Deer Automotive Group, LLC t/a Liberty Ford v. Barbara Brown et al., No. 62, September
Term, 2016. Opinion by Greene, J.
APPEALS—PETITION TO COMPEL ARBITRATION—FINAL JUDGMENT RULE
The denial of a petition to compel arbitration of a claim that is the subject of litigation in a
pending lawsuit between the same parties is not a final judgment under § 12-301 of the Courts
and Judicial Proceedings Article because the denial of such a petition does not put the parties
out of court, otherwise terminate the proceedings, or deny the party requesting arbitration the
means of further prosecuting or defending its rights and interests in the subject matter of the
proceeding.
Circuit Court for Baltimore County IN THE COURT OF APPEALS
Case No.: 3C15002637
Argued: March 2, 2017 OF MARYLAND
No. 62
September Term, 2016
______________________________________
DEER AUTOMOTIVE GROUP, LLC t/a
LIBERTY FORD
v.
BARBARA BROWN et al.
Barbera, C.J.
Greene,
Adkins,
McDonald,
Watts,
Hotten,
Getty,
JJ.
______________________________________
Opinion by Greene, J.
Barbera, C.J., and McDonald, J., dissent.
______________________________________
Filed: June 27, 2017
Appellant1, Deer Automotive Group, LLC t/a Liberty Ford (“Liberty Ford” or
“Appellant”) is a Maryland limited liability company, which operates a new and used
automobile dealership in Baltimore County. Appellees, Barbara Brown and Herbert E.
Spencer, Jr., (“Brown and Spencer”, or collectively “Appellees”) are individuals who each
purchased vehicles from Appellant’s dealership. On March 13, 2015, Brown and Spencer
filed a class action lawsuit (the “Class Action”) in the Circuit Court for Baltimore County
against Liberty Ford, in which they challenged Liberty Ford’s practice of providing
customers with an alleged free lifetime Limited Warranty for their vehicles. The alleged
free warranty was conditioned on the consumer’s continued use of and payment for other
services provided by Liberty Ford, which, Appellees aver, is an arrangement that violates
federal law.
In lieu of filing a motion to compel arbitration in the Class Action matter, Liberty
Ford commenced an independent action in the same court on April 27, 2015 (“the
Arbitration Action”) seeking to compel arbitration in the existing Class Action case. The
Circuit Court ruled that Brown and Spencer’s claims in the Class Action were not subject
to binding arbitration. Liberty Ford appealed. In the Court of Special Appeals, Brown and
Spencer filed a motion to dismiss the appeal arguing that the Circuit Court’s order denying
arbitration was not an appealable final judgment. The Court of Special Appeals denied the
motion, and Brown and Spencer petitioned this Court for review.
1
Because this matter came to this Court on bypass, the initial appeal is still pending in the
Court of Special Appeals. Accordingly, the parties are captioned as Appellant and
Appellees. However, Appellees are the party in the position of a petitioner in this Court.
FACTUAL AND PROCEDURAL BACKGROUND
On or about July 6, 2007, Appellee Brown purchased a used 2002 Hyundai Santa
Fe from Liberty Ford. Ms. Brown signed multiple documents in connection with the sale,
including a buyer’s order, dated July 6, 2007, and a retail installment sales contract
(“RISC”), dated July 11, 2007. The buyer’s order presented to Ms. Brown by Liberty Ford
reflected the following provisions related to claims and disputes arising out of or relating
to the purchase of the Santa Fe:
The parties irrevocably agree that any controversy, claim or dispute arising
out of or relating to the purchase or the financing of this vehicle included but
not limited to this Purchase Agreement or the breach thereof shall be settled
by binding arbitration, pursuant to the separate Agreement to Arbitrate
Disputes. However, binding arbitration will not apply to the failure of the
Purchaser to provide consideration including failure to pay a note, a
dishonored check, failure to provide a trade title, or failure to pay a deficiency
resulting from an additional payoff on a trade. In addition, binding
arbitration will not apply to Dealer’s right to retake possession of the vehicle.
SEE SEPARATE ARBITRATION AGREEMENT ATTACHED HERETO
AND INCORPORATED BY REFERENCE HEREIN FOR SPECIFIC
DETAILS.
On or about April 28, 2012, Appellee Spencer purchased a used 2010 Chrysler 300
from Liberty Ford and signed numerous documents in connection with this purchase,
including a RISC, dated April 28, 2012. The RISC presented to Mr. Spencer by Liberty
Ford reflected the following information related to arbitration and class action lawsuits:
READ THIS ARBITRATION PROVISION CAREFULLY
AND IN ITS ENTIRETY
ARBITRATION
Arbitration is a method of resolving any claim, dispute, or controversy
(collectively, a “Claim”) without filing a lawsuit in court. Either you or
Creditor (“us” or “we”) (each, a “Party”) may choose at any time, including
after a lawsuit is filed, to have any Claim related to this contract decided by
2
arbitration. Such Claims include but are not limited to the following: 1)
Claims in contract, tort, regulatory or otherwise; 2) Claims regarding the
interpretation, scope or validity of this clause, or arbitrability of any issue; 3)
Claims between you and us, your/our employees, agents, successors, assigns,
subsidiaries or affiliates; 4) Claims arising out of or relating to your
application for credit, this contract, or any resulting transaction or
relationship, including that with the dealer, or any such relationship with
third parties who do not sign this contract.
