O'Brien & Gere Engineers, Inc. v. City of Salisbury

REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1734
September Term, 2012
O'BRIEN & GERE ENGINEERS, INC.
v.
CITY OF SALISBURY
Eyler, Deborah S.,
Nazarian,
Moylan, Charles E., Jr.
(Retired, Specially Assigned),
JJ.
Opinion by Eyler, Deborah S., J.
Dissenting Opinion by Nazarian, J.
Filed: April 28, 2015
The primary issue in this appeal is whether the absolute litigation privilege may
immunize a party to a non-disparagement agreement from liability for breaching that
agreement when the breach was by words spoken by a lawyer or witness in court, during a
judicial proceeding. We hold that it may, and that in the circumstances of this case it did, as
a matter of law.
FACTS AND PROCEEDINGS
The parties to this appeal are O’Brien & Gere Engineers, Inc. (“OBG”), the appellant,
and the City of Salisbury (“City”), the appellee. In the early 2000’s, the Maryland
Department of the Environment (“MDE”) directed the City to upgrade its outdated
wastewater treatment plant to comply with federally mandated standards. In 2004, the City
contracted with OBG to perform the design engineering for the plant upgrade. The next year,
the City contracted with Construction Dynamics Group, Inc. (“CDG”) to serve as the
construction manager for the plant upgrade. Among other things, CDG’s contract required
it to oversee OBG’s design engineering work and report any problems with the design to the
City.
It is an understatement to say the plant upgrade did not go well. The City paid over
$80 million dollars for the upgrade, but the plant as upgraded never satisfied federal
standards. Ultimately, the MDE required the City to complete an entirely new plant upgrade.
On February 28, 2011, in the Circuit Court for Wicomico County, the City sued OBG
and CDG, alleging breaches of contract and wrongful acts and omissions that caused the
plant upgrade to fail (“The Plant Upgrade Case”). OBG joined a number of subcontractors
and some of their sureties as third party defendants. The City amended over against the third
party defendants, and OBG filed cross-claims against them. The parties engaged in extensive
discovery. Expert witnesses were disclosed in early 2012. The case was specially assigned
and given a November 1, 2012 trial date.
On June 7, 2012, the City and OBG entered into a comprehensive settlement, which
they memorialized in a written Settlement Agreement (“the Agreement”). The salient terms
are as follows. OBG agreed to pay the City $10 million ($10,000,000) and the City agreed
to release OBG from all claims the City had made or could have made against it relating to
the plant upgrade. All claims, cross-claims, and third-party claims relating to OBG would
be dismissed and OBG would dismiss a separate suit it had brought against the City under
the Maryland Public Information Act (“MPIA”). No provision of the Agreement would
“inure to the benefit of” anyone else, including any other party to the Plant Upgrade Case.
OBG denied fault and tortfeasor status. The City and OBG agreed that if, at the trial
of the Plant Upgrade Case, OBG were found to be a tortfeasor, then any judgment in tort in
favor of the City would be reduced in accordance with the Maryland Uniform Contribution
Among Joint Tort-Feasors Act. See Md. Code (2013 Repl. Vol.), §§ 3-1401 et seq.
The City agreed to defend, indemnify, and hold harmless OBG from any claim made
against it at any time by any other party to the Plant Upgrade Case, relating to the design or
construction of the Plant. The stated purpose of this provision was to protect OBG from
having to expend “any further monies” in connection with the Plant Upgrade Case and,
2
together with the joint tortfeasor provision, to protect OBG “from any liability and expense
associated with any claims that the City is now pursuing, or hereafter may initiate or pursue,
against any person other than OBG arising from or in any way relating to the [plant upgrade]
and the facts and events alleged by the City in the [Plant Upgrade Case].” In addition, the
City agreed to defend, indemnify, and hold harmless OBG from any claim or suit made or
filed against it at any time concerning the design and construction of the plant upgrade. In
consideration for the release and indemnification agreements, OBG agreed to release the City
from any claims -- past, present, and future -- relating to the plant upgrade, except claims for
enforcement or breach of the Agreement.
Central to this appeal, the Agreement contains a mutual non-disparagement clause:
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.
“Disparaging” is defined to mean:
[A]ny 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.
In addition, the clause states with respect to injunctive relief and damages:
The parties agree that, in the event of any breach of this non-disparagement
provision, damages/actual losses will be difficult or impossible to prove with
requisite precision, and that an adequate remedy at law will not exist.
3
Accordingly, in the event of a breach of this provision, the non-breaching party
shall be entitled to equitable relief including but not limited to a temporary
restraining order, a preliminary injunction, and a permanent injunction.
Further, the non-breaching party shall not be required to post any bond in
connection with seeking or obtaining a temporary restraining order, a
preliminary injunction, and/or a permanent injunction. Further, the non-
breaching party shall be entitled to an award of reasonable attorney’s fees and
other litigation costs and expenses associated with enforcement of this
provision against the breaching party.
The Agreement does not include a confidentiality or non-disclosure provision.
The Council of the City of Salisbury approved the Agreement the day it was signed.
Five days later, after receiving the $10 million payment, the City filed a stipulation of
voluntary dismissal with prejudice of OBG from the Plant Upgrade Case. OBG voluntarily
dismissed with prejudice its cross-claims and the MPIA case. Soon thereafter, the City
dismissed with prejudice the claims it had filed against the defendants originally brought into
the case by OBG. That left CDG as the only remaining defendant. The City filed an
amended complaint against CDG for breach of contract only, with an ad damnum clause
reduced from $60 million dollars to $4 million dollars.
The jury trial in the Plant Upgrade Case began on schedule on November 1, 2012.
The City advocated that CDG had breached its contract in a number of ways, including by
failing to oversee OBG’s design engineering work and by failing to bring flaws in that work
to the City’s attention; and that those design flaws caused the plant upgrade to fail. The City
theorized that CDG did not report the problems with OBG’s design engineering because the
year before CDG executed its contract with the City, CDG and OBG had entered into a
4
“teaming agreement,” in which they were collaborating to win a $20 million construction
contract in the District of Columbia, and it would not have served CDG’s interests in seeking
that lucrative contract to reveal OBG’s design flaws in the plant upgrade.1
In opening statement, the City’s lawyer told to the jurors that the evidence would show
that CDG’s contract required it to inform the City of any design flaws in the plant upgrade,
but that CDG failed to do so:
This becomes very important. Because most of the problems at this plant, and
this plant was a disaster, most of the problems were design problems created
by the design engineer, [OBG]. And [CDG] should have been advising the
City of those problems. Particularly when, you’ll hear at the end of the
project, this plant didn’t work. But [CDG] walked away, they didn’t advise the
City.
(Emphasis added.) He continued:
[CDG] [f]ailed to provide the required information in their monthly reports.
They failed to tell us about all of the things that weren’t working. They failed
to tell us about the myriad of design problems that they should have told us
about. Remember the word design.
(Emphasis added.) The lawyer foreshadowed the evidence about the teaming agreement,
characterizing it as a conflict of interest on CDG’s part:
I’ll talk to you about conflicts of interest. Why didn’t CDG report the engineer
[OBG]? Why didn’t CDG come to the City and say the engineer is causing
problems or has caused problems big time? The engineering was a mess.
This engineering, you’ll hear, most of it failed. But CDG wasn’t reporting that.
Why?
Well, what we found out is, remember, CDG is hired in 2005, in 2004
CDG entered into what’s called a teaming agreement with the engineering
1
CDG and OBG in fact obtained the District of Columbia contract.
5
firm [OBG] an agreement to try to get a job in the District of Columbia. A
job in the District of Columbia, which, if they got it, would give them 20
million dollars for the package. Millions each. Six million for CDG. Six
million for [OBG], O’Brien and Ge[re]. Six million for another partner. They
entered into a teaming agreement in 2004.
* * *
So you’re going to – it doesn’t matter to us whether they [CDG] mistakenly
and in breach of their contract declared this plant substantially complete
because they’re incompetent or because they’re in bed with the engineer . . .
(Emphasis added.) The City’s lawyer mentioned OBG by name four times in his opening
statement.
CDG’s defense was that it had fulfilled all its contractual obligations to the City by
ensuring that the plant was upgraded in accordance with specifications. It took the position
that OBG’s design, not anything it had done or not done, caused the plant upgrade to fail; and
it was not responsible for OBG’s design failures and could not have done anything to make
the upgraded plant functional. In his opening statement, CDG’s lawyer explained that
OBG’s design for the plant upgrade was “experimental” and emphasized that as the
construction manager, CDG’s responsibilities did not include uncovering the problems with
that design. CDG’s lawyer mentioned OBG by name 23 times in his opening statement.
The evidence phase of the trial began the next day. The City called Enos Stover,
Ph.D., an expert in environmental engineering. On direct examination, Dr. Stover was asked
to identify component-by-component the failures in the plant upgrade. He did so, opining
that most of the components failed due to “design issues.” On cross-examination, Dr. Stover
stated that OBG’s design for the plant upgrade had been “likely to fail” from the outset. The
6
City then called John Jacobs, the former director of the City’s Department of Public Works.
Mr. Jacobs testified that under the terms of its contract with the City, CDG was responsible
for overseeing OBG’s work, including bringing any “design issues” to the City’s attention.
That same day, the Daily Times, a Salisbury newspaper, published a story headlined,
“Attorneys set stage in city sewer plant trial.” The story summarized the opening statements
in the Plant Upgrade Case, quoting the City’s lawyer as having said that CDG was “in bed
– partners – with the very engineering firm they were supposed to watch.” It reported that
CDG’s lawyer countered, “There’s nothing a construction manager can do to make a failed
design work. . . There was no harm caused to the [C]ity by CDG because the project was
built on time, on budget and with no construction deficiencies.” The article, which described
the plant upgrade as “the largest public works project in the [C]ity’s history,” did not identify
OBG by name.
OBG’s lawyer read the Daily Times article and immediately ordered trial transcripts
and sent the City a “cease and desist” letter. In the letter, he said he was “monitoring” the
trial, quoted the non-disparagement clause in the Agreement, and “instruct[ed] the City, its
attorneys, and any witnesses it calls to testify at trial to comply strictly and fully [with that
clause],” by “regulat[ing] [its] conduct at trial (in regard to [its] arguments and [its]
questioning of any and all witnesses)” and by “prepar[ing] [its] witnesses accordingly, so that
OBG is not disparaged . . . in any way.”
