Title: Schmerling v. Injured Workers'

State: maryland

Issuer: Maryland Supreme Court

Document:

Jack J. Schmerling, et al., v. Injured Workers’ Insurance Fund, No. 88 September Term 2001.
[Issue:  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, Maryland Code (1974, 1998 Repl. Vol.,
2000 Supp.), §10-401, et. seq.   Held: The monitoring and recording equipment does not
qualify as “telephone equipment” because it is add-on equipment that does not functionally
enhance the telecommunications system; therefore, the recording equipment does not fall
under the statutory exemption for intercepting devices.]
IN THE COURT OF APPEALS OF
MARYLAND
No. 88
September Term, 2001
JACK J. SCHM ERLING, et al.
v.
INJURED 
WORKERS’ INSURANCE FUND
Bell, C.J.
Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
JJ.
Opinion by Battaglia, J.
Filed:   April 8, 2002
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
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 2-341.  We hold that the
circuit court did not abuse its discretion in accepting the respondent’s belated answer and
1
IWIF is the successor to the Maryland State Accident Fund, which was created in
1914 to insure employers unable to obtain coverage in the private sector.  In 1988, the State
Accident Fund was established as an independent agency, and in 1990, the State Accident
Fund changed its name to the Injured Workers’ Insurance Fund and its employees were
removed from the State’s classified service.  See 1991 Md. Laws, ch. 8 §2; see also Md.
Code, (1991, 1999 Repl. Vol., 2000 Supp.), §10-113(b)(2) of the Labor and Employment
Article.  IWIF is required to provide workers’ compensation insurance for employers in the
State, see Md. Code, §10-117(1) of the Labor and Employment Article, and may also provide
employer’s liability insurance and  pay benefits comparable to those provided federally or
by another state.  See Md. Code §10-117(2) of the Labor and Employment Article.
2
At the time this dispute arose, the Meridian system was manufactured by Northern
Telecom, Inc., (now known as Nortel Networks, Inc.), and the respondent’s
telecommunications distributor was Bell Atlantic (now operating as Verizon).
2
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.), §10-104 of the
Labor & Employment Article; Md. Code (1991, 1999 Repl. Vol. , 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 Meridian2 telephone system, technically known as a Private
Branch Exchange (“PBX”), which directed incoming telephone calls to specific extensions,
3
Section 10-410(a) of the Courts and Judicial Proceedings Article provides: 
(a) Civil liability. -- Any person whose wire, oral, or electronic
3
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.  
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 Repl. Vol.), §10-410(a)(1) of the Courts
and Judicial Proceedings Article.3
communication is intercepted, disclosed, or used in violation of
this subtitle shall have a civil cause of action against any person
who intercepts, discloses, or uses, or procures any other person
to intercept, disclose, or use the communications, and be entitled
to recover from any person: 
(1) 
Actual damages but not less than liquidated
damages computed at the rate of $100 a day for
each day of violation or $1,000, whichever is
higher; 
(2) 
Punitive damages; and 
(3) 
A reasonable attorney's fee and other litigation
costs reasonably incurred. 
4
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.
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-
4
Maryland Rule 2-341 provides: 
(a)  Prior to 15 days of trial date. A party may file an amendment
to a pleading at any time prior to 15 days of a scheduled trial
date. Within 15 days after service of an amendment, any other
party to the action may file a motion to strike setting forth
reasons why the court should not allow the amendment. If an
amendment introduces new facts or varies the case in a material
respect, an adverse party who wishes to contest new facts or
allegations shall file a new or additional answer to the
amendment within the time remaining to answer the original
pleading or within 15 days after service of the amendment,
whichever is later.  If no new or additional answer is filed within
the time allowed, the answer previously filed shall be treated as
the answer to the amendment. 
(c) Scope. An amendment may seek to (1) change the nature of
the action or defense, (2) set forth a better statement of facts
concerning any matter already raised in a pleading, (3) set forth
transactions or events that have occurred since the filing of the
pleading sought to be amended, (4) correct misnomer of a party,
(5) correct misjoinder or nonjoinder of a party so long as one of
the original plaintiffs and one of the original defendants remain
as parties to the action, (6) add a party or parties, (7) make any
other appropriate change.  Amendments shall be freely allowed
when justice so permits. Errors or defects in a pleading not
corrected by an amendment shall be disregarded unless they
affect the substantial rights of the parties. 
Md. Rule 2-341(a), and (c)(emphasis added).