RIGHTS YOU AND WE AGREE TO GIVE UP
If either you or we choose to arbitrate a Claim, then you and we agree to
waive the following rights:
RIGHT TO A TRIAL, WHETHER BY A JUDGE OR JURY
RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE
OR A CLASS MEMBER IN ANY CLASS CLAIM YOU MAY
HAVE AGAINST US WHETHER IN COURT OR IN
ARBITRATION
BROAD RIGHTS TO DISCOVERY AS ARE AVAILABLE IN
A LAWSUIT
RIGHT TO APPEAL THE DECISION OF AN ARBITRATOR
OTHER RIGHTS THAT ARE AVAILABLE IN A LAWSUIT
You may choose the organization to conduct the arbitration subject to our
approval. The applicable rules (the “Rules”) may be obtained from the
selected organization. If there is a conflict between the Rules and this
contract, this contract shall govern. This contract is subject to the Federal
Arbitration Act (9 U.S.C. § 1 et seq.) and the Federal Rules of Evidence.
The arbitration decision shall be in writing with a supporting opinion.
Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. We will pay your total reasonable arbitration fees
and expenses (not including attorneys fees, except where applicable law
otherwise provides) in excess of $125. We will pay the whole filing fee if
we demand arbitration first. Any portion of this arbitration clause that is
unenforceable shall be severed, and the remaining provisions shall be
enforced. If a waiver of class action rights is deemed or found to be
unenforceable for any reason in a case in which class action allegations have
been made, the remainder of this Arbitration Clause shall be unenforceable.
Notwithstanding any other provision of this Arbitration clause, the validity
and scope of the waiver of class action rights shall be decided by the court
and not by the arbitrator.
On March 13, 2015, Barbara Brown and Herbert E. Spencer, Jr., filed a class action
lawsuit in the Circuit Court for Baltimore County against Liberty Ford. Brown and
3
Spencer’s complaint alleged that Liberty advertised a “Liberty for Life” Warranty for new
and used vehicles that was “free of charge” and “for life” then conditioned those benefits
upon certain mandatory and costly requirements of the consumer. Specifically, Brown and
Spencer allege that, with respect to Mr. Spencer’s warranty, when “Mr. Spencer refused to
have the mandatory 15,000 mile service performed by Liberty Ford because of the
dealership’s excessive $265 charge, Liberty Ford voided his warranty and refused to honor
or provide Mr. Spencer any of the benefits under the [‘]Liberty for Life’ Limited Warranty
program.” Brown and Spencer allege that Liberty Ford “informed Ms. Brown that, by
obtaining required service work on her vehicle at a location other than Liberty Ford, Ms.
Brown voided the terms of her ‘Liberty for Life’ Limited Warranty.” According to Brown
and Spencer, the practice of requiring additional costly maintenance services, which were
outside the scope of a vehicle’s warranty and could only be performed at Liberty Ford, is
a “tying arrangement” because the consumer is forced to pay for non-warranty service and
maintenance charges if the consumer wants the promised benefits of the “Liberty for Life”
Warranty. In effect, the consumer is “tied to” the continued receipt of benefits through
non-warranty and costly services at Liberty Ford. Brown and Spencer allege that this tying
arrangement constitutes a violation of the Magnuson-Moss Warranty Act (“MMWA”), 15
U.S.C. § 2301 et seq.2
2
The Magnuson-Moss Warranty Act, 15 U.S.C. § 2302(c), specifically prohibits such
“tying” mandates:
(c) Prohibition on conditions for written or implied warranty; waiver by
Commission
4
In lieu of filing a motion to compel arbitration in the Class Action suit, Liberty Ford
commenced the independent Arbitration Action in the same court on April 27, 2015. The
matter was assigned to the same judge presiding in the Class Action. In the Arbitration
Action, Liberty Ford sought to compel arbitration of any and all claims contained in the
Class Action and to stay the Class Action. On June 23, 2015, Brown and Spencer filed a
Motion to Consolidate the Class Action and the Arbitration Action. Liberty Ford did not
file a response. The Circuit Court denied Brown and Spencer’s motion pursuant to an order
issued on June 29, 2015. The court explained:
While Plaintiffs are correct that these actions involve common
questions of law and fact and a common subject matter, in this instance the
consideration of “convenience” addressed in Md. Rule 2-503(b) dictates that
these matters not be consolidated. This is the case because Plaintiffs are
correct about another point, that enough information is before the Court to
allow a determination to be made in the Arbitration Action. A hearing will
be held on the pending Petition in that case on August 4, 2015. The Court’s
determination of that Petition will end proceedings in the Arbitration Action
and will either result in the staying of the Class Action or in allowing the
Class Action to proceed outside of the shadow of the Arbitration Action.
No warrantor of a consumer product may condition his written or implied
warranty of such product on the consumer’s using, in connection with such
product, any article or service (other than article or service provided without
charge under the terms of the warranty) which is identified by brand, trade,
or corporate name; except that the prohibition of this subsection may be
waived by the Commission if—
(1) the warrantor satisfies the Commission that the warranted product
will function properly only if the article or service so identified is used in
connection with the warranted product, and
(2) the Commission finds that such a waiver is in the public interest.
The Commission shall identify in the Federal Register, and permit public
comment on, all applications for waiver of the prohibition of this subsection,
and shall publish in the Federal Register its disposition of any such
application, including the reasons therefor.
5
That is, one way or the other, aside from any potential appeal, the Arbitration
Action will be concluded after August 4, 2015.