7
On November 5, 2012, after receiving the trial transcripts, OBG’s lawyer filed a
“Complaint for Injunctive and Other Relief” against the City, also in the Circuit Court for
Wicomico County, alleging that the City had breached the non-disparagement clause of the
Agreement by the words spoken by its lawyer in opening statement at the trial of the Plant
Upgrade Case and by Dr. Stover and Mr. Jacobs in their trial testimony. It sought a
temporary restraining order (“TRO”) and preliminary and permanent injunctive relief,
claiming it would suffer “immediate substantial and irreparable injury” if the City were not
enjoined from making disparaging statements about it in the ongoing trial in the Plant
Upgrade Case. It asked the court to “restrain[] and enjoin[] the City (and its counsel,
witnesses, employees, and officials) from making any statements at the trial in the [Plant
Upgrade Case] or otherwise that portray OBG in a negative light” and to award it attorneys’
fees. It also sought $1.5 million in damages.2
On November 7, 2012, the City and OBG appeared for a hearing on the TRO request,
before the same judge specially assigned to the Plant Upgrade Case. The trial in that case
still was in progress. OBG argued that the City was violating the non-disparagement clause
2
OBG attached the following documents to its complaint: the Agreement; excerpts of
trial transcripts for November 1 and 2, 2012; the Daily Times article; an affidavit by the
lawyer for OBG who sent the cease and desist letter; the cease and desist letter; and an
affidavit by an executive vice president of OBG summarizing the provisions of the
Agreement, quoting from the opening statement given by the City’s lawyer, summarizing the
testimony of Dr. Stover and of Mr. Jacobs, and asserting that the opening statement and
witness testimony had disparaged OBG in violation of the Agreement, and that OBG would
suffer irreparable harm if a TRO were not issued.
8
by making arguments and introducing evidence critical of OBG’s design work on the plant
upgrade. The City responded that, among other things, it was evident when the parties
entered into the Agreement that if the Plant Upgrade Case went to trial, other defendants
would be taking the position that OBG’s design had caused the plant upgrade to fail, and
therefore had caused the City’s injuries and damages. It argued that in any event the non-
disparagement clause could not be enforced to restrain speech by lawyers and witnesses in
a judicial proceeding because words spoken in that setting are covered by the absolute
litigation privilege.
The court denied the request for a TRO. The judge opined that the non-disparagement
clause was “enforceable between the parties” and that the City and OBG were “bound by [its]
terms.” He concluded, however, that when the City and OBG executed the Agreement, it was
“clear . . . that the question of the . . . appropriateness of [OBG’s] design of the [plant
upgrade] would remain an issue in the [Plant Upgrade Case],” and therefore evidence critical
of OBG’s design would be introduced and commented upon in any trial of the case.
Also on November 7, 2012, the City moved to dismiss OBG’s complaint and OBG
amended its complaint, adding a count for unjust enrichment. Two days later, OBG noted
an appeal from the interlocutory order denying a TRO.
The trial in the Plant Upgrade Case continued until November 16, 2012, when the jury
returned a verdict in favor of the City and against CDG for $1,968,417.43 in damages.
On November 19, 2012, the City filed an amended motion to dismiss OBG’s amended
9
complaint. It argued that the conclusion of the trial in the Plant Upgrade Case had rendered
the request for injunctive relief moot; the Agreement only permitted injunctive relief, not
damages, for breach of the non-disparagement clause; and if recovery of damages were
permitted under the terms of the Agreement, OBG did not state a claim for which relief could
be granted, because the absolute litigation privilege immunized the City from liability for
damages based on the words spoken by its lawyer and witnesses in the trial of the Plant
Upgrade Case, including any liability for damages for breach of the non-disparagement
clause.
OBG filed an opposition, arguing that its claim for equitable relief was not moot
because, in all likelihood, CDG would appeal the judgment against it 3 ; the language of the
Agreement permits equitable relief and damages; the absolute litigation privilege only
applies to defamation actions, not to any other cause of action, including an action for breach
of contract; and the City entered into the Agreement with full knowledge that the non-
disparagement clause would foreclose it from criticizing OBG’s design work at any trial in
the Plant Upgrade Case.
Shortly before the hearing on the motion to dismiss, OBG filed a motion to disqualify
the City’s counsel of record. Citing Maryland Lawyer’s Rules of Professional Conduct
3
In fact, CDG noted an appeal from the judgment entered in favor of the City in the
Plant Upgrade Litigation. It did not prevail. On January 17, 2014, this Court filed an
unreported opinion affirming the judgment in favor of the City. Construction Dynamics
Group v. City of Salisbury, No. 2404, Sept. Term, 2012. CDG filed a petition for writ of
certiorari, which the Court of Appeals denied. 438 Md. 143 (2014).
10
(“MRPC”) 3.7 (Lawyer as Witness), it asserted that because the conduct and statements of
the lawyers representing the City in the trial of the Plant Upgrade Case were directly at issue,
they were “necessary witnesses” and could not continue to act as advocates for the City.4
The City countered that the motion to disqualify was premature given the pending motion to
dismiss because, were the court to grant that motion, the case would come to an end without
any witness testimony.
On December 21, 2012, the court held a hearing on the pending motions. It denied
the motion to disqualify counsel, agreeing that it was premature. It granted the motion to
dismiss on the basis of the absolute litigation privilege. Noting that the gravamen of the
complaint “relate[d] solely to statements and utterances spoken by witnesses and lawyers
within the confines of the courtroom,” the judge concluded that although the law respects
“the principles that protect non-disparagement agreements, the larger principle” of
“permitting, encouraging free statements, vigorous statements, between the parties and
lawyers to aid in the resolution of a dispute is paramount.” Thus, even if in trying its case
against CDG the City breached the Agreement by disparaging OBG’s design work on the
4
MRPC 3.7 states, in pertinent part, that “[a] lawyer shall not act as advocate at a trial
in which the lawyer is likely to be a necessary witness unless . . . the testimony relates to an
uncontested issue; . . . or . . . disqualification of the lawyer would work substantial hardship
on the client.”
11
plant upgrade, the absolute litigation privilege protected the City from liability for that
breach.5
The court entered a judgment dismissing the case with prejudice. OBG noted an
appeal, which was consolidated with its earlier appeal from the order denying its TRO
request.
OBG poses three questions for review, which we have rephrased slightly:
I. Did the circuit court err in granting the City’s motion to dismiss?
II. Did the circuit court abuse its discretion in denying OBG’s TRO
request?
III. Did the circuit court err in denying OBG’s motion to disqualify
counsel?
We hold that in the circumstances of this case, the circuit court’s decision to dismiss
OBG’s claims on the basis of the absolute litigation privilege was legally correct. We further
hold that the court did not abuse its discretion in denying the TRO request or err in denying
the motion to disqualify counsel.
DISCUSSION
5
The circuit court did not address the City’s argument that the language of the non-
disparagement clause regarding injunctive relief and damages limited a non-breaching party
to injunctive relief for a breach of the non-disparagement clause, thus prohibiting the
recovery of damages against the breaching party. By granting the City’s motion to dismiss
on the basis of the absolute litigation privilege, after already denying injunctive relief, it
appears that the court assumed that the clause permits recovery of damages. The parties do
not address this issue on appeal. If it were argued, the issue could, conceivably, moot the
absolute litigation privilege issue; but again, the parties do not address it.
12
I.
Motion to Dismiss
We review de novo a circuit court’s decision to grant a motion to dismiss a complaint
for failure to state a claim for which relief can be granted. Gasper v. Ruffin Hotel Corp. of
Md., Inc., 183 Md. App. 211, 226 (2008). In so doing, “we must assume the truth of the
well-pleaded factual allegations of the complaint, including the reasonable inferences that
may be drawn from those allegations.” Adamson v. Corr. Med. Servs., Inc., 359 Md. 238,
246 (2000). “Dismissal is proper only when the alleged facts and permissible inferences,
even if later proven to be true, would fail to afford relief to the plaintiff.” Morris v. Osmose
Wood Preserving, 340 Md. 519, 531 (1995). “In sum, because we must deem the facts to be
true, our task is confined to determining whether the trial court was legally correct in its
decision to dismiss.” Adamson, 359 Md. at 246.
Although not in this order, OBG offers three reasons to support its contention that the
circuit court’s decision to grant the motion to dismiss was legally incorrect. First, the court
engaged in fact finding, which it must not do in ruling on a motion to dismiss for failure to
state a claim for which relief can be granted. Second, the plain language of the non-
disparagement clause covers any disparaging statement made in any setting, including in the
course of a judicial proceeding. Finally, the absolute litigation privilege did not apply
because it only immunizes litigation participants from liability for defamation and the
13
purpose of the privilege will not be served if it is applied to protect them from liability for
breach of contract.
(a)
We can quickly dispose of OBG’s first two arguments. OBG is correct that in ruling
on a motion to dismiss, the circuit court is not to make factual findings. See Magnetti v.
Univ. of Md., 171 Md. App. 279, 284 (2006) (motion to dismiss is decided based upon
“allegations” not upon “evidence”). However, the record does not support its assertion that
the court made factual findings in ruling on the motion to dismiss. The court granted the
motion upon a determination that if the City breached the non-disparagement clause of the
Agreement by the words of its lawyer and its witnesses spoken at the trial of the Plant
Upgrade Case, the City could not be held liable for that breach, because it was immunized
from liability by the absolute litigation privilege. This ruling did not involve any fact
finding.6
OBG’s argument that the language of the non-disparagement clause covers any
disparaging remark made in any setting, including in the course of a judicial proceeding, is
not pertinent to whether the court erred in granting the motion to dismiss. In making its
6
During the hearing on the TRO request, the court made remarks that could be
interpreted as factual findings. The court did not make any factual findings when it granted
the motion to dismiss, however.
14
ruling, the court assumed that the City could breach, and did breach, the non-disparagement
clause by words spoken by its lawyers and witnesses at the trial of the Plant Upgrade Case.7
(b)
We turn to OBG’s third argument -- the central issue in this case -- that the court erred
as a matter of law in ruling that the absolute litigation privilege immunized the City from
liability for breaching the non-disparagement clause of the Agreement by words spoken in
the trial of the Plant Upgrade Case.
