Inlet Associates v. Harrison Inn Inlet, Inc.

Citation596 A.2d 1049,324 Md. 254
Decision Date01 September 1990
Docket NumberNo. 151,151
PartiesINLET ASSOCIATES, Piper & Marbury and George A. Nilson v. HARRISON INN INLET, INC. and K. King Burnett. ,
CourtCourt of Appeals of Maryland
Wilbur D. Preston, Jr. (Louis P. Ruzzi, Whiteford, Taylor and Preston, all on brief), Baltimore, for petitioners/cross-respondents

Robert L. Hanley, Jr. (Nolan, Plumhoff & Williams Chartered, all on brief), Towson, Alvin I. Frederick (George D. Bogris, Eccleston & Wolf, all on brief), Baltimore, for respondents/cross-petitioners.



We granted certiorari in the instant case to determine what standard of appellate review should be applied when a trial court has imposed sanctions in the form of costs and attorney's fees pursuant to Maryland Rule 1-341. The facts giving rise to this controversy cannot be stated as simply and succinctly as the issue before the Court.

This appeal arises out of a $22,000,000 lawsuit filed by Inlet Associates (Inlet) against Harrison Inn Inlet, Inc., Harrison Inn Sixty-Six, Inc., Hale Harrison, John Harrison (the Harrisons), and their attorney, K. King Burnett, for abuse of process and malicious interference with prospective business advantage. Inlet is a Maryland partnership that was formed in 1984 for the purpose of developing a parcel of land, known as Holt's Landing, in Ocean City, Maryland. Inlet's managing partner is an architect, Leo D'Aleo (D'Aleo). The Harrisons own property adjacent to Holt's Landing.

In 1984, the Harrisons hired D'Aleo to design a high-rise condominium building to be located on their property adjacent to the Holt's Landing site. At about the same time, the Harrisons and Inlet had discussions about jointly developing and constructing a marina in front of their adjacent properties. For reasons that shall become apparent, the joint development of the marina never occurred. As a result of litigation by another neighboring property owner, the Harrisons lost a height variance that was essential to their high-rise project. Shortly thereafter, they approached D'Aleo and asked him to abate a portion of his architectural fees for their high-rise project. It was suggested to D'Aleo that, unless he did so, the Harrisons would no longer participate in joint development of the marina property. D'Aleo refused to abate any of his architectural fees and informed the Harrisons that Inlet would, without the Harrisons, develop the marina, as well as a hotel and condominium project (the Inlet project). D'Aleo sued the Harrisons and recovered his architectural fees, and the Harrisons began a series of legal actions to block the Inlet project.

Initially, the Harrisons sought to prohibit the town of Ocean City from transferring to Inlet, without ordinances, a portion of a public street and the riparian rights at the end of the street, which were to be used for the Inlet project. They successfully obtained an injunction prohibiting the transfer, which was affirmed on appeal. Inlet Associates v. Assateague House, 313 Md. 413, 545 A.2d 1296 (1988).

While the appeal of the injunction was pending, Inlet amended the plans for the project and submitted the amended plans to appropriate agencies of the town of Ocean City. The Harrisons, with Burnett as their attorney, challenged the amended plans. The Ocean City Planning and Zoning Commission and zoning administrator approved Inlet's amended plans and issued a building permit. The Harrisons filed three separate appeals with the Board of Zoning Appeals, and when those appeals were unsuccessful, they sought review in the Circuit Court for Worcester County. The Harrisons filed separate appeals of the Board of Zoning Until early 1988, Inlet was represented by Gerard P. Martin. Martin contacted George A. Nilson to inquire whether Nilson and his law firm, Piper and Marbury, (herein collectively Nilson) would take over the representation of Inlet in its litigation with the Harrisons. On February 17, 1988, Nilson entered into an agreement to represent Inlet. Under the terms of that agreement, Nilson would receive a bonus of an additional 50% of his hourly rate if he was able to persuade the Harrisons to drop their opposition to Inlet's project within one month. The bonus provision apparently was extended for an additional month.

