Fisher v. McCrary Crescent City, LLC

JAMES R. EYLER, Judge. This appeal arises from a judgment entered by the Circuit Court for Baltimore City against appellants, Edward V. Giannasca, II (“Giannasca”), Stuart Cornelius Fisher, a.k.a. “Neil Fisher” (“Stuart”), Tamara Jeanne Fisher (“Tamara”), TJ Biscayne Holdings, LLC (“TJB”), Giannasca Crescent City, LLC (“GCC”), Market Street Properties Palm Beach, LLC (“MS”), and Crescent City Estates, LLC (“CCE”), in favor of appellees, Michael C. McCrary (“McCrary”), McCrary Crescent City, LLC (“MCC”), MR Crescent City, LLC (“MRCC”), and CCE. 1 The following chart illustrates the status of the parties in this litigation: Plaintiffs Defendants (Appellees) (Appellants) McCrary Giannasca MCC Stuart ⁹⁷ MRCC Tamara CCE GCC MS TJB CCE McCrary owns MCC. MCC owns MRCC. Giannasca and Stuart own GCC. 2 MRCC and GCC each owned a 50% interest in CCE.

CCE owned the New Orleans building (“the building”) that is at issue in this case. Tamara, Stuart’s wife or ex-wife, 3 owns TJB. Stuart and Tamara jointly own MS. 4 The following chart illustrates the organization of the parties with respect to each other 5 : [[Image here]] ⁹⁸ The circuit court, by “Second Revised Order and Judgment” dated September 16, 2008, entered the judgment after entering orders of default as to liability against Giannasca, Stuart, and Tamara because they violated court orders and committed discovery failures; entering judgment as to liability against TJB, MS, GCC, and CCE after they failed to answer the complaint; and sanctioning Giannasca, Stuart, Tamara, MS, and TJB by precluding them and their counsel from participating at the damages hearing because they violated court orders and committed discovery failures. The circuit court awarded approximately (1) $17.8 million in compensatory damages in favor of CCE against all appellants with the exception of CCE; (2) $15.8 in million punitive damages in favor of all appellees against all appellants with the exception of CCE; and, (3) $8.9 million in compensatory damages in favor of McCrary, MCC, and MRCC against CCE.

The following chart illustrates the structure of the damages award: [[Image here]] On appeal, appellants present several contentions, but we need only decide whether the circuit court erred when it denied Stuart’s motion to dismiss, denied Tamara’s motion to dismiss, entered orders of default and imposed sanctions, and awarded punitive damages and other remedies. We shall affirm the orders of default as to liability but we shall vacate ⁹⁹ the judgment and remand for further proceedings because of errors relating to the assessment of damages. Background Appellees claim that Giannasca, Stuart, and Tamara, acting individually and through their respective entities, fraudulently concealed certain insurance proceeds that should have been paid to CCE. CCE was owned one-half by the McCrary entities and one-half by Giannasca and Stuart through GCC.

The operative complaint 6 is lengthy and contains detailed factual allegations. In circuit court, Giannasca and the Fishers disputed many of the facts, but the orders of default established the operative facts, giving rise to liability. We shall provide an overview at this point and include some additional information, as relevant, when we discuss the issues. As previously mentioned, McCrary owns MCC, and MCC is the sole owner and member of MRCC (all three hereinafter “McCrary” except when necessary to distinguish them).

In February 2005, Giannasca, who co-owned GCC with Stuart, approached McCrary about an investment opportunity. Giannasca asked McCrary to partner with him to buy a building in New Orleans, and convert it into “up-scale” residential condominiums. McCrary agreed, 7 and MRCC and GCC formed CCE. CCE’s operating agreement appointed Giannasca as manager.

MRCC and GCC each held a 50% ownership in CCE. CCE purchased a building in New Orleans (the “building”). CCE also obtained property damage insurance on the building from Lexington Insurance Company (“LIC”) and One Beacon Insurance Company (“OBIC”). ¹⁰⁰ In late August 2005, Hurricane Katrina struck New Orleans. Hurricane Katrina caused damage to the building’s internal mechanical systems, and created several environmental hazards within the building.

Accordingly, CCE filed insurance claims with LIC and OBIC, and retained a public insurance adjuster named Richard Agid to represent CCE in pursuing the insurance claims. McCrary was informed about the insurance claims, but was not informed about the substance of the claims or that Agid represented CCE. In early October 2005, McCrary asked Giannasca and Stuart about the progress of the insurance claims. Stuart told Giannasca that an early meeting with the insurance companies had “gone well,” but cautioned that “we will have to wait and see.” A few weeks later, LIC issued a check to CCE for $1 million, representing the first insurance payment.

Neither Giannasca nor Fisher told McCrary that CCE received this payment. Instead, the next day, Giannasca paid $450,000 of the insurance proceeds to himself, $150,000 of the insurance proceeds to Stuart, and $150,000 of the insurance proceeds to TJB. TJB is a Florida entity owned and managed by Tamara. In late October 2005, Giannasca hosted a conference call with Stuart and McCrary in his Baltimore City office.

Giannasca and Stuart told McCrary that the insurance claims probably would be denied. On November 9, 2005, CCE sold the building to an unrelated party. CCE used the sale proceeds to pay its debts, including a loan for $3.5 million that McCrary made to CCE. Ultimately, CCE made a profit of approximately $6.3 million off of the sale.

Giannasca and Stuart told McCrary that they needed to use a substantial portion of the proceeds to pay CCE’s outstanding operating expenses. Giannasca and Stuart told McCrary that the expenses totaled approximately $1.7 million, but never provided any proof of the expenses. After expenses, CCE was left with approximately $4.7 million. McCrary was paid approximately $2.35 million, in accordance with his 50% ownership interest in CCE. ¹⁰¹ Giannasca met with McCrary at Giannasca’s Baltimore office in December 2005.