Well over 100 years ago the Court of Appeals recognized in Maryland common law
an absolute litigation privilege that immunizes litigation participants from liability in tort for
words spoken or written in the course of a judicial proceeding. Hunckel v. Voneiff, 69 Md.
179 (1888). See also Bartlett v. Christhilf, 69 Md. 219 (1888). It crafted an absolute
litigation privilege for Maryland that is a hybrid of the English and American versions of that
privilege. Lawyers are protected by the American version, which immunizes them from
liability in tort for words spoken or written in the course of a judicial proceeding so long as
the words are relevant to the proceeding. Norman v. Borison, 418 Md. 630, 650 (2011).8
7
As the dissent points out, the parties were in dispute over whether the non-
disparagement clause applied to the Plant Upgrade Case. Because the court assumed that it
did, i.e., assumed OBG’s position in the dispute, there was no need for a factual resolution
of the dispute. Therefore, contrary to the argument made by the dissent, the dispute did not
preclude the court from granting the motion to dismiss based on the absolute litigation
privilege.
8
In the case at bar, there is no dispute that the words spoken by the City’s lawyer
during the trial in the Plant Upgrade Case were relevant to the proceeding.
15
Other litigation participants, including witnesses, are protected by the English version of the
privilege, which immunizes them from liability in tort for words spoken or written in the
course of a judicial proceeding even when the words are irrelevant and incidental. Hunckel,
69 Md. at 193.
In both the American and English versions of the absolute litigation privilege, the
privilege applies notwithstanding that the litigation participant’s “purpose or motive was
malicious, [that] he [or she] knew that the statement was false, or [that] his [or her] conduct
was otherwise unreasonable.” Adams v. Peck, 288 Md. 1 (1980). See also Gersh v.
Ambrose, 291 Md. 188, 192 (1981) (stating that under both the American and the English
versions of the absolute litigation privilege, the privilege is not “defeasible by malice.”).
The purpose of the absolute litigation privilege is to protect “the free and unfettered
administration of justice,” Bartlett, 69 Md. at 226, by “serv[ing] the ultimate goal of
information exchange and discovery of the truth.” Norman, 418 Md. at 660 (footnote
omitted). The privilege is an essential component of the adversary system of justice.9 In that
system, the truth of a dispute is decided by a neutral fact-finder in a judicial proceeding
where each party, ordinarily through counsel, advocates his position by presenting evidence,
challenging his opponent’s evidence through cross-examination and otherwise, and arguing
9
The absolute litigation privilege dates to the emergence of the adversary system in
the common law of medieval England. Briscoe v. LaHue, 460 U.S. 325, 330-31 (1983)
(“The immunity of parties and witnesses from subsequent damages liability for their
testimony in judicial proceedings was well established in English common law”) (footnote
omitted) (citing Cutler v. Dixon, 76 Eng. Rep. 886 (K.B. 1585)).
16
in favor of what the party sees as the just result. It is key to this process that all evidence
material to the search for the truth be available to the decision-maker, regardless of whether
the evidence harms, could harm, or appears to harm someone’s reputation.10
Because “[t]he ultimate purpose of the judicial process is to determine the truth,”
participants in a legal proceeding must be free to speak without “fear of private suits for
defamation.” Adams, 288 Md. at 5. A witness who faces the prospect of civil liability for
the words he speaks at trial will be reluctant to testify, and if he does testify, may distort his
testimony to protect himself. “[T]he fear of subsequent liability” may limit or skew the
evidence the decision-maker needs to fairly decide the case. Briscoe, 460 U.S. at 333. It
therefore is of “great importance to the administration of justice that witnesses should testify
with minds absolutely free from the apprehension of being annoyed by civil actions for any
thing they may say as witnesses.” Hunckel, 69 Md. at 198. See also Gersh, 291 Md. at 192
(observing that the absolute litigation privilege exists not “merely to protect [a litigation
participant] from ultimate liability, but [also] to protect him from the annoyance of suit
itself.”). The absolute litigation privilege is so important to the administration of justice in
an adversary system that it will apply even though an “incidental result” may be protection
of an “evil disposed and malignant slanderer.” Bartlett, 69 Md. at 226.
10
To be sure, there are evidentiary limits on the information the decision-maker can
receive, but they too are designed to advance the judicial process, by ensuring that decisions
are made fairly.
17
Lawyers are duty bound by the Maryland Lawyer’s Rules of Professional Conduct to
zealously advocate for their clients, which includes introducing evidence that supports their
clients’ positions and presenting argument in furtherance of their clients’ claims or defenses.
See Preamble to MRPC (“as advocate, a lawyer zealously asserts the client’s position under
the rules of the adversary system.”). The specter of civil liability for words spoken or written
in the course of a judicial proceeding will inhibit lawyers from abiding by their professional
obligation to advocate zealously, imperiling the rights of their clients. See T. Leigh Anenson,
“Absolute Immunity from Civil Liability: Lessons for Litigation Lawyers,” 31 Pepp. L. Rev.
915, 922 (2004); see also Greenberg Traurig, LLP v. Frias Holding Co., 331 P.3d 901, 903
(Nev. 2014) (explaining that “[t]he policy behind the [litigation] privilege, as it applies to
attorneys participating in judicial proceedings, is to grant them as officers of the court the
utmost freedom in their efforts to obtain justice for their clients.”) (internal quotation marks
and citations omitted) (alteration in Greenberg).
(c)
Until 2013, every reported Maryland opinion about the absolute litigation privilege
arose in the context of a defamation action, that is, an action in which the plaintiff alleged
that he had been defamed by words spoken or written by the defendant during a trial or in
another phase of the judicial process. That changed when this Court decided Mixter v.
Farmer, 215 Md. App. 536 (2013). Mixter, a lawyer, sued Farmer, also a lawyer, for
defamation, intentional infliction of emotional distress, tortious interference with contract,
18
and tortious interference with prospective advantage. The claims stemmed from derogatory
statements Farmer made about Mixter in letters Farmer sent to other lawyers and to one of
Mixter’s former clients seeking information for an anticipated (and eventually filed)
grievance with the Maryland Attorney Grievance Commission.11
This Court held that the absolute litigation privilege insulated Farmer from liability
for all the claims against him, not just the defamation claim. We reasoned that, when liability
is sought based on a common set of events concerning words spoken or written in the course
of or in connection to a judicial proceeding, the precise theory of recovery is not
determinative. The underlying policy of protecting the adversary system of justice by
enabling full and free expression in judicial proceedings is implicated, regardless of the
theory of recovery, and is advanced by applying the absolute litigation privilege. The
absolute litigation privilege protected Farmer from liability for claims against him that were
based on the words he wrote in the course of a judicial proceeding, whether packaged as a
cause of action for defamation or as causes of action for intentional infliction of emotional
distress, tortious interference with contract, or tortious interference with prospective
advantage.
11
The Court of Appeals has held that the absolute litigation privilege applies to some
quasi-judicial proceedings, depending upon the nature of the right the proceeding is meant
to protect and the presence of procedural safeguards. Gersh, 291 Md. at 196-97. Attorney
Grievance Commission Proceedings have been held to be quasi-judicial proceedings to which
the absolute litigation privilege applies. See Kerpelman v. Bricker, 23 Md. App. 628, 630
(1974).
19
In so holding, we examined Maryland cases in which other immunities have been
applied to protect litigation participants from liability not only for defamation but also for
other causes of action. For example, in Walker v D’Alesandro, 212 Md. 163, 169 (1957), the
Court held that the public official privilege was not “confined in the law of torts to matters
of defamation.” Likewise, in Carr v. Watkins, 227 Md. 578, 582 (1962), the Court held that
the qualified privilege enjoyed by certain police officers when performing their duties applies
not only to a claim for defamation but also to claims for invasion of privacy, divulging
information without legal right, malicious interference with contract of employment, and
conspiring to cause termination of employment. The Carr Court observed that “if there was
immunity from liability for defamation, there was immunity from liability for the other
alleged torts claimed . . . to have been committed” as the “privilege is not limited to
immunity from liability for defamation.” Id. at 583.
We pointed out in Mixter that other state appellate courts have “support[ed] the
expansion of immunity beyond defamation torts when those other torts arise from the same
conduct.” 215 Md. App. at 547. See, e.g., Sullivan, D.D.S., P.C. v. Birmingham, 416 N.E.
2d 528, 533 (Mass. App. Ct. 1981) (absolute litigation privilege is a complete defense to
action for intentional infliction of emotional distress); Rainier’s Dairies v. Raritan Valley
Farms, 117 A.2d 889, 895 (N.J. 1955) (absolute litigation privilege is a complete defense
to an action for malicious interference with business).
20
See also Briscoe, 460 U.S. at 325 (absolute litigation privilege protected defendant
from liability in claim for violation of civil rights under 42 U.S.C. section 1983 based on
statements made during trial); Buschel v. MetroCorp, 957 F. Supp. 595, 598 (E.D. Pa. 1996)
(absolute litigation privilege “applies equally in causes of action for invasion of privacy”);
Pinto v. Internationale Set, Inc., 650 F. Supp. 306, 309 (D. Minn. 1986) (absolute litigation
privilege “entitles defendant to judgment on plaintiffs’ claim for intentional interference with
contractual and business relations”); LaPlante v. United Parcel Service, Inc., 810 F. Supp.
19 (D. Me. 1993) (absolute litigation privilege applies to action for sex discrimination,
harassment, and constructive discharge); Loomis v. Tulip, Inc., 9 F. Supp. 2d 22, 25 (D.
Mass. 1998) (absolute litigation privilege applies to action for tortious interference with
contract; “it remains well-established that the privilege applies ‘not only in defamation cases,
but as a general bar to civil liability based on [an] attorneys’s [sic] statements’” (quoting
Blanchette v. Cataldo, 734 F.2d 869, 877 (1st Cir. 1984))); W. Technologies, Inc. v. Sverdrup
& Parcel, Inc., 739 P.2d 1318 (Ariz. Ct. App. 1986) (absolute litigation privilege applies to
bar action for injurious falsehood and intentional interference with contractual relationship).
