Schuele v. Case Handyman & Remodeling Services, LLC

BARBERA, Judge. In this case, we are asked to decide whether under Maryland law a non-signatory to a contract may invoke equitable estoppel to enforce an arbitration provision contained within the contract. We are precluded from answering that question, however, because this case is before us on appeal from an order that is neither a final judgment nor an appealable interlocutory order. Accordingly, we shall vacate the judgment of the Court of Special Appeals and direct that the appeal be dismissed.

I. On November 21, 2006, Petitioners Judith and Albert Schuele entered into a home improvement contract with Shaun Arnold, a Baltimore County contractor and franchisee of Respondents Case Handyman Services, LLC and/or Case Design/Remodeling, Inc. 1 Although Respondents and Petitioners refer to Mr. Arnold’s home improvement company as Professional Home Repair, Inc. (“PHR”), Mr. Arnold signed the contract as “Case Handyman Services” and accepted a $39,800 check payable to the order of “Case Handyman Services” as down payment on the contract. 2 ⁵⁶¹ The contract consists of eight pages, sets forth a payment schedule, and describes the work Mr. Arnold was expected to complete. Printed on the back of each page of the contract is the “fine print,” which is titled “General Conditions” and contains an arbitration clause. The arbitration clause provides: 2. CLAIMS—Any controversy/claim arising out of or relating to this contract or its breach thereof, shall be settled by final and binding arbitration before a single arbitrator in the Baltimore metropolitan area in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

(Underlining in original). Under the contract, Mr. Arnold agreed to perform “remodeling and/or repair work” on Petitioners’ home in Towson, Maryland. After accepting Petitioners’ down payment, however, Mr. Arnold performed no work on the contract except to draft written plans for the remodeling project, for which Petitioners paid an additional $2,700. During the next several months, Petitioners made several requests that Mr. Arnold set a work schedule and begin work, but in March 2007, Mr. Arnold told Petitioners that “he no longer had their funds” and would not begin work on the project.

Mr. Arnold also told Petitioners that he was considering filing for bankruptcy. Petitioners alleged in their complaint that Mr. Arnold has since filed for personal bankruptcy, naming PHR as his home improvement company in the filings. The Lawsuit On June 6, 2007, Petitioners filed a class action complaint against Respondents in the Circuit Court for Baltimore County. Petitioners alleged breach of contract (Counts I & II), ⁵⁶² fraud by misappropriation (Counts III & IV), fraud or deceit (Count V), violations of the Maryland Consumer Protection Act (Count VI), and negligence (Count VII).

In response, based on the arbitration clause in the contract between Petitioners and Mr. Arnold, Respondents filed a “Motion to Dismiss, or in the Alternative, to Compel Arbitration and Stay Proceedings” accompanied by a memorandum of law in support of the motion and a request for a hearing. In an order dated September 7, 2007, without a hearing, the Circuit Court granted Respondents’ motion to compel arbitration without explanation, noting that Petitioners had filed no response. The record indicates, however, that Petitioners filed a response to Respondents’ motion on August 31, 2007. On September 17, 2007, in an open court proceeding conducted without the parties’ knowledge, the Circuit Court struck its order and denied Respondents’ motion without written order.

On September 24, 2007, Respondents filed a “Motion to Alter or Amend Judgment” and a request for a hearing. Petitioners filed their opposition to the motion to amend on October 11, 2007, and the Circuit Court denied Respondents’ motion to amend and request for a hearing in an order dated October 18, 2007. On November 2, 2007, Respondents noted an appeal to the Court of Special Appeals. The Court of Special Appeals held that the Circuit Court erred in denying Respondents’ motion to compel arbitration.

Case Handyman & Remodeling Servs., LLC v. Schuele, 183 Md.App. 44, 49 , 959 A.2d 833, 836 (2008). The court first addressed whether either the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et. seq., or the Maryland Uniform Arbitration Act (“MUAA”), Md.Code (2006 RepLVoL), §§ 3-201 et. seq. of the Courts and Judicial Proceedings Article (“C.J.”), governed the contract at issue. The court determined that, regardless of whether the FAA applied to the contract, the application of the MUAA “provides the same result.” Case Handyman, 183 Md.App. at 54-56 , 959 A.2d at 839-40 . The court held that, because “the Schueles’ allegations [arose] out of and directly relate[d] to their contract with PHR,” Respondents, non-signatories to the contract, could ⁵⁶³ enforce the contract’s arbitration clause against Petitioners based on principles of equitable estoppel frequently applied by federal courts in arbitration cases. 3 Id. at 57-58, 68 , 959 A.2d at 841-42 , 844^5.

