Shofer v. Stuart Hack Co.

FISCHER, Judge. Richard Shofer appeals from three separate orders of the Circuit Court for Baltimore City. The three orders, entered by three different circuit court judges during three separate hearings over the course of four years, dismissed individual damage claims from Shofer’s complaint against The Stuart Hack Company (Hack Co.) and Stuart Hack (Hack) personally. The circuit court, pursuant to Maryland Rule 2-602(b), certified the three orders as final judgments so they could be directly appealed to this Court.

In appealing the three orders, Shofer presents the following issues for our consideration, which have been reworded: I. Should the Court of Appeals decision in Shofer v. Hack Co., 324 Md. 92 [ 595 A.2d 1078 ] (1991) be modified on the issue of damages in light of developing case law subsequent thereto?

II

Did the circuit court err in entering the three orders that limited Shofer’s damages claims?

III

Did the circuit court’s orders constitute a violation of Shofer’s right to due process pursuant to the United States Constitution and the Maryland Declaration of Rights? ⁵⁸⁹ We choose, however, to address the dispositive procedural question that neither party discussed in their briefs, but which we inquired about during oral argument: I. Did the circuit court err in certifying for appeal three interlocutory orders that were neither final judgments nor exceptions to the final judgment rule? FACTS This case is yet another stop on the never-ending litigational odyssey otherwise known as Shofer v. Hack Co. Shofer is an automobile dealer who is the sole stockholder and president of Catalina Enterprises, Inc. (Catalina), which trades as Crown Motors. In 1971, Catalina adopted a pension plan that qualified under the Internal Revenue Code. Hack is president of Hack Co., which coordinates and organizes pension plans for businesses.

Hack Co. administered Catalina’s pension plan. Hack provided professional assistance to Catalina, which included advice on tax issues. A single event gave rise to Shofer’s lawsuit. In 1984, Shofer asked Hack whether he could legally borrow money from the pension fund.

Hack, in a letter, answered Shofer’s question in the affirmative. Between 1984 and 1986 Shofer proceeded to borrow $375,000 from his pension fund. Subsequently, Shofer’s accountants informed him that he owed taxes on the money he borrowed from the pension fund. Shofer paid a total of $120,428.19 in both federal and Maryland taxes and tax penalties.

After paying his taxes and tax penalties, Shofer sued Hack and Hack Co. in the circuit court. Shofer contended that Hack, as a pension consultant to Catalina, should have advised him about the potential tax consequences of borrowing money from the pension fund. After the circuit court dismissed Shofer’s claim with prejudice, Shofer appealed to this Court. Before this Court heard the appeal, the Court of Appeals granted certiorari.

The Court of Appeals held: (1) that the contract and tort claims based on malpractice were not preempted by the Employee Retirement Income Security Act ⁵⁹⁰ of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1988); and (2) that the claim based on breach of duty was preempted by ERISA. The case was remanded to the circuit court for a trial on the remaining damages issues. 1 Shofer v. Hack, 324 Md. 92 , 595 A.2d 1078 (1991). This appeal involves three separate orders from three different circuit court judges resulting from a series of motions and answers filed by the parties following Shofer I. Judge Thomas Ward’s Order After Shofer I, Shofer filed his Third Amended Complaint in the circuit court. Hack moved to dismiss certain damage claims from Shofer’s complaint.

Specifically, Hack sought to exclude the damage claims arising out of excise taxes, prohibited transactions, and possible disqualification of Shofer’s pension. On February 17, 1991 Judge Ward, in accord with Shofer I, granted Hack’s motion. Additionally, Judge Ward dismissed Shofer’s claims for punitive damages and attorney’s fees. In this appeal, Shofer challenges Judge Ward’s rulings on the damages issues.

Judge Ellen Hollander’s Order Following Judge Ward’s decision, and as discovery continued, Shofer filed a memorandum intended to supplement a previous answer to interrogatories. In the supplemental answer, Shofer revealed that he was seeking damages for additional taxes that might flow from a decision of the Internal Revenue Service that the loans constituted prohibited transactions, excise taxes on prohibited transactions, tax penalties arising out of his failure to follow proper procedures in borrowing from his pension, damages due to his inability to refinance his Virgin Islands property, lost salary, and lost business profits. Hack moved for summary judgment on the following grounds: (1) that Shofer’s damage claims were unforeseeable, too speculative, or otherwise not recoverable; ⁵⁹¹ and (2) that on the whole, the Third Amended Complaint was preempted under Mertens v. Hewitt Assoc., 508 U.S. 248 , 113 S.Ct. 2063 , 124 L.Ed.2d 161 (1993). On July 11, 1994, Judge Hollander granted partial summary judgment for Hack and dismissed Shofer’s damage claims.

