Schmerling v. Injured Workers' Insurance Fund

BATTAGLIA, Judge. This case requires us to consider a novel question of law with respect to the Maryland Wiretap Act, Maryland Code (1974, 1998 Repl.Vol., 2000 Supp.), § 10-401, et. seq., of the ⁴³⁸ Courts and Judicial Proceedings Article. Specifically, this Court is tasked to decide whether the recording equipment utilized by the respondent, Injured Workers’ Insurance Fund (“IWIF”), to monitor and record incoming and outgoing calls constituted “telephone equipment ... or a component thereof,” -within what is commonly known as the “telephone exemption” of the Maryland Wiretap Act. If IWIF’s recording equipment falls within this exemption, then it is not a prohibited intercepting device under the Maryland Wiretap Act.

The exemption only applies if the equipment is “telephone equipment ... or a component thereof’ and if the use of the telephone equipment is for a valid business purpose. Therefore, only upon a determination that respondent’s recording equipment is “telephone equipment” as contemplated by the Wiretap Act, must we also consider whether the respondent’s use of the recording equipment was for a “valid business purpose,” thus rendering the utilization of such recording equipment unobjectionable under the Maryland Wiretap Act. Because we hold that respondent’s recording equipment does not qualify as “telephone equipment” under the Wiretap Act, we need not consider whether the respondent had a valid business purpose for the use of the recording equipment. We are asked also to determine whether the circuit court erred in failing to strike the respondent’s answer to petitioners’ second amended complaint when the respondent’s answer failed to comply with the timeliness requirements of Maryland Rule 2-841.

We hold that the circuit court did not abuse its discretion in accepting the respondent’s belated answer and thus, no error occurred. I. Factual Background and Legal History The respondent, the Injured Workers’ Insurance Fund, is an independent but statutorily-created insurance company that primarily provides workers’ compensation insurance to Maryland businesses. 1 See Md.Code (1991, 1999 Repl.Vol.), ⁴³⁹ § 10-104 of the Labor & Employment Article; Md.Code (1991, 1999 RepLVol., 2000 Supp.), § 10-105(a) of the Labor & Employment Article. An internal company-wide reorganization occurred in 1995 and 1996 during which the respondent upgraded its telecommunications system. Improvements to the telecommunications system were made at various times throughout the reorganization process and included a voice mail system, an automatic call distributor, digital announcers, and the monitoring capabilities presently at issue in this case.

The respondent utilized a Meridian 2 telephone system, technically known as a Private Branch Exchange (“PBX”), which directed incoming telephone calls to specific extensions, since its procurement in 1987. The monitoring system, manufactured by Racal, was purchased in 1996 from a distributor, Simko Office Systems. Simko representatives installed the equipment at IWIF to enable the recording of calls made to and from individual telephone lines. The equipment recorded the voices of both the IWIF employee and any party to the conversation.

Each Racal unit was able to monitor and record sixty-four separate lines at once; supervisors could then review calls at their convenience and retrieve calls either at random or about which complaints or problems had been reported. It is undisputed that the respondent’s purpose for installing the Racal monitoring system was to evaluate and improve customer service. ⁴⁴⁰ On February 25, 1999, petitioners commenced a class action against the respondent in the Circuit Court for Baltimore County for violations of the Maryland Wiretapping and Electronic Surveillance Act (hereinafter “Maryland Wiretap Act”) alleging specifically that the monitoring and recording of business calls through the Racal devices was illegal. This class action complaint, however, was never served. Petitioners filed and served an Amended Class Action Complaint on April 12, 1999, seeking injunctive relief from the continuing monitoring and recording practices of the respondent and statutory liquidated and punitive damages pursuant to Maryland Code (1974, 1998 RepLVol.), § 10-410(a)(l) of the Courts and Judicial Proceedings Article. 3 The parties identified the applicability of the Maryland Wiretap Act’s “telephone exemption,” which exempts from the definition of wiretapping devices telephone equipment used in the ordinary course of business, as a potentially dispositive issue.