That being the case, the only thing consolidation will accomplish at
this point will be to keep the case file in the Arbitration Action active after it
should be closed. It has been the Court’s experience that the Office of the
Clerk of the Court has a great deal of difficulty docketing papers in an orderly
fashion where cases—especially cases involving complex civil litigation as
in these matters—are consolidated. Where cases have been consolidated, but
then one case file subsequently should be closed, further chaos—and the
habitual misdocketing of papers—ensues. Therefore, since the Arbitration
Action will not need to be active after August 4, 2015—unless, again, the
matter is appealed—it will only cause inconvenience to the Court—and
negatively impact judicial efficiency—to consolidate the matters.
On August 4, 2015, the Circuit Court held a hearing on the petition in the Arbitration
Action. On August 7, 2015, the Circuit Court issued a written order ruling that Brown and
Spencer’s MMWA claims in the Class Action were not subject to binding arbitration. In
denying the petition to compel arbitration, the Circuit Court wrote, in pertinent part:
Having considered the various arguments advanced by [Liberty Ford], the
Court is not convinced that the instant matter can be meaningfully
distinguished from Koons Ford of Baltimore, Inc. v. Lobach, 398 Md. 38
(2007). The language of Koons Ford is clear and it is broad: “It is clear . . .
that Congress intended to preclude arbitration [of Magnuson-Moss Warranty
Act claims].” Koons Ford, 398 Md. at 62. The Court of Appeals has held
that, per its reading of the intent of Congress, all Magnuson-Moss Warranty
Act claims are exempt from binding arbitration. While the Court understands
that [Liberty Ford] disagrees with this holding, this Court is not free to
disregard a decision of this state’s highest court.
On August 10, 2015, Liberty Ford filed a notice of appeal of the Circuit Court’s
order. On January 27, 2016, Brown and Spencer filed a motion to dismiss the appeal in
the Court of Special Appeals, arguing that the judgment of the Circuit Court denying the
petition to compel arbitration was not an appealable final judgment under Md. Code (1973,
2013 Repl. Vol.), § 12-301 of the Courts and Judicial Proceedings Article (“Cts. & Jud.
6
Proc.”). The intermediate appellate court denied Brown and Spencer’s motion to dismiss
on February 11, 2016, and Brown and Spencer petitioned this Court for review on
September 16, 2016. We granted certiorari to answer the following question:
Is an order of the circuit court denying a petition to compel arbitration, the
sole issue in a separately-docketed case, a final judgment when there is
pending a previously-filed case in the same court addressing all the
substantive issues between the same parties in the same transactions?
Deer Auto. Group v. Brown, 450 Md. 419, 149 A.3d 546 (2016). For the reasons
that follow, we shall answer this question in the negative and remand the case to the
Court of Special Appeals, directing it to dismiss the appeal.
DISCUSSION
Parties’ Contentions
Brown and Spencer argue that the order denying the petition to compel arbitration
is not a final judgment and, therefore, not subject to appeal. They contend that in Am. Bank
Holdings, Inc. v. Kavanagh, 436 Md. 457, 82 A.3d 867 (2013), Schuele v. Case Handyman
& Remodeling Servs., LLC, 412 Md. 555, 989 A.2d 210 (2010) and Addison v. Lochearn
Nursing Home, LLC, 411 Md. 251, 983 A.2d 138 (2009), this Court held that an order
denying a petition to compel arbitration filed within a case already pending was not a final
judgment. Brown and Spencer concede that this Court has never had occasion to decide
whether a denial of a petition to compel arbitration in a separately-filed action is a final
judgment where there is a previously-filed case currently pending in the same court
between the same parties and regarding the same substantive disputes in the same
transactions.
7
Brown and Spencer acknowledge that in Litton Bionetics, Inc. v. Glen Const. Co.,
Inc., 292 Md. 34, 437 A.2d 208 (1981), this Court held that the denial of a petition to
consolidate two separate arbitration disputes into one proceeding is a final judgment where
there is no pending case in the circuit court other than the petition to consolidate. Brown
and Spencer distinguish Litton from the present case because in Litton there was not a
pending related case in circuit court. Brown and Spencer additionally suggest that the
rationale of Brewster v. Woodhaven Bldg. & Dev., Inc., 360 Md. 602, 759 A.2d 738 (2000)
supports their contention, in that the granting of a motion to transfer venue, which is
appealable as a final order, puts the parties out of a particular court, whereas the denial of
such a motion, which is not an appealable final order, permits litigation to continue in the
court that issues the order.
Brown and Spencer rely on Haynie v. Gold Bond Bldg. Prods., 306 Md. 644, 511
A.2d 40 (1986) to bolster their assertion that Liberty Ford filed a separate action in an
attempt to artificially manufacture appellate jurisdiction. In Haynie, this Court declined to
decide an appeal from a separately-filed declaratory judgment action where there was an
existing tort action between the parties. Brown and Spencer assert that the end-run that
was rejected in Haynie is the same end-run that Liberty Ford is attempting in this case.
Next, Brown and Spencer posit that whether the action—here, the Arbitration Action—is
embedded in the previously-filed action or is an independent action where there is a
currently-pending action is a distinction without a difference. For that proposition, Brown
and Spencer rely on a case from the Supreme Court of the United States, Green Tree Fin.