Giannasca told McCrary that the insurance companies denied CCE’s insurance claims, and that CCE would not receive any insurance proceeds. Two months later, in February 2006, LIC paid CCE $2 million in additional insurance proceeds. Neither Giannasca nor Fisher told McCrary that CCE received this payment. Instead, Stuart paid approximately $1.72 million to himself.

In March 2006, LIC paid CCE $7 million in additional insurance proceeds. Neither Giannasca nor Fisher told McCrary that CCE received this payment. Instead, Stuart wired $700,000 to a private trust account, and paid $5 million to TJB. TJB invested the $5 million in another real estate investment project called the Entergy Project.

MS is a member of an organization that is the owner and developer of the Entergy Project. Tamara and Stuart jointly own MS. In April 2006, OBIC paid CCE $2 million in insurance proceeds. Neither Giannasca nor Fisher told McCrary that CCE received this payment.

Instead, Stuart transferred $800,000 to Giannasca, $200,000 to Tamara, and $200,000 to himself. McCrary, Giannasca, and Stuart all attended Tamara’s birthday party in July 2006. Agid, the insurance adjuster, attended the party as well. McCrary met Agid at the party for the first time.

Agid introduced himself to McCrary as the public insurance adjuster retained by CCE who “got the pot of gold for you guys.” Surprised and confused, McCrary asked Agid for further details. Agid revealed that the insurance proceeds totaled $12 million. McCrary confronted Giannasca at the party, asking him “How much did we get from insurance?” McCrary asked the question four times. Giannasca responded “what?,” “huh?,” “what are you talking about?,” and “I don’t know.” McCrary then asked Giannasca the question a fifth time.

Giannasca replied “Two or three million.... Ask [Stuart].” After the party, McCrary contacted Giannasca and Stuart multiple times via email, and asked them to account for ¹⁰² the insurance proceeds. Giannasca and Stuart never complied. Appellees filed suit on February 23, 2007, against appellants, with the exception of the Tamara Fisher entities, who were added at a . later time.

On August 24, 2007, appellees filed the third amended complaint. The gist of the action was fraudulent concealment of insurance proceeds, but it also contained counts alleging breach of contract, unjust enrichment, breach of fiduciary duty, violation of a Louisiana anti-fraud statute, conspiracy and aiding and abetting, and a derivative claim by MRCC and MCC on behalf of CCE. In addition to damages, appellees sought an accounting, injunctive relief, and the imposition of a trust on assets. On July 2, 2007, the court entered a scheduling order, which established a discovery cutoff date of February 21, 2008 and a trial date of June 17, 2008.

Giannasca, GCC, TJB, and CCE never answered the complaint or subsequent complaints, or filed motions to dismiss. None of the appellants complied with temporary restraining orders (“TROs”) issued by the court, which, in essence, prohibited the transfers of assets and required an accounting by specified dates. Giannasca, Tamara, and TJB were the only appellants who produced any requested documents during discovery, but the documents largely were irrelevant and did not fully comply with the discovery requests. Giannasca never appeared for his deposition.

Stuart left his deposition before it was finished and without notifying anyone, then failed to appear for the completion of his deposition on at least one subsequent occasion. Tamara failed to appear for her properly scheduled deposition on at least three occasions. When Tamara finally appeared for her deposition, she testified that she had no knowledge of nearly all the facts in this case, including information relating to her own finances. • Appellants delayed the litigation for over six months by filing an unauthorized petition for bankruptcy, which the federal bankruptcy court eventually dismissed. ¹⁰³ The circuit court entered orders of default as to liability against Giannasca, Stuart, Tamara, MS, TJB, GCC, and CCE because of failure to plead or as sanctions because of violations of court orders or failure of discovery. The circuit court also sanctioned Giannasca, Stuart, Tamara, MS, and TJB for their discovery failures and violations of court orders by precluding them from participating at the damages hearing.

Following the damages hearing, the court entered a judgment, awarding approximately $17.8 million in compensatory damages to CCE against Giannasca, Stuart, Tamara, MS, TJB, and GCC. The court also awarded approximately $8.9 million in compensatory damages to McCrary, MCC, and MRCC against CCE. 8 Additionally, the court awarded approximately $15.8 million in punitive damages to McCrary, CCE, MRCC, and MCC against Giannasca, Stuart, Tamara, MS, TJB, and GCC jointly and severally. Furthermore, the circuit court removed Giannasca from his position as manager of CCE, enjoined Giannasca and Stuart from taking any action on behalf of CCE, established a constructive trust to hold appellants’ funds directly or indirectly derived from funds or assets of CCE, and ordered Giannasca, Stuart, Tamara, MS, TJB, and GCC to “disgorge” all revenues and profits acquired with the funds or assets of CCE. This appeal followed.

Questions Presented Appellants present the following questions: I. Did the trial court err in denying [Stuart’s] motion to dismiss the complaint?

II

Did the trial court err in denying [Tamara and MS’s] motion to dismiss the complaint?

III

Did the trial court deprive [Tamara, TJB, and MS] of procedural due process when it granted default judgments against them on an accelerated basis?

IV

Did the trial court err in precluding appellants and their counsel from participating in the damages hearing? ¹⁰⁴ V. Did the preclusion of appellants’ counsel from participation in the damages phase of the trial deprive appellants of due process of law?

VI

Did the trial court err in awarding compensatory damages?

VII

Did the trial court err in awarding punitive damages?