(d)
The Maryland appellate courts have not addressed whether and in what circumstances
the absolute litigation privilege will immunize a litigation participant from liability for
speaking or writing disparaging words about a person in the course of a judicial proceeding,
when the participant had contracted not to disparage that person. A handful of federal and
21
state appellate courts have analyzed this issue. The most widely cited opinion on this topic
is Rain v. Rolls-Royce Corporation, 626 F.3d 372 (7th Cir. 2010) (applying Indiana law).
Rolls-Royce and Paramount International, Inc., were competitors in the business of
repairing certain model Rolls-Royce helicopter engines. Rolls-Royce sued Paramount and
David Rain, Paramount’s sole shareholder, for misappropriating Rolls-Royce’s intellectual
property. The parties settled the case in a written agreement governed by Indiana law. The
agreement included a mutual non-disparagement clause. A year later, Rolls-Royce sued
several other business competitors in a federal district court in Texas (“the Texas Lawsuit”),
alleging that they had engaged in racketeering in order to obtain its proprietary information,
and had done so in conspiracy with Paramount and Rain.12
When Paramount and Rain learned of the Texas Lawsuit, they sued Rolls-Royce in
an Indiana federal district court for breach of contract, asserting, inter alia, that Rolls-
Royce’s racketeering allegations disparaged them, in violation of the non-disparagement
clause in their settlement agreement. Rolls-Royce moved for partial summary judgment,
invoking the absolute litigation privilege. The Indiana federal district court granted the
motion, reasoning that even if Rolls-Royce’s allegations of wrongdoing against Paramount
and Rain in the Texas Lawsuit disparaged them, in breach of the settlement agreement, Rolls-
Royce was “immune from liability under Indiana’s absolute litigation privilege.” Id. at 376.
12
Rolls-Royce did not identify Paramount and Rain by name in its complaint. It
referred to them as the “Principal Corporation” and “Mr. Doe.” 626 F.3d at 375. It was
evident to all concerned that the references were to Paramount and Rain, however.
22
Following a bench trial on Paramount and Rain’s remaining claims, they appealed,
challenging the grant of partial summary judgment.
Guided by the policy underlying Indiana’s long-recognized absolute litigation
privilege, the Seventh Circuit affirmed. The purpose of the privilege, the court explained,
is to “‘preserv[e] the due administration of justice by providing actors in judicial proceedings
with the freedom to participate without fear of future defamation claims.’” Id. (alteration in
Rain) (quoting Hartman v. Keri, 883 N.E.2d 774, 777 (Ind. 2008)). The court reasoned that
a claim for breach of a contract not to disparage that is based on words spoken or written in
the course of a judicial proceeding is “largely indistinguishable from a tort claim alleging
injury flowing from statements made in a judicial proceeding,” and that, ordinarily, Indiana’s
absolute litigation privilege would immunize Rolls-Royce from liability for its wrongful
allegations against Paramount and Rain in the Texas Lawsuit.13 626 F.3d at 378.
The Rain court emphasized that the question before it was not whether the non-
disparagement agreement was enforceable at all, in any circumstance. Rather, it was
whether, assuming that Rolls-Royce’s allegations against Paramount and Rain in the Texas
Lawsuit disparaged them, in breach of the agreement, Rolls-Royce should be subject to
liability for that breach. The court held that it should not, because the purpose of the absolute
13
Indiana’s absolute litigation privilege is the American version of the privilege, which
is not as broad as Maryland’s hybrid English/American privilege. It does not differ from the
Maryland privilege in any way that is of consequence here, however. As to words spoken
or written by lawyers, both privileges require the words to be relevant to the proceedings. In
that case, as here, the words at issue plainly were relevant to the proceedings.
23
litigation privilege would be advanced if it were applied to protect Rolls-Royce from liability
for breaching the non-disparagement agreement. It reasoned that ensuring that Rolls-Royce
could make use of the courts for their intended purposes -- for example to protect its
intellectual property rights against third parties -- without fear that doing so would expose
it to future liability would serve the administration of justice. “By contrast, the failure to
apply the privilege would frustrate the underlying policy [of the privilege] by discouraging
Rolls-Royce from exercising its fundamental right to resort to the courts to protect its rights.”
Id. at 378. Therefore, Rolls-Royce’s words, spoken or written in the course of the Texas
Lawsuit, would not expose it to liability in contract for breach of the non-disparagement
agreement, any more than they would expose it to liability in tort.
Seven years before the Seventh Circuit’s decision in Rain, the Eighth Circuit Court
of Appeals reached a like conclusion in Kelly v. Golden, 352 F.3d 344 (8th Cir. 2003),
although the settlement agreement in Kelly differed from that in Rain. Kelly and Golden had
been business partners. When their working relationship deteriorated, Kelly sued Golden in
federal district court. The two settled the case in a written agreement that included a clause
in which each party agreed not to “disparag[e]” or “defam[e]” the other and not to disclose
any information about the agreement, or a prior agreement, unless it was “privileged, within
arbitration proceedings, made with consent, or required by law.” Id. at 348.
The ink was barely dry on the agreement when Kelly sued Golden in a Missouri state
court seeking rescission and alleging among other claims breach of fiduciary duty. Golden
24
removed the case to federal district court and filed a counterclaim. Kelly, who was self-
represented, filed “lengthy pleadings containing irrelevant and scandalous allegations that
reflected his anger and personal feelings regarding the case.” Id. The court struck some of
the pleadings and admonished Kelly to refrain from making personal attacks in his filings,
to no avail. Kelly continued on the same path and also sent letters and faxes to Golden and
his lawyer containing “numerous inappropriate, vituperative, and coercive comments, along
with arguably defamatory statements.” Id. at 349.
After the district court granted summary judgment in favor of Golden on Kelly’s
claims, Golden amended his counterclaim, alleging that Kelly had breached the non-
disparagement clause of their settlement agreement by his court filings, and seeking
injunctive relief, damages, and attorneys’ fees. Golden filed a motion for summary
judgment, which the court granted, enjoining Kelly from further disparaging or defaming
him. Kelly appealed.
The Eighth Circuit reversed. It explained that, although Kelly’s disparaging
statements could have subjected him to “court-initiated sanctions,” he was exempt from
liability for breaching the non-disparagement agreement, because his disparaging statements
were made in the course of a judicial proceeding and therefore “were protected by the
absolute privilege.” Id. at 350. The court emphasized that the policy underlying the absolute
litigation privilege “favor[s] freedom of expression and the desire not to inhibit parties from
detailing and advocating their claims in court.” Id.
25
In Wentland v. Wass, 25 Cal. Rptr. 3d 109 (Cal. Ct. App. 2005), a California
intermediate appellate court applied a similar analysis but reached a different result. Charles
Wentland, Warren Wass, and Walter Reiss (and various trusts they controlled) were partners
in Parkview Terrace, a real estate investment partnership. When Parkview Terrace started
to fail, Wass and Reiss began to suspect that Wentland had been misappropriating funds.
They hired a certified public accountant (“CPA”) to audit the partnership’s books. Wentland
denied any wrongdoing and cooperated with the audit. Ultimately, Wentland, Wass, and
Reiss settled their differences without litigation. The terms of the settlement were bare
bones: Wentland agreed to purchase Wass and Reiss’s interest in Parkview Terrace in
consideration for Wass and Reiss agreeing not to disparage Wentland’s management of
Parkview Terrace; and the parties all agreed the settlement would be kept confidential.14
Wass and Reiss held interests in other real estate investment partnerships that
Wentland managed. Sometime after entering into the Parkview Terrace settlement, Wass and
Reiss sued three of the other real estate investment partnerships and Wentland, seeking an
accounting. Wentland moved for summary judgment on the ground that there were no
allegations of wrongdoing to support an accounting. Wass and Reiss filed an opposition, to
which they attached a “declaration” by the CPA who had audited Parkview Terrace’s books.
In the “declaration,” the CPA stated that the Parkview Terrace audit had revealed self-dealing
14
Wass and Reiss also provided Wentland with a letter of apology that Wentland could
use if Wass and Reiss violated the agreement.
26
by Wentland. Wass and Reiss argued that this was sufficient evidence of wrongdoing to
support their request for an accounting.
Wentland reacted by filing a counterclaim, alleging that the assertions of wrongdoing
made against him in the opposition to summary judgment and the CPA’s “declaration”
disparaged him, in violation of the settlement agreement, and further breached that agreement
by making it public. Wass and Reiss moved to dismiss the counterclaim, arguing that
California’s statutory absolute litigation privilege for civil cases protected them from liability
to Wentland for the words they had written in documents filed in court and for the words
written in the “declaration.”15 The court granted the motion to dismiss. After Wass and
Reiss’s claims were decided by the court, Wentland noted an appeal from the dismissal of
his counterclaim.
The California Court of Appeal for the Third District reversed, holding that
California’s absolute litigation privilege did not insulate Wass and Reiss from liability for
breaching the non-disparagement agreement. Like the courts in Rain and Kelly, the Wentland
court focused its analysis on whether applying the privilege would advance its underlying
policies. The court opined that the purposes of the absolute litigation privilege are to “ensure
free access to the courts, promote complete and truthful testimony, encourage zealous
advocacy, give finality to judgments, and avoid unending litigation.” Id. at 115. It concluded
15
California Civil Code section 47 states in pertinent part: “[a] privileged publication
or broadcast is one made . . . (b) In any (1) legislative proceeding, (2) judicial proceeding,
(3) in any other official proceeding authorized by law, . . . .”
27
that immunizing Wass and Reiss from liability for breaching their settlement agreement with
Wentland would not “further[]” “the policies underlying the privilege,” id. at 116, explaining:
Unlike in the usual derivative tort action, application of the privilege in the
instant case does not serve to promote access to the courts, truthful testimony
or zealous advocacy. This cause of action is not based on allegedly wrongful
conduct during litigation . . . . Rather, it is based on breach of a separate
promise independent of the litigation . . . . This breach was not simply a
communication, but also wrongful conduct or performance under the contract
. . . . [H]ere application of the privilege would frustrate the purpose of the
[non-disparagement agreement.]
Application of the privilege in this case does not encourage finality and
avoid litigation. In reaching settlement in the Parkview Terrace matter, the
parties presumably came to an acceptable conclusion about the truth of [Wass
and] Reiss’s comments about Wentland’s management of the [Parkview
Terrace] partnership. Allowing such comments to be made in litigation,
shielded by the privilege, invites further litigation as to their accuracy and
undermines the settlement reached in the Parkview Terrace matter.
