Converge Services Group, LLC v. Curran

HARRELL, J. An incipient dispute arose between Converge Services. Group, LLC, d/b/a SureDeposit, Inc. (“SureDeposit”) and the Consumer Protection Division of the Office of the Maryland Attorney General (“Division”) in 2002 when the Division commenced an investigation of SureDeposit for the latter’s marketing and sale of a “surety bond product” to Maryland residential real estate tenants to be used by the tenants in lieu of traditional security deposits required by their tenancies. After some administrative discovery occurred, the Division notified SureDeposit in January 2003 that it believed SureDeposit’s trade practices violated the Maryland Consumer Protection Act, Md.Code (1975, 2000 Repl.Vol.), § 13-101, et sec/., of the Commercial Law Article (“CPA”) and the Maryland Security Deposit Law and Application Fee Law, 'Md.Code (1974, 2003 Repl.Vol.), §§ 8-203 and 8-213 of the Real Property Article (collectively, “SDL”). Not surprisingly, SureDeposit disagreed.

SureDeposit and the Division engaged in some negotiations; but, apparently unsatisfied with their course and facing a potential contested administrative process regarding the Division’s probable filing of formal charges, SureDeposit filed on 9 October 2003 a complaint in the Circuit Court for Baltimore County seeking declaratory relief that the SDL did not apply to SureDeposit’s “surety bond product” and, assuming that relief were granted, that SureDeposit had not violated the CPA. The Division, on 26 November 2003, filed an administrative statement of charges against SureDeposit, alleging multiple violations of the CPA, some of which overlapped with allegations of violations of the SDL. After the parties exchanged some mutual paper discovery in SureDeposit’s Circuit Court action, the Division moved there for dismissal of the complaint under Md. Rule 2-323(b)(2) on the basis that the declaratory judgments sought would not resolve fully the entire controver ⁴⁶⁷ sy between the parties in accordance with § 8-409(a) of the Declaratory Judgment Act and that the Division, as an administrative agency with recognized expertise with regard to administering and interpreting the CPA, exercised primary jurisdiction over the entire dispute. The Circuit Court dismissed SureDeposit’s complaint on 4 February 2004.

SureDeposit noted an appeal to the Court of Special Appeals. We issued a writ of certiorari, on our initiative and before the intermediate court could decide the appeal, in order to consider SureDeposit’s following questions, which we reword slightly for consistency. 1 I. Does the Division have “primary jurisdiction” over the subject matter of the complaint where the issues raised in the complaint require interpretation of the Security Deposit Law, not the Consumer Protection Act?

II

If the Division does have primary jurisdiction, did the Division waive that argument by affirmatively engaging in discovery in the Circuit Court case?

III

Does the Security Deposit Law apply to the marketing and sale of SureDeposit’s surety bond product? Based on our analysis of SureDeposit’s first issue, and the interplay between the principles of primary jurisdiction and the statutory requirements of the Declaratory Judgment Act, Md.Code (1973, 2002 Repl.Vol.), §§ 3-401 — 8-415 of the Courts and Judicial Proceedings Article, we shall affirm the Circuit Court’s judgment. 2 1. A. SureDeposit is a New Jersey corporation that offers nationwide a “surety bond product” to residential rental tenants as ⁴⁶⁸ an alternative to paying a security deposit to their landlords. Consumers purchase these surety bonds, usually at the commencement of the tenancy, by signing a document entitled “SureDeposit Bond Acknowledgment Form” (Acknowledgment Form) and paying a premium to their landlords.

The landlords collect the premium and forward it to SureDeposit. SureDeposit retains a portion of this premium as profit while allotting a portion of it to a “primary claims pool” 3 to satisfy damage claims filed by landlords. Another portion is returned to the landlords to compensate them for their administrative expenses, although a landlord may elect to receive a portion of any excess funds available in the claims pool in lieu of this payment. SureDeposit characterizes its “surety bond product” as a surety contract where SureDeposit is the surety, the tenant is the principal, and the landlord is the obligee.