Next, the Court of Special Appeals held that the arbitration clause was valid even though it did not fully comply with the Code of Maryland Regulations (“COMAR”) 09.08.01.25, in part, because “COMAR 09.08.01.25 does not contain any penalty provisions or state that an arbitration clause is invalid if it fails to comply with the requirements of the regulation.” 4 Case Handyman, 183 Md.App. at 68 , 959 A.2d at 847 . Moreover, the court noted that any instances of non-compliance ⁵⁶⁴ were minor and the clause was sufficiently conspicuous to give Petitioners notice. Id. at 70 , 959 A.2d at 848-49 . Petitioners filed a petition for unit of certiorari presenting three questions: I. Did the Court of Special Appeals err in adopting federal law as controlling on the issue of whether equitable estoppel could be invoked by a non-party to a contract in order to enforce an arbitration provision, rather than applying state law to determine the provision’s enforceability?

II

Did the Court of Special Appeals err in holding that Petitioners were equitably estopped from avoiding contractual arbitration with a non-party, where the non-party disavows any cognizable connection to the contract at issue, and where the agreement does not manifest any intent or agreement to arbitrate the legal or factual issues related to Respondents’ own wrongdoing?

III

Did the Court of Special Appeals err in holding that a home improvement contract’s arbitration provision may be judicially enforced even though the provision does not comply with the notice requirements imposed on such provisions under COMAR? We shall not address these questions because the appeal of the Circuit Court’s order denying Respondents’ motion to compel arbitration did not constitute a final judgment and was not an appealable interlocutory order. 5 ⁵⁶⁵ II. In Maryland, appellate jurisdiction, except as constitutionally created, is statutorily granted. Gruber v. Gruber, 369 Md. 540, 546 , 801 A.2d 1013, 1016 (2002); Kant v. Montgomery County, 365 Md. 269, 273 , 778 A.2d 384, 386 (2001). “Where appellate jurisdiction is lacking, the appellate court will dismiss the appeal on its own motion.” Gruber, 369 Md. at 546 , 801 A.2d at 1016 .

Recently, we emphasized in Addison v. Lochearn Nursing Home, LLC, 411 Md. 251 , 983 A.2d 138 (2009), that § 12-301 of the Courts and Judicial Proceedings Article of the Maryland Code authorizes appeals only from “a final judgment entered in a civil or criminal case by a circuit court.” 6 411 Md. at 261 , 983 A.2d at 145 (internal quotation marks and citations omitted). Generally, to constitute a final judgment, a trial court’s ruling “must either decide and conclude the rights of the parties involved or deny a party the means to prosecute or defend rights and interests in the subject matter of the proceeding.” Nnoli v. Nnoli, 389 Md. 315, 324 , 884 A.2d 1215, 1219-20 (2005). Moreover, to be a final judgment in a controversy involving multiple claims, the order must dispose of all claims in the action. See Md. Rule 2-602(a) (“[A]n order or other form of decision, however designated, that adjudicates fewer than all of the claims in an action ... is not a final judgment.”); Addison, 411 Md. at 271 , 983 A.2d at 150 ; Rohrbeck v. Rohrbeck, 318 Md. 28, 41 , 566 A.2d 767, 773 (1989) (noting that an order is not a final judgment if it does not ⁵⁶⁶ “adjudicate or complete the adjudication of all claims against all parties”). “An order that is not a final judgment is an interlocutory order and ordinarily is not appealable[.]” Nnoli, 389 Md. at 324 , 884 A.2d at 1220 .

This case is before us on appeal from the Circuit Court’s denial of Respondents’ motion to compel arbitration. Because the Circuit Court’s order did not adjudicate all claims in the action and was therefore not a final judgment as contemplated by § 12-301, we must treat this as an appeal from an interlocutory order. Interlocutory orders are immediately appealable only under three narrow exceptions to the final judgment rule. Nnoli 389 Md. at 324 , 884 A.2d at 1220 .

Those exceptions are: “appeals from interlocutory orders specifically allowed by statute; immediate appeals permitted under Maryland Rule 2-602; and appeals from interlocutory rulings allowed under the common law collateral order doctrine.” Addison, 411 Md. at 274 , 983 A.2d at 152 (internal quotation marks and citations omitted). Appealable Interlocutory Orders Section 12-303 expressly allows appeals from certain interlocutory orders. 7 The Circuit Court’s order denying Re ⁵⁶⁷ spondents’ motion to compel arbitration does not fall within any provision of § 12-303. See Addison, 411 Md. at 274-84 , 983 A.2d at 153-58 (holding that § 12-303(3)(ix), which allows appeals from orders granting a petition to stay arbitration, does not permit appeals from interlocutory orders denying a motion to compel arbitration). Therefore, § 12-303 does not confer appellate jurisdiction over this matter.

