Helman v. Mendelson

KENNEY, Judge. This case arises out of a grant of summary judgment by the Circuit Court for Montgomery County in favor of appellees, ³⁵ Ira Mendelson (“Ira”), Herlene Nagler (“Herlene”), and David Luftig (“David”), to two suits, consolidated below, filed by appellant, Herby Helman. Appellant presents three questions on appeal, which we have renumbered: 1. Whether the trial court abused its discretion when it excluded the report of Mr. Helman’s expert, Charles Lundelius, which exclusion resulted in the grant of summary judgment in favor of Appellees on Mr. Helman’s claim that the trustees of the Alfred G. Mendelson Trust breached their fiduciary duty by improperly investing the assets of the Alfred G. Mendelson Trust. 2.

Whether the trial court incorrectly held that there was no genuine issue of material fact and that Appellees were entitled to judgment as a matter of law on Mr. Helman’s claim that the loans made by the trustees of the Alfred G. Mendelson Trust to themselves and Mendelson family members and friends constitute a breach of fiduciary duty. 3. Whether the trial court abused its discretion when it denied Mr. Helman’s motion to alter or amend the Order that granted summary judgment in favor of Appellees. Answering all questions in the negative, we will affirm. Factual Background Alfred G. Mendelson (“Alfred”), appellant’s grandfather, died in 1972.

Alfred created a testamentary trust, the Alfred G. Mendelson Trust (“AGM Trust”), pursuant to which his wife, Ida Mendleson (“Ida”), was the income beneficiary, and his two children, Murry Mendelson (“Murry”) and Sandra Helman (“Sandra”), were the remainder beneficiaries. Murry had two children, Ira and Herlene. Sandra had two children, Gloria Helman (“Gloria”) and appellant. If Murry or Sandra predeceased Ida, their children (or their grandchildren, if the children were deceased) would take the remainder, except that if Sandra predeceased Ida, appellant’s per stirpes share was to be placed into a trust identified as the ³⁶ Herby Helman Trust (“HH Trust”). 1 Murry and Ida were also the designated trustees of the AGM Trust.

In 1981, Sandra and Gloria sold all of their ownership interests in the closely held family business, Murry’s Steaks, Inc.(“Murry’s Steak”), back to the company. They also agreed to sell their interests in the AGM Trust to Murry’s Steaks at some future time. Pursuant to the agreement with Gloria, her contingent remainder interest was worth $665,000, and she agreed to sell her interest if her mother predeceased her. Sandra died in January 1985, and, later that year, the purchase of Gloria’s 25% interest in the AGM Trust was completed.

The alternate purchasers were the three remaining contingent remainder beneficiaries, Ira, Herlene, and appellant. Each were required to pay $221,667 for one-third of Gloria’s 25% interest in the trust. To take advantage of this opportunity, and, as Ida wished, each of them were loaned the $221,667 from the AGM Trust to effectuate the purchase. Each signed a promissory note to the Trust, but Ida paid appellant’s interest on the note as a gift. 2 As a result, after Sandra’s death, Ira and Herlene each owned a 25% contingent remainder beneficiary interest in the AGM Trust through their father in addition to an 8/é% remainder interest in the AGM Trust from their purchase of one-third of Gloria’s share.

On Ida’s death, appellant would own outright 8}é% of Gloria’s remainder interest in the AGM Trust; his original 25% remainder interest would be placed into the HH Trust. During her life, Ida was very generous, giving large sums of money to her grandchildren and great-grandchildren as gifts. ³⁷ These gifts were drawn on an account entitled “Ida Mendelson Trust C,” a revocable inter vivos trust set up to receive the income from the AGM Trust. Appellant was aware that the gifts came from this account, and he had asked Murry about it.,., Murry advised that “Ida Mendelson Trust C” was the naine of the account but apparently provided no detailed explanation regarding its origin or its funding. During the life of the AGM Trust, the corpus grew from approximately $420,000, the value of the stock in Murry’s Steaks at the time of Alfred’s death, to approximately $22 million.

