule but rather an informal policy of deference.”); Fitch v. Whaples, 220 A.2d 170,
173 (Me. 1966) (“There is no compulsory duty resting on a trial court to stay the proceedings
pending before it on account of the pendency in another jurisdiction of an action previously
instituted between the same parties for the same cause. The doctrine of comity does not
establish an imperative rule of law. It has the power to persuade but not command.”).
21
The American Law Institute’s position is that “[a] state may entertain an action even
though an action on the same claim is pending in another state.” Restatement (Second) of
Conflict of Laws § 87 (1971) (noting, however, that when a “plaintiff can secure all the relief
to which he is entitled . . . the courts will frequently, in their discretion, grant a stay of the
second action pending the outcome of the first”). The position articulated in the
Restatement, however, is in tension with our rule. The authorities that have been willing to
affirm a declaratory judgment rendered while an action involving the same issues is pending
rely heavily on the principle that the general prohibition “is neither jurisdictional nor
absolute,” and that the trial court is vested with significant discretion in such matters.
Haynie, supra, 306 Md. at 652. Our binding authorities, however, illustrate that a trial court
abuses its discretion, absent unusual and compelling circumstances, when it exercises
declaratory jurisdiction over a matter involving the same issues as another matter pending
before a court of concurrent jurisdiction.
We are further persuaded by the dearth of support for the proposition that the circuit
court has discretion to render a declaration under circumstances similar to the case sub
judice. Indeed, our research -- thorough we trust -- has not unearthed a single case in which
our appellate courts have upheld the grant of a declaratory judgment notwithstanding a
pending action involving the same parties and the same issues in another state. Although our
courts have crafted language enabling the trial courts to declare the rights of the parties in
“unusual and compelling circumstances,” this is an extremely narrow exception that has
22
never been employed since it was articulated by the Court of Appeals in A. S. Abell Co.,
supra, in 1975. 274 Md. at 721.
The rule reflected in the Restatement as well as persuasive authority suggesting that
we should be more deferential to a trial court’s willingness to usurp the jurisdiction of
out-of-state courts is inconsistent with the significant limitations on discretion imposed by
the Court of Appeals. Notably, our cases have viewed a trial court’s willingness to
undermine the jurisdiction of a court with concurrent jurisdiction by means of a declaratory
judgment action with great skepticism out of recognition that a declaratory judgment action
in such circumstance fails to serve the dual purposes of (1) “serv[ing] a useful purpose in
clarifying and settling the legal relations in issue, and (2) . . . terminat[ing] and afford[ing]
relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.”
Borchard, The Uniform Declaratory Judgments Act, supra, at 239.
The Court of Appeals’ specific use of the words “unusual and compelling” as applied
in the Court of Appeals’ decision in A. S. Abell Co., supra, 274 Md. at 721; Waicker, 91st
St. Joint Venture, Tpk. Farm Ltd. P’ship and Brohawn (as well as persuasive authorities from
other jurisdictions imposing similar rules), illustrate just how narrowly those terms are to be
construed. Notably, the Court of Appeals has expressed little hesitation when reversing the
discretionary decisions of trial courts that make declarations while another action involving
the same issues are pending. See, e.g., Waicker, supra, 347 Md. 108; 91st St. Joint Venture,
supra, 330 Md. 620; Tpk. Farm Ltd. P’ship, supra, 316 Md. 47.
23
While our authorities in Maryland do not articulate the precise definition of the words
“unusual and compelling,” our cases nevertheless illustrate the attendant features that will
accompany a circumstance that is sufficiently unusual and compelling. For instance, we
know that a circumstance may be unusual and compelling when judicial economy is not
offended by the exercise of jurisdiction, Waicker, supra, 347 Md. at 115-16, when principles
of comity do not require deference to be afforded to the court first exercising jurisdiction,
91st St. Joint Venture, supra, 330 Md. at 628-29, and when there is no concern with one
party inappropriately controlling the litigation. Brohawn, supra, 276 Md. at 406.
Accordingly, we are guided by these principles as we determine whether the circumstances
here are sufficiently unusual and compelling.
C. Hanover’s Action is Not Unusual and Compelling
In the case sub judice, we are called upon to adopt one of two polarized positions by
holding that this is either one of the infrequent instances when a trial court has abused the
discretion vested in it, or, alternatively, whether this case qualifies as the first “unusual and
compelling circumstance” since the Court of Appeals adopted this interpretation of the rule
in 1975. A. S. Abell Co., supra, 274 Md. at 721. After weighing the considerations that are
woven through our authorities on this subject, namely, judicial economy, comity, and control
of the litigation, we hold that the trial court erred by issuing declaratory relief in this case.
