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In the Circu it Court for P rince Geo rge's Cou nty Case No. 02-21119 IN THE COURT OF APPEALS OF MARYLAND No. 137 September Term, 2003 ______________________________________

THE BAN K OF NEW YOR K, TRUSTEE, ET AL.

v.

RONALD SHEFF, ET AL.

______________________________________ Bell, C.J. Raker Wilner Harrell Battaglia Greene Eldridge, Jo hn C. (Re tired, Specially Assigned), JJ. ______________________________________ Opinion by Wilner, J. ______________________________________ Filed: July 28, 2004

This action arises from the sale of nearly $50 million in tax-exempt revenue bonds by Prince George 's County, M aryland, in 1993. The ultimate recipients of the net proceeds and the true borrowers w ere health care providers in the D istrict of Columbia-Prince G eorge's County area that comprised the Greater Southeast Healthcare System. Everyone agrees that the county acted m erely as a cond uit; it issued the bonds, received the proceeds of the sale, and immedia tely passed the p roceeds o n to the borrowers which, alone, were responsible for repayment. T he county ha d no oblig ation to the b ondhold ers for repa yment. Part of the security for repayment of the bonds was a lien on the assets of the individual health care providers and their subsidiaries, including their accounts receivable. In order to perfect that lien, it was necessary to file a UCC Financing Statement with the Maryland State Department of Assessments and Taxation (SDAT), with the Clerk of the Circuit Court for Prince George's County for the health care providers located in the county, and with the District of Columbia Recorder of Deeds for the health care providers located in the District. Financing statements were appropriately filed with SDAT and with the Clerk in Prince George's County, but, u nfortunate ly, a financing sta tement w as not filed with the D.C. Recorder of D eeds , and , as a r esult of th at lap se, th e bondholde rs los t the o pportunity to perfect against third parties a first lien on the receivables of the entities located in the District, one of which was the 483-b ed Greater South east Commu nity Hospital (GSCH ). That became a problem when the consortium defaulted on the bonds and it was discovered that another creditor, Daiw a Healthco-2 LLC, had obtained a first lien on the receivables of

GSC H in 19 97. The Bank of New York, as trustee for the bondholders, and four municipal bond funds that hold the bonds, led by Eaton Vance Municipal Bond Fund, blamed one of the law firms that acted as counsel for the county in the transaction, Piper & Marbury (now Piper Rudnick) (P & M), for the failure to file a financing statement in the District. They sued th e firm in the Circuit Court for Prince George 's County for negligence (legal malpractice) and breach of fiduciary obligation.1 Finding no genuine dispute of material fact, the court, upon concluding that (1) P&M did not act as counsel to the bondholders and had no o bligation to them, (2) P&M never assu med a du ty to file the financing statement in the District, and (3) even if there we re liability on P& M's part, th e action was barred by limitations, granted summary judgmen t to the defen dants. The plaintiffs ap pealed. O n our ow n initiative, we granted certiorari prior to proceedings in the Court of Special Appeals, and, convinced that the action is barred by limitations, we shall affirm.

BACKGROUND Most any bond sale is a complex transaction, and this one was no exception. There were eight borrowers who were part of the consortium (one of which owned several health care facilities, including GSCH), a corporate trustee for multiple bond purchasers, six

The suit also named as defendants two individual lawyers from P&M who worked on the transaction. For convenience, we shall refer to the defendants, collectively, as P&M. -2-

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underwriters, and the county. Over 70 documents were drafted, circulated, and negotiated, and it appears that five law firms were involved in planning and consummating the transaction. Each of the law firm s was assig ned respo nsibility for drafting documents. Among the documents assigned to P&M to draft were general certificates of the borrowers, the Trust Indenture, the Loan Agreement, the Master Indenture, bond counsel opinions, and "Financing Statement Covering the Receipts." The financing statements were obviously an important part of the transaction, and they were dealt with in a number of the documents. The Loan Agreement between the county and the borrowers and the Master Trust Indenture entered into by the borrowers and the trustee for the bondho lders each p ut the obliga tion to file all necessary financing statements on the borrowers

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