In the interim, Murry’s Steaks had been sold to Rymer, Inc. for $57 million. This resulted in a large influx of cash into the AGM Trust after taxes were paid on the sale. Murry’s Steaks was bought back in 1989 through a bank loan in addition to loans from Murry and Ida; the AGM Trust did not pay any of the costs of repurchase. The company is now known as Murry’s, Inc. In 1989, Ida, who no longer wished to be a co-trustee of the AGM Trust, resigned and Ira took over in her place. 3 After Ida died on May 28, 1996, Murry and Ira then began serving as trustees of the now funded HH Trust.

Appellant contested Ida’s will, which was probated in the Circuit Court for Palm Beach County, Florida, where she lived at the time of her death. Murry was the designated personal representative of Ida’s estate. Appellant alleged that Ida lacked testamentary capacity and accused Murry of exerting undue influence on her in an effort to reduce the amount she left appellant in her will. Appellant apparently believed that he was entitled to one-fourth of Ida’s $10 million estate.

Appellant settled that litigation on the eve of trial for a “relatively small amount”. ³⁸ During the course of the will contest, appellant began complaining about the handling of the AGM Trust. He insisted that the corpus did not grow as much as he thought it should have and that the assets were allocated in a manner to provide the maximum benefit to the income beneficiary to the detriment of the remainder beneficiaries because the trustees invested primarily in fixed income securities such as bonds and notes rather than investing in the stock market. Appellant also argued that the trustees made improper loans to family members and engaged in other behavior appellant viewed as “self-dealing.” Murry died in 1998, and David replaced him as trustee for the HH Trust. Ira and Herlene were named as the co-personal representatives of Murry’s estate.

Between the time of Murry’s death and the filing of the present litigation, appellant was making demands for increasing amounts of money from the HH Trust. Although Ira and David granted some of these requests, they explained in letters to appellant that they also had a duty to the remainder beneficiaries of that trust, namely, appellant’s children. On January 13, 1999, appellant filed two suits in the Circuit Court for Montgomery County. The first suit was filed against Ira as co-trustee of the AGM Trust and co-personal representative of Murry’s estate, Herlene as co-personal representative of Murry’s estate, and David as trustee of the HH Trust.

The suit claimed breach of fiduciary duty, requested an accounting, requested removal of both Ira and David as trustees of the HH Trust and the AGM Trust, and requested removal of both Ira and David as trustees of the HH Trust. The second suit requested that the circuit court assume jurisdiction over the HH Trust. In it, he claimed Ira breached his fiduciary duty with respect to the HH Trust by breaching various duties to the AGM Trust, 4 requested removal of both Ira and David as trustees of the HH Trust, and requested an ³⁹ accounting. The two cases were consolidated by order of the court on April 29,1999.

During the course of discovery, appellant requested several modifications of the discovery schedule, apparently revolving around the retention of an expert witness. In addition, appellant was not forthcoming with the information he intended to use to prove the allegations made in his complaints, apparently relying on his expert to provide him with whatever evidence he would need to prevail. Discovery in the case closed on November 24, 1999; appellant’s December 9, 1999 request for a further extension was denied. Appellant did not provide appellees with his expert’s report until January 26, 2000.

Appellees filed a motion for summary judgment on December 9, 1999. They argued that appellant had failed to “determine and disclose” the facts he intended to rely upon to support his claims, that the expert finally designated by appellant lacked the qualifications needed to be an expert in this case, and that appellant’s claims were barred by both the doctrine of laches and the doctrine of equitable estoppel. On January 14, 2000, appellant filed an amended complaint, dismissing David from the first complaint concerning management of the AGM Trust. That same day, appellant filed an amended petition in the case concerning the HH Trust that requested relief only with respect to Ira.

The court held a hearing on the motion for summary judgment on January 28, 2000. At that hearing, the court declined to accept the late-filed expert’s report and granted appellees’ motion for summary judgment. A written order, entered on February 1, 2000, effectively disposed of both of the original complaints. Appellant filed a motion to amend or alter judgment on February 11, 2000.