Final Judgment Certification Under Rule 2-602(b), a trial judge may certify as a final judgment an order that adjudicates only some of the rights at issue, even though other claims between the parties remain unadjudicated. 8 Maryland-Nat’l Capital Park & ⁵⁶⁸ Planning Comm’n v. Smith, 333 Md. 3, 6-7, 633 A.2d 855, 857 (1993). The order certified, however, must be one that is itself “final in the traditional sense.” Planning Bd. of Howard County v. Mortimer, 310 Md. 639, 651 , 530 A.2d 1237, 1243 (1987) (“[A] prerequisite for the invocation of the certification procedure embodied in Rule 2-602(b) is an order which, absent the circumstance of multiple parties or multiple claims, would be final in the traditional sense.”); see also Med. Mut. Liab.

Ins. Soc’y of Maryland v. B. Dixon Evander & Assoc., 331 Md. 301, 308 , 628 A.2d 170, 173 (1993) (“[A] finding [of no just reason for delay] only makes a final order appealable. It cannot make a nonfinal order into a final order.”). In other words, “Rule 2-602 does not operate to modify one of the statutory conditions for appellate jurisdiction—the existence of a final judgment.” Mortimer, 310 Md. at 649 , 530 A.2d at 1242 .

To be deemed final in the traditional sense, an order “must be completely dispositive of an entire claim or party.” B. Dixon Evander, 331 Md. at 309 , 628 A.2d at 174 (internal quotation marks and citations omitted); see also Addison, 411 Md. at 273 n. 14, 983 A.2d at 151 n. 14 (acknowledging that only orders adjudicating entire claims may be certified under Rule 2-602). Under Rule 2-602, a “claim,” regardless of whether it is the original claim, a counterclaim, or a third-party claim, is defined as a “substantive cause of ⁵⁶⁹ action,” Suitland Dev. Corp v. Merchs. Mtg.

Co., 254 Md. 43, 54 , 254 A.2d 359, 365 (1969), that encompasses all rights arising from common operative facts, East v. Gilchrist, 293 Md. 453, 459 , 445 A.2d 343, 346 (1982). 9 Orders that dispose of less than an entire claim, such as only one among multiple legal theories or counts presented, cannot be certified. Keene v. Levin, 330 Md. 287, 292 , 623 A.2d 662, 664 (1993); East, 293 Md. at 459 , 445 A.2d at 346 . When a trial court has not exercised its discretion to certify an order as a final judgment, an appellate court, pursuant to Maryland Rule 8-602(e) may certify the order as a final judgment on its own initiative. 10 Silbersack v. AC & S, 402 Md. 673, 681 , 938 A.2d 855, 859 (2008) (“[An] appellate court’s authority under Rule 8-602(e)(l)(C) to enter judgment on its ⁵⁷⁰ own initiative may be exercised only when the circuit court has never exercised its own discretion in the matter and not when the trial court was asked to enter judgment under Rule 2-602(b) and expressly declined to do so.”); see also Addison, 411 Md. at 269, 272-73 , 983 A.2d at 146, 150-51 (holding that an appellate court cannot certify an order denying a motion to compel arbitration when the trial court had denied a motion to certify the same order earlier in the litigation). Rule 8-602(e), however, limits the certification authority of this Court and the Court of Special Appeals to only those orders for which “the lower court had discretion to direct the entry of a final judgment pursuant to Rule 2-602(b).” Rule 8-602(e)(1); Osborn v. Bunge, 338 Md. 396, 402 , 658 A.2d 1102, 1105 (1995) (“This Court’s power is limited to cases in which certification may be granted under Rule 2-602[.]”).

The most frequently cited limitation on a trial court’s discretion to direct the entry of a final judgment is that the court must expressly determine in a written order that there is no just reason for delay of the appeal. Mortimer, 310 Md. at 648 , 530 A.2d at 1241-42 (“In the exceptional case, the trial judge may decide that early appellate decision of a particular point is of sufficient importance, or that delay will produce sufficient hardship or unfairness, to outweigh the general policy against piecemeal appeals.”). The Circuit Court in this case was not petitioned to certify its order denying Respondents’ motion to compel arbitration; therefore, we need not address this condition to determine whether certification is appropriate. Instead, we must examine whether the Circuit Court’s order denying Respondents’ motion to compel arbitration is, as the law requires, “final in the traditional sense.” Mortimer, 310 Md. at 651 , 530 A.2d at 1243 .