The surety bond product seems neither to protect nor insure the tenant from the typical landlord claim most often satisfied from a tenant’s security deposit. Rather, the surety bond product allows a landlord to collect compensation for damages to the leased property from an allegedly readily available “claims pool” in lieu of the traditional security deposit. In addition, according to the Acknowledgment Form signed by the tenant, the “surety bond product” may be utilized by the landlord to ⁴⁶⁹ pay for past due rent, fees, and any other charges beyond “normal wear and tear” to the leased premises. These charges include court costs, expenses, and attorney’s fees.

The Acknowledgment Form states that SureDeposit retains the right to seek reimbursement from the tenant for sums paid to the landlord for damages. In addition to SureDeposit’s right to reimbursement, the Acknowledgment Form purports to protect the landlord by waiving any landlord responsibility for SureDeposit’s collection activities. Tenants also preauthorize SureDeposit to collect “all requested information to assist in the collection or monies paid by BIC as previously described,” from “anyone.” B. In 2001, SureDeposit began selling its surety bond product in Maryland. Between June 2002 and September 2002, the Division issued administrative subpoenas for production of documents and depositions of SureDeposit’s corporate officers.

SureDeposit complied with the subpoenas for production of documents and offered up Dan Rudd, SureDeposit’s Chief Financial Officer and Chief Operating Officer, for deposition on 10 September 2002. Upon the conclusion of this discovery, SureDeposit began negotiation with the Division about the investigation. Two letters were sent to the Division, on 9 October 2002 and 19 December 2002, requesting an appointment to discuss any concerns surrounding its surety bond product. At some point during the investigation, SureDeposit voluntarily suspended sale of its surety bond product in Maryland.

The Division responded on 10 January 2003 that it had “reason to believe” that SureDeposit engaged “in trade practices that violate the Maryland Consumer Protection Act, Md.Code Ann., Com. Law II, § 13-101 et seq., 4 and the ⁴⁷⁰ Maryland Security Deposit Law and Application Fee Law, Md.Code Ann., Real Property, §§ 8-203 5 and 8-213 6 (2001 Supp.).” On 21 January 2003, SureDeposit and the Division met to discuss a proposed Assurance of Discontinuance that would require SureDeposit to halt permanently the sale of its surety bond product, make restitution to its current clients, and pay the Division’s administrative costs and a civil penalty. That meeting was followed by another exchange of letters. Sure-Deposit sought further clarification of the allegations regarding violations of the CPA and SDL.

The Division explained why it believed SureDeposit was in violation of those laws and urged settlement through execution of the Assurance of Discontinuance. In the Division’s last letter on 25 July 2003, it stated that, “[tjypically when we cannot reach an acceptable ⁴⁷¹ settlement, we bring an enforcement action pursuant to the Consumer Protection Act.” The Division learned of SureDeposit’s response when, on 25 November 2003, it was served with SureDeposit’s complaint for declaratory judgment, 7 filed in the Circuit Court for Baltimore County on 9 October 2003, together with requests for production of documents, admissions, and interrogatories. The Division countered on 4 December 2003 by propounding its own interrogatories and a request for production of documents. In a contemporaneous time frame, the Division filed an administrative statement of charges against SureDeposit and two of its officers on 26 November 2003.

The Division’s charges may be categorized in three groupings: 1) those alleging violations of the SDL because the surety bond product is claimed to be a security deposit under § 8-203(a)(3); 2) those alleging violations of the SDL because, alternatively, the surety bond product is claimed to be a “fee other than a security deposit” under § 8 — 213(b); and 3) those alleging violations of the CPA, some of which overlapped portions of the allegations regarding the SDL. Allegations supporting the assertion that the surety bond product is a security deposit under § 8-203(a)(3) included: 1) SureDeposit did not disclose to the tenants their rights and protections under the SDL; 8 2) the surety bond product may ⁴⁷² expose tenants to liabilities that exceeded those that landlords would normally claim against traditional security deposits; 3) SureDeposit paid damage claims to landlords without requiring the landlords to submit evidence or affording tenants the right to be present at the inspections or contest the claims; 4) SureDeposit paid damage claims without providing to tenants written lists of damages claimed or costs incurred; and 5) the premiums paid by tenants for the surety bond products were non-refundable. The Division also alleged alternatively that, if the surety bond product was not a security deposit, it was a fee “other than security deposit” under § 8-213(b). 9 In that event, the Division alleged that the surety bond product premiums were neither non-refundable nor expended for actual expenses arising out of credit checks or the application process. The Division lastly charged violations of the CPA.