That motion was denied on March 28, 2000. This appeal followed and involves the claims of both original complaints. ⁴⁰ Discussion I. The Expert’s Report In his brief, appellant argues that the circuit court abused its discretion by excluding his expert’s report. In order to fully discuss this issue, it would be useful to set forth what occurred during discovery. The first scheduling order in this case was issued on April 21, 1999, and called for plaintiffs experts to be identified by June 28, 1999, defense experts to be identified by August 11, 1999, and discovery to be completed by October 25, 1999.

That order also stated: “ANY MODIFICATIONS OF THIS SCHEDULING ORDER MUST BE REQUESTED BY WRITTEN MOTION AND FILED BEFORE THE COMPLIANCE DATE(S).” (Emphasis in original.) On July 7, 1999, after the original deadline for appellant to identify his experts, appellant requested, and was granted, an extension of the time to identify his experts. Appellant was given until August 28, 1999, to identify his experts. On August 23,1999, appellant identified Charles Lundelius (“Lundelius”), an accountant, as his expert. On October 19, 1999, appellees deposed Lundelius.

Lundelius indicated that his first meeting with appellant concerning the substance of the c.ase had taken place on October 6, 1999. He also advised that he had not been officially retained, because appellant had not signed the engagement letter. Lundelius was unable to provide any opinion or even the methodologies he would use to render his opinion on the appropriateness of asset allocation in the AGM Trust: ‘We haven’t even finished getting the. data loaded into a spreadsheet so I can even look at the allocations that were made. So we haven’t even started, essentially, in terms of the analysis.” Appellees stopped the deposition in light of Lundelius’ lack of knowledge of the specifics of the case.

At that time, discovery was set to close on October 25, 1999, which left appellees with little or no time to confer with their own expert, redepose Lundelius, and prepare a defense. ⁴¹ On November 9, 1999, again after the original deadline, appellant requested, and received, with appellees’ consent, a second extension of time until November 24,1999, to complete discovery. The date passed without the submission of Lundelius’ report. On December 9, 1999, again contrary to the instructions in the original scheduling order, appellant filed an additional motion requesting, inter alia, that the close of discovery be delayed until February 10, 2000. That same day, appellees filed their motion for summary judgment.

On December 20, 1999, appellant supplemented his motion to extend the discovery period with information that Lundelius was changing firms, which had resulted in a delay in the preparation of his report. On January 6, 2000, the court granted some of appellant’s requests, although it declined to extend the time for the close of discovery. In this same order, the court scheduled a hearing on appellees’ motion for summary judgment for January 26, 2000. Appellant does not dispute the trial court’s refusal to extend the time for discovery.

The hearing on the motion for summary judgment actually took place on January 28, 2000. Two days prior, appellant had finally provided Lundelius’ report to appellees, but he did not submit it to the court until February 11, 2000. The court, ruling from the bench, decided not to accept the late filed report: From a philosophical standpoint, I know what counsel is saying with respect to the enforcement of scheduling orders and the requirement that those scheduling orders be met in order to allow the cases to proceed in an orderly fashion. My view generally is such that if there is no compliance with the scheduling order, then I take a look at the prejudice that is being suffered by the parties seeking to enforce the terms of the scheduling order to the detriment of the party who has failed to comply with the scheduling order as part of my consideration in declining to allow a party to continue with discovery or to present evidence before the ⁴² Court that was not produced prior to the expiration of that day.

In this instance, it has been urged that this matter should be disposed of and the matter should be tried and the resolution of the issues should be reached, and summary judgment is not appropriate. I generally do not feel that summary judgment is appropriate in cases of this nature because it does deny the parties an opportunity to finally resolve this case and to have a hearing on the merits. [T]he allegations of diversion of substantial assets of the trust to finance private loans to themselves and their families, the allegations that they have engaged in a pattern of self-dealing and asset manipulation which are contained within the plaintiffs complaint are serious allegations. And the trustees deserve to have this matter resolved. The trustees deserve to have this matter concluded.