Id. at 116-17
More recently, an intermediate appellate court in another district in California held
that the absolute litigation privilege applied to protect a litigation participant from liability
for breaching a non-disparagement agreement. In Vivian v. Labrucherie, 153 Cal. Rptr. 3d
707 (Cal. Ct. App. 2013), Labrucherie’s boyfriend, nicknamed “Dodi,” sought injunctive
relief against her ex-husband, Vivian, a county deputy sheriff. Dodi alleged that Vivian was
harassing him by following him in his patrol car and telling law enforcement officials in
Dodi’s native country that Dodi was being investigated by the sheriff’s department. The court
granted a TRO. Soon thereafter, Vivian asked the sheriff’s department to open an internal
affairs investigation into Dodi’s allegations.
28
The following month Vivian and Dodi entered into a settlement. Dodi agreed to drop
his request for a permanent injunction and he, Vivian, and Labrucherie agreed not to
disparage “any other party.” Id. at 710. Even though she was not a party, Labrucherie signed
the settlement agreement and represented that (with an exception not relevant here) she
would be bound by it.
A year later, Vivian sued Labrucherie, her mother, and Dodi, alleging among other
things that Labrucherie had violated the settlement agreement by making disparaging
statements about him to people in the sheriff’s office’s internal affairs department, during its
investigation.16 Labrucherie moved to dismiss the complaint, arguing the absolute privilege
protected her from liability for breaching the non-disparagement agreement. The court
denied the motion, and she noted a permitted interlocutory appeal.
The appellate court reversed, holding that the absolute litigation privilege insulated
Labrucherie from liability for breaching the non-disparagement agreement by means of her
communications about Vivian to the sheriff’s department. It found that applying the
privilege would “further[] the policies underlying the privilege.” Id. at 715. Specifically, in
the context of police investigations, that policy is “‘to assure utmost freedom of
communication between citizens and public authorities whose responsibility it is to
investigate and remedy wrongdoing.’” Id. (quoting Williams v. Taylor, 181 Cal. Rptr. 423,
16
Vivian also alleged that Labrucherie and her mother had conspired to have Dodi file
the petition for injunctive relief for an improper purpose, based on false information they had
fed him.
29
428 (1982). The court observed that the dispute involved “a significant public concern -- a
governmental investigation into inappropriate conduct by a police officer [-- and that] [t]he
public purpose is served by application of the privilege here in a way that does not apply to
statements made in many other contexts.” Id. at 716.
Finally, and most recently, a Florida intermediate appellate court analyzed principles
of waiver in holding that the absolute litigation privilege immunized a party to a non-
disparagement agreement from liability for breaching that agreement by words written in the
course of a judicial proceeding. In James v. Leigh, 145 So. 3d 1006 (Fla. Dist. Ct. App.
2014), the parties were former law partners. They entered into an agreement that included
a mutual non-disparagement clause. Later, James recited disparaging facts about Leigh in
a motion James filed in his ongoing divorce case. Specifically, in seeking to set aside a
marital settlement agreement, James alleged that his earnings had declined because Leigh had
fired him and James’s expectation that he would take over the law practice, because Leigh
was facing disciplinary action, proved unfounded when the disciplinary proceedings against
Leigh were dismissed.
Leigh brought a contract action against James, alleging that he breached the non-
disparagement clause of their agreement by including derogatory information about him in
the motion filed in the divorce case. James moved to dismiss, invoking the absolute litigation
privilege. The court denied the motion. James noted an interlocutory appeal, challenging
that ruling.
30
Before the appellate court, Leigh argued that the absolute litigation privilege did not
protect James from liability for breaching the non-disparagement clause because, by entering
into an agreement that included a non-disparagement clause, James had waived the absolute
litigation privilege. In other words, without an exception in the non-disparagement clause
for words spoken or written in the course of a judicial proceeding, the absolute litigation
privilege was waived.
The appellate court rejected the waiver argument and held that the absolute litigation
privilege applied. It observed that as a matter of law “‘an individual cannot waive a right
designed to protect both the individual and the public.’” Id. at 1008-09 (quoting Chames v.
DeMayo, 972 So. 2d 850, 860 (Fla. 2007)). It concluded that because the absolute litigation
privilege protects a public right, an individual cannot waive it:
Since the absolute litigation privilege is a firmly established right of immunity
designed to protect the public by ensuring the free and full disclosure of facts
in the conduct of judicial proceedings, we conclude the parties’ non-
disparagement agreement could not be construed as a waiver of the privilege.
Id. at 1009. On that basis, the appellate court reversed the denial of the motion to dismiss.
See also Iskanian v. CLS Transp. Los Angeles, LLC, 327 P.3d 129, 148-49 (Cal. 2014)
(employee could not waive in arbitration agreement the right to bring a representative action
for labor code violation because the statute permitting those actions protected a public right);
Andrews v. Wisconsin Public Serv. Corp., 762 N.E.2d 837, 840 (Wis. Ct. App. 2008)
(explaining that “[p]ersonal rights may be waivable, but public rights are not” and holding
the power of eminent domain effectuates a public purpose and may not be waived); Campbell
31
v. Mahoney, 29 P.3d 1034 (Mont. 2001) (distinguishing between nonwaivable public rights
and waivable private rights and concluding that Montana’s “good time” statute for inmates
was waivable).17
(e)
As our review of the decisional law shows, there is a strong trend favoring application
of the absolute litigation privilege to immunize litigation participants from liability for any
tort claim (not just defamation) that is based on words written or spoken in the course of a
judicial proceeding. Just as this Court concluded in Mixter, courts elsewhere have concluded
that what matters is not the cause of action alleged but whether immunity from tort liability
will advance the policies the privilege is meant to protect. That substance-over-form analysis
likewise has guided the courts that have considered whether the absolute litigation privilege
will immunize a litigation participant from liability for breaching a non-disparagement
agreement by words written or spoken in a judicial proceeding. Significantly, none of these
courts have held that the absolute litigation privilege will not apply merely because a cause
of action against a litigation participant that is based on words spoken or written in the course
of judicial proceeding sounds in contract, not tort. Instead, they have considered whether
17
In Rain, Paramount and Rain argued before the Seventh Circuit that Rolls-Royce had
waived the absolute litigation privilege by entering into the non-disparagement agreement.
The Rain court declined to consider that argument because it had not been raised in the
district court.
32
immunity from liability is consistent with and will serve the public policy objectives of the
privilege, and have applied the privilege when that is the case.
We agree with this consensus view. The absolute litigation privilege is a policy
implementing tool. Ordinarily, a person has a right to legal redress in tort for words spoken
or written in violation of a duty recognized in the law, when the elements of the tort are
proven. If the words that form the basis for the tort were spoken or written in the course of
a judicial proceeding, the individual right to redress is trumped by the paramount public right
to judicial proceedings that afford the trier of fact “free and unfettered” access to information
necessary to its search for the truth. Bartlett, 69 Md. at 226. When people bargain privately
for restrictions on the words they may speak or write about each other, such as by a non-
disparagement agreement, they may obtain legal redress for a violation of that privately
imposed duty through a cause of action for breach of contract. If the breach of such a
contractual duty is by words spoken or written in the course of a judicial proceeding,
however, the public right to the fair administration of justice is implicated. It is the context
in which the breaching words are communicated -- in the course of a judicial proceeding --
that involves the absolute litigation privilege, whether the breach is of a duty in tort or a right
afforded by contract. The individual contractual right to redress will yield to the public right
-- that is, the absolute litigation privilege will apply -- when in the particular case that “would
promote the due administration of justice and free expression by participants in judicial
proceedings.” Rain, 626 F.3d at 378.
33
This approach comports with the principles the Court of Appeals has followed in
assessing the scope of the absolute litigation privilege in Maryland, for instance, as applied
to extrinsic statements. “We extend the absolute privilege to [certain categories of out of
court] statements for the traditional reason - to encourage the free divulgence of information
in pursuit of justice.” Norman, 418 Md. at 654 (holding that the absolute litigation privilege
protected lawyers from liability for defamation for allegations made in a complaint not yet
filed in court and given to the news media for publication). See, e.g., Adams, 288 Md. at 8
(extending the absolute litigation privilege to defamatory statements made in documents
prepared for use in litigation, but not filed, because “[t]he evaluation and investigation of
facts and opinions for the purpose of determining what, if anything, is to be raised or used
in pending litigation is as integral a part of the search for truth . . . as is the presentation of
such facts and opinions during the course of the trial . . .”); Offen v. Brenner, 402 Md. 191,
202 (2007) (commenting that “the basis for extending absolute immunity [is] to prevent
unduly hindering important speech, and to ensure that otherwise actionable conduct thus is
protected where the accused acts in furtherance of a recognized socially important interest.”)
(quotation omitted).
We must consider, then, whether in the circumstances of this case application of the
absolute litigation privilege to immunize the City from liability for breaching its non-
disparagement agreement with OBG “would promote the due administration of justice and
free expression by participants in judicial proceedings.” Rain, 626 F.3d at 378. As
34
discussed, in the Plant Upgrade Case, the City was seeking to recover from OBG and CDG
$60 million of the $80 million in public funds it had spent on the failed upgrade to its
wastewater treatment plant.18 The City recovered $10 million in its settlement with OBG,
and the case proceeded to trial on a $4 million contract claim against CDG. In broad terms,
the jury’s task was to decide whether CDG had breached its contract with the City and, if so,
whether the breach had caused the plant upgrade to fail.
The City’s claims against OBG, which were settled, and its claims against CDG,
which went to trial, were facets of the same litigation -- the Plant Upgrade Case -- and that
litigation concerned a single project -- the plant upgrade. OBG designed the plant upgrade
and CDG managed its construction, under a contract that required it to inform the City about
any problems with the upgrade’s design. Consequently, the facts material to whether CDG
breached its contract with the City were interrelated with the facts material to whether OBG’s
design was flawed. Likewise, the facts relevant to whether any breach of contract by CDG
caused the plant upgrade to fail were not separable from the facts relevant to whether OBG’s
design caused the plant upgrade to fail.