VIII

Did the trial court err in awarding pre-judgment interest? In light of our disposition of appellants’ other questions, we need not address appellants’ sixth contention—where appellant contends that the circuit court improperly admitted certain evidence during the damages proceeding and that the evidence was legally insufficient in any event—nor appellants’ eighth contention—where appellant contends that the circuit court erred when awarding prejudgment interest. 9 To ease our analysis, we combined, re-worded, and re-ordered the remaining questions as follows: I. Did the circuit court err when it denied Stuart’s motion to dismiss?

II

Did the circuit court err when it denied Tamara and MS’s motion to dismiss?

III

Did the circuit court err when it entered orders of default as to liability and imposed sanctions against appellees?

IV

Did the circuit court err when it awarded punitive damages and imposed other remedies? Discussion I. Stuart's Motion to Dismiss Stuart argues that the circuit court erred when it denied his motion to dismiss because he was improperly served, the circuit court lacked personal jurisdiction over him, Maryland was an improper forum, and the circuit court was an improper ¹⁰⁵ venue. As appellants acknowledge, these issues are of law, even though at the time they were decided, they were decided on affidavits. See Bond v. Messerman, 391 Md. 706, 718 , 895 A.2d 990 (2006).

A. Service Stuart, a resident of Florida, argues that he was improperly served because appellees tricked him into coming to Maryland, and then served him. In Maryland, [i]f a defendant is within the jurisdiction of the Court by means of fraud or trickery of the plaintiff, no act accomplished thereby can be allowed to stand. There is very little difference between enticing a person from one jurisdiction to another for the purpose of getting process on him and by carrying him by force from one jurisdiction to another to be served with process. A fraud or trick usually has a fair face.

It would not succeed without it. Margos v. Moroudas, 184 Md. 362, 371 , 40 A.2d 816 (1945). Appellants cite two cases discussed by the Margos Court: Commercial Mutual Accident Co. v. Davis, 213 U.S. 245 , 29 S.Ct. 445 , 53 L.Ed. 782 (1909), and Empire Manufacturing Co. v. Ginsburg, 253 Ill.App. 242 (1929). In Commercial Mutual, the plaintiffs husband died from a gunshot wound. 213 U.S. at 250 , 29 S.Ct. 445 .

The insurance company asked to inspect the decedent’s body. Id. The plaintiff invited the insurance company to send an examiner, and asked that the examiner have authority to settle the matter if appropriate. Id. at 250-51 , 29 S.Ct. 445 .

The company sent a doctor, and authorized him to settle the matter if appropriate. Id. at 251 , 29 S.Ct. 445 . Upon arrival, the insurance company’s doctor asked the plaintiff to procure an additional doctor to oversee his examination. Id.

At that point, the plaintiff served the doctor. Id. The insurance company challenged the service. Id. at 251-52 , 29 S.Ct. 445 .

The Supreme Court held that the plaintiff did not trick the insurance company into service, explaining that “[tjhere is testimony tending to show that both parties expected an ¹⁰⁶ adjustment of the claim to be made at this meeting, which was held for that purpose.” Id. at 257 , 29 S.Ct. 445 . In Empire Manufacturing, the plaintiff invited the defendant to the forum state “to settle the controversy.” 253 IlLApp. at 244. The plaintiff arrived in the forum state on a train. Id.

A representative of the defendant met the plaintiff at the train station. Id. The defendant’s representative informed the plaintiff that he had a car that would take the plaintiff to the meeting. Id.

The plaintiff entered the back seat of the car, where a deputy sheriff immediately served him. Id. The court held that the service was improper because the plaintiff tricked the defendant into entering the forum state. Id. at 247 .

The difference between these cases is that in Empire Manufacturing, the plaintiff promised to conduct settlement negotiations, only to lure the defendant to the forum and serve the defendant without ever making a bona fide attempt to settle. Id. at 247 . In Commercial Mutual, the plaintiff and the defendant made a good faith bona fide effort to settle. 213 U.S. at 256-57 , 29 S.Ct. 445 . The plaintiff served the defendant only after negotiations broke down.

Id. at 257 , 29 S.Ct. 445 . In this case, there is evidence that Stuart came to Maryland intending to settle the case. On August 8, 2006, Stuart, who supposedly possesses a law degree, emailed McCrary and stated 10 : You, [Giannasca], and I have to meet face to face to resolve all issues. I believe that this is possible.

I have always been willing to do that.... Let me know what your schedule is and perhaps all of us can meet over the weekend. Because both you and [Giannasca] are in Baltimore it only make[s] sense for me to come see both of you. On February 12, 2007, Stuart emailed McCrary, stating, “Perhaps if your [sic] guys schedule works, I can drive up to ¹⁰⁷ Baltimore and we can meet on Monday March 5, in the afternoon or for dinner.

Let me know.” Stuart stated on several occasions that the purpose of the February 23, 2007 meeting was to settle the issues underlying this case. For example, at the hearing on the motion to dismiss, the following colloquy occurred: THE COURT: And there was an email that suggested that [Stuart] was the one that proposed coming to Maryland. [STUART’S COUNSEL]: There’s no question about that, Your Honor. [Stuart] recognized the need to sit down with ... McCrary and have a meeting. He said, “I’ll come to Baltimore if that’s more convenient for you,” to have a settlement meeting.[ ] He didn’t say I’ll come to Baltimore so you can serve me with process and a lawsuit that I don’t know anything about.

That’s not what he would have done The misapprehension was he thought he was coming for a settlement meeting. When he was introduced to [McCrary’s attorney], he was not told that [McCrary’s attorney] was outside counsel for ... McCrary. Additionally, in Stuart’s “Second Affidavit,” Stuart stated, “The settlement meeting that occurred on February 23, 2007, had its origins in a birthday party .... ” The evidence also indicates that McCrary intended to and did make a good faith effort to settle the case at the meeting.