And there is prejudice to the trustees by allowing this case to continue on and on and on in an open-ended sort of fashion to allow experts to say, “Well, I have not arrived at my opinion yet. I have not reached a conclusion yet, but I have a theory that the trust was not managed properly and, therefore, the trustee should be held responsible.” Well, there comes a point in time where the trustees deserve an answer to that. That point in time should have been reached at the time this lawsuit was filed, and these types of allegations and claims being made against trustees are serious allegations and claims. And I understand what [appellant’s attorney] is saying with respect to his evaluation and review of the evidence and the good faith basis for filing the lawsuit.

But on the other hand, the trustees are entitled to have a resolution of this case, and that was why I denied the motion to extend discovery further. ⁴³ And that is why I am not going to accept the late filing of the expert’s report. It is clear to me from the evidence that I have before me that there is no fact in dispute that would allow this case to proceed against the trustees. Appellant now argues that exclusion of the expert’s report was a discovery sanction based upon appellant’s failure to timely file the report. “The report’s exclusion formed a substantial basis for the trial court’s award of summary judgment to Appellees and dismissal of Mr. Helman’s claims. Mr. Helman, therefore, has been denied a trial on the merits.” We review the exclusion of the report for abuse of discretion.

Massie v. State, 349 Md. 834, 850-51 , 709 A.2d 1316 (1998); Commercial Union Ins. Co. v. Porter Hayden Co., 116 Md.App. 605, 641 , 698 A.2d 1167 (1997), cert. denied, 348 Md. 205 , 703 A.2d 147 (1997). Under the approach taken by most courts, whether the exclusion of ... testimony is an abuse of discretion turns on the facts of the particular case. Principal among the relevant factors which recur in the opinions are whether the disclosure violation was technical or substantial, the timing of the ultimate disclosure, the reason, if any, for the violation, the degree of prejudice to the parties respectively offering and opposing the evidence, whether any resulting prejudice might be cured by a postponement and, if so, the overall desirability of a continuance.

Frequently these factors overlap. They do not lend themselves to a compartmental analysis. Shelton v. Kirson, 119 Md.App. 325, 331 , 705 A.2d 25 , cert. denied, 349 Md. 236 , 707 A.2d 1329 (1998) (quoting Taliaferro v. State, 295 Md. 376, 390-91 , 456 A.2d 29 (1983)). 1. Substantial or Technical Violation This Court has previously held that, at some point, a failure to comply with a discovery deadline moves from technical to substantial.

Heineman v. Bright, 124 Md.App. 1, 8-9 , 720 A.2d 1182 (1998). In that case, the appellant was fighting a request by her late husband’s estate to turn over some ⁴⁴ bonds, to which she had waived her rights pursuant to a prenuptial agreement. Appellant’s entire case, that she gained subsequent rights to the bonds, rested entirely on witness testimony. Despite this, she failed to identify witnesses within the discovery period and failed to provide any information regarding the relevant knowledge the witnesses might have.

This Court found the appellant’s noncompliance under these circumstances to be a substantial violation of the discovery rules. Id. at 9 , 720 A.2d 1182 . Although the discovery period lasted two years in Heine-man rather than the one year period in this case, we find Heineman instructive. In both cases, the parties relied completely on the testimony of particular witnesses in order to make their case.

Both parties failed to comply with discovery orders and were dilatory in providing their opponents with information necessary to defend their cases. Appellant’s actions, like those of the appellant in Heineman , deprived appellees of the ability to mount a defense to the case. We believe that appellant’s discovery violation, which was primarily due to his own lack of diligence, was therefore substantial and not merely technical. 2. Timing of Ultimate Disclosure Appellant finally provided his expert’s report to appellees two days before the hearing on the motion for summary judgment.