Evidence 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. Without assessing OBG’s
18
The City amended its complaint to include additional defendants that OBG had
brought into the case as third party defendants, but dismissed them after settling with OBG.
Clearly, the target defendants in the case were OBG and CDG.
35
design work, the jury could not decide the “truth” of the contract claim. And given the
broad definition of “disparaging” in the Agreement, no amount of censoring the evidence
about OBG’s design engineering and the reason for the plant upgrade failure could make that
evidence not disparaging. Under the Agreement, a “disparaging” statement is one that
“adversely reflects on the other settling party’s [here, OBG’s] personal or professional
reputation and/or business interests and/or that portrays the other settling party [here, OBG]
in a negative light.” Evidence that there were flaws in OBG’s design for the plant upgrade
and that its design caused the upgrade to fail necessarily would portray OBG in a negative
light, in violation of the Agreement. And of course that was so even if the evidence were
true.19
The City was entitled to use the court system to seek compensation for the losses it
sustained due to the failed plant upgrade; and it did so, blaming the failure on OBG and
CDG, the only defendants named in its original complaint. The City’s settlement with OBG
did not limit its right to continue to use the court system, in the same case, to pursue its
claims against CDG. Indeed, the Agreement expressly provided that it would not inure to
the benefit of any other party to the Plant Upgrade Case. The facts underlying the Plant
19
The City’s “conflict of interest” evidence regarding the “teaming agreement”
between CDG and OBG did not disparage OBG beyond the assertion that OBG’s design was
flawed. It disparaged CDG. The “conflict of interest” evidence (as prefaced by the City’s
lawyer in his opening statement) was being used by the City to show that CDG did not report
the design flaws as its contract with the City required it to do because criticism of OBG by
CDG could jeopardize CDG’s interest in obtaining the District of Columbia contract.
36
Upgrade Case and the disputes about those facts were the same before and after the City’s
settlement with OBG, as was the interconnection between OBG’s design work and CDG’s
contract supervision work. To decide the truth of the City’s contract claim against CDG, the
jurors needed the same “unfettered access” to the evidence relevant to the upgrade’s design
that they would have had absent the settlement between OBG and the City.
Without a complete body of evidence pertaining to OBG’s design, the jurors would
be left to make findings critical to the contract claim against CDG on a record sanitized of
important facts -- including facts the jurors might credit as true -- merely because those facts
could place OBG in a negative light. To carry out their public function, the jurors in the
Plant Upgrade Case needed access to all the evidence necessary to put together the puzzle
of facts, not to select puzzle pieces cherry-picked to protect OBG’s reputation. The
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.
There are additional circumstances that militate in favor of applying the absolute
privilege in this case. The non-disparagement clause did not preclude CDG from introducing
evidence disparaging OBG’s design for the plant upgrade. In fact, CDG did so. As noted,
a central theme in its defense was that OBG’s design was so flawed that the upgrade was
bound to fail, regardless of anything it did or did not do. Absent countervailing evidence
37
from the City that CDG knew about OBG’s design flaws and failed to apprise the City about
them, as was required by the terms of its contract, the jurors would be deciding the contract
claim on but a portion of the relevant evidence, and OBG’s design would be disparaged
anyway.20
Also, just as the court in Rain recognized, the issue here is not whether the non-
disparagement clause is enforceable at all, but whether it is enforceable when the disparaging
words are spoken or written in the course of a judicial proceeding. The non-disparagement
clause is fully enforceable as to any disparaging words spoken or written by the City about
OBG’s design work on the plant upgrade, outside of a judicial proceeding, and only is not
20
In its brief, OBG asserts that under the indemnity clauses in the Agreement, if at the
trial of the Plant Upgrade Case CDG were to criticize OBG’s design for the plant upgrade,
the City would have to respond by defending the design to the jury. This assertion discloses
a complete misunderstanding not only of the indemnity language of the Agreement but also
of the legal concept of indemnity. As explained, the City agreed to defend, indemnify, and
hold harmless OBG from claims and suits brought against it by others arising out of the
failed plant upgrade. The Agreement specifies that the City will defend OBG from such
claims and suits “with counsel paid for and selected by the City.” The plain meaning of this
language is that, if a claim were made or a suit were filed against OBG arising out of its work
on the plant upgrade, the City would be obligated to provide and pay for a lawyer to defend
OBG in the claim or suit. “‘Indemnity obligations, whether imposed by contract or by law,
require the indemnitor to hold the indemnitee harmless from costs in connection with a
particular class of claims,’” including the legal fees and costs incurred in defending an
indemnified claim. Nova Research, Inc. v. Penske Truck Leasing Co., L.P., 405 Md. 435,
453 (2008) (quoting Peter Fabrics, Inc. v. S.S. Hermes, 765 F.2d 306, 316 (2d Cir. 1985)).
The obligation of an indemnitor to “defend” an indemnitee is not an obligation to stand up
and announce that the indemnitee did not commit any wrongdoing. It is an obligation to
provide a legal defense to a claim or suit brought against the indemnitee. Moreover, CDG’s
defense in the Plant Upgrade Case -- that OBG’s design was flawed and caused the plant
upgrade to fail -- was not a claim or suit against OBG.
38
enforceable for words spoken or written in the course of a judicial proceeding when the fair
administration of justice warrants otherwise. Accordingly, the purpose of the non-
disparagement clause is not frustrated by application of the absolute litigation privilege.
This distinguishes the case at bar from Wentland, in which the court reasoned that
applying the absolute litigation privilege to immunize Wass and Reiss from liability for
breaching the non-disparagement agreement in the Parkview Terrace settlement would
frustrate the purpose of that agreement. The non-disparagement agreement in Wentland was
unilateral, running only from Wass and Reiss to Wentland, and was the sole consideration
Wentland received in the Parkview Terrace settlement. In that circumstance, the Wentland
court concluded that in entering into that settlement “the parties presumably came to an
acceptable conclusion about the truth of [Wass and] Reiss’s comments about Wentland’s
management of the partnership” -- i.e., that they were not true. 25 Cal. Rptr. 3d at 116.
Allowing Wass and Reiss to support their allegations of wrongdoing in Wentland’s
management of other partnerships with evidence of wrongdoing by Wentland in managing
Parkview Terrace that the parties had agreed was not true, when the only consideration
Wentland had received in the Parkview Terrace settlement was Wass and Reiss’s promise
not to disparage him about his management of Parkview Terrace, would have rendered the
Parkview Terrace settlement meaningless. And it would not have advanced the
administration of justice in the case against Wentland and the other partnerships, because that
case required evidence of wrongdoing by Wentland in managing those partnerships, not in
39
managing another partnership. As the Wentland court explained, it would not have promoted
truthful testimony, because Weiss, Rain, and Wentland had agreed the Parkview Terrace
allegations were not true; would not have promoted finality in litigation, because an already
resolved issue would be resurrected for re-decision; and would not have promoted zealous
advocacy because that does not encompass advocating a falsity.
By contrast, in the case at bar, the non-disparagement clause was mutual and was a
single feature of a wide-ranging settlement between the City and OBG. The primary
consideration OBG received for its $10 million dollar payment to the City was its release
from liability for the City’s claims against it that, if tried successfully, could have resulted
in its liability for significantly more than that amount. In addition, the indemnity provisions
of the Agreement freed OBG from the cost of defense and from having to pay any judgment
or settlement in a suit or claim by another arising out of the failed plant upgrade (for example
a claim for indemnification or contribution by CDG).
Unlike in Wentland, there was no agreement between the City and OBG that it was
untrue that OBG’s design was flawed or that its design had caused the plant upgrade failure.
To be sure, OBG denied fault. The City did not agree that OBG was not at fault, however.
Moreover, and significantly, the joint tortfeasor provision of the Agreement allowed for
OBG’s tortfeasor status to be proven at the trial of the Plant Upgrade Case. In other words,
evidence could be introduced at trial that OBG had been negligent in its design engineering
for the plant upgrade.
40
Here, the purpose of the non-disparagement clause was not frustrated by applying the
absolute liability privilege to immunize the City from liability for the words used in arguing
its case and presenting evidence at trial; and the fair administration of justice would have
been frustrated had the privilege not been applied. In contrast to Wentland, applying the
absolute litigation privilege in this case promoted access to the courts to resolve a dispute,
presentation of truthful testimony, and zealous advocacy; and did not contribute to any lack
of finality of judgments or repetitive litigation.21
As in Rain, if the absolute litigation privilege were not applied here, the City would
have been deprived of its “fundamental right” to vigorously litigate its breach of contract
claim against CDG without fear of liability for words spoken in court. 626 F.3d at 378.22
In Rain, and in Kelly, the legal proceedings in which the disparaging words were spoken or
written involved disputes between private parties enforcing private interests. The public
21
We note, furthermore, that the Parkview Terrace settlement agreement included a
confidentiality provision that Wentland alleged Wass and Reiss violated by the allegations
in their opposition to the motion for summary judgment and the CPA’s “declaration.” In the
case at bar, there was no confidentiality or non-disclosure provision in the Agreement. The
City could have disseminated the Agreement, which on its face showed that OBG was paying
the City a $10 million settlement to resolve the City’s claim that OBG had negligently
designed the plant upgrade.
22
The dissent argues that the City could have limited the theories of liability it pursued
against CDG to focus on faulty construction rather than faulty design. This overlooks two
things. First, the Agreement specified that it would not inure to the benefit of any other
party. Obviously, eliminating a viable theory of recovery against CDG would inure to
CDG’s benefit. Second, and even more important, breach and causation were integral
elements of the City’s contract claim against CDG; and causation -- what made the plant
upgrade fail -- necessarily implicated any flaws in the design of the plant upgrade.
41
policy favoring “unfettered” access to information necessary to the decision-maker’s truth-
seeking function is even greater in the case at bar, as the taxpayers who funded the plant
upgrade had an interest in the City’s being compensated by CDG for breaching its contract.
This is not unlike the “significant public concern” identified by the Vivian Court. As in that
case, the “public purpose” of the absolute litigation privilege was advanced by its application
here. 183 Cal. Rptr. at 716.
For all these reasons, under the circumstances of this case, the absolute litigation
privilege applied as a matter of law to OBG’s breach of contract action, and therefore the
circuit court correctly dismissed OBG’s amended complaint for failure to state a cause of
action for which relief may be granted.23
II.