One set of alleged violations appear to be grounded on § 13-301(1) of the CPA, which protects consumers from false or misleading statements that have the “capacity, tendency, or effect of deceiving or misleading consumers.” Supporting allegations included: 1) the Acknowledgment Form did not disclose adequately to consumers that they remained liable for damages due to nonpayment of rent, breach of lease, or damages to the rental premises in excess of wear and tear; 2) the Acknowledgment Form did not disclose adequately that, although the Surety is obligated to satisfy the claims by the landlord up to the bond amount, the tenant is obligated to reimburse the Surety for sums expended to pay those claims; 3) SureDeposit’s Acknowledgment Form and advertising brochure promoted the benefit of its “bond product” without actually delivering an actual copy of the SureDeposit “bond product” to the consumers; and 4) the Acknowledgment Form did not disclose adequately that tenants may incur liabilities from claims that ⁴⁷³ may exceed what the landlords could have deducted legally from traditional security deposits. Another set of violations appear to be grounded on § 13-301(3) of the CPA, which protects consumers from a “[fjailure to state a material fact if the failure deceives or tends to deceive.” Included in these charges were 1) SureDeposit did not disclose that landlords received fees from SureDeposit for the sale of the surety bond product; 2) SureDeposit did not provide the mandatory notice required upon receipt of a security deposit under § 8-203.1 of the Real Property Article; 3) the Acknowledgment Form failed to disclose that landlords may obtain satisfaction of claims via the surety bond product without honoring the tenants’ rights under the SDL or submitting any evidence in support of their claims; and 4) the Acknowledgment Form made no disclosure to tenants that the purchase of the surety bond product would affect the tenants’ statutory rights and protections afforded them under the SDL. In its memorandum of law 10 in support of its motion to dismiss SureDeposit’s complaint in the Circuit Court, the Division explained that it had primary jurisdiction in the matter because the dispute included an interpretation of a law in its area of specific expertise — the Consumer Protection Act. Further, the Division argued that the action for declaratory relief was inappropriate as it would not resolve fully the dispute between SureDeposit and the Division.

Even if the Circuit Court declared that SureDeposit had not violated the SDL, such a judgment would not address the alleged violations based solely on the CPA. Lastly, it contended that a declaratory judgment in favor of SureDeposit would not address any of the alleged violations by SureDeposit’s officers named in the Division’s administrative statement of charges because they were not named parties in the complaint. ⁴⁷⁴ After receiving the Division’s responses to SureDeposit’s request for production of documents, interrogatories, and admissions, SureDeposit filed on 14 January 2004 its opposition to the Division’s motion to dismiss. It claimed that the Division’s assertion of primary jurisdiction was off-the-mark because SureDeposit’s complaint asked solely for a declaratory judgment interpreting the SDL. But see, supra, at 7, n. 7.

As SureDeposit’s argument continued, concurrent jurisdiction also did not exist because the Division possessed no particular expertise in matters of interpreting the SDL; thus, the Circuit Court appropriately could interpret the SDL and issue the requested declaratory judgment. SureDeposit also claimed that the Circuit Court’s declaration as to the SDL would dispose completely of all of the Division’s claims in its administrative statement of charges. This was so because SureDeposit believed that all of the Division’s alleged violations of the CPA were dependent on whether the SDL applied to SureDeposit’s conduct. Upon receiving notice of the parties’ agreement to waive a hearing on the motion to dismiss, the Circuit Court dismissed SureDeposit’s complaint on 4 February 2004 with a simple order.

