MCR of America, Inc. v. Greene, No. 1274

• Court: Court of Special Appeals of Maryland
• Writing for the Court: KRAUSER.
• Citation: 811 A.2d 331,148 Md. App. 91
• Docket Number: No. 1274
• Decision Date: 26 November 2002
• Parties: MCR OF AMERICA, INC., d/b/a Mortgage Credit Reports Inc. v. J. William GREENE.

811 A.2d 331
148 Md. App. 91

MCR OF AMERICA, INC., d/b/a Mortgage Credit Reports Inc.
v.
J. William GREENE

No. 1274, Sept. Term 2000.

Court of Special Appeals of Maryland.

November 26, 2002.

811 A.2d 333

Peter T. McDowell of Timonium, (Edward L. Blanton, Jr. of Towson, on the brief), for appellant

Karen D. Amos, Ellicott City, for appellee.

Argued before MURPHY, C.J., KRAUSER, and STUART R. BERGER (Specially assigned), JJ.

811 A.2d 332

KRAUSER, Judge

We are asked to determine whether an arbitrator can impose sanctions on an attorney, representing a party to the arbitration, for misconduct. In this case, the arbitrator sanctioned the offending attorney¹ by making him jointly responsible with his client for a portion of the award of fees and costs his client was ordered to pay, as the non-prevailing party in the proceeding below. In deciding this issue and others presented by the parties, we shall take this opportunity to illumine the role and powers of the arbitrator under Maryland law.

This case arose from an employment dispute. Appellant, MCR of America, Inc., ("MCR"),² fired its marketing director, appellee J. William Greene, for purportedly violating his employment contract. The propriety of that termination was ultimately submitted to arbitration.

Following what were apparently unnecessarily contentious proceedings, the arbitrator found that MCR had not breached its agreement with Greene by terminating his employment. She then ordered Greene, as the non-prevailing party on the principal issue before her, to reimburse MCR for all arbitration "fees and expenses" as well as attorney's fees incurred by MCR in defending against Greene's breach of contract claim. But MCR's victory was not complete nor Greene's defeat total. On his claim for unpaid wages, the arbitrator ordered MCR to pay Greene $2,676.92.

811 A.2d 334

Then turning to Greene's counsel, whose "vexatious conduct" the arbitrator believed had unnecessarily complicated and prolonged the proceedings, she declared that he was "jointly responsible" with his client for a portion of the arbitration and legal fees to be paid to MCR. While the award of arbitration fees and expenses was upheld by the Circuit Court for Baltimore County, the award of legal fees was not. Cross-appeals to this Court followed

Before this Court, MCR challenges the circuit court's vacation of the arbitrator's award of attorney's fees while Greene contests the court's affirmance of the arbitrator's award of fees and costs to MCR. Specifically, MCR presents two issues, which can be restated as one:

I. Whether the circuit court erred in vacating the arbitrator's award of attorney's fees?

On cross-appeal, Greene presents the following issues, which we have set forth below largely as they appear in his brief:

I. Whether the circuit court erred in confirming all fees and costs awarded pursuant to MCR's motion for sanctions.

A. Whether the arbitrator was without authority to consider an award of sanctions.

B. Whether the award of fees/expenses based upon documents provided by MCR to the arbitrator ex parte following the close of the hearing constitutes misconduct, bias, prejudice, and denial of due process such that the award must be vacated.

C. Whether the arbitrator was without authority to extend personal liability of the award to Greene's counsel who was not a party to the arbitration or to the agreement requiring the parties to submit to arbitration.

II. Whether the circuit court erred in refusing to vacate the arbitrator's decision and award.

For the reasons that follow, we shall affirm the circuit court's vacation of the arbitrator's award of attorney's fees but reverse its confirmance of the arbitrator's award of fees and expenses. In all other respects, we shall affirm the judgment of the circuit court.

BACKGROUND

MCR is engaged in the credit reporting business. It provides credit and investigative reports to businesses in the home mortgage industry. Hoping to expand that business, MCR hired Greene to be its marketing director and executive vice-president.

The terms of Greene's employment were memorialized in a written agreement between the parties. Paragraph 6 of that agreement, entitled "Breach," states that the parties shall "by mutual agreement, develop written performance criteria including achievable goals regarding steps for the growth, expansion or diversification of the Corporation." Under that paragraph, if Greene fails "to render services or accomplish the criteria or goals" agreed to by the parties or "to perform any material covenant or condition" of the agreement, MCR may terminate the agreement. Paragraph 8 of the agreement, entitled "Termination," permits MCR to terminate Greene's employment "for justifiable cause" which includes "any disclosure by [Greene] to any person, firm or corporation... of any confidential information."