Corp. – Alabama v. Randolph, 531 U.S. 79, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000),
8
which rejected the distinction between embedded and independent actions as to the finality
of judgments when interpreting the Federal Arbitration Act. Brown and Spencer, finally,
contend that permitting an appeal of the denial of a petition to compel arbitration would
allow parties to eviscerate the final judgment rule.
Liberty Ford, of course, disagrees. Liberty Ford contends that Brown and Spencer’s
efforts to distinguish Litton are unavailing because the sole issue raised in the separately-
filed action was whether arbitration could be compelled, and the Circuit Court’s denial of
the petition to compel arbitration denied all relief sought by Liberty Ford, thereby,
terminating the case. Further, Liberty Ford contends that the test of appealability cannot
be based on the pendency of a related case because that test conflates otherwise separate
proceedings. Liberty Ford asserts that Haynie is inapplicable in the present context,
because a ruling on arbitration, if sustained, puts the parties out of court.
In addition, Liberty Ford distinguishes Addison, Case Handyman, and Kavanagh
from the instant case based on the filing and subsequent denial of a petition to compel
arbitration in an existing case. Liberty Ford insists that where such an order denying a
petition to compel arbitration was issued in “a separate, independent, and freestanding
action” with arbitrability of a claim as the sole issue in that case, the order was final. To
support its conclusion, Liberty Ford relies on dicta from Kavanagh where we suggested
that an order denying a petition to compel arbitration in a separate and independently-filed
action is a final, appealable order.
Liberty Ford further asserts that the Federal Arbitration Act applies, by virtue of
reference to the Federal Arbitration Act in the Appellees’ RISC. To the extent that this
9
Court finds that the order is not appealable under the Maryland Uniform Arbitration Act,
Liberty Ford asks this Court to follow the federal statute, which expressly allows an
immediate appeal of an order denying arbitration. Finally, Liberty Ford urges this Court
to adopt the reasoning employed by the Court of Special Appeals in FutureCare
NorthPoint, LLC v. Peeler, where the intermediate appellate court held that “an order
denying an independent, freestanding petition to compel arbitration is a final judgment
from which the aggrieved party has the right to appeal.” 229 Md. App. 108, 115, 143 A.3d
191, 194 (2016).
The Final Judgment Rule
Pursuant to Cts. & Jud. Proc. § 12-301, a party may appeal from a final judgment
entered by a circuit court in a civil case
Except as provided in § 12-302 of this subtitle, a party may appeal from a
final judgment entered in a civil or criminal case by a circuit court. The right
of appeal exists from a final judgment entered by a court in the exercise of
original, special, limited, statutory jurisdiction, unless in a particular case the
right of appeal is expressly denied by law. . . . In a civil case, a plaintiff who
has accepted a remittitur may cross-appeal from the final judgment.
A final judgment is “a judgment, decree, sentence, order, determination, decision, or other
action by a court . . . from which an appeal, application for leave to appeal, or petition for
certiorari may be taken.” Md. Code (1974, 2013 Repl. Vol.), § 12-101(f) of the Courts and
Judicial Proceedings Article. To constitute a final judgment, an order of the circuit court
must satisfy three requirements
(1) it must be intended by the court as an unqualified, final disposition of the
matter in controversy[;] (2) unless the court acts pursuant to Maryland Rule
2-602(b) to direct entry of a final judgment as to less than all of the claims or
all of the parties, it must adjudicate or complete the adjudication of all claims
10
against all parties; (3) it must be set forth and recorded in accordance with
Rule 2-601.
Metro Maint. Sys. South, Inc. v. Milburn, 442 Md. 289, 298, 112 A.3d 429, 434 (2015).
Maryland law recognizes three exceptions to the final judgment rule
(1) appeals from interlocutory orders specifically allowed by statute; (2)
appeals permitted when a circuit court enters final judgment under Maryland
Rule 2–602(b) as to certain claims or parties and expressly determines that
there is no just reason for delay[;] and (3) appeals from interlocutory rulings
allowed under the common law collateral order doctrine.
442 Md. at 298, n.8, 112 A.3d at 434–35, n.8. The parties in the instant case do not dispute
that the order of the Circuit Court, which denied the petition to compel arbitration, does
not meet any of these three exceptions. The issue presented before us relates to the nature
of a final judgment—whether an order denying a petition to compel arbitration filed as a
freestanding action is a final judgment where there is a previously-filed pending case
between the same parties and involving the same issues and facts— and it is one of first
impression in this State.
We have previously discussed the final judgment rule at length. On each occasion,
we have been guided by the primary objective of the final judgment rule: “to prevent
piecemeal appeals and to prevent the interruptions of ongoing judicial proceedings.”
Washington Suburban Sanitary Comm’n v. Bowen, 410 Md. 287, 294–95, 978 A.2d 678,
683 (2009) (quoting Cnty. Comm’ns for St. Mary’s County v. Lacer, 393 Md. 415, 424,
903 A.2d 378, 383–84 (2006)). To that end, we have explained that an order considered
to be a final judgment “need not necessarily dispose of the merits of a case.” Brewster,
360 Md. at 610, 759 A.2d at 742. The Court’s consideration is, instead, whether an order
11
has denied a party “the ability to pursue claims anywhere[.]” Brewster, 360 Md. at 611,
759 A.2d at 743. We have also explained that an “order is final if it terminates the litigation
in a particular court.” Brewster, 360 Md. at 611, 759 A.2d at 742.
