Hanover Investments, Inc. et al. v. Susan J. Volkman
No. 9, September Term 2016
Declaratory Judgments Act – Effect of Pending Litigation. Under the Maryland
Uniform Declaratory Judgments Act, a court may entertain a declaratory judgment action
even if there are other causes of action that could be asserted by one of the parties to resolve
the same issues presented in the declaratory judgment action. However, if there is already
pending another action between the same parties concerning substantially the same issues
as the declaratory judgment action, the court should dismiss the declaratory judgment
action or stay it until the pending action is resolved, unless there are “unusual and
compelling” reasons for doing otherwise. Maryland Code, Courts & Judicial Proceedings
Article, §3-401 et seq.
Circuit Court for Montgomery County
Case No. 335496V
Argued: September 7, 2016
IN THE COURT OF APPEALS
OF MARYLAND
No. 9
September Term, 2016
HANOVER INVESTMENTS, INC. et al.
V.
SUSAN J. VOLKMAN
_____________________________________
Barbera, C.J.
Greene
Adkins
McDonald
Watts
Getty,
Harrell, Jr., Glenn T., (Senior
Judge, Specially Assigned)
JJ.
______________________________________
Opinion by McDonald, J.
Harrell, J., dissents.
______________________________________
Filed: July 31, 2017
The declaratory judgment action has been lauded as a “simple judicial device for
speedy adjudication of legal differences” that serves “the important social function of
deciding controversies at their inception.”1 The fact that there may be other causes of
action available to resolve the same issues in a particular case does not preclude a party
from pursuing declaratory relief. However, this Court has consistently held that a trial
court should not entertain a declaratory judgment action when there is already pending
another action between the same parties concerning substantially the same issues unless
there are “unusual and compelling circumstances.”
Respondent Susan J. Volkman was a managerial employee of Petitioner One Call
Concepts, Inc. (“OCC”), and, as a result of that employment, a shareholder of OCC’s
parent, Petitioner Hanover Investments, Inc. (“Hanover”). Both OCC and Hanover are
controlled by Petitioner R. Thomas Hoff, the founder of the two companies. When Mr.
Hoff decided that it was necessary to terminate Ms. Volkman’s employment with OCC and
to redeem her shares of Hanover, litigation ensued on several fronts. This case is a
declaratory judgment action brought by Hanover, Mr. Hoff, and others against Ms.
Volkman in the Circuit Court for Montgomery County to vindicate the procedures it
followed to redeem her stock. However, at the time it was filed, there was already pending,
in a Minnesota state court, a breach of contract action by Ms. Volkman against Hanover
concerning the same issue.
1 E. Borchard, Declaratory Judgments (2d ed. 1941) xiii, 316.
The Circuit Court declined to dismiss or stay this action in deference to the pending
Minnesota action, proceeded to trial, and issued a declaratory judgment in favor of
Hanover. Ms. Volkman appealed. In a thorough and scholarly opinion, the Court of
Special Appeals concluded that there were not “unusual and compelling” circumstances
that justified the issuance of a declaratory judgment by the Circuit Court to resolve the
same question at issue in the pending litigation in Minnesota. We agree.
I
Background
A. Facts
We recount some of the underlying facts to provide context for the legal issue before
us. While the Circuit Court did not make detailed factfindings in its oral opinion and
written order in this case, the basic facts are largely undisputed.2
OCC
OCC, a Maryland corporation known locally by its trade name “Miss Utility,” was
founded by Mr. Hoff, a Maryland resident. OCC operates call centers that function as one-
call clearinghouses for excavators for information on the location of underground utility
lines. It has operations in many states, including Maryland and Minnesota.
2
The Circuit Court drew certain conclusions as to whether parties acted in good
faith and the legal ramifications of those conclusions – issues that were disputed. We do
not express an opinion about those conclusions, as the merits of those conclusions are not
before us. Rather, the question before us is whether the court should have conducted the
trial and made any findings at all.
2
Employment of Susan Volkman
In 1984, OCC hired Ms. Volkman, who had previously worked for a similar one-
call notification center in Wisconsin. Ms. Volkman worked her way up through the ranks
of the company, relocated to Minnesota, and by early 2010 was serving as the manager of
several locations, including OCC’s Minnesota one-call center. She reported directly to Mr.
Hoff.
Ms. Volkman eventually entered into an employment agreement with OCC dated
January 1, 1993 (“Employment Agreement”). Under that agreement, OCC retained the
option to terminate Ms. Volkman’s employment with or without “good cause.” In
particular, she could be terminated immediately for “good cause”; otherwise, OCC was
required to provide Ms. Volkman 15 days’ notice, during which time she would continue
to be paid. The Employment Agreement listed several examples of what might constitute
good cause (including use of illegal drugs, certain felony convictions, and neglect of
duties), but stated that these examples were not exhaustive. The Employment Agreement
provided that it was to be construed in accordance with the law of Maryland and included
a forum selection clause requiring any action to enforce the agreement to be filed “in a
courthouse located in Montgomery County, Maryland.”
Creation of Hanover, Distribution of Shares, and the Shareholders’ Agreement
In 2007, as Mr. Hoff contemplated retirement, he decided to sell OCC to several of
its longtime employees, including Ms. Volkman. For that purpose, he created Hanover, a
Maryland corporation, whose sole purpose is to hold stock in OCC. Mr. Hoff sold OCC to
Hanover, and allowed selected employees, including Ms. Volkman, to purchase shares in
3
Hanover for a nominal price. The shares purchased by Ms. Volkman amounted to 19% of
Hanover’s stock.3 Under a financing arrangement, Mr. Hoff would receive the purchase
price for OCC – $26 million – over time, out of OCC’s income. In the meantime, the new
shareholders of Hanover agreed to assign the voting rights of their stock to a voting trust,
for which Mr. Hoff’s counsel was trustee. At all relevant times, Mr. Hoff has remained a
board member and CEO of Hanover.
As part of the arrangement, the new Hanover shareholders were also required to
enter into a Shareholders’ Agreement. Under that agreement, Hanover had the right to
repurchase an employee/shareholder’s shares if and when that individual stopped working
for Hanover’s subsidiary, OCC. The price to be paid for the shares in that repurchase
transaction would depend on the circumstances of the employee/shareholder’s departure
from OCC. The most pertinent provisions, for purposes of this case, deal with a share
repurchase when an employee/shareholder has been involuntarily terminated from OCC.
If OCC were to terminate the employment of an employee/shareholder without good cause
– and Hanover’s board of directors agreed that the termination was without good cause –
Hanover was obligated to redeem the shares for their full “Fair Market Value.”4 If OCC
were to terminate the employment of an employee/shareholder with good cause – and
Hanover’s board of directors agreed that the termination was with good cause – Hanover
3Hanover charged the employees $1 per share. Ms. Volkman purchased 190 shares
for $190.
4
Under the Shareholders’ Agreement, the Fair Market Value would be set by
Hanover’s board of directors once each year.
4
would pay only 10% of the “Fair Market Value” of the shareholder’s shares. The
Shareholders’ Agreement defined “good cause” in terms similar to Ms. Volkman’s
Employment Agreement.