Therefore, the Circuit Court for Baltimore County entered a Preliminary Scheduling Order on May 26, 1999, which limited discovery to the telephone exemption issue and scheduled briefings and hearings on dispositive motions concerning this issue. Both parties moved for summary judgment on February 4, 2000 — petitioners argued that the exemption did not apply while the respondent sought a judgment that the exemption did apply. ⁴⁴¹ On January 18, 2000, a little more than' two weeks before the scheduled deadlines for summary judgement motions, the petitioners filed another amendment to their complaint to pray for statutory liquidated damages which had been included in the initial Complaint but omitted in the First Amended Complaint. The respondent did not answer the Second Amended Complaint until February 17, 2000, and thereby failed to comply with the fifteen-day requirement of Maryland Rule 2-341. 4 On this basis, petitioners moved to strike the Answer to the Second Amended Complaint. On March 9, 2000, the Circuit Court held a hearing on the summary judgment motions as well as petitioners’ motion to strike but reserved ruling on both these issues.

At a subsequent hearing, which occurred on August 24, 2000, the Circuit Court denied petitioners’ motion to strike because respondent’s answer to the Second Amended Complaint was a general denial and not substantially different from its Answer to the First Amended Complaint; thus, the Circuit Court found that ⁴⁴² no prejudice resulted from the respondent’s failure to meet the fifteen-day requirement of Rule 2-341. The Circuit Court also denied the petitioners’ motion for summary judgment, granted the respondent’s motion for summary judgment and ultimately entered judgment in favor of the respondent on the basis that respondent’s Racal recording and monitoring equipment fell under the telephone equipment exemption of the Maryland Wiretap Act. Because the court found that “the Racal system was designed and manufactured only to work with the telephone communication system, had no independent function outside of the telephone communication system, [and] is permanently wired into the PBX in the same fashion as voicemail,” the trial court ruled that the Racal system qualified as telephone equipment pursuant to the statutory exemption. Furthermore, the lower court found that the respondent used the Racal equipment for a valid business purpose in its attempts to improve customer service.

The petitioners appealed the summary judgment in favor of respondent to the Court of Special Appeals asserting that the lower court erred in ruling that the monitoring equipment was telephone equipment within the exemption of the Maryland Wiretap Act and that the court erred in accepting the respondent’s untimely Answer to the Second Amended Complaint on the basis of lack of prejudice to petitioners. 5 See Schmerling v. Injured Workers’ Ins. Fund, 139 Md.App. 470, 475 , 776 A.2d 80, 83-84 (2001). The Court of Special Appeals affirmed the lower court’s judgment, concluding that the Racal monitoring system was “telephone equipment” and that the use of the Racal monitoring system was in the “ordinary course of business.” Id. at 491 , 776 A.2d at 93 . With respect to the respondent’s belated answer in violation of Rule 2-341, the ⁴⁴³ Court of Special Appeals affirmed the lower court finding no abuse of discretion in allowing the answer to be amended.

Petitioners sought and we granted a writ of certiorari to consider the question of first impression presented in this case: whether monitoring and recording equipment can be “telephone equipment” for purposes of the statutory exemption from the prohibitions of the Maryland Wiretap Act. See Schmerling v. Injured Workers’ Ins. Fund, 366 Md. 246 , 783 A.2d 221 (2001). The petition for writ of certiorari also requested review of whether the Circuit Court erred in ruling, as a matter of law, that the respondent had a valid business purpose to sustain its uniform recording of certain telephone lines, and whether the lower court’s refusal to strike the belated answer filed by the respondent in violation of Maryland Rule 2-341 was erroneous.

II

Standard of Review Appellate courts review a grant of summary judgment de novo. See Fister v. Allstate Life Ins. Co., 366 Md. 201, 210 , 783 A.2d 194, 199 (2001). The underlying premise of a summary judgment motion is that no dispute as to material fact exists; thus, a trial court’s grant of a summary judgment motion is strictly a matter of interpreting or applying the law.

See A.J. Decoster Co. v. Westinghouse Elec. Corp., 333 Md. 245, 261 , 634 A.2d 1330, 1338 (1994)(stating that “a trial court decides issues of law, not fact, when granting summary judgment”); Beatty v. Trailmaster Prods. Inc., 330 Md. 726, 737 , 625 A.2d 1005, 1011 (1993)(stating that a trial court “makes rulings as a matter of law, resolving no disputed issues of fact”). The task of an appellate court in reviewing summary judgments is to determine whether the trial court was legally correct.