We have determined that orders granting requests to compel arbitration are final,
appealable orders because they terminate the underlying action and put the parties out of
the court issuing the order. See Wells v. Chevy Chase Bank, F.S.B., 363 Md. 232, 241, 768
A.2d 620, 624 (2001) (“Because an order of a circuit court compelling the parties . . . to
arbitrate the underlying claim completely terminates the action in the circuit court, we have
held that an order compelling arbitration is a final judgment and appealable under CJ § 12-
301.”). Moreover, an order denying a petition to compel the consolidation of separate
arbitration proceedings is a final judgment where there is no other case pending in the
circuit court other than the petition to compel consolidation. See Litton, 292 Md. at 42,
437 A.2d at 212 (“Because the order denied all of the relief sought by Litton and completely
terminated the action in the circuit court, it is an appealable, final judgment.”).
Conversely, we have held that orders denying motions to compel arbitration filed in
an existing action are not final judgments. Kavanagh, 436 Md. at 478–79, 82 A.3d at 880
(“An order denying a request to compel arbitration . . . filed in an existing action [neither
decides and concludes the rights of the parties nor denies a party means of further
prosecuting or defending rights in the proceeding] and cannot be viewed as a final
judgment, unlike that situation when a Petition to Compel Arbitration filed on its own is
denied, which terminates the action.”) (emphasis added).
12
In Kavanagh, we held that an order denying a motion or petition to compel
arbitration filed in an existing action was not a final judgment under Cts. & Jud. Proc. §
12–301. 436 Md. at 478, 82 A.3d at 880. In that case, the respondents sued their former
employer, American, as a result of a dispute regarding their employment contracts.
Kavanagh, 436 Md. at 460, 82 A.3d at 868. Each employment contract contained an
arbitration provision. Kavanagh, 436 Md. at 459, 82 A.3d at 868. Within the deadline to
file motions in the employment case, American filed a “Petition to Compel Arbitration and
Stay All Proceedings and Request for Hearing,” which the Circuit Court denied.
Kavanagh, 436 Md. at 460–61, 82 A.3d at 869. American noted an appeal of the circuit
court’s order denying its petition to compel arbitration, but the intermediate appellate court
dismissed the appeal on the basis that the order was not final and appealable under Cts. &
Jud. Proc. § 12-301. Kavanagh, 436 Md. at 461, 82 A.3d at 869–70.
We held that the Court of Special Appeals properly dismissed American’s appeal
because the circuit court’s order denying American’s petition to compel arbitration was not
a final judgment where there was an existing action. Kavanagh, 436 Md. at 478, 82 A.3d
at 880. We reasoned that where a court denies a petition to compel arbitration that is filed
in an existing action, that order neither decides and concludes the rights of the litigants
involved, nor denies “a party means of further prosecuting or defending rights in the subject
matter of the proceeding.” Id. Accordingly, the order denying the request to compel
arbitration was not a final judgment. Id. In Kavanagh, we noted a distinction between
cases where a petition to compel arbitration was filed in an existing action and cases where
a petition to compel was filed separately as a free-standing and independent action.
13
Kavanagh, 436 Md. at 478–79, 82 A.3d at 880. We explained that “[a]n order denying a
request to compel arbitration, styled as a motion or petition, filed in an existing action . . .
cannot be viewed as a final judgment, unlike that situation when a Petition to Compel
Arbitration filed on its own is denied, which terminates the action.” Id. (emphasis added).
In Kavanagh, we recognized that where there is no underlying or additional litigation, as
in Litton, 292 Md. at 42, 437 A.2d at 212, a denial of a petition to compel, or consolidate,
arbitration proceedings is immediately appealable. Our holding in Litton and affirmance
in Kavanagh does not, however, stand for the proposition that, where litigation has been
instituted as to the merits of a dispute, a party may file a motion to compel under a separate
case number, and its denial would be immediately appealable.
This Court in Kavanagh expressed specifically the view in dicta that orders denying
petitions to compel arbitration, filed as independent actions, are final orders, subject to the
final judgment rule. See id. That view is limited to instances where there is not an already
pending matter between the same parties regarding the same substantive dispute. In other
words, independent means that there is no case pending other than the arbitration action,
and that within the arbitration action, there is no issue pending other than arbitration. See
Kavanagh, 436 Md. at 478–79, 82 A.3d at 880 (noting that “when a petition to compel
arbitration filed on its own is denied[,]” it terminates the action and is a final judgment)
(emphasis added). The facts of Kavanagh did not encapsulate the scenario before us now
where the parties were involved in a pending matter—the Class Action—and one party
filed an action that was separate but related to the same issue that was already being
litigated in the Class Action. See Kavanagh, 436 Md. at 460–61, 82 A.2d at 868–69.
14
Kavanagh, nevertheless, informs the outcome of this case. The final judgment rule,
specifically in the context of a request to compel arbitration, applies where an order that
has denied a petition to compel arbitration has decided and concluded the rights of the
litigants involved, or denied the party an opportunity to further prosecute or defend the
party’s rights in the matter. See Kavanagh, 436 Md. at 478, 82 A.3d at 880. Here, the
order denying Liberty Ford’s petition to compel arbitration neither decided and concluded
its rights, nor denied Liberty Ford the opportunity to further prosecute or defend its rights
in the pending matter.
In Peeler, the Court of Special Appeals considered, on its own motion, whether a
party has a right to appeal from an order denying a petition to compel arbitration when the
appeal was brought as an independent action, rather than as a motion in the existing action.