McCrary, Giannasca, and Stuart met in Maryland on February 23, 2007, at around 10 a.m. The group 11 discussed settling this case for approximately four hours, and apparently were close to settling the case on several occasions. 12 ¹⁰⁸ McCrary served Stuart only after the negotiations broke down. Under Margos and Commercial Mutual the circuit court did not err in its ruling because the evidence supports a conclusion that Stuart willingly came to Maryland, both Stuart and McCrary intended to settle and made a good faith attempt to settle the claim at the meeting, and service occurred only after the bona fide settlement negotiations broke down. B. Personal Jurisdiction Stuart argues that the circuit court erred when it denied his motion to dismiss because the circuit court lacked personal jurisdiction over him.

A circuit court has personal jurisdiction over a nonresident defendant if the requirements of the Maryland long-arm statute, Maryland Code (2006 Repl.Vol.), § 6-103 of the Courts and Judicial Proceedings Article, have been satisfied and exercising jurisdiction comports with due process i.e., defendant has minimum contacts with the forum, such that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. See Himes Associates, Ltd. v. Anderson, 178 Md.App. 504, 527 , 943 A.2d 30 (2008). Appellants do not challenge the applicability of the statute, but assert that the exercise of jurisdiction violated due process. Under the conspiracy theory of personal jurisdiction, a defendant possesses the requisite minimum contacts if the defendant (1) entered into a conspiracy, and (2) “had a reasonable expectation, at the time the co-conspirator agreed to participate in the conspiracy, that acts to be done in furtherance of the conspiracy by another co-conspirator would be sufficient to subject that other co-conspirator to personal jurisdiction in the forum.” Mackey v. Compass Mktg., Inc., 391 Md. 117, 132-34 , 892 A.2d 479 (2006).

Appellees pled conspiracy, and the circuit court entered an order of default, establishing that Stuart engaged in a conspiracy. Nevertheless, Stuart argues that he could not ¹⁰⁹ have reasonably expected that acts would be done in furtherance of the conspiracy sufficient to subject him to personal jurisdiction in Maryland. We disagree. Before entering into the conspiracy, Stuart knew that his co-conspirator, Giannasca, was a Maryland resident and maintained an office in Maryland.

Furthermore, Stuart knew that McCrary maintained an office in Maryland, and had other Maryland ties. Stuart also knew that Giannasca was the manager of CCE, and CCE’s operating agreement required Giannasca to deposit all CCE funds in a Maryland bank account. Any reasonable person with knowledge of these facts would have reasonably expected that acts would be done in furtherance of the conspiracy sufficient to subject him to personal jurisdiction in Maryland. C. Forum Non Conveniens Stuart argues that Maryland was not the appropriate forum for this case.

As appellants acknowledge, the circuit court is vested with wide discretion when determining whether a forum is convenient. See, e.g., Johnson v. G.D. Searle & Co., 314 Md. 521, 523, 526 , 552 A.2d 29 (1989). Maryland is not an inconvenient forum for the parties. Giannasca and McCrary are Maryland residents.

Giannasca, CCE), and McCrary all maintained offices in Maryland, providing easy access to sources of proofs. Although Stuart and Tamara are nonresidents, Stuart has a history of doing business in Maryland. Moreover, Giannasca and Stuart carried out fraudulent activities in Maryland when they made fraudulent misrepresentations to appellees. There is nothing to indicate that obtaining compulsory process for unwilling witnesses would be difficult, or that the cost of obtaining the attendance of witnesses would be prohibitive.

Viewing the premises at issue is not important. Appellants argue that Florida and Louisiana were convenient forums for this case. Stuart, Tamara, TJB, and MS all are Florida residents. GCC and CCE are Louisiana residents.

The building at issue is located in Louisiana. More ¹¹⁰ over, fraudulent acts occurred in both Florida and Louisiana. Nevertheless, the convenience of Florida and Louisiana does not preclude Maryland from also being a convenient forum. D. Improper Venue Stuart also argues that “[t]he action did not belong in the Circuit Court for Baltimore City.

None of the parties on either side had actual physical addresses in Baltimore City that would have made venue proper.” Maryland Code (2006 ReplVol.), § 6-201(a) of the Courts and Judicial Proceedings Article provides “a civil action shall be brought in a county where the defendant resides, carries on a regular business, is employed, or habitually engages in a vocation. In addition, a corporation also may be sued where it maintains its principal offices in the State.” Furthermore, a plaintiff can bring suit in any county in the State in an action for damages against a nonresident individual. Id. §§ 6— 201(a), -202(11). If the action is against a corporation that has no principal place of business in Maryland, the appropriate venue is the county where the plaintiff resides.

Id. § 6-202(3). Venue is proper anywhere in Maryland against Stuart and Tamara because they are nonresident individuals. Venue is proper in Baltimore County against GCC, MS, and TJB because they are nonresident corporations with no principal place of business, and one of the plaintiffs, McCrary, resides in Baltimore County. Although CCE also is a nonresident defendant, CCE’s principal place of business was in Baltimore City because its only office was in Baltimore City.

Giannasca resided in Harford County, and carried on regular business in Baltimore City because he was the sole manager of CCE, and CCE’s only office was in Baltimore City. Therefore, no single venue was appropriate for all defendants. “If there is more than one defendant, and there is no single venue applicable to all defendants, under [ § 6-201 (a) ], all may be sued in a county in which any one of them could be sued, or in the county where the cause of action arose.” Id. ¹¹¹ R. 6-201(b). Under this rule, the Circuit Court for Baltimore City was an appropriate venue.