Like the Employment Agreement, the Shareholders’ Agreement provided that it was
to be construed according to Maryland law. However, unlike the Employment Agreement,
the Shareholders’ Agreement did not include a forum selection clause. The Shareholders’
Agreement provided for arbitration of disputes concerning “the value of, or payment for,
Common Stock,” but not for any other dispute.
Ms. Volkman’s Dismissal from OCC and Hanover’s Redemption of Her Stock
The genesis of this lawsuit (and, as will be discussed below, several other lawsuits
as well) was Ms. Volkman’s termination by OCC.
In early January 2010, Mr. Hoff called Ms. Volkman and told her she was not to
return to work. According to Ms. Volkman, Mr. Hoff gave her no reason for her
termination. In February 2010, an attorney for Mr. Hoff, OCC, and Hanover sent her
counsel a letter formally notifying Ms. Volkman that OCC had terminated her for good
cause, which would result in the redemption of her Hanover shares. OCC eventually gave
several reasons for dismissing Ms. Volkman that it contended were good cause under the
Employment Agreement. It blamed her for the very difficult relationship it had with a
Minnesota client, Gopher State One Call, a relationship that had been under Ms. Volkman’s
purview as manager of Minnesota operations. It noted complaints about her leadership
received from employees under her supervision. And it noted that the Minnesota call center
had lost call recordings that OCC was contractually and legally required to retain. For her
5
part, Ms. Volkman contends that she was terminated not due to her own job performance,
but as a result of a vendetta against her by the general counsel of one of OCC’s Minnesota
clients.
For purposes of this appeal, we need not resolve whether or not OCC had “good
cause” to terminate Ms. Volkman. However, it is significant for understanding some of
the later court proceedings that OCC continued to pay Ms. Volkman’s salary for 15 days
after she received written notice of her termination, although this was not required by the
Employment Agreement if she had in fact been terminated for good cause.
As set forth in the Shareholders’ Agreement, Hanover redeemed Ms. Volkman’s
stock and, on February 3, 2010, sent her a “purchase note” for $1,900 with a maturity date
seven years later on January 31, 2017. The cover letter explained that Hanover’s board of
directors had set its Fair Market Value at $100,000, that Ms. Volkman’s 19% interest was
therefore valued at $19,000, and that the payment was discounted 90% to $1,900 under the
provision of the Shareholders’ Agreement relating to terminations for good cause.
As explained below, the redemption of Ms. Volkman’s shares of Hanover, as well
as the underlying termination of her employment by OCC, set off a series of legal
encounters between Hanover, its other shareholders, and OCC, on the one hand, and Ms.
Volkman on the other.
B. Legal Proceedings
The Employment Agreement Action
More than two years after her termination, on April 17, 2012, Ms. Volkman filed a
lawsuit against OCC and Mr. Hoff based on the Employment Agreement (the
6
“Employment Agreement Action”). As required by the forum selection clause in that
agreement, she filed her complaint in the Circuit Court for Montgomery County. As later
amended, the complaint included a breach of contract claim against OCC based on the
Employment Agreement, along with various tort claims against OCC and Mr. Hoff
concerning her termination, some of which referenced the interaction of the Employment
Agreement with the Shareholders’ Agreement. The complaint alleged that OCC had
violated the Employment Agreement by purporting to terminate her for good cause (1)
when there was no factual basis to support a good cause termination and (2) when OCC
knew of the “substantial ramifications” such a termination would have on her ownership
of Hanover stock.5
On August 31, 2012, OCC and Mr. Hoff moved to dismiss the amended complaint.
In that motion they argued, among other things, that Ms. Volkman would not be able to
prove any damages under the Employment Agreement because OCC had paid Ms.
Volkman “everything to which she was entitled under the Employment Agreement,”6 and
that any “damages” stemming from the alleged breach of the Employment Agreement
5
Although the pleadings from that case are not part of the record of this case, we
take judicial notice of the docket and certain filings in that case, which have been discussed
at some length by both sides in this case. Volkman v. One Call Concepts, Inc., et al., Case
No. V362636 (Circuit Court for Montgomery County). See Cochran v. Griffith Energy
Services, Inc., 426 Md. 134, 145 n.4 (2012) (although an appellate court does not normally
“travel” outside the record, judicial notice may be taken of filings in related cases in
furtherance of a just result).
6
OCC and Mr. Hoff did not elaborate on this assertion, but it appears that they were
referring to the 15 days’ pay that Ms. Volkman received following her termination in
January 2010.
7
would relate to the redemption of her Hanover stock under the provisions of the
Shareholders’ Agreement – an agreement to which OCC was not a party.
Two months later, the Circuit Court held a hearing on this motion on November 2,
2012, and – on the same day – issued an order dismissing the tort claims. With respect to
the breach of contract claim against OCC, the court ruled that Ms. Volkman would be
permitted “to prove a defective ‘for cause’ termination and nominal damages, if any.” The
order did not elaborate the reasons for the court’s rulings. Hanover maintains that the
court’s decision to limit any award to nominal damages was based on the fact that, even if
Ms. Volkman’s termination was without cause, the Employment Agreement entitled her to
only 15 days’ pay from the date of termination – which she had, in fact, already received.
On March 22, 2013, Ms. Volkman voluntarily dismissed the Employment
Agreement Action with prejudice by stipulation of counsel pursuant to Maryland Rule 2-
506(a).
The Arbitration Proceeding
On October 10, 2012, while the Employment Agreement Action was pending,
Hanover invoked the arbitration provision in the Shareholders’ Agreement to determine
what it was required to pay Ms. Volkman when it redeemed her stock under the
Shareholders’ Agreement.7 The arbitrator, as designated in the Shareholders’ Agreement,
was the Voting Trustee under the voting trust, an attorney who had worked for Mr. Hoff
7
As noted above, Hanover had already sent Ms. Volkman a note in the amount of
$1,900 with respect to her stock in February 2010, although payment under that note was
deferred.
8
and his companies since the 1980s and who was a member of the Hanover board of
directors.8
In a written decision dated October 17, 2013, the arbitrator specifically noted that
he was not deciding any issues related to OCC’s termination of Ms. Volkman (i.e., whether
or not there was “good cause”). He calculated the amount Hanover would owe for
termination with good cause ($1,900) and without good cause ($19,000). However, he
concluded that, regardless of whether there was good cause or not, Hanover in fact owed
her only $10 for her Hanover shares. He reached that conclusion on the basis of his
additional finding that Ms. Volkman had violated a separate Restriction Agreement by
revealing the relationship of OCC to Hanover when she filed her complaint in the
Employment Agreement Action. The arbitrator also awarded the costs of the arbitration
proceeding to Hanover and against Ms. Volkman, which he computed to be $12,740, after
subtracting the $10 awarded to Ms. Volkman for her stock. The arbitrator acknowledged
in a footnote that Ms. Volkman had disputed the authority of the arbitrator and had not
participated in the proceeding.
On August 1, 2014, Hanover successfully obtained a default judgment in the Circuit
Court for Montgomery County confirming the award. Ms. Volkman did not appeal that
judgment.
At the time of Ms. Volkman’s termination in 2010, the arbitrator, as counsel to
8
OCC and Hanover, had attempted to negotiate a severance agreement on behalf of OCC
with Ms. Volkman’s counsel and had sent her the purchase note for $1,900 on behalf of
Hanover for redemption of her stock.