Judge Hollander did not grant summary judgment on the preemption issue. Shofer challenges the award of partial summary judgment in this appeal. Judge Andre M. Davis’ Order Following Judge Hollander’s order, Shofer filed new damage claims for loss of sheltered earnings and losses attributable to tax penalties and interest. Hack filed a motion to dismiss the new damage claims.

Judge Davis granted Hack’s motion to dismiss the damage claim for loss of sheltered earnings, but denied the motion on the tax penalties and interest. Shofer challenges the dismissal of the damage claim for loss of sheltered earnings in this appeal. At a pretrial conference in the circuit court, Shofer announced that he planned to appeal the three previous orders regardless of the result of the upcoming non-jury trial. Pursuant to Rule 2-602(b), Judge Davis certified the three orders as final judgments so Shofer could directly appeal to this Court before the start of the trial on the merits.

Subsequently, Shofer filed a timely appeal before this Court. STANDARD OF REVIEW It is this Court’s duty to examine a circuit court’s certification decision under Maryland Rule 2-602. See Planning Bd. v. Mortimer, 310 Md. 639, 648 , 530 A.2d 1237 (1987). If the certification was improper, the appeal will be dismissed.

Certification under Rule 2-602 is a question of law. Accordingly, this Court will afford no deference to the trial judge’s decision. See, Davis v. Davis, 280 Md. 119, 124-126 , 372 A.2d 231 , cert. denied, 434 U.S. 939 , 98 S.Ct. 430 , 54 L.Ed.2d 299 (1977). ⁵⁹² DISCUSSION Generally, Maryland appellate courts cannot exercise subject matter jurisdiction over a case on appeal unless that case is the product of a final judgment from a lower court. Md.Code, (1974, 1995 Repl.Vol. 1995 Supp.) § 12-301 of the Cts. & Jud.Proc.Art. 2 Section 12-301 outlines this final judgment rule, which is the foundation for appellate jurisdiction in Maryland. 3 To qualify as a final judgment, “The judgment [of the lower court] must settle the rights of the parties, thereby concluding the cause of action----” Estep v. Georgetown Leather, 320 Md. 277, 282 , 577 A.2d 78 (1990); see also County Comm’rs v. Schrodel, 320 Md. 202, 209 , 577 A.2d 39 (1990) (stating that “[o]rdinarily a judgment is final, for the purposes of an appeal under § 12-301, ‘only if it terminates the action in [the trial] court’ ” (quoting Bunting v. State, 312 Md. 472, 476 , 540 A.2d 805 (1988)); Md.Code, (1974, 1995 Repl.Vol., 1995 Supp.) § 12-101© of the Cts. & Jud.Proc.Art. (defining final judgment as “a judgment, decree, sentence, order, determination, decision, or other action by a court ... from which an appeal ... may be taken”).

Generally, interlocutory orders, such as the three orders in this case, do not qualify as appealable orders under section 12-301. 4 Most interlocutory orders lack the “finality” characteristic that section 12-301 requires. Therefore, without a ⁵⁹³ final judgment parties cannot generally appeal interlocutory orders. See Md. Rule 8-131(d). This is not to say that parties can never directly appeal an interlocutory order during the course of a trial proceeding.

There are several limited exceptions to section 12-301 that provide for the appeal of interlocutory orders. For example, section 12-303 5 the collateral order doctrine, 6 and Maryland Rule 2-602 7 all provide for the direct appeal of interlocutory orders. ⁵⁹⁴ This case concerns the appeal of three interlocutory orders pursuant to Rule 2-602. This rule permits trial judges to certify an interlocutory order for final judgment that otherwise does not qualify as a final judgment under section 12-301. Keene Corp. v. Levin, 330 Md. 287, 291 , 623 A.2d 662 (1993).

The purpose of this section and the final judgment rule is to ensure a uniform appellate process and to prevent piecemeal appeals. 8 See Jolley v. State, 282 Md. 353, 356 , 384 A.2d 91 (1978). Rule 2-602 is not a conduit for trial judges to certify any interlocutory order as a final judgment so as to acquire an advisory opinion from this Court on a pressing legal issue. The certification process is “limited to orders which, by their nature, have a characteristic of finality. Such orders must be completely dispositive of an entire claim or