II

Tamara and MS’s Motion to Dismiss 13 Appellees asserted personal jurisdiction over Tamara and MS under a conspiracy theory. As we previously stated, under the conspiracy theory of personal jurisdiction, Maryland courts have personal jurisdiction over a conspirator when the conspirator (1) entered into a conspiracy; and (2) “had a reasonable expectation, at the time the coconspirator agreed to participate in the conspiracy, that acts to be done in furtherance of the conspiracy by another co-conspirator would be sufficient to subject that other coconspirator to personal jurisdiction in the forum.” Mackey, 391 Md. at 132-134, 892 A.2d 479 . A. Tamara, and MS Entered Into the Conspiracy The complaint alleged facts sufficient to establish that Tamara knowingly participated in a conspiracy. Specifically, the complaint alleged that Tamara is or was Stuart’s wife, a member of MS, and a member and the manager of TJB.

LIC Paid $1 million to CCE in October 2005. CCE paid $150,000 of the proceeds to TJB. Tamara managed TJB. LIC also paid CCE $5 million to CCE in insurance proceeds on March 22, 2006.

Eight days later CCE paid $5 million to TJB. On April 6, 2006, TJB transferred $4.2 million to Tamara’s per ¹¹² sonal account. OBIC also paid CCE $2 million. Subsequently CCE transferred $200,000 to Tamara.

Furthermore, MS is a member of the owner and developer of the Entergy Project, where other portions of the insurance proceeds were invested. It is reasonable to infer that Tamara knew the origin of the substantial funds that were deposited into her personal account and TJB’s account, and were invested in MS’s development projects. The cases relied on by appellants, McKown v. Criser’s Sales and Service, 48 Md.App. 739 , 430 A.2d 91 (1981), and AP Links, LLC v. Global Golf, Inc., Civ. Action No. CCB-08-705, 2008 WL 4225764 (D.Md. Sept.2, 2008), are not apposite because they involved a failure of proof.

The existence of the conspiracy in this case was established by the orders of default as to liability. The conspiracy, as thus established, existed prior to the initiation of this action. B. Tamara and MS had Reason to Believe that They Would Be Subject to Personal Jurisdiction in Maryland Appellees alleged in their complaint that Tamara, and consequently MS, knew at the time that they conspired to defraud appellees that Giannasca lived in and maintained his principal office in Maryland. Tamara knew that McCrary was from Maryland and maintained an office in Maryland.

Any reasonable person would have reason to believe that they would be subject to personal jurisdiction in Maryland when they conspire with a Maryland resident with its primary office in Maryland against another individual with personal ties to Maryland and their principal place of business in Maryland. Despite knowing that the conspiracy involved actors with ties to Maryland, neither Tamara nor MS refrained from entering into the conspiracy. In fact, Tamara and MS continued to participate in the conspiracy despite the fact that numerous acts in furtherance of the conspiracy occurred in Maryland. 14 ¹¹³ Again, appellants’ reliance on cases, such as Capital Source Finance, LLC v. Delco Oil Inc., Civ. Action No. DKC 2006-2706, 2007 WL 3119775 (D.Md. Sept. 17, 2007), is unavailing because they were based on lack of sufficient allegations.

In this case, there were detailed allegations and an order of default as to liability. 15 III. Orders of Default, Contempt, and Discovery Sanctions In some instances, when finding appellants in contempt and imposing discovery sanctions, the circuit court erred because it failed to follow the proper procedures. In addition, it abused its discretion when it precluded certain appellants and their counsel from participating in the damages hearing. A. Procedural Flaws When a party or circuit court is confronted with an uncooperative party, the party or circuit court may seek to compel the party’s cooperation, or punish the party.

Specifically, the party or circuit court may pursue direct civil or criminal contempt sanctions, constructive civil or criminal contempt sanctions, or discovery sanctions. The remedies may overlap, but each one has certain requirements, largely contained in the applicable rules, which must be followed. Because the court may wish to revisit the question of sanctions on remand, we shall summarize the major requirements for each remedy. 16 See infra Parts III.A. 1-4. We then will apply the rules to the facts of this case.

See infra Part III.A.5. ¹¹⁴ Contempt proceedings require an action constituting contempt. In a narrow sense, a' contempt has been defined as a despising of the authority, justice, or dignity of the court; in a more general sense, a person whose conduct tends to bring the authority and administration of the law into disrespect or disregard, interferes with or prejudices parties or their witnesses during litigation, or otherwise tends to impede, embarrass, or obstruct the court in the discharge of its duties, has committed a contempt. Goldsborough v. State, 12 Md.App. 346, 355 , 278 A.2d 623 (1971). If a contempt has occurred, the moving party and the court must determine the nature of the contempt proceeding—i.e., direct or constructive, and civil or criminal.

See State v. Roll and Scholl, 267 Md. 714 , 298 A.2d 867 (1973) (holding that the nature of the contempt proceeding is determined before reaching the time for imposing sanctions). To conduct this analysis, parties and courts first should determine whether the contempt was direct. See infra Part III.A.1. If the contempt was direct, the party or court follows the same rules to dispose of the case, regardless of whether the contempt was criminal or civil.

See infra Part III.A.1. If the contempt was not direct, it must have been constructive. Md. Rule 15-202(a). The party or court then must determine whether the constructive contempt was criminal or civil, and apply the rules accordingly.

See infra Parts III.A.2-3. A court may impose discovery sanctions if “a failure of discovery” has occurred or if a party has failed to obey an order compelling discovery. Md. Rule 2-433(a), (c); see infra Part III.A.4. 1. Direct Civil and Criminal Contempt A direct contempt is “a contempt committed in the presence of the judge presiding in court or so near to the judge as to interrupt the court’s proceedings.” Md. Rule 15-202(b).

Direct contempt proceedings are inappropriate when ¹¹⁵ the judge does not have personal knowledge of all relevant facts, and must learn all of the facts from others. Roll and Scholl, 267 Md. at 734 , 298 A.2d 867 . Any contempt that is not a direct contempt—“where the judge must look at extrinsic evidence to determine that a contempt has been committed”—is a constructive contempt. Md. Rule 15-202(a); Scott v. State, 110 Md.App. 464, 480-81 , 677 A.2d 1078 (1996); see infra Parts III.A.2-3.