9
The Shareholders’ Agreement Action
As described above, on November 2, 2012, the Circuit Court had ruled in the
Employment Agreement Action that Ms. Volkman would be entitled, at most, to nominal
damages for her breach of contract claim against OCC and Mr. Hoff. A little more than a
month after that ruling (but before she voluntarily dismissed that action), on December 17,
2012, Ms. Volkman served Hanover with a complaint that she filed in a state trial court in
Minnesota. That complaint named Hanover as the lone defendant and alleged that it had
violated its contract with her – i.e., the Shareholders’ Agreement (“the Shareholders’
Agreement Action”).9 She alleged that Hanover did so by “declaring the existence of Good
Cause to terminate [her] employment . . . when in fact there was no factual basis upon
which either OCC or Hanover, in the exercise of good faith, could find Good Cause as that
term is defined in either the Employment Agreement or the Hanover Shareholders’
Agreement.” She sought specific performance – the return of her Hanover stock – a remedy
explicitly provided for in the Shareholders’ Agreement.
Hanover moved to dismiss the complaint, asserting that the Minnesota court lacked
in personam jurisdiction of Hanover. The Minnesota trial court denied that motion in April
2013. Hanover appealed that decision to the Minnesota Court of Appeals, which affirmed
9 Ms. Volkman apparently served the complaint in this case approximately a month
before filing it on January 16, 2013.
10
the trial court decision on March 3, 2014. Volkman v. Hanover Investments, Inc., 843
N.W.2d 789 (Minn. Ct. App. 2014).
However, as recounted in the next section of this opinion, by the time the case
returned to the Minnesota trial court, Hanover had filed a declaratory judgment action in
Maryland involving the same issues, Hanover had prevailed in the Circuit Court, and Ms.
Volkman had appealed that disposition. As a result, on January 19, 2015, the Minnesota
trial court dismissed the Shareholders’ Agreement Action, but explicitly reserved
jurisdiction to reopen the case depending on the resolution of the Maryland appeal.
The Declaratory Judgment Action
On June 26, 2013 – two months after the Minnesota trial court denied Hanover’s
motion to dismiss, and while that decision was on appeal – Hanover filed a declaratory
judgment action against Ms. Volkman in the Circuit Court for Montgomery County
(“Declaratory Judgment Action”). The complaint was brought not only on behalf of
Hanover, but also listed other Hanover shareholders and OCC as plaintiffs. Hanover
sought a declaration concerning the rights of the parties under the Shareholders’ Agreement
and, more specifically, that it had complied with its obligations under that agreement in
connection with the redemption of Ms. Volkman’s stock as a result of her termination from
employment with OCC. On the civil cover sheet submitted with the complaint, Hanover
checked a box “yes” for “related case pending?” and entered the number of the
Employment Agreement Action that had been dismissed some months earlier. The case
11
was assigned to the same judge who had earlier been assigned to the Employment
Agreement Action.
Shortly thereafter, Ms. Volkman filed an answer to the complaint in which, in
addition to admitting or denying factual allegations and asserting affirmative defenses, she
noted the pendency of “an identical case” – the Shareholders’ Agreement Action – in
Minnesota and asked the Circuit Court to either decline jurisdiction or stay the proceedings
in the Declaratory Judgment Action pending a final judgment in the Shareholders’
Agreement Action.
In late March 2014, the parties filed cross-motions for summary judgment.
Repeating the defense asserted in her answer to the complaint, Ms. Volkman asked the
Circuit Court to dismiss or stay the proceedings because of the pending Shareholders’
Agreement Action in Minnesota. In its summary judgment motion, Hanover argued that
(1) the Shareholders’ Agreement imposed no duty to complete an independent
investigation into OCC’s termination of Ms. Volkman, and (2) the dismissal of the
Employment Agreement Action with prejudice entitled Hanover to judgment as a matter
of law. In April and May 2014, the Circuit Court denied the parties’ respective motions
without a hearing, and did not elaborate on the reasons for that ruling.
A bench trial on the merits was held on June 16 and 17, 2014. At the close of the
plaintiffs’ evidence, Ms. Volkman renewed her motion to dismiss the action in light of the
pending Shareholders’ Agreement Action. The Circuit Court declined to do so, citing
Marriott Corp. v. Village Realty & Inv. Corp., 58 Md. App. 145 (1984), for the proposition
12
that a declaratory judgment action could be filed “defensively” even if there was similar
litigation “pending or impending” in another court.
On August 14, 2014, the Circuit Court orally rendered its decision in the case in
favor of the plaintiffs. In a written declaratory judgment issued the same day, the Circuit
Court declared that the Shareholders’ Agreement did not require Hanover to conduct an
“independent investigation” into OCC’s termination of Ms. Volkman and that, in
compliance with the Shareholders’ Agreement, the Hanover board of directors had agreed
with OCC’s decision that Ms. Volkman was terminated for good cause when it redeemed
her stock.10
Appeal of the Declaratory Judgment Action
Ms. Volkman appealed to the Court of Special Appeals. She argued that the Circuit
Court should not have heard the case while the Shareholders’ Agreement Action involving
the same issues was pending. She also challenged the Circuit Court’s interpretation of the
Shareholders’ Agreement and its finding concerning good cause.
In a reported decision, the Court of Special Appeals held that the Circuit Court erred
in issuing a declaratory judgment while the Shareholders’ Agreement Action was pending.
225 Md. App. 602 (2015). Because this holding rendered Ms. Volkman’s challenges to
10 Although not part of the written declaration, the Circuit Court also found in its
oral ruling that OCC had good cause for terminating Ms. Volkman’s employment.
13
the substance of the Circuit Court’s decision moot, the Court of Special Appeals declined
to address them.
Hanover petitioned this Court for a writ of certiorari, which we granted.
II
Discussion
The sole question for review is whether the Circuit Court erred in issuing a
declaratory judgment while the Shareholders’ Agreement Action was pending.
A. Declaratory Judgment Actions – Generally
The Maryland Uniform Declaratory Judgments Act is codified in Maryland Code,
Courts & Judicial Proceedings Article (“CJ”), §3-401 et seq. A declaratory judgment
action – as the name implies – is a vehicle by which a person may obtain a judicial
declaration to “afford relief from uncertainty and insecurity with respect to rights, status,
and other legal relations.” CJ §3-402. A declaratory judgment action is designed simply
to “terminate the uncertainty or controversy giving rise to the proceeding” and is available
whether or not corresponding legal or equitable relief is requested or even available. CJ
§§3-403, 409. In other words, under the Declaratory Judgments Act, a party may seek a
definitive statement of the “correct answer” to a disputed question without asking that the
court also enforce its decision by, for example, awarding monetary damages to the
prevailing party or by ordering another party to act (or refrain from acting) in a certain way.
The “uncertainty or controversy,” however, must be justiciable. A declaratory
judgment action may not be used to resolve abstract questions or questions that are moot
or that may never arise. E.g., Koontz v. Ass’n of Classified Emp., 297 Md. 521, 527-29
14
(1983) (affirming dismissal of declaratory judgment action when question presented had
become moot and “entirely academic”). In short, a declaratory judgment action “should
not be used where a declaration would not serve a useful purpose . . . .” Hamilton v.