5
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
6
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 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
5
The petitioners also argued that the Circuit Court erred when it allowed the respondent
to amend several affidavits to cure alleged format deficiencies.  See Schmerling, 139
Md.App. at 475, 776 A.2d at 84.  The Court of Special Appeals disagreed and affirmed the
Circuit Court’s ruling.  Id. at 499, 776 A.2d at 98.  This issue was not raised in the petition
for writ of certiorari  to this Court and as such, will not be addressed any further. 
7
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 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.
8
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
is within the sound discretion of the trial judge.  See Robertson v. Davis, 271 Md. 708, 710,
319 A.2d 816, 818 (1974)(discussing 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);
9
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.
10
Underwood, ___ Md. ___, ___, ___ A.2d ___, ___ (2002)(stating that the “cardinal rule of
statutory interpretation 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.),§10-402(a)(1)
6
Unless otherwise signified, all references to the Maryland Code are to the Courts and
Judicial Proceedings Article.
7
The definition of “electronic, mechanical, or other device” in its entirety is: 
any device or electronic communication other than: 
(i) Any telephone or telegraph instrument, equipment or
other facility for the transmission of electronic communications,
or any component thereof, (a) furnished to the subscriber or user
11
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 “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
by a provider of wire or electronic communication service in the
ordinary course of its business and being used by the subscriber
or user in the ordinary course of its business or furnished by the
subscriber or user for connection to the facilities of the service
and used in the ordinary course of its business; or (b) being used
by a communications common carrier in the ordinary course of
its business, or by an investigative or law enforcement officer in
the ordinary course of his duties; or 
(ii) A hearing aid or similar device being used to correct
subnormal hearing to not better than normal. 
Md. Code, §10-401(4).
12
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 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. ___, ___ S. Ct. ___, ___ L. Ed. 2d ___ (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
8
Under the Federal Act, the definition of “electronic, mechanical, or other device” is:
any device or apparatus which can be used to intercept a wire,
oral, or electronic communication other than-- 
(a) any telephone or telegraph instrument, equipment or
facility, or any component thereof, (i) furnished to the subscriber
or user by a provider of wire or electronic communication
service in the ordinary course of its business and being used by
the subscriber or user in the ordinary course of its business or
furnished by such subscriber or user for connection to the
facilities of such service and used in the ordinary course of its
business; or (ii) being used by a provider of wire or electronic
communication service in the ordinary course of its business, or
by an investigative or law enforcement officer in the ordinary
course of his duties; 
(b) a hearing aid or similar device being used to correct
subnormal hearing to not better than normal; 
See 18 U.S.C. §2510(5)(emphasis added).  Compare the same definition in the Maryland
Wiretap Act.  See supra note 4.  The definition of “electronic, mechanical, or other device”
in Title III is substantively similar to the Maryland Act, with one exception.  The Maryland
Wiretap Act provides that an “electronic, mechanical, or other device” is “any device . . .
other than [a]ny telephone or telegraph instrument, equipment or other facility for the
transmission of electronic communications, or any component thereof. . .”see Md. Code,
§10-401(4), while the Federal Act lacks the qualifying phrase “for the transmission of
electronic communications.”  See 18 U.S.C. §2510(5).  The influence of this qualifying
phrase on the provision’s preceding terms was the subject of much dispute between the
parties and will be discussed in further detail, infra.
13
A.2d 1021, 1026 (1980)(acknowledging 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 intent 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
14
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”
15
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 federal 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 for 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. PROC. 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
16
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 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 “furnisher” 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
9
We digress to note the significant statutory interpretation battle that ensued at the trial
level with respect to the phrase “for the transmission of electronic communications” in the
Maryland Wiretap Act’s definition of “electronic, mechanical, or other device.” In relevant
part, again, that provision states that an “[e]lectronic, mechanical or other device” is: 
any device or electronic communication other than: 
(i) Any telephone or telegraph instrument, equipment or
other facility for the transmission of electronic communications,
or any component thereof . . . .
