Riccio v. Morelli

• Decision Date: 20 August 2021
• Docket Number: 0371-2020
• Parties: ROBERT J. RICCIO, et al. v. RICHARD A. MORELLI
• Court: Court of Special Appeals of Maryland

ROBERT J. RICCIO, et al. v. RICHARD A. MORELLI

No. 0371-2020

Court of Special Appeals of Maryland

August 20, 2021

Circuit Court for Worcester County Case No. C-23-CV-17-000080

Friedman, Gould, Zarnoch, Robert A. (Senior Judge, Specially Assigned), JJ.

OPINION ^[*]

ZARNOCH, J.

In this case of dueling defamation claims between one-time friends appellants Robert J. Riccio and the Mr. and Mrs. Riccio Memorial Foundation ("Riccio") challenge an arbitrator's decision that awarded punitive damages to appellee Richard A. Morelli ("Morelli") and rejected Riccio's claim. Morelli petitioned the Circuit Court for Worcester County to confirm the arbitration award and Riccio petitioned to vacate it. In June of 2020, the court denied the petition to vacate and granted the petition to confirm. This appeal followed.

QUESTIONS PRESENTED

Riccio presents the following questions that we quote verbatim:

1. Did the Circuit Court err in denying vacation of the Award where the Arbitrator failed to consider material evidence and resolve the dispute?

2. Did the Circuit Court err in denying vacation of the punitive damages portion of the Award where the Arbitrator's punitive damages award was issued in manifest disregard of law?

FACTS AND PROCEEDINGS

We need set forth only an abbreviated version of the facts.^[1] In her decision, the Arbitrator, retired Court of Appeals Judge Irma S. Raker, laid out the background of the case:

Robert Riccio and Richard Morelli were friends for many years. This dispute arises from the [Riccio] Foundation golf tournament in June 2016, held in Ocean City, Maryland. The registration fee for the tournament was $450.00. Many of the participants, including Riccio and Morelli, stayed at the Tidelands Hotel in Ocean City. On the evening of June 4 2016, Morelli and several of the other tournament participants ate dinner at the Embers Restaurant where the tournament sponsored an all-you-can-eat buffet dinner. A dispute arose between Morelli and the management regarding an unpaid bar bill ($25.00) and some missing cash left on the table. The Ocean City Police Department was called by the restaurant. The incident was resolved with no arrests and Morelli and his friend returned to the hotel by city bus.

The next morning, Riccio called Morelli in a heated telephone call. Morelli stated that before Riccio hung up, he said: "you're going to find out how many ways I can hurt you, now pack your bags." Riccio wanted Morelli to return to the Embers Restaurant to clear the air, to resolve any unresolved issues with the restaurant, and to generally protect the reputation of the golf event. Morelli refused. Ultimately, Riccio, who leased all the hotel rooms, asked the hotel to "evict" or remove Morelli, and according to Riccio, the hotel management told Morelli to leave. Morelli also issued a stop payment order on his golf tournament registration of $450 (and later sent a check for $94.99, which Riccio never cashed). Without laying out the details, Morelli left the hotel, returned, and then left.

Beginning in June 2016, Morelli began to seek information about the finances of the Foundation. The State of Maryland informed Morelli that the Foundation had not registered properly in Maryland and had failed to file required annual filings in Maryland and similarly in Pennsylvania. The Charities Division of the Maryland Secretary of State's Office and Commonwealth of Pennsylvania both investigated the Foundation's lack of compliance and as a result took regulatory action against the Foundation.

In December 2016, Ocean City Police Officer Grady applied for a statement of charges against Morelli, alleging trespass and theft arising out of a June golf event dispute. The Commissioner issued charges for trespass but declined the theft charge; the State's Attorney later filed a criminal information against Morelli for theft. Morelli eventually resolved the criminal charges; the charges were first placed on the stet docket to enable Morelli to perform community service and to reimburse the Foundation for $450.00. Following Morelli's performance of community service, the charges were nolle prossed.

Thereafter, much of the alleged defamatory activity occurred. [Morelli] made inquiries to the State of Maryland requesting information about the Foundation. He made a complaint to the Better Business Bureau and made a posting on Facebook about the Oasis Bar. An unsigned letter, including a copy of the Ocean City arrest report related to Morelli, was circulated around the Pennsylvania community, to Morelli's employer, the local airport Board, and others. [Jack Seamon, vice president and treasurer of the Foundation] sent a copy of [Morelli's] arrest report and the "anonymous" letter to the Better Business Bureau. [Morelli's] employer, Morgan Stanley, and others received the "anonymous" letter about [Morelli] and the Foundation's counsel (Luke Rommel) issued, on March 10, 2017, a Press Release about the dispute. Morelli sent a Letter to the Editor to the local Pennsylvania newspaper, which the paper published.