We note, however, that the report was not provided to the court until February 11, 2000, when appellant attached Lundelius’ report to his motion to alter or amend judgment. Appellant suggests that this eventual disclosure makes up for the prior delays because the delay was “eminently curable” and there was no harm because the cases were to be heard by an auditor, who had not yet been appointed. We observe, however, that, while the expert was first designated on August 23, 1999, appellant had made no meaningful attempt to have Lundelius perform the analysis necessary to be able to render an opinion. In fact, as of the date of his deposition, on October 19, 1999, which was four business days prior to the ⁴⁵ scheduled close of discovery, Lundelius had not yet been officially retained and had not been able to even begin his analysis.

Furthermore, Lundelius indicated that he had not been asked to analyze the HH Trust, which was the subject of one of appellant’s claims. The delay in this case is not merely the two-month delay between the close of discovery and the date that the report was furnished to appellees. Rather, appellant has, during the entire course of this litigation, continually delayed providing appellees with the information necessary to prepare a defense. During his deposition, appellant repeatedly declined to answer questions regarding the basis for his allegations and referred to the fact that his expert would be providing the entire basis for his claims, thereby hampering appellees from making the preparations they needed in order to prepare a defense.

Certainly, appellees needed time, after receiving Lundelius’ report, to adequately address the issues raised therein. Even though the lawsuits had only been pending for a year at the time the report was excluded and summary judgment was granted, appellees had been accused of gross misconduct with respect to both the AGM Trust and the HH Trust. Appellant was making numerous allegations against the trustees, including accusing them of attempting to curry favor in Prince George’s County, where Murry’s Steaks is located, by having invested trust funds in Prince George’s County municipal bonds. We are not oblivious to the fact that there is a history of problems between appellant and, at the very least, Ira.

From the beginning, appellant’s behavior in this case seemed designed to drag this process out as long as possible rather than to resolve the matter in an expeditious manner. The timing of the submission of the expert’s report, which had already been effectively excluded by the denial of appellant’s December 9, 1999 motion to extend, could only further delay matters. 3. Reason for the Violation Appellant’s reason for the delay in furnishing Lundelius’ report is set forth in his brief as follows: ⁴⁶ [T]he litigation has placed a significant financial burden on Mr. Helman and his family. In October 1998, Ira Mendel-son terminated Mr. Helman from Murry’s Steaks, Inc. Since that time, Mr. Helman has been unemployed.

Lundelius’ services have been costly — approximately $80,000 to date— and estimated to approach $100,000 if this Court grants Mr. Helman’s appeal and remands these consolidated actions to the trial court for further proceedings. Mr. Helman has encountered some difficulty making timely payments to Lundelius. In addition, Lundelius changed firms in the midst of performing his analysis and drafting his report. As a result, it took longer than anticipated for Mr. Helman to obtain the expert opinion from Lundelius.

These circumstances do not warrant the trial court’s exclusion of Lundelius’ report and grant of summary judgment. 5 Appellant’s self-serving claims of impoverishment only serve to bolster the circuit court’s decision in this case. Appellant is hardly a pauper. When the corpus of the AGM Trust was distributed after Ida’s death, appellant received $1.7 million outright and his trust received $5.5 million, which has grown to $8.1 million and from which he is receiving income distributions. Moreover, over the years, there had been an estimated $8.6 million in inter vivos gifts made by Ida to him and for the benefit of his family.

During his deposition, appellant repeatedly admitted having received large sums of money but refused to explain what he did with the money. In addition, since David became a trustee, appellant had requested, and was granted, extra funds from the HH Trust to spend on his son’s bar mitzvah. By appellant’s own account, he spent at least $50,000 on the bar mitzvah, which apparently took place during the course of these proceedings. 6 ⁴⁷ Appellant’s own delays in retaining Lundelius resulted in the report not being submitted before Lundelius changed firms in late December 1999. Lundelius’ career moves should not be held against appellees, particularly when the report was supposed to have been filed a month prior to Lundelius’ move.

Ip. Prejudice and Ejfect of Delay The circuit