Md. Code §10-401(4)(emphasis added).  We agree with the interpretation by the Court of
17
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 communications services (telephone, email, etc.) and the increased means
of communicating.9  See id.  Both Congress and the General Assembly specifically deleted
Special Appeals that the phrase “for the transmission of . . .” applies only to the words or
phrase immediately preceding – in this case, “facility.”  See 139 Md.App. at 495–498, 776
A.2d at 95-97 Such an interpretation is consistent with the general rules of statutory
construction with respect to qualifying clauses.  See Underwood, ___ Md. at ___, ___ A.2d
at ___ (noting that the “generally recognized rule of statutory construction [is] that a
qualifying clause ordinarily is confined to the immediately preceding words or phrase -
particularly in the absence of a comma before the qualifying phrase . . .”)(quoting Sullivan
v. Dixon, 280 Md. 444, 451, 373 A.2d 1245, 1249 (1977)).  
The Court of Special Appeals’s analysis, however, stopped too soon.  While the
qualifying clause only affects the immediately preceding word, the use of the word “other”
before “facility” indicates that the “facility” is of the same kind as “equipment” and
“instrument.”  As petitioner points out, it would be nonsensical to use the word “other” to
modify “facility” if the terms did not have some relation to each other.  Therefore, while we
agree with the Court of Special Appeals that the prepositional phrase, “for the transmission
of . . .” only modifies “facility,” we agree with petitioners that the use of the word “other”
connotes a similarity in the types of equipment listed. 
10
While the equipment covered by the telephone exemption could now be provided by
someone other than the “common carrier,” the equipment still must be used for connection
“to the facilities of a service provider.”  See U.S. Senate Report 99-541 at 13.  The
monitoring and recording equipment utilized by the respondent was unrelated to any
connection to the communications service provider, unlike, for example, devices such as
voice mail, speaker phones, or extension phones which are related to the connections to the
communications provider.
18
the “common communications carrier” provision and in its place used “providers of wire or
electronic communication service” and permitted that the equipment utilized to channel these
services could be not only furnished by the “providers of wire or electronic communication”
but also “furnished by the subscriber or user for connection to the facilities of the service and
used in the ordinary course of its business.”  Id.; see also S. REP. NO. 99-541 at 2-3, 55.
Except in its need to make allowances for the changes in the telecommunications industry,
Congress did not otherwise increase the scope of the equipment subject to the exemption.10
19
Thus, in the case sub judice, we proceed with the understanding that the goals of
Congress and the General Assembly were to bring Title III and the Maryland Wiretap Act,
respectfully, in step with the increased technological changes and the new risks of intrusion
these changes bring.  See S. REP. NO. 99-541 at 2 (stating that the “new methods of
communication and devices for surveillance has expanded dramatically the opportunity for
[privacy] intrusions”).  Contrary to respondent’s arguments, we do not believe that legislative
history of the amendments to the Wiretap Acts, both Federal and State, indicate any intention,
whatsoever, to extend the telephone exemption to encompass the wiretapping instruments
used by the respondent.  As the United States Court of Appeals for the First Circuit similarly
stated in Williams v. Poulos, 11 F.3d 271 (1st Cir. 1993), “[t]he legislative history makes it
apparent that the 1986 amendments were aimed at strengthening the statute by updating it
to reflect nearly twenty years of telecommunications advances. Despite defendants' contrary
urgings, there is absolutely no evidence in this history suggesting that Congress meant to
expand the parameters of the business extension exception so as to embrace almost all
wiretapping equipment.” Id. at 280 n.13 (internal citations omitted)(emphasis in original).
We are also mindful that this is a case of first impression in Maryland; we have not
examined whether the use of recording equipment to monitor employees  who interact with
customers by telephone is a violation of the Maryland Wiretap Act.  As such, case law from
jurisdictions which have considered the permissibility of using similar equipment pursuant
to similarly enacted wiretapping laws may help guide our ultimate conclusion, the caveats
20
being, as we stated previously, that the legislative intent for the wiretapping statutes is
sufficiently discernable and that Maryland has professed a heightened interest in the privacy
of its citizens, as witnessed by the more restrictive nature of our Wiretap Act.  Our Court’s
protections of the privacy sought by the Legislature should similarly be regarded.
Courts have employed various methods of defining or discerning that which is
encompassed by the term “telephone equipment.”  Some courts have focused on the entity
that designed or sold the add-on equipment , see e.g. Epps v. St. Mary’s Hosp. of Athens Inc.,
802 F.2d 412, 415-16 (11th Cir. 1986)(dispatch console installed by telephone company
considered “telephone equipment”); James v. Newspaper Agency Corp., 591 F.2d 579, 581
(10th Cir. 1979)(monitoring device installed by telephone company was implicitly considered
“telephone equipment”), and  some have focused on the degree of integration, see e.g. Deal
v. Spears, 980 F.2d 1153, 1157-58 (8th Cir. 1992)(recording device was not telephone
equipment within the meaning of the exemption because it was not purchased from the
telephone company and it was connected to an extension phone and not directly to the
telephone line); O’Sullivan v. Nynex Corp., 687 N.E.2d 1241, 1245 (Mass. 1997)(recording
system designed for and used by telephone company did not require connections to an extra
telephone line); Dillon v. Massachusetts Bay Transp. Auth., 729 N.E.2d 329, 335 (Mass.