229 Md. App. at 114–15, 143 A.3d at 194. In that case, the daughter of a deceased resident
of FurtureCare NorthPoint, LLC sued the nursing facility in a wrongful death action. 229
Md. App. at 116, 143 A.3d at 195. The nursing home commenced an independent action
in the circuit court by filing a petition to compel arbitration of the wrongful death claim.
Id. The circuit court denied the petition, and the nursing home appealed that order.3 Peeler,
229 Md. App. at 117, 143 A.3d at 196. On appeal, the Court of Special Appeals addressed
the jurisdictional issue sua sponte. Peeler, 229 Md. App. at 118, 143 A.3d at 197.
3
We note that the trial court in Peeler, on its own motion, consolidated the wrongful
death action with the action to compel arbitration but “maintained separate files for the
two actions.” 229 Md. at 117, 143 A.3d at 196.
15
The Court of Special Appeals noted that the nursing home’s freestanding petition to
compel
easily satisfies most of the elements of a final judgment. The judge signed a
document that denied all relief in unqualified terms, and the clerk
memorialized the denial of relief in a proper docket entry . . . The remaining
question is whether the court’s ruling was sufficiently final in its nature so
that it could have been entered as a final judgment.
Peeler, 229 Md. App. at 119–20, 143 A.3d at 197. The intermediate appellate court
examined Kavanagh, applied dicta from that case, and concluded that “an order denying
an independent, freestanding petition to compel arbitration [wa]s a final judgment from
which the aggrieved party ha[d] the right to appeal.” Peeler, 229 Md. App. at 115, 143
A.3d at 194. In applying the final judgment rule to the order at issue, the court noted that
“[t]he circuit court’s order fully adjudicated the only claim in the separate action, denied
all of the relief sought by [the nursing home] in that action, and completely terminated that
case.” Peeler, 229 Md. App. at 115, 143 A.3d at 200 (emphasis added).
We disagree. Where an order puts the parties out of court, with no recourse to
prosecute or defend its rights with respect to the claim that may be subject to arbitration,
an order denying a petition to compel arbitration is a final, appealable order. See Litton,
292 Md. at 42, 437 A.2d at 212. Where, however, there is a pending case involving a claim
that is allegedly subject to arbitration, an order denying a petition to compel arbitration that
is filed in a separate, independent action is not a final, appealable order because the party
seeking to compel arbitration is not put out of court—indeed, the party is mandated to stay
in court to litigate the underlying claim.
16
As Brown and Spencer assert, Haynie supports our holding in the instant case. In
Haynie, an injured employee sued his employer, Gold Bond Building Products, in a tort
action. Haynie, 306 Md. at 645, 511 A.2d at 40–41. While the tort action was pending,
Haynie filed a declaratory judgment action in which he sought relief relative to several
provisions of the Worker’s Compensation Act. Haynie, 306 Md. at 645–47, 511 A.2d at
40–41. We explained that “permitting declaratory judgment actions to resolve issues which
could properly be raised and decided in pending cases, would be unfortunate as it would
unduly burden the courts.” Haynie, 306 Md. at 651, 511 A.2d at 43. This Court declined
to decide the question presented in the petition for certiorari, because to answer the question
would require this Court to overlook the “inappropriate procedure”, which “might result in
litigants misusing the declaratory judgment statute in order to circumvent the policy against
appeals from interlocutory orders and against piecemeal appeals.” Haynie, 306 Md. at 653,
511 A.2d at 44. This Court explained that “as long as no party to the litigation challenged
the procedure, we would be allowing the parties, by consent, to bypass the final judgment
requirement.” Haynie, 306 Md. at 654, 511 A.2d at 45. The reasoning of Haynie applies
in equal force to this case. A party, in this case, Liberty Ford, should not be permitted to
circumvent the final judgment rule by filing a separate cause of action to compel arbitration
of a claim that is the subject of litigation in a pending lawsuit between the same parties and
the party seeking to compel arbitration could have filed previously a motion to compel
arbitration in the pending case. To allow otherwise undermines the final judgment rule.
The legislative history of the Maryland Uniform Arbitration Act supports our
conclusion as well as our rejection of Liberty Ford’s contention that the appeal provisions
17
of the Federal Arbitration Act are dispositive. As we explained in Kavanagh, the appeal
provisions of the Maryland Uniform Arbitration Act were deleted as duplicative in 1973
as part of the Annotated Code revision process. Kavanagh, 436 Md. at 473, 82 A.3d at
876. The appeal provisions, “which permitted an appeal to be taken from an order denying
an application to compel arbitration only ‘in the manner and to the same extent’ as other
final judgments in civil actions,” were eliminated because “‘[m]ost of its language deals
with appeals from final judgments and is thus covered by § 12˗301.’” Kavanagh, 436 Md.
at 472–74, 82 A.3d at 876–77 (quoting 1973 Maryland Laws, Ch. 2, Revisor’s Note to §
12˗303). Thus, the appealability of an order denying a petition to compel arbitration was
limited to “the manner and to the same extent as from orders or judgments in a civil action.”
Kavanagh, 436 Md. at 472, 82 A.3d at 876 (quotation marks omitted). We further
explained that “no substantive changes were intended during the recodification process,
with respect to [the Maryland Uniform Arbitration Act.]” Kavanagh, 436 Md. at 474, 82
A.3d at 877.4 The final judgment rule directs our determination of whether an appeal can
be taken from an order denying a petition to compel arbitration where there is a pending
suit between the same parties and regarding the same substantive dispute, and the party
seeking to compel arbitration could have filed a motion to compel arbitration in the pending
4
Kavanagh was issued in 2013. As we commented therein, “‘the General Assembly is
presumed to be aware of this Court’s interpretation of its enactments and, if such
interpretation is not legislatively overturned, to have acquiesced in that interpretation.”