Both paragraphs contain arbitration provisions. Paragraph 6(b) provides:

In the event of a dispute between the Corporation and the Employee as to a termination of this agreement, such dispute shall be submitted to arbitration

811 A.2d 335

under the rules of the American Arbitration Association, and the decision of the arbitrator shall be final and binding upon all parties. The fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered.

And Paragraph 8(b) provides:

In the event of a dispute between the board of directors and the employee as to the existence of justifiable cause, such dispute shall be submitted to arbitration under the rules of the American Arbitration Association, and the decision of the arbitrator shall be final and binding upon all parties. The fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered.

In sum, Paragraph 6(b) requires that disputes "as to a termination" be arbitrated while Paragraph 8(b) requires that disputes "as to the existence of justifiable cause" be arbitrated. Both arbitration provisions state that "the fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered." That language was the basis upon which the arbitrator awarded MCR fees and costs.

Greene began working for MCR on May 15, 1996. But over the next five months, MCR's business did not grow as planned. Consequently, among other cost-cutting measures, MCR reduced Greene's salary by fifty-three percent. That reduction, MCR informed Greene, was to "bring [his] salary down" to the level of the salaries of other employees, which had been reduced because of MCR's economic difficulties. Unfortunately, Greene discussed his salary reduction with the owner of a credit reporting company that MCR was attempting to purchase. The disclosure of that information, MCR claims, created questions as to its financial viability.

After learning of that disclosure, MCR terminated Greene's employment. In a letter to Greene, dated October 25, 1996, MCR informed Greene that he was being terminated for "failure to perform" under paragraph 6 of the agreement and for "justifiable cause" under Paragraph 8(a) of that agreement for disclosing confidential information about his salary reduction to a competitor.³

On June 8, 1997, Greene filed a complaint in the Circuit Court for Howard County against MCR, alleging breach of contract and a violation of Labor and Employment ("LE") § 3 507.1 of the Maryland Code Annotated (1991, 1999 Repl. Vol.).⁴ In that complaint, he "sought recovery of the unpaid portion of his salary, as well as monetary reimbursement of lost fringe benefits, attorney's fees and costs." In response, MCR filed a petition to compel arbitration and to stay the action pending before the circuit court, pursuant to Paragraphs 6(b) and 8(b) of Greene's employment

811 A.2d 336

agreement. The circuit court denied that petition, whereupon MCR noted an appeal to this Court.

After argument, this Court issued an unreported opinion.⁵ In that opinion, we observed that the parties' employment agreement "mandates arbitration for disputes regarding `termination of [the] agreement' and the `existence of justifiable cause' for termination." We declared that because Greene's "claims for monetary damages are inextricably linked to his termination," the subject matter of the parties' dispute was within the scope of the arbitration provisions of their agreement. Accordingly, we reversed the circuit court's order and remanded this case to that court with instructions to grant MCR's petition to compel arbitration.

Thereafter, Greene filed a Statement of Claim with the American Arbitration Association, seeking, among other things, unpaid wages and damages for breach of contract. Greene also sought "reasonable attorney's fees ... pre-judgment interest and the costs of [the] action, including the submission fee and all hearing fees." In reply, MCR filed an answer and a counterclaim for fraudulent misrepresentation, alleging that Greene misrepresented his "qualifications, abilities, and commitment" to MCR. As Greene did, MCR requested "the costs of the arbitration and all proceedings and attorneys' fees incident thereto."

In mid-July of 1999, a hearing was held before an arbitrator provided by the American Arbitration Association ("AAA"). Following that hearing, the AAA case manager, by letter dated July 20, 1999, informed the parties that "[p]ost-hearing briefs [were] to be filed on or before August 13, 1999." The letter further stated that "[u]pon the filing of final briefs ... the arbitrator [would] declare the hearings closed."

On August 20, 1999, one week after the letter's August 13, 1999 deadline, MCR filed a "Motion for Sanctions" with the Arbitrator. That motion claimed that "throughout the presentation of his case and the cross examination of Claimant's witnesses" Greene's attorney, among other things, "was argumentative in the extreme, constantly interfering with the examination of...