App. Ct. 2000), cert. denied, 733 N.E.2d 1067 (Mass. 2000)(recording devices directly
integrated into phone lines on which they depended in order to function were “telephone
equipment”).  To a certain extent, these factors may assist a court in determining whether the
21
devices qualify as “telephone equipment;” overall, however, we believe these factors are
unsatisfactory.   
We agree with courts that have taken a more functional approach to this
determination.  That is, to be deemed telephone equipment, the equipment must further the
use of or functionally enhance the telecommunications system.   See Sanders v. Bosch Corp.,
38 F.3d 736, 740 (4th Cir. 1994)(stating that “[t]he voice logger in no way furthers the plant’s
communication system”); Williams, 11 F.3d at 280 (monitoring system “is precisely the type
of intercepting device Congress intended to regulate heavily when it enacted Title III”).  
The utility of the add-on equipment must have some relation to the enhancement of
the communication system.  The United States District Court for the District of New Jersey
succinctly described the type of add-on equipment that would functionally enhance the
telecommunications system as “instruments [which have] a positive impact on the efficiency,
clarity, cost, or any other factor by which one would measure the effects on a
communications system.”  See Pascale v. Carolina Freight Carriers Corp., 898 F.Supp. 276,
281 (D. N.J. 1995).  Thus, we measure the applicability of the exemption by the functional
utility of the equipment and its ability to further the use of the telecommunications system.
This is consistent with our interpretation of “electronic, mechanical or other device”
in Adams v. State, 289 Md. 221, 424 A.2d 344, (1981).  In Adams, we considered whether
a witness’s telephonic identification of the defendant through the use of an extension phone
in the police station violated the Maryland Wiretap Act.  Id. at 222, 424 A.2d at 345.  We
22
held that the use of extension phones was exempted from the statute under the telephone
exemption.  Id. at 229, 424 A.2d at 348.  While not explicitly so stating, we did consider the
functional enhancement that resulted from an extension phone device.   We stated that the
extension phone “was furnished to the subscriber in order that the same communication may
be received or transmitted at the same time by more than one person,” id. at 227, 424 A.2d
at 347, and characterized the extension phone as similar in nature to a speaker phone, which
would allow anyone in the room to hear the communication.  See id. at 228-29, 424 A.2d at
348.  Thus, a speaker phone and an extension phone further the use of the
telecommunications equipment, in that they increase the ability of the phone equipment to
accommodate more parties to the communication.   Furthermore, in concluding that the
extension phone was “telephone equipment” we noted that the extension phone was not an
additional device attached to the telephone, and specifically, it “was not a device placed on
the line in order to receive the communication during its transmission.”  Id. at 227, 424 A.2d
at 347 (emphasis added).  The Racal equipment, however, is such a device.   In fact, it is
precisely the type of device  intended to be restricted under the wiretapping statutes.  
The respondent argued, and the Court of Special Appeals agreed, that the Racal
monitoring and recording equipment was “designed to support a function related to the
effectiveness of the telecommunications system.”  139 Md.App. at 489, 776 A.2d at 92.  We
disagree.  The recording devices in no way increased the effectiveness of the
telecommunications system; it may have increased the effectiveness of the monitoring and
23
training of the IWIF employees in their interactions with the customers on the telephone, but
the telecommunications equipment itself was not improved, enhanced, or furthered by the
addition of the monitoring and recording devices.  The efficiency, clarity and cost of the
respondent’s Meridian telephone system were not positively affected by the procurement and
utilization of the Racal devices.