Kavanagh, 436 Md. at 475, n.19, 82 A.3d at 877, n.19. Our interpretation in Kavanagh of
the Maryland Uniform Arbitration Act and its legislative history has not been superseded
by any action of the General Assembly.
18
case. We hold that the Circuit Court’s denial of Liberty Ford’s petition to compel
arbitration is not a final appealable order pursuant to Cts. & Jud. Proc. § 12-301.
Finally, we note that in the instant case the Circuit Court denied Brown and
Spencer’s Motion to Consolidate the Arbitration and Class actions. In doing so, the court
explained that consolidation of the two actions was unnecessary because the issue of
arbitrability in the Arbitration Action would be determinative of further proceedings in the
Class Action. The court commented that consolidation would only serve to create “further
chaos [due to] the habitual misdocketing of papers” and would result in inconvenience to
the court. We are sympathetic to the Circuit Court’s frustration, but its rationale for
denying Brown and Spencer’s motion to consolidate is unavailing in this case. The
question of arbitrability of the same issue that was pending in the Class Action should have
been considered as part of that action because, as the Circuit Court pointed out, a
“determination of th[e] Petition [to Compel Arbitration] will end proceedings in the
Arbitration Action and will either result in the staying of the Class Action or in allowing
the Class Action to proceed.” See Md. Rule 2-503 (“When actions involving a common
question of law or fact or a common subject matter, the court, on motion or on its own
initiative, may order a joint hearing or trial or consolidation of any or all of the claims,
issues, or actions.”). Here, in an effort to avoid chaos, the Circuit Court engendered it. In
fact, at oral argument before us, counsel for Liberty Ford conceded that Liberty Ford filed
the separate Arbitration Action for the purpose of taking an immediate appeal. The Circuit
Court could have dismissed Liberty Ford’s petition, directed Liberty Ford to file its motion
in the pending Class Action, or consolidated the two actions. Instead, the court
19
unnecessarily bifurcated the two actions, giving rise to Liberty Ford’s impermissible
appeal.
CONCLUSION
The Circuit Court’s order denying Liberty Ford’s petition to compel arbitration is
not a final, appealable judgment under Cts. & Jud. Proc. § 12-301. The Court of Special
Appeals does not have jurisdiction to hear an appeal of that order.
JUDGMENT OF THE COURT OF
SPECIAL APPEALS VACATED.
CASE REMANDED TO THAT COURT
WITH INSTRUCTIONS TO DISMISS
THE APPEAL. COSTS IN THIS
COURT AND IN THE COURT OF
SPECIAL APPEALS TO BE PAID BY
APPELLANT.
20
Circuit Court for Baltimore County IN THE COURT OF APPEALS
Case No.: 3C15002637
Argued: March 2, 2017 OF MARYLAND
No. 62
September Term, 2016
______________________________________
DEER AUTOMOTIVE GROUP, LLC t/a
LIBERTY FORD
v.
BARBARA BROWN et al.
Barbera, C.J.
Greene,
Adkins,
McDonald,
Watts,
Hotten,
Getty,
JJ.
______________________________________
Dissenting Opinion by McDonald, J.,
which Barbera, C.J., joins.
______________________________________
Filed: June 27, 2017
I agree with the Majority opinion in one respect – there should be no distinction
between the appealability of a denial of a motion to compel arbitration filed in an existing
action and a denial of a petition to compel arbitration filed in a separate action concerning
the same dispute. But I disagree with the Majority opinion in another respect. In my view,
the General Assembly provided that there is a right to an immediate appeal in both
circumstances when it adopted the Uniform Arbitration Act.1 We should respect that
policy decision concerning appealability, even if we have doubts about the merits of
diverting a particular case to arbitration.
As the Majority opinion recounts, in American Bank Holdings, Inc. v. Kavanagh,
436 Md. 457, 471-75 (2013), this Court held that a denial of a motion to compel arbitration
in an existing case was not appealable while acknowledging that the denial of a petition to
compel arbitration of the same dispute in a separate action would be appealable as a final
judgment. The majority opinion in Kavanagh painted itself into that corner in its effort to
reconcile its holding with prior decisions of this Court.
The Majority opinion in this case offers a revisionist view of Kavanagh. It states
that the Kavanagh majority “recognized that where there is no underlying or additional
litigation, as in Litton [Bionetics, Inc. v. Glen Constr. Co., Inc., et al.], 292 Md. [34] at 42
… a denial of a petition to compel, or consolidate, arbitration proceedings is immediately
1
It is notable that the Supreme Court decision construing the Federal Arbitration
Act that is cited in the Majority opinion (Majority slip op. at 8-9) in support of a consistent
approach to appealability in these circumstances actually held in favor of appealability.
Green Tree Fin. Corp. – Alabama v. Randolph, 531 U.S. 79 (2000).
appealable.” Majority slip op. at 14. The Majority opinion is mistaken, in at least two
respects. First, the Kavanagh opinion actually cited Litton Bionetics – together with
Hartford Accident & Indem. Co. v. Scarlett Harbor Assocs. Ltd. P’shp, 346 Md. 122 (1981)
– for the proposition that “an order denying a petition to compel arbitration as an
independent action … is appealable” without the gloss that the Majority opinion now adds.