II

SureDeposit notes, by footnote in its brief, frustration with the “plain vanilla” order employed by the Circuit Court to memorialize the grant of the Division’s motion to dismiss. 11 Although the Division does not appear to have responded directly to this complaint in SureDeposit’s brief (nor should it necessarily respond to a contention slipped into a footnote, bereft of supporting authority), the point sounds a procedural ⁴⁷⁵ note that an appellate court must recognize, at the outset, in selecting the proper standard of review to be applied. The sparely worded order used by the Circuit Court makes it somewhat ambiguous as to which possible procedural vehicle the Circuit Court intended to employ to dispose of SureDeposit’s complaint. 12 Each of the two possible options, whether the Circuit Court disposed of SureDeposit’s complaint pursuant to a Rule 2 — 322(b) motion to dismiss or converted it into a motion for summary judgment under Rule 2-322(c) and Rule 2-501, has consequences. In our review of the grant of a motion for dismissal under Md. Rule 2-322(b) we accept all well-pled facts in the complaint, and reasonable inferences drawn from them, in a light most favorable to the non-moving party. Porterfield v. Mascari II, Inc., 374 Md. 402, 414 , 823 A.2d 590, 597 (2003).

Typically, “[t]he object of the motion is to argue that as a matter of law relief cannot be granted on the facts alleged.” See Paul V. Niemeyer & Linda M. Schuett, Maryland Rules Commentary, 206 (3d ed.2003). Thus, consideration of the universe of “facts” pertinent to the court’s analysis of the motion are limited generally to the four corners of the complaint and its incorporated supporting exhibits, if any. On the other hand, if a trial court treats a motion to dismiss as a “speaking demurrer” under Md. Rule 2-322(e) and considers “matters outside the pleading” (see Niemeyer & Schuett, supra, at 206-207, explaining that Rule 2-322(b) serves the same function as the common law demurrer but also permits a “speaking demurrer”) the trial court must treat ⁴⁷⁶ (and is presumed to have treated) the Rule 2-322(b) motion as a motion for summary judgment under Md. Rule 2-501. Md. Rule 2-322(c); Dual v. Lockheed Martin, Inc., 383 Md. 151, 161 , 857 A.2d 1095, 1100 (2004); see Oak Crest Village, Inc. v. Murphy, 379 Md. 229, 239 , 841 A.2d 816, 822 (2004) (observing that the trial court treated a motion to dismiss as “one for summary judgment” under Md. Rule 2-322(c)).

Unless the court states to the contrary, it is presumed to have considered also the factual allegations presented by the movant in its exhibits attached to the so-called motion for dismissal. Because the Circuit Court in the present case did not state, in its order of dismissal or otherwise, that, in granting the Division’s motion to dismiss, it did not consider the factual allegations and exhibits beyond those in SureDeposit’s complaint, the default provision established by the pertinent Rules and our cases interpreting them dictate that we review the action as the grant of summary judgment. A motion for summary judgment is granted where “there is no genuine dispute as to any material fact and that the party is entitled to judgment as a matter of law.” Md. Rule 2-501. The standard for review is “whether the trial court was legally correct.” Sadler v. Dimensions Healthcare Corp., 378 Md. 509, 533 , 836 A.2d 655, 669 (2003) (quoting Goodwich v. Sinai Hosp. of Balt., Inc., 343 Md. 185, 204 , 680 A.2d 1067, 1076 (1996).

This review must determine first if a “dispute of material fact exists.” Todd v. Mass Transit Admin., 373 Md. 149, 154-55 , 816 A.2d 930, 933 (2003) (citations omitted). If the record reveals there is no material fact in dispute, then the motion may be granted if it is correct as a matter of law. Id. at 155 , 816 A.2d at 933 . In the case before us, no genuine dispute of a material fact was generated.

Thus, were this other than an action for declaratory relief, we simply would move next to analysis of the purely legal question(s) presented. Because additional considerations apply to the proper disposition of declaratory judgment actions, however, we must remind ourselves what ⁴⁷⁷ those additional considerations are and determine how they may apply to the present case.

III

A. A court “may grant a declaratory judgment;” therefore, declaratory judgment generally is a discretionary type of relief. Md.Code (1973, 2002 Repl.Vol), § 3-409(a) of the Courts and Judicial Proceedings Article. The refusal to grant a discretionary order will be reversed on appeal if the judge abused his or her discretion. A.S. Abell Co. v. Sweeney, 274 Md. 715, 720 , 337 A.2d 77, 81 (1975) (holding that “‘some discretion is left to the courts’ in granting declaratory relief’ (quoting Grimm v. County Comm’rs of Washington County, 252 Md. 626, 632 , 250 A.2d 866, 869 (1969)).