TRO
A circuit court’s decision to deny a request for injunctive relief is reviewed for abuse
of discretion. Schisler v. State, 394 Md. 519, 535 (2006). A court may issue a TRO only if
it finds: (1) the plaintiff is likely to succeed on the merits; (2) the “balance of convenience”
weighs in favor of the plaintiff; (3) the plaintiff will “suffer irreparable injury unless the
injunction is granted”; and (4) “the public interest” weighs in favor of granting the temporary
injunctive relief. LeJeune v. Coin Acceptors, Inc., 381 Md. 288, 300–301 (2004).
23
As noted, OBG amended its complaint to add a claim for unjust enrichment. This
claim is not addressed by the parties in their briefs.
42
In the instant case, the court did not abuse its discretion by denying OBG’s request for
a TRO. As our holding makes plain, OBG was not likely to succeed on the merits of its
claim because the absolute litigation privilege immunized the City from liability for
breaching the non-disparagement agreement by words spoken by its lawyer and witnesses
at the trial of the Plant Upgrade Case. Moreover, under the fourth factor, the public interest
weighed strongly in favor of the trial going forward without any restrictions on the City’s
presentation of its case.
III.
Motion to Disqualify Counsel
The circuit court denied OBG’s motion to disqualify the City’s lawyer because the
motion was based on that lawyer’s expected participation as a witness at trial, and that
eventuality would not come to fruition if the motion to dismiss were granted. The motion
to dismiss then was granted, and, for the reasons we have explained, was properly granted.
The court did not err in denying OBG’s motion to disqualify counsel.
JUDGMENT AFFIRMED. COSTS TO BE
PAID BY THE APPELLANT.
43
REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1734
September Term, 2012
O’BRIEN & GERE ENGINEERS, INC.
v.
CITY OF SALISBURY
Eyler, Deborah S.,
Nazarian,
Moylan, Charles E., Jr.
(Retired, Specially Assigned),
JJ.
Dissenting Opinion by Nazarian, J.
Filed: April 28, 2015
As the majority states up front, “the primary issue in this case is whether the absolute
litigation privilege may immunize a party to a non-disparagement agreement from liability
for breaching that agreement when the breach was words spoken by a lawyer or witness in
court, during a judicial proceeding.” Slip op. at 1 (emphasis added). The majority answers
that question in the affirmative and I agree with that general principle as far as it goes. Here,
though, the circuit court erred in applying that principle on a motion to dismiss posture and
despite the hotly disputed factual question about the meaning and scope of the Agreement.1
And this matters because, in my view, these sophisticated parties could properly have waived
the litigation privilege if, as a matter of fact, it applied at all. Their ability to waive it flows
from the fact that this privilege, like all privileges, protects them, and specifically their ability
to participate freely in the judicial process. Put another way, there would be no question that
the City could waive any claims or defenses it could assert against OBG or CDG in exchange
for $10 million (or, for that matter, any other privilege), and I see no reason why the City
could not equally (wisely or not) waive its right to take certain positions in future litigation
as part of its settlement with OBG, even if that were viewed as a waiver of the litigation
privilege.
1
The circuit court and the majority both assume, correctly on this posture, that the
statements themselves were disparaging, and I will as well. I express no views on whether
in fact they are disparaging, or whether they would violate the Agreement if the merits of the
issue were reached.
1. OBG’s claims should not have been dismissed.
Because we are reviewing a decision to grant a motion to dismiss, I begin with the
complaint, which includes two counts that sound in contract, not tort, and turn on the scope
of the non-disparagement provision of the Agreement. OBG alleges that in exchange for $10
million, among other things, the City agreed not to make disparaging comments or remarks
about OBG and its work on the Salisbury wastewater treatment plant. The City counters that
the non-disparagement clause was not meant to limit its positions or testimony in the Plant
Upgrade Case. This is an intractable point of dispute, one that the circuit court didn’t resolve
and that we can’t resolve on the present record (nor should we). See Samuels v.
Tschechtelin, 135 Md. App. 483, 527 (2000) (noting that it is not “the function of the motions
court to consider matters outside the pleadings in order to resolve disputed facts”); see also
Debbas v. Nelson, 389 Md. 364, 372 (2005) (“In reviewing the underlying grant of a motion
to dismiss, we must assume the truth of the well-pleaded factual allegations of the complaint,
including the reasonable inferences that may be drawn from those allegations.”).
But instead of assuming the truth of the allegations here, the circuit court found (in
language the majority cites, slip op. at 9) when it denied the request for a TRO that when the
parties executed the Agreement, it was “clear . . . that the question of the . . . appropriateness
of [OBG’s] design of the [plant upgrade] would remain an issue in the [Plant Upgrade
Case].” (Emphasis added.) That assumption (if not a finding) leaped over a dispute of fact
2
that required the court to deny the motion to dismiss.2 Indeed, it is just as obvious for present
purposes that OBG intended (or at least could have intended) the non-disparagement clause
to limit the City’s future litigation positions, and common-sense reasons support such a
reading. First, to permit the City here to use litigation as a sword and a shield (offensively
as the plaintiff in the Plant Upgrade Case against CDG, and defensively to prevent any
recourse by OBG), seems to ignore the $10 million settlement. The City was not merely
reacting, but came out swinging when it argued in its opening statement that “most of the
problems [at the plant] were design problems created by the design engineer, [OBG].” 3 In
light of the public attention this case garnered in the local press (and the complaint alleges
as much), it is not unreasonable to think that an agreement not to disparage could have been
intended to include disparaging statements made in court. Second, although the majority may
be correct 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,” the truth of that
premise either depends on the resolution of facts disputed by these parties or resort to
2
The court did not exactly go outside the complaint, which would have had the effect
of converting the motion to dismiss to one for summary judgment. See D’Aoust v. Diamond,
424 Md. 549, 574 (2012) (noting that where “the trial judge clearly looked outside the ‘four
corners of the complaint’ in reviewing Respondents’ Motion to Dismiss, [he] thereby
convert[ed] it into a Motion for Summary Judgment). Instead, the court assumed an
answer—the opponent’s answer—to the disputed question.
3
Although OBG claims that the disparaging statements were “publicly reported” in
an Eastern Shore newspaper, the article included in the Record Extract does not identify
OBG by name.
3
materials out of bounds for a motion to dismiss. And finally, the City cannot prevail on a
motion to dismiss even if I were to agree that the non-disparagement clause obviously
covered the Plant Upgrade Case without saying so because OBG’s complaint alleges
otherwise.
The circuit court erred, in my view, when it skipped over the threshold question of
whether the parties actually intended to include litigation within the scope of the non-
disparagement clause in the Agreement. And beyond the mere procedural error, resolution
of this question would have framed OBG’s breach of contract claims more precisely. If the
court or a jury were to find that the parties did not intend the non-disparagement claims to
encompass the parties’ positions in the Plant Upgrade Case, that would end the case, since
the City could not have breached the Agreement in that manner. But if the court or a jury
were to make the opposite finding, the court would assess the City’s privilege claim (and
whether the Agreement waived it) against the backdrop of that finding. For the reasons I
explain next, that context matters.
2. These parties could have waived the litigation privilege.
If the litigation privilege were to apply at all, I take a different view of how it applies,
beginning with its scope. The majority refers frequently to the privilege as “absolute,” and
I agree that the privilege applies absolutely to the in-court statements of a party or witness
when it applies. I respectfully disagree, though, that the privilege is absolute in the sense that
parties cannot waive it.
4
Privileges may, as the litigation privilege and attorney-client privilege both do, serve
broader societal purposes. See, e.g., Mixter v. Farmer, 215 Md. App. 536, 543 (2013) (“The
absolute privilege is broad and comprehensive in order to serve its purpose to foster the ‘free
and unfettered administration of justice.’” (quoting Keys v. Chrysler Credit Corp., 303 Md.
397, 404 (1985))). But privileges don’t exist in a vacuum—they attach to and protect
individuals and parties. The litigation privilege protects the whole range of participants in
the litigation process, and it applies differently to different players: witnesses, parties, and
judges enjoy total immunity from tort liability for statements made in a judicial proceeding,
whereas statements by attorneys must bear “some rational relation to the matter at bar.”
Norman v. Borison, 418 Md. 630, 650 (2011). At the most fundamental level, then, the scope
of the privilege is a function of context: a witness can defame anyone about anything from
the witness stand with malice and impunity, but a lawyer can’t do the same from the table or
the podium. And so out of the box, “absolute” doesn’t really mean absolute.
Next, parties generally are free to waive privileges, such as the attorney-client,
spousal, and other testimonial privileges, just as they can waive claims, defenses, arguments,
and objections. They can do so for substantive reasons, tactical reasons, by neglect, or for
no reason at all. Like the litigation privilege, these other privileges serve broader societal
purposes—the attorney-client privilege, for example, furthers the broader purposes of justice
by allowing clients to speak freely with counsel. See CR-RSC Tower I, LLC v. RSC Tower
I, LLC, 429 Md. 387, 433 (2012). So in this case—where sophisticated parties to a complex
5
infrastructure contract represented by able counsel settled complex litigation through an
Agreement that featured an eight-figure payment from OBG to the City—I struggle to
understand why, if it wanted to, the City could not agree as part of settling one case to limit
the positions it could take in another, i.e., to try the Plant Upgrade Case on the theory that the
plant failed because of faulty construction. Again, I don’t know and don’t opine on whether
the parties in fact intended the non-disparagement clause to apply to arguments or testimony
in the Plant Upgrade Case. But $10 million from OBG might well justify such an agreement,
just as favorable treatment in settlements or plea bargains—or indeed, simply as a trial
tactic—might justify a party’s decision in another case to waive another privilege. See, e.g.,
McCarthy v. United States, 394 U.S. 459, 466 (1969) (“A defendant who enters [a guilty]
plea simultaneously waives several constitutional rights, including his privilege against
compulsory self-incrimination. . .”); United States v. Woodall, 438 F.2d 1317, 1325 (5th Cir.
1970) (“By offering his own testimony as to a part of the conversation [with his counsel]
relative to plea results, [the defendants] waived the right to claim the privilege as to the
whole thereof.”); In re Nazarian,4 18 B.R. 143, 147 (Bankr. D. Md. 1982) (holding that the
defendants could be held to have waived attorney-client privilege if they raised
communications with their attorney in the course of testimony purely for their own benefit).