See Okwa v. Harper, 360 Md. 161, 178 , 757 A.2d 118, 127 (2000); Sheets v. Brethren Mutual Ins. Co., 342 Md. 634, 638 , 679 A.2d 540, 542 (1996); Southland Corp. v. Griffith, 332 Md. 704, 712 , 633 A.2d 84, 87-88 (1993). With respect to procedural issues, a trial court’s rulings are given great deference. The determination to allow amendments to pleadings or to grant leave to amend pleadings ⁴⁴⁴ is within the sound discretion of the trial judge.

See Robertson v. Davis, 271 Md. 708, 710 , 319 A.2d 816, 818 (1974)(dis-cussing Rule 320, the predecessor to Rule 2-341, and stating “whether to permit an amendment rests within the sound discretion of the trial judge”); Prudential Sec. v. E-Net, Inc., 140 Md.App. 194, 231-32 , 780 A.2d 359, 381 (2001); Residential Warranty Corp. v. Bancroft Homes Greenspring Valley, Inc., 126 Md.App. 294, 317-18 , 728 A.2d 783, 794-95 , cert. denied, 355 Md. 613 , 735 A.2d 1107 (1999). Only upon a clear abuse of discretion will a trial court’s rulings in this arena be overturned.

III

Discussion A. The Maryland Wiretap Act The issue presented before this Court requires us to analyze and interpret the statutory language of the Maryland Wiretap Act. To the extent possible, it is the explicit statutory language of the Act upon which we primarily base our determination of legislative intent. See Langston v. Langston, 366 Md. 490, 507 , 784 A.2d 1086, 1096 (2001); Marriott Employees Federal Credit Union v. Motor Vehicle Admin., 346 Md. 437, 445 , 697 A.2d 455, 458 (1997)(stating that where the statutory language is free from ambiguity, courts do not look beyond the language of the statute); State v. Pagano, 341 Md. 129, 133 , 669 A.2d 1339, 1340-41 (1996)(stating that the “primary source of legislative intent is, of course, the language of the statute itself’) (quoting Tucker v. Fireman’s Fund Ins. Co., 308 Md. 69, 73 , 517 A.2d 730, 731 (1986)).

The General Assembly, as well as Congress, expressly provided definitions for most of the pivotal terms in the Act; where definitions were not explicitly provided, as was the case for the term “telephone equipment,” we determine the intended scope of the term by applying the language’s natural and ordinary meaning, by considering the express and implied purpose of the statute, and by employing basic principles of common sense, the meaning these words intend to convey. See Maryland Dept. of the Env’t v. Underwood, 368 Md. 160, 175 , 792 A.2d 1130, 1138 (2002)(stating that the “cardinal rule of statutory interpreta ⁴⁴⁵ tion is to ascertain and effectuate the intention of the legislature”) (quoting Oaks v. Connors, 339 Md. 24, 35 , 660 A.2d 423, 429 (1995)); Graves v. State, 364 Md. 329, 346 , 772 A.2d 1225, 1235 (2001)(affirming that the statutory language “must be viewed from a commonsensical perspective”); Blandon v. State, 304 Md. 316, 319 , 498 A.2d 1195, 1196 (1985) (indicating that the Court will “reject a proposed statutory interpretation if its consequences are inconsistent with common sense”). We review the language of the contested provision in the context of the statute as a whole and with respect to the clear purposes the legislature conveyed. See Giant Food, Inc. v. Dept. of Labor, Licensing and Regulation, 356 Md. 180, 189 , 738 A.2d 856, 861 (1999) (quoting Tucker, 308 Md. at 73 , 517 A.2d at 732 )(stating that “a plainly worded statute must be construed without forced or subtle interpretations designed to extend or limit the scope of its operation”); Prince George’s County v. Vieira, 340 Md. 651, 658 , 667 A.2d 898, 901 (1995)(stating that courts may “confirm the meaning reached by reference to the words of the statute by considering the purpose, goal or context of the statute”); Frost v. State, 336 Md. 125, 138 , 647 A.2d 106, 112 (1994)(when considering the “context” of a statute, courts may review “related statutes, pertinent legislative history and other material that fairly bears on the fundamental issue of legislative purpose or goal”)(internal citations and quotations omitted).