McAuliffe, 277 Md. 336, 339-40 (1976); see also E. Borchard, The Uniform Declaratory
Judgments Act, 18 Minn. L. Rev. 239, 267 (1934).
The existence of other potential causes of action or remedies is not a bar to pursuit
of a declaratory judgment. Thus, a party may seek a declaratory judgment
“notwithstanding a concurrent common-law, equitable, or extraordinary legal remedy,
whether or not recognized or regulated by statute.” CJ §3-409(c). As this Court previously
noted, the General Assembly added this proviso to the Declaratory Judgments Act to make
clear that a party is not precluded from seeking declaratory relief simply because that party
has the option of pursuing some other remedy. Falls Road Community Ass’n, Inc. v.
Baltimore County, 437 Md. 115, 136 n.20 (2014). However, if a statute “provides a special
form of remedy for a specific type of case,” that statutory procedure takes precedence. CJ
§3-409(b).
B. Discretion of Circuit Court to Grant or Deny Declaratory Relief
The Declaratory Judgments Act appears to entrust the decision whether to grant or
deny declaratory relief to the trial court’s discretion. CJ §3-409 (“a court may grant a
declaratory judgment”) (emphasis added). Accordingly, it is often said that an appellate
court reviews the decision to do so under an “abuse of discretion” standard. See, e.g.,
Sprenger v. Public Service Comm’n, 400 Md. 1, 21 (2007); Converge Services Group, LLC
v. Curran, 383 Md. 462, 477 (2004).
15
In some respects, however, the apparent leeway given to the trial court is just that
– apparent – and the trial court may actually be required as matter of law to issue
declaratory relief or to abstain from doing so. This Court has “insisted that courts declare
the rights of the parties when presented with an action properly susceptible to a declaratory
judgment.” Post v. Bregman, 349 Md. 142, 159-60 (1998). Accordingly, many cases have
noted that “dismissal is rarely appropriate in a declaratory judgment action.” Christ v.
Department of Natural Resources, 335 Md. 427, 435 (1994) (collecting cases).
Conversely, there are circumstances when a court should not entertain an action for
declaratory relief. Pertinent to this case, a court should not do so when there is already a
pending action “involving the same parties and in which the identical issues that are
involved in the declaratory action may be adjudicated.” Sprenger 400 Md. at 27-28
(existence of a similar, pending action is “fatal” to a declaratory judgment action); see also
Waicker v. Colbert, 347 Md. 108, 113 (1997); A.S. Abell Co. v. Sweeney, 274 Md. 715,
720-21 (1975); Brohawn v. Transamerica, 276 Md. 396, 406 (1975). This judicial
reticence has long been part of the guidance concerning declaratory judgments. E.
Borchard, Declaratory Judgments (2d ed. 1941) 350 (“it is manifestly unwise and
unnecessary to permit a new petition for a declaration to be initiated” when there is a
similar, pending action). It is widely followed in other jurisdictions.11
11 See, e.g., First Midwest Corporation v. Corporate Finance Associates, 663
N.W.2d 888, 893 (Iowa 2003); Sensient Colors, Inc. v. Allstate Insurance Co., 939 A.2d
767 (N.J. 2008); Woodmen of the World Life Insurance Society v. Yelich, 549 N.W.2d 172
(Neb. 1996); Simmons v. Superior Court in and for L.A. County, 214 P.2d 844 (Ca. 1950);
see generally 22A Am. Jur. 2d Declaratory Judgments §§36-44.
16
There are strong policy considerations for the principle that a court should decline
to issue a declaratory judgment in deference to a pending action, including conserving
judicial resources,12 avoiding conflicting judgments,13 and preventing evasion of the final
judgment requirement for appeal.14 Were this rule not followed, “almost any pending
action could be interrupted and held at bay until the determination, in one or more
subsequently instituted declaratory judgment actions, of issues culled out of the pending
action.” Waicker, 347 Md. at 115 (internal quotation marks and citation omitted).
An example is Haynie v. Gold Bond Building Products, 306 Md. 644 (1986). In
that case, an employee injured on the job initially applied for workers’ compensation
benefits, but later brought a tort suit, alleging that the employer had disabled a safety
mechanism that may have prevented his injury. While that tort suit was pending, the
employee filed a separate action seeking a declaration that his initial election to receive
workers’ compensation benefits did not bar his subsequent tort suit. The circuit court
ultimately issued a declaratory judgment – adverse to the employee. The employee
appealed the merits of that decision.
This Court did not reach the merits of the circuit court’s decision. Instead, it held
that the circuit court should not have entertained the declaratory judgment action and
remanded the case to the circuit court with instructions to dismiss that action. The Court
12 Waicker, 347 Md. at 115.
13 Sprenger, 400 Md. at 27.
14 Turnpike Farm Limited Partnership v. Curran, 316 Md. 47, 49 (1989).
17
observed that the allegations, as well as the defense, in the two actions were identical.
Relying on Brohawn and the Borchard treatise, the Court held that, once a common law
remedy is invoked to resolve a dispute – in Haynie, the earlier-filed, pending tort action –
a party is barred from instituting a second lawsuit to “obtain a declaratory judgment to
resolve the same matter.” Id. at 650. Were the rule otherwise, “each separate disputed
issue” in any given case “could be made the subject of a separate declaratory judgment
action,” and thereby allow a party to bypass the final judgment requirement for appellate
review. Id. at 653-54.
In A.S. Abell, this Court, while upholding the dismissal of a declaratory judgment
action in the face of an earlier-filed, pending action, observed that the principle precluding
a duplicative declaratory judgment action was to be followed “absent very unusual and
compelling circumstances.” 274 Md. at 721. The Court has reiterated, on several
occasions, the exception to the general rule for “unusual and compelling circumstances,”
but has not found that exception applicable in the cases presented to it to date. See, e.g.,
Waicker, 347 Md. at 113-15; Haynie, 306 Md. at 652; State v. 91st Street Joint Venture,
330 Md. 620, 630; but cf. Harpy v. Nationwide Mutual Fire Insurance Co., 76 Md. App.
474, 482 (1988) (holding that pending tort action would not resolve issue presented in
declaratory judgment action and stating, as an alternative holding, that even if the issue
would be resolved in the tort action, “unusual and compelling circumstances” existed for
proceeding with the declaratory judgment action without analyzing the latter issue).
18
C. Application to this Case
In this case, the Shareholders’ Agreement Action qualifies as an earlier-filed,
pending action that would, under our customary analysis, operate as a bar to the later-filed
Declaratory Judgment Action. The two actions involve essentially the same parties and
both actions concern the identical issue – the propriety of Hanover’s redemption of Ms.
Volkman’s Hanover stock under the Shareholders’ Agreement. Hanover disputes whether
the parties are the “same,” whether the issues are “identical,” and whether the
Shareholders’ Agreement Action was truly pending first. It further contends that, even if
it loses on each of those scores, there are unusual and compelling circumstances that
justified the decision of the Circuit Court to proceed with its declaratory judgment action.
Same Parties
Hanover argues that the two actions did not involve the same parties because, while
the Shareholders’ Agreement Action was brought by Ms. Volkman against Hanover and
the Declaratory Judgment Action was filed by Hanover against Ms. Volkman, there are
additional plaintiffs in the Declaratory Judgment Action – other Hanover shareholders, and
Hanover’s subsidiary, OCC. The mere existence of additional parties on one side of the
case does not necessarily mean that a court must proceed with an otherwise duplicative
declaratory judgment action. Waicker, 347 Md. at 113 n.2 (the presence of additional
parties “does not, in and of itself, render this declaratory judgment action permissible”).