Kavanagh, 436 Md. at 468. Second, in the other case relied upon by Kavanagh – Scarlett
Harbor – there was related underlying litigation, yet this Court simply stated, as did the
Kavanagh majority opinion, that “[a]n order denying a claim that arbitration should be
compelled in an action in which that is the sole claim asserted is an appealable judgment.”
346 Md. at 126 n.5.
The Court of Special Appeals has recognized that, under the reasoning of the
Kavanagh majority opinion, it was a “foregone conclusion” that a denial of a request for
arbitration is appealable if made in a separate action, but not if made in an existing action
concerning the same subject matter. FutureCare NorthPoint, LLC v. Peeler, 229 Md. App.
108, 123-24 (2016). Litigators have been advised to take the distinction made by
Kavanagh into account when deciding how to enforce an arbitration clause. See I.C.
Wolpert, Appealability of an Order to Stay or Compel Arbitration, 69 Dispute Res. J. 91
(2014). The Court now abandons that distinction.
As I indicated in my dissent in Kavanagh, I found the distinction made by the
Kavanagh majority opinion not only incongruous, but also contrary to the legislative
history of the Maryland Uniform Arbitration Act and a prior decision of the Court of
Special Appeals that had analyzed that legislative history. Kavanagh, 436 Md. at 479 – 96
2
(McDonald, J., dissenting); see also Regina Construc. Corp. v. Envirmech Contracting
Corp., 80 Md. App. 662 (1989) (Wilner, J.).2 That legislative history clearly indicates that
the Legislature intended to allow immediate appeals in both situations.
The Majority opinion in this case makes a passing reference to the legislative history
of the Maryland Uniform Arbitration Act and concedes that the 1973 code revision that
resulted in the current version of the law did not effect a substantive change in that law.
Majority slip op. at 17-18. However, the Majority opinion ignores the fact that, prior to
the 1973 code revision, the act indisputably provided for an immediate appeal of denial of
a motion to compel arbitration. See Maryland Code, Article 7, §§2, 18(a)(1) (1968 Repl.
Vol.).
In the end, while the Majority opinion perpetuates the Kavanagh majority opinion’s
misreading of the statute and its legislative history, it does have the virtue of eliminating
the internal inconsistency of the Kavanagh majority opinion.
2
In Regina, Judge Wilner reviewed in some detail the legislative history of the
arbitration act and the effect of code revision and explained: “In enacting the Courts &
Judicial Proceedings Article, the General Assembly seemed to accept the notion that an
order denying a petition or application to compel arbitration was immediately appealable,
and indeed appeared to believe that it was appealable as a final judgment.” 80 Md. App.
at 670. As a result of that analysis, Judge Wilner concluded that the appeal in Regina was
properly before the intermediate appellate court and proceeded to discuss the merits of the
appeal. The majority opinion in Kavanagh did not address that analysis of the legislative
history and largely distinguished Regina on the ground that the case had not been
previously cited in the Court of Appeals and on the reasoning of a 1978 decision of the
Court of Special Appeals that preceded Regina and that had turned on a then-existing
distinction between courts of law and courts of equity which, as Judge Wilner had noted in
Regina, no longer exists. Kavanagh, 436 Md. at 477-78.
3
In any event, for the reasons explained in my dissent in Kavanagh, the result in this
case, as well as in Kavanagh, is contrary to the direction that the General Assembly gave
in the Maryland Uniform Arbitration Act.3 This does not mean that this dispute necessarily
should be decided by an arbitrator, but it does mean that we should decide now whether it
must be. One might disagree with a legislative policy favoring arbitration4 including the
decision to allow immediate appealability in these circumstances, but that is the General
Assembly’s prerogative and there is some common sense to it – better to decide now
whether a case must be diverted to arbitration rather than determine in a later appeal after
trial that judicial resources have been expended for naught.
Chief Judge Barbera has advised that she joins this opinion.
3
In a footnote, the Majority opinion suggests, as did the Kavanagh majority opinion,
that the General Assembly has acquiesced in its interpretation of the Maryland Arbitration
Act, Majority slip op. at 18 n.4. As I noted in my dissent in Kavanagh, it is somewhat
contradictory to rely on a notion of “legislative acquiescence” and at the same time assert
that earlier cases did not determine the issue before the Court. Compare Kavanagh, 436
Md. at 468 with id. at 475 n.19. In addition, while legislative inaction might be significant
“where bills have repeatedly been introduced in the General Assembly to accomplish a
particular result, and the General Assembly has persistently refused to enact such bills,”
Moore v. State, 388 Md. 623, 640 (2005), that is not the case here. Finally, this Court has
frequently described legislative inaction as a “weak reed upon which to lean.” E.g.,
Sherwood Brands v. Great American Ins. Co., 418 Md. 300, 321 n.16 (2011).
4
The court system is the original system of “alternative dispute resolution.” It
replaced the old system of blood feuds and violence. In time it became the official system
of dispute resolution. During the last century there has been significant legislative and
judicial enthusiasm for other alternatives, such as arbitration, which have collectively
assumed the title of “alternative dispute resolution.” It is not entirely clear that such
alternatives are always fair, or efficient, or are truly an “alternative” that is voluntarily
chosen by all of the parties. Thus, whether alternative dispute resolution is always
preferable to judicial resolution is certainly open to debate.
4