Morelli made assertions about Riccio's employment history, activities alleged to have occurred at a bar the latter owned, and the operation of the Riccio Foundation. The anonymous letter asserted in essence that Morelli was immoral, dishonest, lacked integrity, had professional shortcomings, was guilty of marital infidelity, and was an unfit parent. The press release accused Morelli of making vindictive and false allegations about the Foundation.

This war of words turned into a legal battle when, on March 1, 2017, Riccio and the Foundation sued Morelli in the Circuit Court for Worcester County, alleging defamation and conversion. On April 21^st, Morelli filed a counterclaim, asserting actions for defamation and abuse of process. When discovery had ended, both parties agreed to binding arbitration of the live claims, and filed a joint motion for referral to arbitration. Under the agreement, no further discovery was permitted and the transcript of the proceedings was to be made available only to the Arbitrator.

Both parties agreed on Judge Raker as the Arbitrator. And they both asked her for a "reasoned award," which is apparently arbitration-talk for a standard that obligates the arbitrator to provide "something more than a line of unexplained conclusions, but something less than full findings of fact and conclusions of law on each issue before the panel. Leeward Construction, LTD v. American University of Antigua-College of Medicine, 826 F.3d 634, 640 (2nd Cir. 2016).^[2] The Arbitrator required both sides to file a statement of claim, which mirrored the complaint and counterclaim filed in the circuit court.

Riccio's statement of claim specifically stated that Morelli made defamatory statements that the Foundation did not file required financial documents; that the Foundation had not disclosed its financial information; that the Foundation had misappropriated funds; and that it had been less-than-transparent in its charitable mission. Riccio asserted that he had been defamed by Morelli when he published the statement that Riccio "was kicked out of the OC Police Department," as well as statements that illegal drugs were sold at a bar owned by Riccio. Morelli's statement of claim asserted defamatory statements in the anonymous letter and press release.

The Arbitrator held evidentiary hearings at which both Riccio and Morelli testified.^[3] On March 31, 2020, the Arbitrator issued her award. In this written decision, she rejected the defamation claims of Riccio and the Foundation; but found both claimants liable for defaming Morelli in the anonymous letter. She awarded Morelli $10, 000 in compensatory damage against Riccio and $450 in damages against the Foundation.^[4] The decision also stated:

As to punitive damages, the Arbitrator finds that Respondent has established by clear and convincing evidence both constitutional malice and actual malice and awards punitive damage [of] $25, 000 in favor of … Morelli against Claimant.

The Arbitrator hinged liability only on the anonymous letter, not the press release, which she found not to be malicious. Because Morelli was a "limited purpose public figure" due to his involvement in the controversy over the Foundation, he had to show a higher element of fault to prevail, what the Arbitrator termed "constitutional malice," viz. knowing or reckless falsity.^[5]

Riccio and the Foundation defended on the ground that they had not sent the letter; causing the Arbitrator to pointedly observe that Riccio "did not defend or represent that the letter was not with actual malice." However, the Arbitrator found that the anonymous letter was sent by Riccio and the Foundation, pointing to evidence, such as the fact that the claimant had requested Morelli's police record from the Ocean City Police Department, that Seamon (who lived with Riccio) admitted that he sent the letter and the police record to the Better Business Bureau and that Riccio bore "personal ill will" towards Morelli. Thus, the Arbitrator concluded that the key statements in the letter were false and were made with "reckless disregard [as] to [their] truth or falsity," and "constitutional malice" had been proven.

As to the punitive damages award, the Arbitrator stated:

Punitive damages are allowable in a defamation case if the plaintiff proves the actual malice standard, even if the plaintiff is a private person. Seley-Radtke v Hosmane, 450 Md. 468, 489-903 (2016). Thus, to be entitled to punitive damages, a Claimant or plaintiff must establish that the Respondent or defendant had actual knowledge, or [published] with reckless disregard that the defamatory statement was false. Id. at 495.^[6]

She went on to note:

Punitive damages require proof

...