To hold otherwise would be to invite a party to add another nominal plaintiff to circumvent
this limitation on declaratory judgment actions.
19
In this case, the interest of Hanover’s other shareholders and its wholly-owned
subsidiary in the Declaratory Judgment Action appear to be co-extensive with the interest
of Hanover. None of the other named plaintiffs has staked out a different position from
Hanover in the litigation.15 All plaintiffs are represented by the same counsel, who has
advanced the same arguments on their collective behalf. For purposes of our analysis, then,
the Shareholders’ Agreement Action and the Declaratory Judgment Action involve the
“same parties.”
Identical Issues
Hanover also argues that the two actions do not involve “identical issues.” Hanover
claims that the primary issue in the Declaratory Judgment Action is the interpretation of
the Shareholders’ Agreement, while the primary issue in the Shareholders’ Agreement
Action is the Employment Agreement (despite, apparently, the fact that the complaint in
the Shareholders’ Agreement Action alleged a breach of the Shareholders’ Agreement).
The standard, however, is whether the question presented in the declaratory judgment
15 Hanover asserted in its brief that, “as filed,” the Shareholders’ Agreement Action
“did not allow the shareholders of Hanover or OCC to be heard on any issues.” This just
restates the identity of the parties in the Shareholders’ Agreement Action “as filed.”
Hanover does not suggest that the other shareholders or OCC attempted to intervene in that
action and were rebuffed. Nor does it indicate in what respect, if any, they would wish to
be heard differently than Hanover.
At oral argument, Hanover’s counsel suggested, without elaborating, that some of
the employee/shareholders might have a different view of how the Shareholders’
Agreement should be construed – the issue on which the declaratory judgment was sought.
Counsel did not elaborate on what that difference would be; no alternative construction
was presented by Hanover’s counsel on behalf of other shareholders at the trial of this case.
20
action “can be adequately decided,”16 or “may be adjudicated,”17 in the earlier-filed,
pending action. Absolute identity of all issues in both cases is not the standard. Sprenger,
400 Md. at 27-28 (declaratory relief was inappropriate because the two actions at issue
dealt with “almost exactly the same issues”) (emphasis added).
There is little doubt that the question presented in the Declaratory Judgment Action
“can be” or “may be” decided in the Shareholders’ Agreement Action. In the Shareholders’
Agreement Action, Ms. Volkman sought return of her Hanover stock – on the basis of her
allegation that Hanover violated the Shareholders’ Agreement in the way it redeemed her
stock. In the Declaratory Judgment Action, Hanover asked for a declaration that it acted
in compliance with the Shareholders’ Agreement when it redeemed Ms. Volkman’s stock.
Indeed, in its complaint in the Declaratory Judgment Action, Hanover cited the
Shareholders’ Agreement Action to demonstrate that there was an “actual controversy”
between it and Ms. Volkman with respect to that issue. Whether or not Ms. Volkman were
to prevail in the Shareholders’ Agreement Action, the trial court would have to resolve
whether Hanover acted in compliance with the Shareholders’ Agreement when it redeemed
Ms. Volkman’s stock. Either Hanover acted properly – and Ms. Volkman is not entitled
to return of the stock – or Hanover acted improperly – and Ms. Volkman is entitled to its
16 A.S. Abell, 274 Md. at 720 (emphasis added),
17 Waicker, 347 Md. 113 (emphasis added).
21
return. The Declaratory Judgment Action sought resolution of the same question that was
already pending in another court.18
Whether the Shareholders’ Agreement Action was Pending First
While there can be no dispute that Ms. Volkman filed the Shareholders’ Agreement
Action more than five months before Hanover filed the Declaratory Judgment Action,
Hanover attempts to reverse that chronology by associating the Declaratory Judgment
Action with the Employment Agreement Action. It argues that, because the Circuit Court
for Montgomery County was the venue (by virtue of the forum selection clause in the
Employment Agreement) of the Employment Agreement Action, that court “was the first
jurisdiction in possession of the disputes between the parties.” Hanover essentially asks
that we tack the Declaratory Judgment Action onto the previously dismissed Employment
Agreement Action to defeat the “pending” status of the Shareholders’ Agreement Action.19
18 Hanover also argues that the two actions are not the same because the plaintiffs
seek different relief in the two actions: Ms. Volkman seeks equitable relief – specific
performance of the Shareholders’ Agreement – while Hanover asks for a declaration that
it has already complied with the Shareholders’ Agreement. However, it is not surprising
that the parties ask for different relief, even though the decision in each case turns on the
same issue. Moreover, Hanover’s argument proves too much. A declaratory judgment
action by definition seeks declaratory relief and, when such an action overlaps with a
pending common law action, will always seek different relief from that lawsuit. If
Hanover’s argument had merit, a declaratory judgment action would never be barred by
the existence of a pending overlapping lawsuit.
19
Hanover quotes a passage from State v. 91st Street Joint Venture, 330 Md. 620,
629 (1993), that a “court of co-ordinate jurisdiction, first in possession of any portion of
the subject-matter should not be disturbed by any other court” (internal quotation marks
and citations omitted). That case, however, does not stand for the novel proposition
Hanover ascribes to it – i.e., that a circuit court somehow retains jurisdiction of a matter
even after the matter has been dismissed with prejudice. Rather, consistent with Waicker,
Brohawn, A.S. Abell, and the other cases described in the text, the Court in 91st Street Joint
22
This may be creative, but it is not chronological. The simple fact is that the Shareholders’
Agreement Action was pending when the Declaratory Judgment Action was filed and the
Employment Agreement Action was not.
In support of this argument, Hanover points to several policy considerations –
judicial economy, discouragement of forum shopping, consistency in rulings. Those
considerations do not affect the chronology of events or whether a particular matter is
“pending” when another is filed. But such considerations are relevant to the question
whether there are “unusual and compelling circumstances” in a particular case for deviating
from the usual rule that a court should not entertain a declaratory judgment action
concerning an issue between the same parties in a pending case. Accordingly, we address
those considerations in the next part of this opinion.
Whether there are “Unusual and Compelling Circumstances”
Hanover offers several reasons that it contends are unusual and compelling
circumstances justifying a deviation from the usual rule this Court has applied when a
declaratory judgment action is duplicative of a pending lawsuit.
First, Hanover stresses several policy considerations, including discouraging forum
shopping by litigants, allowing Maryland courts to interpret a contract governed by
Maryland law, and avoiding a “multiplicity of suits.” Hanover argues that Ms. Volkman,
after receiving an unfavorable ruling in the Employment Agreement Action in Maryland,
Venture held that a circuit court should not have entertained a declaratory judgment action
when an action was already pending in another circuit court that was “materially the same.”
330 Md. at 630.
23
engaged in forum shopping by filing the Shareholders’ Agreement Action in Minnesota.
Of course, it is also true that it was only after Hanover suffered an adverse ruling in the
Shareholders’ Agreement Action in Minnesota that it filed the Declaratory Judgment
Action in Maryland about the same issue. Thus, while we have no desire to encourage
forum-shopping,20 the argument cuts both ways in the controversy between these parties.