We have “admonished trial courts that, when a declaratory judgment is brought, and the controversy is appropriate for resolution by declaratory judgment, the court must enter a declaratory judgment....” Salomon v. Progressive Classic Ins. Co., 379 Md. 301 , 308 n. 7, 841 A.2d 858 , 862 n. 7 (2004) (quoting Jackson v. Millstone, 369 Md. 575, 594-95 , 801 A.2d 1034, 1045-46 (2002)). We have found this standard instructive when reviewing appeals of declaratory judgment actions dismissed on pre-trial motions. See, e.g., Jackson v. Millstone, 369 Md. 575, 594-95 , 801 A.2d 1034, 1045 (2002); Allstate v. State Farm Mut.

Auto. Ins. Co., 363 Md. 106 , 117 n. 1, 767 A.2d 831 , 837 n. 1 (2001); Bushey v. N. Assurance Co. of Am., 362 Md. 626, 651 , 766 A.2d 598, 611 (2001); Harford Mut. Ins.

Co. v. Woodfin Equities Corp., 344 Md. 399, 414 , 687 A.2d 652, 659 (1997). Of equal importance, and more instructive in this case, is the logical converse, that is, when a declaratory judgment action is brought and the controversy is not appropriate for resolution by declaratory judgment, the trial court is neither compelled, nor expected, to enter a declaratory judgment. See Popham v. State Farm Mut. Ins.

Co., 333 Md. 136 , 140-41 n. 2, 634 A.2d 28 , 30 n. 2 (1993). ⁴⁷⁸ B. The purpose of the Declaratory Judgment Act is to “settle and afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations.” Md.Code (1973, 2002 Repl.Vol.), § 3-402 of the Courts and Judicial Proceedings Article.. Section 3-402 of the Declaratory Judgment Act states that it should be “liberally construed and administered.” In fact, the broad, inclusive language of § 3-406 of the CPA reflects this liberal application, granting courts the power to grant declaratory relief to, “[a]ny person interested under a deed, will, trust, land patent, written contract, or other writing constituting a contract, or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, administrative rule or regulation, contract, or franchise.... ” Declaratory relief, however, is barred by some statutory and judicially-crafted restrictions in limited circumstances. See Md.-Nat’l Capital Park and Planning Comm’n v. Washington Nat'l Arena, 282 Md. 588, 595 , 386 A.2d 1216, 1222 (1978). For example, declaratory relief in a given ease is barred under § 3-409(b) of the Declaratory Judgment Act when a special form of remedy is otherwise provided by statute.

We have held that declaratory relief is inappropriate in the absence of a justiciable controversy. Md. State Admin. Bd. of Election Laws v. Talbot County, 316 Md. 332, 339 , 558 A.2d 724, 727 (1989) (citations omitted) (explaining that declaratory judgment is inappropriate where issue is moot or where it will not serve a useful purpose or terminate a controversy). We also have held that declaratory judgment is an inappropriate remedy where the primary jurisdiction doctrine properly is implicated.

Luskin’s Inc. v. Consumer Prot. Div., 338 Md. 188 , 657 A.2d 788 (1995). Primary jurisdiction is a judicially created rule designed to coordinate the allocation of functions between courts and administrative bodies. The doctrine is not concerned with subject matter jurisdiction or the competence of a court to adjudicate, but rather is predicated upon policies of judicial restraint: ‘which portion ⁴⁷⁹ of the dispute — settling apparatus — the courts or the agencies — should, in the interests of judicial administration, first take the jurisdiction that both the agency and the court have.’ It comes into play when a court and agency have concurrent jurisdiction over the same matter, and there is no statutory provision to coordinate the work of the court with that of the agency. [Pjrimary jurisdiction is relevant only ... where the claim is initially cognizable in the courts but raises issues or relates to subject matter falling within the special expertise of an administrative agency.

Washington Nat’l Arena, 282 Md. at 601-602 ,