Once the court finds that a direct contempt—either civil or criminal—has occurred, the court must determine whether to impose summary sanctions, 17 defer imposing sanctions until the conclusion of the proceeding where the alleged contemnor committed the contempt, or issue the sanctions after holding a hearing. We shall briefly discuss these three options. First, summary sanctions are appropriate when the court observes actions that “pose[ ] an open, serious threat to orderly procedure that instant.... ” Roll and Scholl 267 Md. at 733, 298 A.2d 867 ; see also Md. Rule 15-203(a). Ordinarily, the court should “afford the alleged contemnor an opportunity, consistent with the circumstances ..., to present exculpatory or mitigating information.” Md. Rule 15-203(a).

The alleged contemnor may offer affidavits before or after the court imposes sanctions. Id. R. 15-203(c). If the court issues sanctions summarily, the court must (1) issue a written order 18 (2) stating that a direct contempt has been committed; (3) specifying whether the contempt is civil or criminal 19 ; (4) specifying the evidentiary ¹¹⁶ facts that support a finding of direct contempt, known to the court from the court’s own personal knowledge; (5) specifying the evidentiary facts that support a finding of direct contempt but are not known to the court’s personal knowledge, and the court’s basis of finding them as facts; (6) the sanction imposed for the contempt 20 ; (7) how the contempt may be purged if the contempt is civil; (8) if the sanction is incarceration and the contempt is criminal, the determinate term of the incarceration; and (9) any condition under which the sanction may be suspended, modified, revoked, or terminated if the contempt is criminal.

Md. Rule 15-203(b). Second, if the court wants to impose sanctions at the conclusion of the proceeding in which the contempt occurred, the court must “summarily find[ ] and announce[ ] on the record” after the contempt that the alleged contemnor committed direct contempt. Md. Rule 15-203(a). When the court issues sanctions at the conclusion of the proceeding, it should follow the same procedures used when issuing sanctions summarily immediately after the contempt.

See supra. Third, if the court wants to hold a hearing before issuing sanctions, “reasonably promptly” after the contemptuous conduct, the court must issue a written order identifying the contemnor, and the “evidentiary facts within the personal knowledge of the judge as to the conduct constituting the contempt.” Md. Rule 15-204; see also Hermina v. Baltimore Life Ins. Co., 128 Md.App. 568, 584-590 , 739 A.2d 893 (1999) (holding that the court committed procedural errors when not summarily sanctioning a contemnor in a direct contempt case). The order should specify whether the contempt is civil or ¹¹⁷ criminal.

See Md. Rule 15-204; infra Parts III.A.2-3. If the contempt is civil, the court must proceed pursuant to the constructive civil contempt rules. Md. Rule 15-204; see infra Part III.A.2. If the contempt is criminal, the court must proceed pursuant to the constructive criminal contempt rules.

Md. Rule 15-204; see infra Part III.A.3. With certain exceptions, the judge instituting the direct contempt proceeding is disqualified from presiding over the hearing if the judge reasonably expects to be called as a witness at any hearing on the matter. Md. Rule 15-207(b). Regardless of whether the court imposed the sanctions summarily, after the conclusion of the proceeding, or following a separate hearing, the clerk should ensure that the record consists of (1) the written order of contempt; (2) a transcript of the portion of the proceeding in which the court found someone in direct contempt, if the proceeding was recorded; and (3) “any affidavits offered or evidence admitted in the proceeding.” Id.

R. 15-203(d). The record should be composed so that the appellate court can conduct a meaningful review. 2. Constructive Civil Contempt A party, the Attorney General, 21 or the court may institute a constructive civil contempt proceeding when (1) the movant intends to file or filed the proceeding as a continuation of the original action, as opposed to a separate and independent action; (2) the movant seeks relief to benefit themselves or a party instead of punishing the alleged contemnor; (3) “the acts complained of do not of themselves constitute crimes or conduct by the defendant so wilful or contumacious that the court is impelled to act on its own motion”; and (4) the contempt is not a direct contempt. Md. Rule 15-206(a), (b); Winter v. Crowley, 245 Md. 313, 317 , 226 A.2d 304 (1967). ¹¹⁸ The court order or petition must satisfy three general requirements.

The order or petition must comply with Rule 2-303 (form of pleadings), Md. Rule 15-206(c), and the order or petition must “expressly state whether or not incarceration is sought.” Id. If the court initiates the proceeding or receives a petition for constructive civil contempt, the court must “enter an order,” generally referred to as a show cause order, as long as the petition for contempt is not “frivolous on its face.... ” Id. R. 15-206(c)(2). The show cause order must include three elements.

First, if incarceration is sought, the court must provide a notice in the form set forth in Rule 15-206(c)(2)(C). Second, the order must establish a date by which the alleged contemnor must answer the petition: Id. R. 15-206(c)(2)(A). The date may not be less than 10 days after service of the order, unless good cause exists.

Id. Third, the order must establish a time and place at which the alleged contemnor must appear in person for a prehearing conference, a hearing, or both. Id. R. 15-206(c)(2)(B).

If the court schedules a hearing, the order also must state whether the hearing is before a master or a judge. 22 Id. With certain exceptions, if the judge initiated the proceeding, the hearing cannot be before that judge if the judge reasonably expects to be called as a witness. Id. R. 15-207(b).

Additionally, if the court schedules a hearing, the hearing date must allow the alleged contemnor a reasonable amount of time to prepare a defense. Id. R. 15-206(c)(2). The amount of time may not be less than 20 days after the prehearing conference.