Moreover, Minnesota is not a jurisdiction foreign to this dispute. Ms. Volkman lived and
worked there while employed by OCC. The events resulting in her termination and the
involuntary redemption of her stock occurred there.
Hanover argues that it would be preferable to have a Maryland court construe the
Shareholders’ Agreement because that agreement states that it is “subject to and governed
by the laws of the State of Maryland.” But this does not mean that Minnesota courts are
disqualified from resolving disputes over that agreement. Both Maryland and Minnesota
courts regularly apply the laws of other jurisdictions, and Minnesota courts honor
legitimate choice-of-law clauses in contracts, just as Maryland courts do. See Combined
Insurance Co. of America v. Bode, 77 N.W.2d 533, 536 (Minn. 1956) (“We are . . .
committed to the rule that the parties, acting in good faith and without an intent to evade
the law, may agree that the law of either state shall govern.”); Cunningham v. Feinberg,
441 Md. 310, 326 (2015) (“If the contract contains a choice of law provision, we apply
20 American Motorists Insurance Co. v. ARTRA Group, Inc., 338 Md. 560, 578
(1995).
24
generally the law of the specified jurisdiction.”). Hanover suggests no reason why a
Minnesota court would deviate from that rule.
Finally, it goes without saying that allowing an additional action to proceed does
nothing to trim a “multiplicity” of actions, no matter where they are filed.
Hanover also suggests that the Shareholder Agreement Action is precluded in
Minnesota as a result of prior Maryland court proceedings, including Ms. Volkman’s
voluntary dismissal of the Employment Agreement Action with prejudice and the entry of
a judgment confirming the arbitration award concerning the amount of compensation to be
paid her for the stock redemption. This appears to be an argument of issue preclusion –
e.g, res judicata, collateral estoppel – that may be made in defense of the Shareholders’
Agreement Action.21 Without assessing the merits of such a defense, it is not a matter that
justifies an additional parallel declaratory judgment action.
Hanover also points to the fact that the judge who presided over the Employment
Agreement Action was also assigned to the Declaratory Judgment Action. It argues that
the judge’s familiarity with the issues from the earlier action established “unusual and
compelling circumstances” for allowing the Declaratory Judgment Action to proceed
despite the existence of a pending action concerning the same issues. The record does not
support this argument. As an initial matter, it does not appear – at least from what the
During legal argument at the trial of this case, the Circuit Court raised the question
21
of whether the result would be controlled by the result in the Employment Agreement
Action. However, when it rendered its oral opinion deciding this case, the Circuit Court
made no mention of the earlier action and relied solely on the evidence presented in this
case.
25
parties have presented to us and from what we have gleaned from our own review of the
court file in the Employment Agreement Action – that the Employment Agreement Action
delved deeply into the matter at issue in the Declaratory Judgment Action, that is, whether
Hanover and OCC acted properly during Ms. Volkman’s termination and stock repurchase.
As described above, most of the litigation preceding the voluntary dismissal of the
Employment Agreement Action concerned the viability of Ms. Volkman’s tort claims
against OCC. The parties disputed, for example, whether tort or fiduciary duties existed
between them and whether certain “financial interest” tort defenses applied. In its
pleadings and motions, OCC never addressed the underlying contract dispute (except to
deny liability generally) until its motion to dismiss filed only two months before trial, and
even then only disputed the availability of damages – not whether the facts supported a
good cause termination. Moreover, even if there was a close relation between the two
cases, it is apparent from the transcript of the Declaratory Judgment Action that the judge
presiding over the Declaratory Judgment Action candidly admitted that he had little
memory of the prior action.22
22For example, after the judge indicated that he did not remember the Employment
Agreement Action, the parties stipulated to certain facts about the earlier action and the
following colloquy took place:
[Counsel for Hanover]: [Stipulations] 6 and 7 addresses the questions the Court
had yesterday that Volkman had filed suit in this court
alleging that OCC had breached the employment
agreement . . . .
The Court: What was the result of that case?
26
Waiver
Hanover also argues that Ms. Volkman somehow waived her position that the
Declaratory Judgment Action should be stayed or dismissed in light of the Shareholders’
Agreement Action. This argument appears to be based on a misreading of the record. In
its brief, Hanover states that Ms. Volkman first raised the possibility of staying the
Declaratory Judgment Action in a summary judgment motion in March 2014 after
completion of discovery. Hanover repeated this contention at oral argument, stating that
Ms. Volkman never asked to stay the Declaratory Action until “90 days before trial . . .
after an answer had been filed more than eight months prior.” Hanover is incorrect. In her
answer to the complaint in this case filed in September 2013, Ms. Volkman requested that
the Circuit Court “exercise its discretionary authority to abstain from accepting
jurisdiction” because of the “pendency of the identical case and controversy in the courts
of the State of Minnesota.” She reiterated that position in her pretrial motions and again at
trial. There was no waiver.
[Counsel for Hanover]: That action as stipulated to here was dismissed with
prejudice on March 22, 2013, Your Honor.
The Court: Was that a decision on the merits or was that some
procedural matter? I don’t remember.
[Counsel for Hanover]: It was procedural as I understand it . . . .
Counsel for Hanover then noted that the parties disagreed about whether the voluntary
dismissal of the Employment Agreement Action had preclusive effect in the Declaratory
Judgment Action. The Circuit Court’s lack of memory concerning the earlier Employment
Agreement Action is certainly understandable as the Employment Agreement Action never
went to trial and, according to the court docket, there were only two motions hearings in
that case, each approximately one hour in duration.
27
Comity
Considerations of comity also counsel against entertaining the Declaratory
Judgment Action in these circumstances. The doctrine of comity, which has long been a
part of the common law of Maryland,23 counsels us to show “deference and respect” to the
courts of other jurisdictions.24
It is true that, at the time the Circuit Court heard this Declaratory Judgment Action,
the Minnesota court had issued no judgment which our courts would be required to respect
under the federal Full Faith and Credit Clause. United States Constitution, Article IV, §1.
However, comity’s contours are not limited to the mandate of the Full Faith and Credit
Clause. While “not a matter of obligation,” Port v. Cowan, 426 Md. 435 (2012), the
doctrine of comity can be used as a “rule of jurisdictional courtesy or the recognition of an
accepted order of precedence” among courts, Apenyo v. Apenyo, 202 Md. App. 401, 410
(2011). This “accepted order of preference” is reflected in the principle that a court should
not entertain a declaratory judgment action when there is an earlier-filed, pending action
dealing with the same parties and the same issues.
The Circuit Court’s Reasoning
Finally, we address the reason actually stated by the Circuit Court for rejecting Ms.
Volkman’s requests that it stay or dismiss the Declaratory Judgment Action, although
23 E.g., Holloway v. Safe Deposit & Trust Co. of Baltimore, 151 Md. 321, 334
(1926).
24 Washington Suburban Sanitary Commission v. CAE-Link Co., 330 Md. 115, 140
(1993).