First, we recognize from the majority and dissenting opinions in Waicker that the
argument for judicial economy often cuts both ways. See generally Waicker, supra, 347 Md.
24108. In this case, however, the interests of judicial economy are best served by permitting
this entire action to be resolved in its original forum. Were it not for our prohibition on
entertaining declaratory judgment actions while actions involving similar issues are pending,
“‘almost any pending action could be interrupted and held at bay until the determination, in
one or more subsequently instituted declaratory judgment actions, of issues culled out of the
pending action.’” Id. at 115 (quoting Redmond v. Matthies, 180 A.2d 639, 642 (Conn. 1962)).
The most efficient means to resolve this litigation would be for the entire action to be
resolved in Minnesota, where the breach of contract action would not only articulate the
rights of the parties, but also afford relief, if any, was due.
By pursuing a declaratory judgment with issues identical to those in the Minnesota
action, Hanover has unduly burdened our courts, as well as the courts of Minnesota. First,
the Circuit Court for Montgomery County was called upon to resolve an issue that was
already in the process of being litigated in another state. To burden the circuit court’s docket
with an action identical to one already being litigated elsewhere is, generally, an imprudent
use of judicial resources and runs contrary to our policy against forum shopping and
piecemeal litigation.5 Moreover, this action imprudently wastes the judicial resources of
5
Hanover, for its part, argues that the dismissal of the employment action in Maryland
followed by an action in Minnesota amounts forum shopping on Volkman’s part, and, in any
event, the dismissal of the earlier action with prejudice precludes the Minnesota action and
requires a declaratory judgment in its favor. We are not persuaded. First, the employment
action addressed whether Volkman was properly terminated from her employment with OCC,
whereas this declaratory judgment action addresses what rights, if any, she has under the
(continued...)
25
Minnesota’s courts by virtue of the fact that Hanover participated in the Minnesota litigation,
appealed the judgment in that case to the Minnesota Court of Appeals, and then Hanover, in
effect, mooted that case by seeking a declaratory judgment in Maryland. We, therefore, hold
that it is otherwise inefficient for Hanover to pursue two actions involving the same parties
and the same issues under these circumstances. As such, it is not an appropriate use of
judicial resources to permit Hanover to pursue a declaratory judgment action while the
previously filed action in Minnesota was pending. Accordingly, this improper use of judicial
resources weighs against us holding that an unusual and compelling circumstance exists here.
Secondly, principles of comity suggest that this action is more properly resolved in
Minnesota. Initially, we are cognizant that, unlike the full faith and credit clause of the U.S.
Constitution (which requires us to give full faith and credit to the judgments of other
jurisdictions), comity is an amorphous principle that merely permits us to give deference to
the proceedings of other jurisdictions “‘not as a matter of obligation but out of deference and
5
(...continued)
shareholders’ agreement with Hanover. While Volkman’s recovery under the shareholders’
agreement is largely contingent on whether she was properly terminated by OCC, we note
that the shareholders agreement further requires the Hanover’s Board of Directors to concur
that Volkman was terminated for good cause before Hanover may redeem Volkman’s shares
at a 90% discount. Secondly, aside from the stipulated dismissal, the record is devoid of any
information regarding the first lawsuit involving the employment action. Critically, the
record is silent as to what claims were made, what facts were presented, or what judgments
were rendered in the employment litigation. Accordingly, we are unwilling to permit the
employment action to influence our decision. The record merely reflects that there was an
action between Hanover and Volkman and the parties stipulated to a dismissal of that action
with prejudice.
26
respect.’” Port v. Cowan, 426 Md. 435, 444 (2012) (quoting Wash. Suburban Sanitary
Comm’n v. CAE-Link Corp., 330 Md. 115, 140 (1993)). To be sure, there are many factors
that bear on whether comity militates in favor of affording deference to the jurisdiction of
Minnesota, just as comity is but one factor in determining whether this situation is
sufficiently unusual and compelling.
For instance, we observe that Minnesota has a much stronger interest in adjudicating
this dispute, and that Minnesota is a more convenient forum. Our holding is guided by
Volkman’s status as a Minnesota resident; that the conduct that gave rise to the parties’
claims and defenses, i.e., the interaction between Volkman and the Minnesota client,
occurred in Minnesota; and that Volkman initially initiated litigation involving this issue in
Minnesota.6 Additionally, we recognize the Minnesota trial and appellate courts had already
expended significant time, efforts, and resources in this matter prior to the Maryland trial
court’s declaratory judgment.