The Maryland Wiretap Act makes it unlawful to “wilfully intercept ... any wire, oral, or electronic communication.” Md.Code (1973, 1998 Repl.Vol., 2000 Supp.), § l(MQ2(a)(l) of the Courts and Judicial Proceedings Article. 6 The Wiretap Act defines “intercept” as “the aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device.” Md.Code (1973, 1998 Repl.Vol.), § 10-401(3). The contentious issue in the present case is, of course, whether the respondent’s conduct could be categorized as an ⁴⁴⁶ “interception” under the Maryland Wiretap Act. That the respondent acquired the content of countless communications is undisputed; whether this acquisition was through the use of an “electronic, mechanical, or other device,” however, is ardently disputed and depends entirely upon whether, as a matter of law, respondent’s Racal recording equipment is such an intercepting device. An “electronic, mechanical or other device” is defined, in relevant part, as “any device ... other than [a]ny telephone or telegraph instrument, equipment or other facility for the transmission of electronic communications, or any component thereof’ that is “furnished by the subscriber or user for connection to the facilities of the [telecommunications] service and used in the ordinary course of its business.” 7 Md.Code, § 10-401(4)(i)(a)(emphasis added).

Thus, the default rule is that the device is an intercepting device forbidden by the Maryland Wiretap Act. In its simplest terms, the statutory exception to this blanket prohibition is for telephone equipment (or component thereof) used in the ordinary course of business. Both criteria must be met to satisfy the “telephone exemption” and each will be addressed independently, to the extent necessary. Prior to reviewing the dual prongs of the “telephone exemption,” we must note that when interpreting and applying the ⁴⁴⁷ Maryland Wiretap Act, federal jurisprudence is both useful and applicable because our Act was modeled extensively after its federal counterpart, Title III of the Omnibus Crime Control and Safe Streets Act (hereinafter “Title III”), 18 U.S.C.S. §§ 2510-2522 (2000).

See Miles v. State, 365 Md. 488, 507 , 781 A.2d 787, 798 (2001), cert. denied, - U.S. -, 122 S.Ct. 1175 , 152 L.Ed.2d 118 (2002)(stating that Title III, which set forth minimum standards for protections against interceptions of communications, was the model for Maryland’s Act); State v. Bailey, 289 Md. 143, 151 , 422 A.2d 1021, 1026 (1980)(ac-knowledging the Maryland’s Wiretap Act is an “offspring” of Title III). 8 While modeling the Maryland Wiretap Act after Title III, our State Legislature unequivocally has demonstrated its in ⁴⁴⁸ tent to create an Act more protective of privacy interests than that which is promoted by Title III. See Miles, 365 Md. at 508 , 781 A.2d at 798 ; Derry v. State, 358 Md. 325, 343-44 , 748 A.2d 478, 487-88 (2000)(noting that Maryland’s Act, while very similar to the Federal Act, actually provides more protection from wiretapping than does the Federal Act). As Judge Harrell declared in Standiford v. Standiford, 89 Md.App. 326 , 598 A.2d 495 (1991), cert. denied, 325 Md. 526 , 601 A.2d 1101 (1992), while on the Court of Special Appeals, “[t]he alterations that were made [to Title III] by the General Assembly before enacting the Maryland Act were obviously designed to afford the people of this State a greater protection than Congress provided in Title III.” Standiford, 89 Md.App. at 334 , 598 A.2d at 499 . Under Maryland law and contrary to federal law, for example, interception of communications is only authorized if consent of all parties to the interception is obtained.