28
Hanover has not relied on that reason. In the one instance in which it explained its
reasoning, the Circuit Court appeared to be operating under a misimpression of Maryland
law. In rejecting a motion to stay or dismiss made by Ms. Volkman at trial, the Circuit
Court cited Marriott Corp. v. Village Realty & Inv. Corp., 58 Md. App. 145 (1984) for the
proposition that a declaratory judgment action could be brought “defensively” when
litigation is “pending or impending in another state.” Contrary to the Circuit Court’s
impression, while the Village Realty decision did hold that a party who anticipates
litigation over a particular dispute may bring a declaratory judgment action to resolve that
dispute, the intermediate appellate court did not uphold the filing of a declaratory judgment
action in that case while a related action concerning the same dispute was “pending”
elsewhere. Indeed, in a footnote, the Village Realty court cited Brohawn as an example of
a circumstance in which proceeding with a declaratory judgment action would be
“inappropriate.” 58 Md. App. at 153 n.3. Thus, the case on which the Circuit Court was
relying actually favored a stay or dismissal of the Declaratory Judgment Action.
III
Conclusion
At the time the Declaratory Judgment Action was filed in the Circuit Court, the
Shareholders’ Agreement Action was pending in Minnesota – an action that involved the
same parties and that raised the essentially same issue presented in the Declaratory
Judgment Action. The fact that the Circuit Court had previously dealt with, and dismissed,
an earlier related action – the Employment Agreement Action – did not create “unusual
and compelling circumstances” that would justify an exception in this case to the principle
29
that a court should not entertain a declaratory judgment action when there is a pending
lawsuit involving the same issues. Accordingly, the Circuit Court abused its discretion
when it declined to dismiss or stay the Declaratory Judgment Action. We express no
opinion as to the merits of the Circuit Court’s ruling on the substantive issues in the case,
but only hold that its ruling was premature.
JUDGMENT OF THE COURT OF SPECIAL APPEALS
AFFIRMED. COSTS TO BE PAID BY PETITIONERS.
30
Circuit Court for Montgomery County IN THE COURT OF APPEALS
Case No. 335496V OF MARYLAND
Argued: September 7, 2016
No. 9
SEPTEMBER TERM, 2016
HANOVER INVESTMENTS, INC. et al.
v.
SUSAN J. VOLKMAN
Barbera, C.J.,
Greene,
Adkins,
McDonald,
Watts,
Getty,
Harrell, Glenn T., Jr. (Senior Judge,
Specially Assigned)
JJ.
Dissenting Opinion by Harrell, J.
Filed: July 31, 2017
With respect, I dissent.
The Majority Opinion explains our declaratory judgment jurisprudence, noting
that Md. Code, Courts & Judicial Proceedings Art., § 3-409(a) provides generally for the
exercise of judicial discretion regarding whether to grant a declaratory judgment. The
common law guides the exercise of that discretion. For example, “dismissal is rarely
appropriate in a declaratory judgment action.” Christ v. Dep’t of Natural Resources, 335
Md. 427, 435, 644 A.2d 34, 37 (1994) (citations and quotation marks omitted). The
existence of pending, parallel declaratory actions (at least within competing Maryland
courts) “involving the same parties and . . . identical issues,” Sprenger v. Pub. Serv.
Comm’n of Maryland, 400 Md. 1, 26, 926 A.2d 238, 253 (2007) (citations and quotation
marks omitted)… “warrants dismissal of one of the actions in the interests of “conserving
judicial resources, avoiding conflicting judgments, and preventing evasion of the final
judgment requirement for appeal.” Maj. Slip Op. at 15-16 (footnotes omitted). The
Majority Opinion recognizes also that “very unusual and compelling circumstances” may
overcome these underlying policy considerations and permit a trial judge to allow
nonetheless a potentially redundant declaratory action to proceed. A. S. Abell Co. v.
Sweeney, 274 Md. 715, 721, 337 A.2d 77, 81 (1975).
After determining that the actions here and in Minnesota share essentially the
same parties and issues, the Majority Opinion rejects Hanover’s arguments why the
particular circumstances of the present case are sufficiently unusual and compelling so as
to render permissible the trial judge’s exercise of discretion not to dismiss the Maryland
action. It is at this analytical crossroads that I take a different fork in the road than the
Majority Opinion. How do I disagree with thee? Let me count the ways.1
The Majority Opinion rejects Hanover’s policy arguments, “including
discouraging forum shopping by litigants, allowing Maryland courts to interpret a
contract governed by Maryland law, and avoiding a ‘multiplicity of suits.’” Maj. Slip
Op. at 23. Hybridizing the age-old arguments “two wrongs make a right” and “he started
it,” the Majority Opinion minimizes the importance of discouraging forum-shopping,
condoning Volkman’s exercise of the disfavored tactic because “it is also true that it was
only after Hanover suffered an adverse ruling in the Shareholders’ Agreement Action in
Minnesota that it filed the Declaratory Judgment Action in Maryland about the same
issue.” Maj. Slip Op. at 24.
The Majority Opinion goes on to rain on Hanover’s parade by rejecting the
argument that Maryland courts are better equipped to construe the Shareholders’
Agreement, which is “subject to and governed by the laws of the State of Maryland,”
because “Minnesota courts honor legitimate choice-of-law clauses in contracts, just as
Maryland courts do.” Maj. Slip Op. at 24 (citations omitted). This factor makes
reasonable certainly the circuit court’s discretionary option to defer to the Minnesota
court in this case, but it does little to demonstrate the unreasonableness of what happened
actually here—the trial judge’s decision to hear and decide the Maryland declaratory
judgment action, notwithstanding the pendency of the Minnesota action. I am reticent to
1
Apologies to Elizabeth Barrett Browning and her Sonnet 43, Lines 1-2.
2
join in the Majority Opinion’s reasoning that the Minnesota courts are at least as well-
equipped to apply and interpret correctly Maryland law as are Maryland courts.2
Third, the Majority Opinion states that “allowing an additional action to proceed
does nothing to trim a ‘multiplicity’ of actions, no matter where they are filed.” Maj. Slip
Op. at 25 (emphasis in original). Perhaps in a narrow view this is true because allowing
the Maryland action to proceed admits literally an additional judicial proceeding into the
world. Viewing the case from a mile high, however, our choice should be whether to
curtail, in this instance, forum-shopping, regardless of “who started it.” Allowing the
Maryland proceeding to stand sends the message that parties such as Volkman may not
avoid a Maryland forum—with a variety of connections to the underlying litigation—to
seek a perceptually more favorable jurisdiction.
Next, the Majority Opinion rejects, as a potential unusual and compelling
circumstance, “Ms. Volkman’s voluntary dismissal of the [Maryland] Employment
Agreement Action with prejudice and the entry of a judgment confirming the [Maryland]
arbitration award concerning the amount of compensation to be paid her for the stock
redemption.” Maj. Slip Op. at 25. I agree that this circumstance did not preclude, as a
matter of law, Volkman from initiating suit in Minnesota, but it seems to be clear that,
2
Perhaps my timidity in this regard stems from the retirement from the Supreme
Court of Minnesota in August 2015 of the Hon. Alan C. Page (formerly one of the
“Purple People Eaters” defensive line of the Minnesota Vikings), one of my athletic and
legal heroes.
3
because she chose to bring suit there, instead of seeking to vacate the Maryland
arbitration award, she engaged blatantly in forum-shopping.