                Appeals' oral decisions, as well as its written opinions "in an abundance of caution to insure the preservation of the right to appeal."   They did, however, request that all of the appeals be consolidated, and this was done by the trial judge.   The Harrisons also filed suit seeking declaratory and injunctive relief "solely as a protective action due to uncertainty concerning the right to take an administrative appeal from the decision of the Planning and Zoning Commission."   Thus, there were six circuit court actions filed by the Harrisons, all of which were consolidated for trial

Martin also provided Nilson with a draft bill of complaint of Inlet against the Harrisons alleging abuse of process and malicious interference with prospective business advantage. This draft complaint named the Harrisons as defendants, but did not name their attorney, Burnett. The day after Nilson was retained by Inlet, he wrote to Burnett advising him that if the parties did not meet before March 3, 1988, to resolve their differences, suit would be filed by Inlet against the Harrisons and Burnett for "abuse of process and related matters." With that letter, Nilson also enclosed a draft bill of complaint. This draft complaint differed from the one provided to Nilson by Martin in that Burnett was added as a defendant.

The meeting of the parties suggested by Nilson did not take place. Citing a conflict of interest, Burnett informed Nilson that he could no longer participate in any settlement negotiations or advise the Harrisons about settlement.

                Burnett's concern about a conflict of interest was based on his belief that his representation of the Harrisons might be compromised by the suit against him personally.   See The Maryland Lawyers' Rules of Professional Conduct, Rule 1.7 (1991).   Burnett was concerned that, if he had counseled the Harrisons to withdraw their opposition to the Inlet project, his advice might be perceived as being partially motivated by his own self-interest.   It might give the appearance that his actions were directed at avoiding being a defendant in a lawsuit, rather than being motivated solely by his clients' best interest

On April 11, 1988, Nilson, on behalf of Inlet, filed suit against the Harrisons and Burnett for abuse of process and malicious interference with prospective business advantage (herein collectively the abuse of process suit). The ad damnum clause sought compensatory and punitive damages in the amount of $22,000,000. For approximately 18 months, Nilson took no steps to prosecute the claims asserted by Inlet.

Subsequent to the filing of the abuse of process suit, the Circuit Court for Worcester County affirmed the decisions of the Board of Zoning Appeals, rejecting the challenges filed by the Harrisons. The Harrisons appealed that decision and, in an unreported decision, the Court of Special Appeals reversed the circuit court, thereby finding that the Harrisons' challenges to the Inlet project were well founded.

Following the Court of Special Appeals' resolution of the challenges to the Inlet project in the Harrisons' favor, the circuit court found in favor of the Harrisons and Burnett in Inlet's abuse of process suit. Count I (abuse of process) was dismissed as to all defendants, and Count II (malicious interference with prospective business advantage) was dismissed as to Burnett. Summary judgment was entered in favor of the Harrisons on Count II. The Harrisons and Burnett filed motions for costs and attorney's fees pursuant to Rule 1-341. After a hearing, the circuit court denied the Harrisons' motion but granted Burnett's motion and assessed "Everybody knows what the facts are. To put them in their simplest terms, it appears to the court that the parties to this litigation were originally jointly involved in developing certain property in Ocean City, Maryland. That there was an--I don't want to say falling out among thieves, but falling out among the parties. That Inlet Associates, the plaintiff in this particular action, attempted to scale down the project in pursuance of certain permits which had previously been received, but that there were ongoing hearings before the Board of Zoning Appeals and other administrative bodies in Worcester County and/or Ocean City. I think there were [six] appeals....

                costs and attorney's fees against Inlet, Nilson, and Piper and Marbury in the amount of $15,368.23.   In rendering his decision, the trial judge stated

While all this was going on these cases were at that point pending, either in the Circuit Court for Worcester County or on appeal to the appellate courts of this State. The plaintiffs hired Mr. George Nilson of the firm of Piper and Marbury, at the behest of Mr. Martin.... I assume, for the express purpose, that the court finds, to see if there was not some manner in which all the other ongoing litigation could be settled.

One of the provisions of the retainer of Mr. Nilson was a provision for a bonus if the case was settled within a short period of time, and if not then he would be paid at his regular office rate. It is obvious to the court that being the provision, even though it's not in there, time was of the essence. His efforts to effect settlement negotiations within the short period of time did not come to fruition....

During this period a draft copy of, with some modifications, the complaint which was ultimately filed in this case being sent to Mr. Burnett, the court's thinking was an obvious act of intimidation to effect a settlement.

It is the court's thinking in a hearing on this...

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