The Circuit Court’s order conclusively denied Respondents’ “Motion to Dismiss, or in the Alternative, to Compel Arbitration and Stay Proceedings” and thus finally settled Respondents’ sole claim. To be final in the traditional sense, however, an order must not only settle an entire claim but also ⁵⁷¹ “be intended by the court as an unqualified, final disposition of the matter in controversy!.]” Rohrbeck, 318 Md. at 41 , 566 A.2d at 773 . It is well settled that to constitute an “unqualified final disposition” an order must be “so final as to determine and conclude the rights involved, or deny the appellant the means of further prosecuting or defending his rights and interests in the subject matter of the proceeding.” United States Fire Ins. Co. v. Schwartz, 280 Md. 518, 521 , 374 A.2d 896, 899 (1977), overruled on other grounds by Litton Bionetics, Inc. v. Glen Constr.

Co., 292 Md. 34 , 437 A.2d 208 (1981); see also Dep’t of Pub. Safety v. LeVan, 288 Md. 533, 542 , 419 A.2d 1052, 1057 (1980) (citing Schwartz, 280 Md. 518 , 374 A.2d 896 ). From this principle, we have reasoned that “a trial court’s order, terminating the action in that court and remanding the parties to another tribunal for resolution of their dispute, is final and appealable” even though the order does not resolve the underlying controversy. Horsey v. Horsey, 329 Md. 392, 404 , 620 A.2d 305, 311 (1993).

More specifically, in the context of arbitration, we have held that an order compelling arbitration of a controversy is immediately appealable as a final judgment even though “it does not finally dispose of all claims in the action in which it was filed” because the order “has the effect of putting the parties out of court.” Town of Chesapeake Beach v. Pessoa Constr. Co., 330 Md. 744, 750-53 , 625 A.2d 1014, 1017-18 (1993) (quoting Horsey, 329 Md. at 401 , 620 A.2d at 310 ) (internal quotation marks and citations omitted); accord Addison, 411 Md. at 272-73 , 983 A.2d at 151 . Conversely, “[w]e have held that a trial court’s order denying a challenge to its jurisdiction is a nonappealable interlocutory order” because the order “does not settle or conclude the rights of any party or deny him the means of proceeding further.” Gruber, 369 Md. at 547 , 801 A.2d at 1017 (internal quotation marks and citations omitted); Highfield Water Co. v. Washington County Sanitary Dist., 295 Md. 410, 416-17 , 456 A.2d 371, 374-75 (1983) (holding that a trial court’s determination that it had subject matter jurisdiction over a dispute was a nonappealable interlocutory order). ⁵⁷² As we noted in Addison , an order denying a motion to compel arbitration does not put the parties out of court but, instead, effectively keeps the parties in court to litigate the claims remaining between them. 411 Md. at 273 , 983 A.2d at 151 . Moreover, like an order denying a jurisdictional challenge, an order denying a motion to compel arbitration asserts a court’s jurisdiction over the controversy and leaves the parties free to resolve the underlying dispute in a judicial forum.

See Gruber, 369 Md. at 547-48 , 801 A.2d at 1017 (“Whenever a court makes a disposition or order, it does so on the basis that it has jurisdiction, and if its express announcement of that fact constituted an appealable order, it would be impossible for a court to proceed with the trial of any case in which its jurisdiction was challenged.”) (internal quotation marks and citations omitted). For these reasons, an order denying a motion to compel arbitration is not final in the traditional sense. See Addison, 411 Md. at 273 , 983 A.2d at 151 . Consequently, we cannot certify as a final judgment, under Rule 8-602(e), the Circuit Court’s order denying Respondents’ motion to compel arbitration.

The Collateral Order Doctrine “This Court has made clear ... that the collateral order doctrine in Maryland is very limited.” Walker v. State, 392 Md. 1, 15 , 895 A.2d 1024, 1033 (2006). The doctrine permits premature appeals from a limited class of cases in which the order appealed does not adjudicate all claims against all parties but “(1) conclusively determines the disputed question, (2) resolves an important issue, (3) resolves an issue that is completely separate from the merits of the action, and (4) would be effectively unreviewable if the appeal had to await the entry of a final judgment.” Id., 895 A.2d at 1033 (internal quotation marks and citations omitted); accord Addison, 411 Md. at 284-85 , 983 A.2d at 158 ; Dawkins v. Baltimore City Police Dept., 376 Md. 53, 58 , 827 A.2d 115, 118 (2003). In Addison , we emphasized that this doctrine should be applied sparingly in only the most extraordinary circumstances. 411 Md. at 285 , 983 A.2d at 158 ; see also Washing ⁵⁷³ ton Suburban Sanitary Comm’n v. Bowen, 410 Md. 287, 296 , 978 A.2d 678, 684 (2009)