Miles, 365 Md. at 508 , 781 A.2d at 798 (noting that before a communication may be recorded or intercepted, Maryland requires consent of all parties); Perry v. State, 357 Md. 37, 60-62 , 741 A.2d 1162, 1175-76 (1999)(noting the longstanding interest in Maryland in protecting the conversations of private individuals); Mustafa, 323 Md. 65, 74 , 591 A.2d 481, 485 (1991) (“[t]he two-party consent provision of the Maryland Act is aimed at providing greater protection for the privacy interest in communications than the federal law.”). Requiring the consent of all parties is one example of the Legislature’s intent to establish strict protections for the privacy interests of the citizenry-it is with this intent in mind that we must consider the scope of the telephone exemption. B. “Telephone Equipment ... or Components Thereof” To fall within the telephone exemption, and thus be used legally, the Racal recording device must be “telephone ... equipment ... or any component thereof.” See Md.Code, § 10-401(4). Specific to this exemption, compelling legislative history exists, particularly from the amendments to the feder ⁴⁴⁹ al wiretapping laws upon which our State’s amendments were based, see Senate Judicial Proceedings Committee, 1998 General Assembly of Maryland, Bill Analysis for Senate Bill 679 (“MD Sen.

Jud. Pro. Comm. Analysis-Bill 679”), which specifies that the wiretapping laws, including the telephone exemption, were amended “in light of dramatic changes in new computer and telecommunications technologies.” See U.S. Senate Report No. 99-541 at 1 (1986)(“S.Rep.

No. 99-541”); see also 1988 Md Laws. ch. 607. Congress passed the Electronic Communications Privacy Act (“ECPA”) in 1986 lor the primary purpose of extending privacy protections given the new technology that had developed since the original enactment. See S. Rep. No. 99-541 at 1.

In 1988, the Maryland General Assembly followed suit and adopted legislation which conformed to the Federal Act. See MD Sen. Jud. Prog.

Comm. Analysis-Bill 679 (stating that the Maryland amendments were based upon the Model Act developed by the Department of Justice for the states to use in “preparing and enacting conforming Electronic Surveillance Legislation”). The reasons for these changes and the discussion surrounding the respective adoptions at the Federal and State level provide great insight into the purpose and scope of the telephone exemption. The Federal ECPA was drafted in response to new and developing technologies which appeared to impact an individual’s privacy interests and in response to the change in the economic or market structure for communications providers: “[Title III] has not kept pace with the development of communications and computer technology.

Nor has it kept pace with changes in the structure of the telecommunications industry.” S. Rep. No. 99-541 at 2. Thus, ECPA accomplished two things: (a) it modified who could supply telephone equipment or telecommunications services and, (b) it made Title III more restrictive because it expanded the scope of the prohibited interceptions to include electronic communications, rather than just wire or oral communications. The Maryland Bill ⁴⁵⁰ accomplished equivalent tasks “to bring it in line with ... new technological developments and changes in the structure of the telephonic communications industry.” See MD Sen.

Jud. Proc. Comm. Analysis-Bill 679.

First, with respect to modifying who could supply telecommunications equipment under the exemption, the federal amendments acknowledged the changes in the telecommunications industry by eliminating the “communications common carrier” language from the statute, and in its stead employed “provider of wire or electronic communication service.” S. Rep. No. 99-541 at 2-3, 55. Furthermore, the amendments undisputably recognized that equipment might be provided by institutions other than the providers of telecommunication services, as is seen by the addition of the alternative “furnish-er” language in 18 U.S.C. 2510(5) and Maryland Code, § 10-401(4)(i). The Wiretap Act exemption now permits telephonic equipment to be furnished by the user/subscriber for connection to the communications service.

See S. Rep. No. 99-541 at 55 (the exemption now applies to “any telephone ... or any component thereof ... furnished by such subscriber or user for the connection to the facilities of such [wire or electronic communication] service and used in the ordinary course of its business”); accord MD Sen. Jud. Proc.

Comm. Analysis-Bill 679. It is under this alternative that petitioners’ claim proceeds. With respect to the scope of the equipment covered, the intent of Congress and the General Assembly was, to a certain extent, to make the telephone equipment exemption more restrictive because the definition of a prohibited interception now encompassed electronic communications as well as oral and wire communications.

See 1988 Md. Laws ch. 607. While the telephone exemption was altered to include “equipment or other facility for the transmission of electronic communications,” this was, again, only in response to the changes in the telecommunications industry, i.e. the increased number of entities that may provide the increased types of communica ⁴⁵¹ tions services (telephone, email, etc.)