The Court of Special Appeals erroneously emphasized certain factual characteristics
of the Racal system in support of its conclusion that the Racal system qualified as telephone
equipment.  The intermediate appellate court found that the recorders were designed and
manufactured for use as integrated components of a telecommunications system to provide
monitoring and recording for that system.  See Schmerling, 139 Md.App. at 488, 776 A.2d
at 91.  The court further emphasized that the Racal equipment was “highly specialized,
expensive hardware.”  Id. at 489, 776 A.2d at 91.  That an intercepting device is
manufactured to be an integrated component of a larger system, and that the device is highly
technical and expensive does not, per se, establish that the equipment is telephone equipment
under the Act.  Similarly, simply because the recorders “have no use outside of their
integrated functioning in IWIF’s system” and “their connections are indistinguishable from
those for the other [IWIF] hardware,” does not mean they automatically become telephone
equipment or a component thereof.  Id. at 489, 490, 776 A.2d at 92, 93.  The equipment must
enhance the functional use of the communications system rather than merely containing
indistinguishable connections from the main system.  
24
Respondents believe that so long as a device is made and sold commercially,
connected directly to the phone lines and deeply integrated into the users telephone system,
it should be considered telephone equipment or a component thereof.  See e.g. Sanders, 38
F.3d at 744 (Widener, J., concurring in part, dissenting in part).  Such a standard, however,
would render the first prong a virtual nullity – the only consideration would be whether the
interception was for a valid business purpose.  This is certainly not what the Legislature
intended.  
Again, in considering the functionality of the device at issue, it is clear that the Racal
system is only capable of monitoring telephone transmissions.  By respondent’s admission
and the Court of Special Appeals’s agreement therewith, the Racal system does nothing other
than monitor and record, it does not enhance communication or advance the efficient use of
the telecommunications.  See Schmerling, 139 Md.App. at 479, 776 A.2d at 86.  These
devices cannot be considered “telephone equipment” because, simply put, the Racal
recorders do not contribute to the functionality of the phone system in that they do not relate
to the facilitation of communication; thus, the exemption cannot apply.
C.
Ordinary Course of Business
As we discussed supra, to fall within the telephone exemption, and thus not be
deemed an intercepting device, the equipment must satisfy two criteria: (1) the equipment
must be a “telephone . . . instrument, equipment or other facility for the transmission of
electronic communications, or any component thereof”; and (2) the equipment must be “used
25
in the ordinary course of [the subscriber’s or user’s] business.”  Because we hold that the
Racal recording equipment does not fall within the statutory telephone exemption, it is an
intercepting device prohibited by the Maryland Wiretap Act and we need not reach the
second prong.
D.
Rule 2-341 Violation
Turning now to petitioners’ contention that the lower court erred in accepting the
respondent’s belated Answer to the Second Amended Complaint, we hold that the trial court
properly exercised its discretion in allowing the answer.  Amendments to pleadings are to be
“freely allowed when justice so permits,” see Md. Rule 2-341(c), and shall only be denied
if “prejudice to the opposing party or undue delay results.”  Robertson, 271 Md. at 710, 319
A.2d at 818.  Having found that a comparison of the two pleadings demonstrated the
substantial similarities between the original and amended answer, the court ruled that the
petitioners were not prejudiced by the delay.  We agree.  The only remarkable variation to
which the respondent might answer was the petitioners’ amended prayer for statutory
liquidated damages, in addition to the relief already sought.  Respondent previously had
generally denied the allegations and prayers for relief, and did so similarly, again, with
respect to the prayer for statutory liquidated damages.  Therefore, we agree with the Circuit
Court and the Court of Special Appeals that the petitioners suffered no prejudice from the
belated filing of the Answer, see Schmerling, 139 Md.App. at 498-99, 776 A.2d at 97-98, and
we affirm the judgment of the Court of Special Appeals that the trial court was well within
26
its discretion to so conclude.  Id. at 498, 776 A.2d at 97. 
IV.   Conclusion
We reverse the Court of Special Appeals’s holding regarding the application of the
telephone exemption to the respondent’s recording and monitoring equipment.  We affirm
the intermediate appellate court’s holding with respect to Maryland Rule 2-341.
JUDGMENT OF THE COURT OF SPECIAL
APPEALS REVERSED.  CASE REMANDED
TO THAT COURT WITH INSTRUCTIONS
TO REVERSE THE JUDGMENT OF THE
CIRCUIT 
COURT 
FOR 
BALTIMORE
COUNTY AND REMAND THE CASE TO
T H A T  
C O U R T  
F O R  
F U R T H ER
PROCEEDINGS CONSISTENT W ITH THIS
OPINION. COSTS IN THIS COURT AND
THE COURT OF SPECIAL APPEALS TO
BE PAID BY RESPONDENT.