Id. Also, when scheduling the hearing, the court may consolidate constructive criminal and civil contempt petitions for hearing and disposition. Md. Rule 15-207(a). Nevertheless, the constructive criminal and civil contempt proceedings must have separate charging documents.

Dorsey v. State, 356 Md. 324, 348-50 , 739 A.2d 41 (1999). The Rules’ requirement of an answer and a hearing for the alleged contemnor in a constructive civil contempt ¹¹⁹ proceeding is one of the main differences between constructive and direct proceedings. The court may punish contempt summarily only in direct contempt proceedings. Betz v. State, 99 Md.App. 60, 66 , 685 A.2d 77 (1994).

In contrast, in constructive contempt proceedings, the court must give the accused contemnor an opportunity to challenge the alleged contempt and show cause why a finding of contempt should not be entered. Id. The show cause order must be served upon the alleged contemnor pursuant to Rule 2-121 (service of process-in personam) or in the manner prescribed by the court if the alleged contemnor is a party in the action. If the hearing on constructive civil contempt is before a master, Rule 9-208 (referral of matters to masters) is applicable.

If the hearing on constructive civil contempt is before a judge, the alleged contemnor appears without counsel, and incarceration is sought, the court must follow a specific set of procedures. See id. R. 15—206(e)(l), (2) (notice and right to and waiver of counsel). If the hearing on constructive civil contempt is before a judge, incarceration is sought, and the alleged contemnor asks to discharge his counsel, the court must follow another specific set of procedures.

See id. R. 15—206(e)(3) (meritorious reason). If the alleged contemnor fails to appear at the hearing on constructive civil contempt, the court may (1) proceed ex parte; and/or (2) order the “sheriff or other peace officer to take custody of and bring the alleged contemnor before the court or judge designated in the order.” Id. R. 15—207(c)(2).

The rules do not allow for pre-hearing incarceration of the alleged contemnor. Young v. Fauth, 158 Md.App. 105, 110-12 , 854 A.2d 293 (2004); Redden v. Dep’t of Soc. Servs., 139 Md.App. 66, 72-76 , 773 A.2d 1094 (2001). At the show cause hearing, the court may terminate the civil contempt proceeding and institute new criminal contempt proceedings if facts exist indicating “that the alleged contemnor cannot comply with the order of the court” due to ¹²⁰ the contemnor’s “deliberate effort or a wilful act of commission or omission ... committed with the knowledge that it would frustrate the order of the court.... ” Roll and Scholl, 267 Md. at 780 , 298 A.2d 867 .

Nevertheless, some time lag must exist between the termination of the civil contempt proceeding and the trial of a new constructive criminal contempt case. Indeed, courts may not convert or merge a civil contempt proceeding to a criminal contempt proceeding mid-trial. Bryant v. Howard County Dep’t of Soc. Servs., 387 Md. 30, 50 , 874 A.2d 457 (2005); Dorsey, 356 Md. at 350-51 , 739 A.2d 41 .

A court must find civil contempt by a preponderance of the evidence. Roll and Scholl, 267 Md. at 728 , 298 A.2d 867 . Following a finding of contempt, the court must issue a written order specifying (1) the coercive sanction imposed for the contempt, and (2) how the contempt may be purged. Md. Rule 15-207(d)(2); Roll and Scholl, 267 Md. at 730 , 298 A.2d 867 (stating that “[i]f it is a civil contempt the sanction is coercive and must allow for purging____”).

The purging provision—another critical difference between civil and criminal contempt—is important. “In this way, a civil contemnor is said to have the keys to the prison in his own pocket.” Jones v. State, 351 Md. 264, 281 , 718 A.2d 222 (1998). Absent a purging provision, the sanction is no longer coercive and remedial. See id. at 279-83 , 718 A.2d 222 . Rather, the sanction is punitive, and “the constitutional and procedural rules applied to criminal trials must be observed.” Id. at 280 , 718 A.2d 222 (quotations and citations omitted).

Not only must a sanction contain a purge provision, but the contemnor must have the ability to comply with the purge provision. Jones, 351 Md. at 281-82 , 718 A.2d 222 . In other words, completion of the purging provision must be feasible. See Young, 158 Md.App. at 113-14 , 854 A.2d 293 ; Redden, 139 Md.App. at 77-78 , 773 A.2d 1094 . 3.

Constructive Criminal Contempt The court, the State’s Attorney, the Attorney General, or the State Prosecutor, depending on the circumstances, may ¹²¹ institute a constructive criminal contempt proceeding when (1) the movant intends to file or filed the proceeding as a separate action as opposed to a continuation of the original action; (2) the alleged contemnor willfully violated or attempted to frustrate a court order, such that the alleged contemnor offended the dignity or process of the court; (3) the act was not a direct contempt; and (4) the movant seeks to punish the alleged contemnor for his act. See Md. Rule 15-202(a), -205(a), (b); Bryant, 387 Md. at 47 , 874 A.2d 457 ; Dodson v. Dodson, 380 Md. 438, 452 , 845 A.2d 1194 (2004); Roll and Scholl, 267 Md. at 728 , 298 A.2d 867 . The order or petition instituting the proceeding must contain the information required by Rule 4-202 (contents of charging document). Md. Rule 15-205(d).

The order, along with a summons or warrant, must be served in accordance with Rule 4-212 (service of summons or warrant). At the hearing on constructive criminal contempt, [w]hile a contemnor in a criminal contempt proceeding in Maryland is not entitled to indictment by a grand jury and may not have a right to a jury trial, .... [t]he burden of proof is increased [to proof beyond a reasonable doubt], the accused cannot be compelled to testify against himself, he cannot be put in double jeopardy, and, except when a contempt may be dealt with summarily, the panoply of fundamental due process rights comes into play. These include not only the right to notice, and the opportunity to be heard but also the right to counsel and with the possibility of imprisonment an indigent has the right to have an attorney appointed for him. Roll and Scholl, 267 Md. at 730-31 , & 731 n. 12, 298 A.2d 867 (citations omitted).