Moreover, an informed decision on the City’s part to try the case in an agreed fashion
(in exchange for $10 million) doesn’t interfere with the due administration of justice or the
4
No relation.
6
ability of participants to speak freely. The City could readily have decided, on its own, for
all sorts of reasons, to focus on faulty construction rather than faulty design. Perhaps, for
example, a jury would be more likely to understand a trial theory focused entirely on faulty
construction, or a narrower focus might allow the City to avoid presenting witnesses who
might perform poorly on the stand or emphasizing documents that undermined its case. CDG
would, of course, be free to defend the case however it wished, and the City’s strategic and
tactical decisions might ultimately have consequences it regrets. But the litigation privilege
does not compel parties to present the ideal case, or even their entire potential case—it
protects their ability to participate as they wish, consistently with the law, without fear of
civil liability, and I think it allows them to agree to forego claims or defenses or positions.
Neither the cases the majority cites nor the principles underlying them elevates the
litigation privilege above informed waiver. First, our recent decision in Mixter presented
the analytical inverse of the situation before us. Mixter, 215 Md. App. at 541-42. That case
stands for two propositions; the one relevant here5 is that the litigation privilege knocks out
torts “beyond defamation when those torts arise from the same conduct as the defamation
claim.” Id. at 547 (emphasis added). The linchpin there was the alleged defamation.
Allowing other tort claims grounded in that same defamatory statement to go forward simply
because they had other titles would, as the majority notes correctly, have elevated form over
substance in a manner inconsistent with the privilege. See slip op. at 32. But here, OBG is
5
The other proposition is that letters prepared and sent for the purpose of preparing
for litigation are protected by the privilege in the same way as in-court statements. Id. at 544.
7
seeking to enforce a contract altogether separate from the Plant Upgrade Case, and
specifically its contractual right not to be disparaged (the scope of which, again, is disputed).
To apply the Mixter principle to these facts would require us to hold that the enforceable
scope of the non-disparagement clause depends in the first place on whether a tort claim (that
is not alleged) might be barred by the litigation privilege. This seems backwards. And
neither Mixter nor any other case I have found independently limits a party’s right to agree
not to disparage, not to take litigation positions, or to waive privileges.
Second, the out-of-state cases the majority cites don’t account for the important
competing interest—previously recognized by this Court—in encouraging settlement and
bringing litigation to finality. The majority looks to a case cited by the City, Rain v. Rolls-
Royce Corp., 626 F.3d 372 (7th Cir. 2010), in which the United States Court of Appeals for
the Seventh Circuit held that the absolute litigation privilege protected an aircraft engine
manufacturer for two purported breaches of a non-disparagement agreement it had executed
with a seller of engine parts in settling a prior suit. The non-disparagement provision was
nothing like the one at issue here: it said simply that “None of the Parties will disparage the
others.” Id. at 375. When the manufacturer made allegations in another complaint that
disparaged the seller, it sued and asserted that the manufacturer had breached the non-
disparagement agreement. The manufacturer moved for summary judgment, arguing that the
absolute litigation privilege applied to bar the suit under the law of Indiana. The trial court
granted summary judgment in favor of the manufacturer and the seller appealed. Id. at 376.
8
The Seventh Circuit held that Indiana observed an absolute privilege protecting all
“relevant statements made in the course of a judicial proceeding,” in order to preserve the
“due administration of justice by providing actors in judicial proceedings with the freedom
to participate without fear of future defamation claims.” Id. at 376 (quoting Hartman v. Keri,
883 N.E.2d 774, 777 (Ind. 2008)); see also Kelly v. Golden, 352 F.3d 344, 350 (8 th Cir.
2004) (noting that Missouri provided an absolute litigation privilege covering statements
made in judicial proceedings, again relying on “the policy favoring freedom of expression
and the desire not to inhibit parties from detailing and advocating their claims in court.”) In
the Rain court’s view, Indiana favored a “liberal rule” that shrouded with the privilege all
statements but “those allegations that are ‘so palpably irrelevant to the subject matter of the
controversy that no reasonable man can doubt [their] irrelevancy and impropriety.’” Rain,
626 F.3d at 377 (quoting Miller v. Reinert, 839 N.E.2d 731, 735 (Ind. Ct. App. 2005)
(brackets in original)). Notably, however, the court determined that the appellants had waived
the argument that Indiana’s policy favoring the enforcement of contracts outweighed the
importance of the litigation privilege by failing to raise it in the district court. Id. at 378.
(And importantly for our purposes, there was more than one issue waived at the district court
level—the appellants also waived the argument that Rolls-Royce had waived the absolute
privilege by agreeing to the non-disparagement clause. Id.) The court also viewed the
contract claim effectively as one sounding in tort—i.e., a defamation claim—and determined
9
only in that context that the privilege barred liability based on a violation of the agreement.
Id.
Whether because it viewed the policy argument as being waived or for other reasons,
Rain overlooked the important countervailing principle that parties are free, and should be
encouraged, to settle lawsuits by agreement rather than resorting to litigation. See Smelkinson
SYSCO v. Harrell, 162 Md. App. 437 (2005) (discussed below). For that reason, I find more
persuasive the California Court of Appeals’s analysis in Wentland v. Wass, 126 Cal. App. 4th
1484 (Cal. Ct. App. 2005). In that case, the parties settled a dispute involving Mr.
Wentland’s management of a local property development company, Parkview Terrace, in
which Messrs. Reiss and Wass were partners. Id. at 1487-88. The settlement provided that
Mr. Reiss would not make any statements that “may have the effect of impugning [Mr.
Wentland’s] honesty or integrity,” and further provided that Mr. Reiss would sign a letter of
apology. Id. at 1489. As part of a later lawsuit by Messrs. Reiss and Wass against certain
partnerships managed by Mr. Wentland, the latter moved for summary judgment. Id. at 1487.
Messrs. Wass and Reiss opposed the motion by producing an accountant’s declaration, along
with their own affidavits, that according to Mr. Wentland, contained information that
violated their prior non-disparagement agreement. The trial court dismissed Mr. Wentland’s
cross-complaint, reasoning in part that his breach of contract claim was barred by the
litigation privilege, which is codified in California as Cal. Civ. Code § 47(b). Id. at 1487-88.
The court began by explaining the circumstances under which the privilege applies:
10
Section 47(b) provides in part that a privileged communication
is one made in a judicial proceeding. “The usual formulation is
that the privilege applies to any communication (1) made in
judicial or quasi-judicial proceedings; (2) by litigants or other
participants authorized by law; (3) to achieve the objects of the
litigation; and (4) that have some connection or logical relation
to the action.”
Id. at 1490 (quoting Silberg v. Anderson, 786 P.2d 365 (Cal. 1990) (citations omitted)).
After looking at prior cases, the court held that the privilege applied absolutely with
regard to tort claims, but that no court had precluded any and all breach of contract claims
based on the privilege, and that “whether the litigation privilege applies to an action for
breach of contract turns on whether its application furthers the policies underlying the
privilege.” Id. at 1492 (citations omitted). The court concluded that no one can use the
litigation privilege to shield himself from all liability, and that one can validly contract to
waive the litigation privilege. Id. at 1494. And in that case, the court determined that the
policies behind the privilege were “not furthered by its application in this case”:
This cause of action is not based on allegedly wrongful conduct
during litigation. . . Rather, it is based on a breach of a separate
promise independent of the litigation. . . . This breach was not
simply a communication, but also wrongful conduct or
performance under the contract, . . . [and] here application of the
privilege would frustrate the purpose of the Parkview Terrace
agreement.
Id. at 1494 (emphasis added). The court saw no reason to allow the party who had, on the
one hand, voluntarily agreed to keep silent to use the litigation privilege later to circumvent,
on the other hand, the non-disparagement clause and the party’s prior agreement:
11
Application of the litigation privilege in this case does not
encourage finality and avoid litigation. In reaching settlement in
the Parkview Terrace matter, the parties presumably came to an
acceptable conclusion about the truth of Reiss’s comments about
Wentland’s management of the partnership. Allowing such
comments to be made in litigation, shielded by the privilege,
invites further litigation as to their accuracy and undermines the
settlement reached in the Parkview Terrace matter.
Id.
The privilege here arises, if at all, in the context of a litigation settlement agreement
that conferred rights and imposed obligations on both sides (including, again, a $10 million
payment from OBG to the City). We explained in Smelkinson that non-disparagement
clauses in settlements are valuable and enforceable:
What SYSCO bought through the negotiated settlement . . . was
immediate and long-term “peace” with Harrell, with the
attendant right to expect that it would no longer have to expend
money, effort, or goodwill in responding to his disparaging
allegations. The language [in the contract] and the
circumstances surrounding the execution of the Settlement
Agreement leave no doubt that SYSCO and Harrell struck a
bargain that was designed to prevent precisely what happened
here—that SYSCO would pay Harrell $185,000 to drop all his
allegations, claims and agitations against the company, only to
have Harrell later resume them.
Smelkinson, 162 Md. App. at 453. And as we permitted SYSCO to recover damages against
Mr. Harrell based on his breach of a non-disparagement clause, we also pointed out
Maryland courts’ long-standing reluctance to nullify a “negotiated remedy at the heart of a
settlement agreement,” id.:
12
“The law always favors compromises and amicable adjustments
of disputes, rather than compel parties to resort to litigation and
it would be strange if, in the absence of clear evidence of fraud
or mistake, the parties were not bound and concluded after what
has taken place in respect to this award.”
Id. (quoting Sisson v. Baltimore, 51 Md. 83, 95-96 (1879)).
The ultimate question, then, is whether the City agreed, as part of settling its
differences with OBG, not to disparage OBG in the Plant Upgrade Case. The outcome of
that question depends in the first instance on what the parties intended the non-disparagement
clause to cover. The circuit court erred in dismissing the case in the face of that looming
factual dispute, and I would reverse and remand on that basis. From there, I would hold that
the City could well have agreed to limit its litigation positions in the ongoing litigation,
whether viewed as a positional or tactical decision or as a waiver of the litigation privilege,
and direct the circuit court on remand to address OBG’s claims against that backdrop. And
for those reasons, I respectfully dissent.
13