Preview:

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1274

September Term, 2000 _________________________________ MCR OF AMERICA, INC., D/B/A MORTGAGE CREDIT REPORTS INC. v. J. WILLIAM GREENE _________________________________ Murphy, C.J., Krauser, Berger, Stuart R., (Specially assigned ), JJ. ________________________________ Opinion by Krauser, J. Concurring Opinion by Murphy, C.J. ____________________________

Filed: November 26, 2002

We are asked to determine whether an arbitrator can impose sanctions on an attorney, representing a party to the arbitration, for misconduct. In this case, the arbitrator sanctioned the

offending attorney1 by making him jointly responsible with his client for a portion of the award of fees and costs his client was ordered to pay, as the non-prevailing party in the proceeding below. In deciding this issue and others presented by the parties, we shall take this opportunity to illumine the role and powers of the arbitrator under Maryland law. This case arose from an employment dispute. Appellant, MCR of America, Inc., ("MCR"),2 fired its marketing director, appellee J. William Greene, for purportedly violating his employment contract. The propriety of that termination was ultimately submitted to arbitration. Following what were apparently unnecessarily contentious

proceedings, the arbitrator found that MCR had not breached its agreement with Greene by terminating his employment. She then

ordered Greene, as the non-prevailing party on the principal issue before her, to reimburse MCR for all arbitration "fees and

expenses" as well as attorney's fees incurred by MCR in defending against Greene's breach of contract claim. not complete nor Greene's defeat total. But MCR's victory was

On his claim for unpaid

We note that appellate counsel is not the counsel against whom the arbitrator awarded arbitration and legal fees and costs.
2

1

MCR does business as Mortgage Credit Reports of America, Inc.

wages, the arbitrator ordered MCR to pay Greene $2,676.92. Then turning to Greene's counsel, whose "vexatious conduct" the arbitrator believed had unnecessarily complicated and prolonged the proceedings, she declared that he was "jointly responsible" with his client for a portion of the arbitration and legal fees to be paid to MCR. While the award of arbitration fees and expenses

was upheld by the Circuit Court for Baltimore County, the award of legal fees was not. Cross-appeals to this Court followed.

Before this Court, MCR challenges the circuit court's vacation of the arbitrator's award of attorney's fees while Greene contests the court's affirmance of the arbitrator's award of fees and costs to MCR. Specifically, MCR presents two issues, which can be

restated as one: I. Whether the circuit court erred in vacating the arbitrator's award of attorney's fees?

On cross-appeal, Greene presents the following issues, which we have set forth below largely as they appear in his brief: I. Whether the circuit court erred in confirming all fees and costs awarded pursuant to MCR's motion for sanctions. A. Whether the arbitrator was without authority to consider an award of sanctions. B. Whether the award of fees/expenses based upon documents provided by MCR to the arbitrator ex parte following the close of the hearing constitutes misconduct, bias, prejudice, and denial of due process such that the award must be vacated. C. Whether the arbitrator was without authority to -2-

extend personal liability of the award to Greene's counsel who was not a party to the arbitration or to the agreement requiring the parties to submit to arbitration. II. Whether the circuit court erred in refusing to vacate the arbitrator's decision and award.

For the reasons that follow, we shall affirm the circuit court's vacation of the arbitrator's award of attorney's fees but reverse its confirmance of the arbitrator's award of fees and expenses. In all other respects, we shall affirm the judgment of

the circuit court.

BACKGROUND MCR is engaged in the credit reporting business. It provides

credit and investigative reports to businesses in the home mortgage industry. Hoping to expand that business, MCR hired Greene to be

its marketing director and executive vice-president. The terms of Greene's employment were memorialized in a written agreement between the parties. Paragraph 6 of that

agreement, entitled "Breach," states that the parties shall "by mutual agreement, develop written performance criteria including achievable goals regarding steps for the growth, expansion or diversification of the Corporation." Under that paragraph, if

Greene fails "to render services or accomplish the criteria or goals" agreed to by the parties or "to perform any material covenant or condition" of the agreement, MCR may terminate the -3-

agreement.

Paragraph 8 of the agreement, entitled "Termination,"

permits MCR to terminate Greene's employment "for justifiable cause" which includes "any disclosure by [Greene] to any person, firm or corporation . . . of any confidential information." Both paragraphs contain arbitration provisions. 6(b) provides: In the event of a dispute between the Corporation and the Employee as to a termination of this agreement, such dispute shall be submitted to arbitration under the rules of the American Arbitration Association, and the decision of the arbitrator shall be final and binding upon all parties. The fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered. And Paragraph 8(b) provides: In the event of a dispute between the board of directors and the employee as to the existence of justifiable cause, such dispute shall be submitted to arbitration under the rules of the American Arbitration Association, and the decision of the arbitrator shall be final and binding upon all parties. The fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered. In sum, Paragraph 6(b) requires that disputes "as to a Paragraph

termination" be arbitrated while Paragraph 8(b) requires that disputes "as to the existence of justifiable cause" be arbitated. Both arbitration provisions state that "the fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered." That language was the basis upon which

-4-

the arbitrator awarded MCR fees and costs. Greene began working for MCR on May 15, 1996. next five months, among MCR's other business did not grow But over the as MCR planned. reduced

Consequently,

cost-cutting

measures,

Greene's salary by fifty-three percent.

That reduction, MCR

informed Greene, was to "bring [his] salary down" to the level of the salaries of other employees, which had been reduced because of MCR's economic difficulties. Unfortunately, Greene discussed his

salary reduction with the owner of a credit reporting company that MCR was attempting to purchase. The disclosure of that

information, MCR claims, created questions as to its financial viability. After learning of that disclosure, MCR terminated Greene's employment. In a letter to Greene, dated October 25, 1996, MCR

informed Greene that he was being terminated for "failure to perform" under paragraph 6 of the agreement and for "justifiable cause" under Paragraph 8(a) of that agreement for disclosing confidential competitor.3 On June 8, 1997, Greene filed a complaint in the Circuit Court for Howard County against MCR, alleging breach of contract and a violation of Labor and Employment ("LE")

Download MCR v Greene.pdf

Maryland Law