With certain exceptions, the judge cannot be the same judge who (1) instituted the constructive criminal contempt proceeding; and (2) reasonably expects to be called as a witness at ¹²² any hearing on the constructive criminal contempt proceeding. Md. Rule 15-207(b). If the alleged contemnor fails to appear at the hearing on • constructive criminal contempt, the court may order the “sheriff or other peace officer to take custody of and bring the alleged contemnor before the court or judge designated in the order.” Id. R. 15-207(c)(2).

Unlike constructive civil contempt proceedings, the court may not conduct an ex parte proceeding. See id. At the hearing, the State must prove beyond a reasonable doubt “a deliberate effort or a •willful act of commission or omission by the alleged contemnor committed with the knowledge that it would frustrate the order of the court....” In re Ann M., 309 Md. 564, 569 , 525 A.2d 1054 (1987). “[Ejvidence of an ability to comply, or evidence of a defendant’s conduct purposefully rendering himself unable to comply, may, depending on the circumstances, give rise to a legitimate inference that the defendant acted with the requisite willfulness and knowledge.” Dorsey and Craft, 356 Md. at 352 , 739 A.2d 41 . Following a finding of criminal contempt beyond a reasonable doubt, the court must issue a written order specifying a sanction.

Md. Rule 15-207(d)(2). Unlike orders in constructive criminal contempt proceedings, orders in criminal contempt proceedings do not need a purge provision. See id. In constructive criminal contempt proceedings, sanctions punish the contemnor “for past misconduct which may not necessarily be capable of remedy.” Roll and Scholl, 267 Md. at 728 , 298 A.2d 867 .

In any event, “if the sanction is incarceration, the order [must] specify a determinate term[,] and any condition under which the sanction may be suspended, modified, revoked, or terminated.” Md. Rule 15-207(d)(2). Ultimately, the sanction for criminal contempt “is largely within the discretion of the court, so long as it is not cruel or unusual.” Arrington v. Dep’t of Human Res., 402 Md. 79, 100 , 935 A.2d 432 (2007). ¹²³ 4. Discovery Sanctions Discovery sanctions are permitted if a “failure of discovery” has occurred or a party fails to obey an order compelling discovery. Md. Rule 2-432, -433.

We reviewed the procedures in Hossainkhail v. Gebrehiwot, but will briefly summarize them herein. 143 Md.App. 716, 729-33 , 795 A.2d 816 (2002). A discovering party may move for sanctions without first moving to compel if another party fails to appear for a properly noted deposition, fails to respond to interrogatories, or fails to respond to a request for production or inspection. Md. Rule 2-432(a). When defending the motion for sanctions, the party against whom sanctions are sought may not argue that the court should excuse that party’s discovery failure because the discovery sought is objectionable unless a protective order has been obtained.

Id. R. 2-432(a). A discovering party may move for an order compelling discovery if there is a failure of discovery or if a party provides discovery but fails to respond to one or more discovery requests, as enunciated in Md. Rule 2-432(b). “If the court denies the motion [to compel] in whole or in part, it may enter any protective order it could have entered on a motion pursuant to Rule 2-03.” Id. R. 2—432(b) (2).

If the court grants the motion to compel, the court must issue an order compelling discovery. See id. R. 2—433(b). If a party fails to obey an order compelling discovery, the discovering party may move for sanctions, Id.

If either party wants a hearing on a motion for sanctions, the party must request the hearing in accordance with Rule 2—311(f). Karl v. Blue Cross & Blue Shield of Maryland, Inc., 100 Md.App. 743, 745-48 , 642 A.2d 903 (1994). After receiving a motion for sanctions produced by either method outlined above, the court may enter such orders 23 “as are just, including one or more of the following.” ¹²⁴ Id. R. 2-433(a), (b).

The court may order that certain matters are established. Id. R. 2-433(a)(l). The court may prohibit the failing party from supporting or opposing designated claims or defenses.

Id. R. 2-433(a)(2). The court may prohibit the failing party from introducing certain matters into evidence. Id.

R. 2-433(a)(2). The court may strike out pleadings in whole or in part. Id. R. 2-433(a)(3).

The court may stay further proceedings until the failing party provides discovery. Id. The court may dismiss the action in whole or in part. Id.

The court may enter a judgment by default that determines liability and all relief sought by the moving party ¹²⁵ against the failing party, 24 as long as the court is satisfied that it has personal jurisdiction over the party. Id. Lastly, if the discovering party moved to compel, the court granted the motion and issued an order compelling discovery, the other party still failed to honor the order, and the discovering party then moved for sanctions—the court may initiate a constructive civil contempt proceeding in compliance with the rules outlined above “[i]f justice cannot otherwise be achieved.” Id. R. 2-433(b); see supra Part III.A.3.

Ultimately, discovery sanctions are in the sound discretion of the circuit court. Williams, 32 Md.App. at 691, 363 A.2d 598 . 5. Appellant-Specific Procedural Errors When Imposing Sanctions for Contempt and Discovery Violations i. Giannasca: The court entered an order of default against Giannasca on April 30, 2007, because he failed to answer appellees’ complaint within 30 days, as required by the Maryland Rules.

Giannasca does not challenge this order. Nevertheless, we note that we perceive no error. On June 5, 2008, appellees filed a petition to hold Giannasca in constructive civil contempt. On June 10, 2008, the circuit court issued a show cause order.

At a hearing on June 17, 2008, the circuit court found Giannasca in contempt for