Finally, the Majority Opinion rejects Hanover’s argument that the trial judge in
this action, having presided over the earlier employment agreement dispute, was in a
position to be unusually and compellingly more familiar than the Minnesota court with
the basis of the underlying dispute. The Majority Opinion states that the earlier action
focused primarily on Volkman’s tort claims and dealt minimally with the issues in this
declaratory action, and that, in any event, the trial judge admitted to a limited recollection
of the earlier proceeding. Maj. Slip Op. at 26. Although the judge’s memory, imperfect
as it may have been on that given day, may dilute somewhat this factor as a standalone
unusual and compelling circumstance, considered with the other factors (and that he
could get up to speed likely faster than a Minnesota court), it lends an additional hue of
judicial reasonableness painted by all of the factors.
The cases relied on in the Majority Opinion for the proposition that the Court “has
not found [the unusual and compelling circumstances] exception applicable in the cases
presented to it to date” were decided only in the context of like actions pending
simultaneously in Maryland courts. Maj. Slip Op. at 18. Our opinion in A. S. Abell, for
example, upheld the Circuit Court for Baltimore County’s dismissal of a declaratory
action regarding the same issues and parties as involved in a case pending in the District
Court of Maryland, Eighth District (Baltimore County). 274 Md. at 716, 337 A.2d at 78.
In Waicker, we held that the Circuit Court for Baltimore City abused its discretion by
ruling on a declaratory judgment action involving the same parties and issues as another
4
case pending in the same court. Waicker v. Colbert, 347 Md. 108, 699 A.2d 426 (1997).
Similarly, in Haynie, we ruled that “there were no very unusual and compelling
circumstances justifying the declaratory judgment” while another case, with the same
issues and parties, was pending before the same court, the Circuit Court for Baltimore
City. Haynie v. Gold Bond Bldg. Prod., 306 Md. 644, 652, 511 A.2d 40, 44 (1986).3
Also, in 91st Street, we held that “the Circuit Court for Baltimore City abused its
discretion when it enjoined the State and Ocean City from proceeding with the Worcester
County action previously filed” in the Circuit Court for Worcester County. State v. 91st
St. Joint Venture, 330 Md. 620, 632, 625 A.2d 953, 958 (1992). More recently, our
opinion in Sprenger, a case involving dueling actions in the Circuit Courts for Baltimore
City and Garrett County, stated that “it is inappropriate for a court to entertain a
declaratory judgment action if there is pending, at the time of the commencement of the
action for declaratory relief, another action or proceeding involving the same parties and
in which the identical issues that are involved in the declaratory action may be
adjudicated.” 400 Md. at 26, 926 A.2d at 253 (citations and quotation marks omitted).
Thus, the efficiencies to be achieved in deciding these cases represented purely matters of
internal case management of our State Judiciary. We were not concerned, as here, with
whether it was reasonable for a Maryland court to proceed, even though a foreign action
of similar ilk was pending.
3
The original action was filed “in what was then the Baltimore City Court (now
part of the Circuit Court for Baltimore City).” Haynie v. Gold Bond Bldg. Prod., 306
Md. 644, 649, 511 A.2d 40, 42 (1986).
5
The present case involves extraterritoriality, an element quite unusual undeniably
in contrast with the Majority Opinion’s cited, and somewhat inapposite, authorities.
Moreover, as conceded by the Majority Opinion, “at the time the Circuit Court heard this
Declaratory Judgment Action, the Minnesota court had issued no judgment which our
courts would be required to respect under the federal Full Faith and Credit Clause.” Maj.
Slip Op. at 28. Extending the purview of this constitutional consideration via the
principle of comity, the Majority Opinion states that, even in the absence of a foreign
judgment, courts may choose, as a “courtesy,” but not an “obligation,” to defer to the
court in which the first-filed action exists. Our task, however, is to determine whether our
circuit court abused its discretion, not whether it declined to extend a discretionary
courtesy to a foreign court.
As pointed out by Judge Chasanow in his dissent in Waicker, “the question is
whether the judge’s decision that the circumstances of this case warranted a declaratory
judgment amounts to an abuse of discretion. Rather than reviewing this case under an
abuse of discretion standard, however, the majority appears simply to apply a rule of law,
without regard to the particular considerations that prompted the circuit court to entertain
the declaratory judgment action.” 347 Md. at 119–20, 699 A.2d at 431 (Chasanow, J.,
dissenting). Here, the Majority Opinion considers the circumstances pressed by Hanover
by reweighing them individually and in isolation as though we sit as an über trial court.
Our role is not to reweigh uncontroverted facts, but to determine whether the trial court
acted within a range of reasonableness:
6
The analytical paradigm by which we assess whether a trial court’s actions
constitute an abuse of discretion has been stated frequently. In Wilson v.
John Crane, Inc., 385 Md. 185, 867 A.2d 1077 (2005), for example, we
iterated
[t]here is an abuse of discretion “where no reasonable person
would take the view adopted by the [trial] court[ ]”. . . or
when the court acts “without reference to any guiding
principles.” An abuse of discretion may also be found where
the ruling under consideration is “clearly against the logic and
effect of facts and inferences before the court[ ]” . . . or when
the ruling is “violative of fact and logic.”
Questions within the discretion of the trial court are
“much better decided by the trial judges than by appellate
courts, and the decisions of such judges should be disturbed
where it is apparent that some serious error or abuse of
discretion or autocratic action has occurred.” In sum, to be
reversed “[t]he decision under consideration has to be well
removed from any center mark imagined by the reviewing
court and beyond the fringe of what that courts deems
minimally acceptable.”
385 Md. at 198–99, 867 A.2d at 1084 (quoting In re
Adoption/Guardianship No. 3598, 347 Md. 295, 312–13, 701 A.2d 110,
118–19 (1997)). An abuse of discretion, therefore, “should only be found
in the extraordinary, exceptional, or most egregious case.” Wilson, 385 Md.
at 199, 867 A.2d at 1084.
Aventis Pasteur, Inc. v. Skevofilax, 396 Md. 405, 418–19, 914 A.2d 113, 121 (2007).
Viewed as a whole, the circumstances of this action indicate to me that the circuit
court judge’s decision not to dismiss the Maryland action was reasonable and not an
abuse of discretion. Volkman chose an out-of-state forum, despite the dispute’s pre-
existing connections to Maryland, thereby introducing extraterritoriality into the
equation—an element unusual certainly in light of the relevant Maryland case law that
deals only with dueling pending actions in Maryland. Here, Maryland fora decided at
least two aspects of the larger dispute, i.e., the employment agreement spat and the
stockholder agreement stock valuation arbitration award. Maryland courts are likely
7
more familiar with Maryland law (the admitted governing law) than are Minnesota courts
and, therefore, more likely to apply it correctly to the remaining dispute between the
parties.
I would hold that, viewed in the aggregate, the factors examined in the Majority
Opinion constitute “unusual and compelling circumstances” that are sufficient to reverse
the Court of Special Appeals’s judgment determining that the circuit court judge abused
his discretion by declining to dismiss or stay the declaratory judgment action. Therefore,
I would direct the intermediate appellate court to affirm the judgment of the Circuit Court
for Montgomery County.
8
Hanover Investments, Inc. v. Volkman
Court: Court of Appeals of Maryland
Date filed: 2017-07-31
Citations: 165 A.3d 497, 455 Md. 1
Copy CitationsCombined Opinion