We nevertheless recognize that Maryland is not indifferent to the resolution of this
dispute which involves an entity incorporated under the laws of Maryland and with its
principal place of business in Maryland. Furthermore, the shareholders’ agreement provides
that the agreement is to be interpreted under the laws of Maryland. Under the totality of
these circumstances, however, Maryland’s interest in this litigation is inferior to that of a
6
We recognize that Volkman apparently initiated an action in Maryland prior to the
Minnesota action. For the reasons stated supra, however, we are unwilling to allow our
analysis to be guided by the status of litigation that is not reflected in the record.
27
court of concurrent jurisdiction that has exercised primary jurisdiction over a dispute that
involves matters primarily within its territorial jurisdiction. For its part, Hanover argues that
it would be unduly burdensome to require its shareholders to travel to litigate in Minnesota,
but we fail to ascertain why Hanover’s shareholders would be necessary parties to the action
in Minnesota. Accordingly, principles of comity weigh against holding that this is a
sufficiently unusual and compelling circumstance.
Finally, Brohawn instructs us that we should resist usurping the jurisdiction of another
court when a subsequent action will work to “allow one party to wrest control of the
litigation from another.” Brohawn, supra, 276 Md. at 406. Moreover, we have a strong
policy in favor of respecting a plaintiff’s choice of forum and we will only disregard that
interest when there is some more important countervailing interest. See Jones v. Prince
George’s Cnty, 378 Md. 98, 120 (2003) (“plaintiff[’s] choice of forum is not to be lightly
disturbed”); Leung v. Nunes, 354 Md. 217, 225 (1999) (“Unless the balance of convenience
is strongly in favor of the defendant, or such balance weighs heavily in favor of the
defendant, the plaintiff’s choice of forum should not, or should rarely, be disturbed.”
(internal quotations omitted)). Indeed, the legal maxim invitus agere nemo cogatur (no one
is forced to act unwillingly) can be traced back to Roman and Germanic law supporting the
proposition that “the holder of a right of action is free to assert it when and where he
chooses . . . .” Robert Wyness Millar, Civil Procedure of the Trial Court in Historical
Perspective 137-38 (1952).
28
We hold that, under these circumstances, Hanover’s declaratory judgment action
undermines our policy in favor of respecting a plaintiff’s choice of forum. In this case, the
litigation between Volkman and Hanover was filed and was in the midst of an interlocutory
appeal to the Minnesota Court of Appeals before Hanover initiated the Maryland declaratory
judgment action. Moreover, the Minnesota Court of Appeals had affirmed that jurisdiction
was proper in Minnesota prior to the circuit court’s declaratory judgment order. Critically,
the very question that Hanover sought to be adjudicated in the declaratory judgment action
was the dispositive question in the pending Minnesota litigation.
We are not naive about the fact that both litigants have made numerous tactical
decisions to further their respective causes throughout this litigation. For reasons stated
supra, we are unwilling to allow our analysis to be guided by the prior Maryland employment
action in the absence of a record indicating the questions or proofs presented in that
litigation. Further, we are unpersuaded that arbitration proceedings between the parties in
Maryland involving issues wholly distinguishable from the issues sub judice warrant
disregarding Volkman’s choice of forum. Under the totality of these circumstances, we see
no countervailing interest sufficient to permit Hanover to disturb Volkman’s choice of forum
by means of pursuing this declaratory judgment action. We, therefore, hold that Hanover’s
attempt to deprive Volkman of the right to select a forum of her choosing by means of a
declaratory judgment action weighs against concluding this constitutes an unusual and
compelling circumstance.
29
II. Conclusion
For the reasons stated above, we hold that neither principles of judicial economy,
comity, nor procedural policy weigh in favor of this action constituting an unusual and
compelling circumstance so as to permit the issuance of a declaratory judgment when an
action was pending in another court involving the same issue. Accordingly, we are
unpersuaded that the circumstances under which this declaratory judgment was rendered are
sufficiently unusual and compelling to permit usurping the jurisdiction of the Minnesota trial
court. We, therefore, hold that the trial court erred in rendering a declaratory judgment while
an action involving the same issues was pending in Minnesota. Accordingly, we reverse the
judgment and remand the case to the circuit court with instructions to vacate the
declaratory judgment rendered on August 18, 2014. The remaining two questions presented
by Volkman are rendered moot in light of our holding.
JUDGMENT REVERSED; CASE REMANDED TO
THE CIRCUIT COURT FOR MONTGOMERY
COUNTY WITH INSTRUCTIONS TO VACATE
THE DECLARATORY JUDGMENT ENTERED ON
AUGUST 18, 2014. COSTS TO BE PAID BY
APPELLEE.
30