Title: Holiday v. Montgomery County

State: maryland

Issuer: Maryland Supreme Court

Document:

IN THE COURT OF APPEALS OF MARYLAND
No. 74
September Term, 2002
_________________________________________
HOLIDAY UNIVERSAL, INC., et al.
v.
MONTGOMERY COUNTY, MARYLAND, et al.
__________________________________________
Bell, C.J.
        Eldridge
       
Raker
Wilner
Cathell
Harrell
Battaglia, 
                                
         JJ.
__________________________________________
Opinion by Eldridge, J.
_________________________________________
Filed:   October 9, 2003
1
 The appellants in this case are Holiday Universal, Inc., N.A.T.S.O.D., Inc. and N.A.T.S.O.D.
Two, Inc.  Holiday Universal, while a single corporation, trades as both “Bally’s Holiday Spa” and
“Bally’s Total Fitness.”  Holiday Universal is engaged in the business of providing health club
services.  The other two appellants, both of whom trade as “Now and Then Dance Studio,” sell
ballroom dance lessons.
In this action, the appellants challenge an ordinance enacted by the
Montgom ery County Council, which enables Montgom ery County to regulate a future
service contract where the performance of the contract is “primarily” in Montgom ery
County or, regardless of where performance takes place, when the contract is merely
signed in Montgom ery County. 1  The dispositive issue before us is whether the
Montgom ery County ordinance is a valid “local law” under Article XI-A of the
Maryland Constitution.  We shall hold that, because of its significant extraterritorial
impact, the ordinance is not a “local law” and that the Montgom ery County Council
exceeded the authority delegated to charter home rule counties in enacting the
ordinance.  
I.
On August 3, 1993, the Montgomery County Council enacted Bill No. 22-92,
which added § 11-4A to the Consumer Protection Chapter of the Montgom ery County
Code.  Section 11-4A(a) states that “[i]t is unlawful for a merchant to engage in an
unfair trade practice in the offering or sale of a future service contract.”  Under § 11-
4A(b)(1), three conditions must be met before a contract for the sale of services will
be deemed a “future service contract,” subjecting the merchant in question to the
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administrative oversight and penalties established under Chapter 11.  First,
performance of the contract must take place either “on a continuing basis or during a
period of time after the contract is signed.”  § 11-4A(b)(1)(A).  In addition, the
ordinance limits regulation to services provided by a “health spa, dance studio, weight
reduction service, self-defense school, dating service, or vacation and travel club.”
§ 11-4A(b)(1)(B).  Finally, the ordinance covers any contract for the sale of services
that “will primarily be provided in [Montgomery] County or [services] under a contract
signed in [Montgomery] County.”  § 11-4A(b)(1)(C) (emphasis added).
Section 11-4A(c) details the types of practices that are considered unfair trade
practices as follows:
“(c)
Unfair trade practices prohibited by this Section are:
(1) 
refusing to allow a consumer to cancel a future
service contract, without any obligation to the
consumer, within:
(A) 
three business days after the consumer signs
the contract, or
(B) 
any longer period allowed by State or Federal
law;
(2) 
representing, orally or in writing, that a consumer has
no legal right to terminate a future service contract;
(3) 
failing to offer a consumer the option to either:
(A) 
enter into an initial contract for 90 days or
less; or 
(B) 
receive and pay for each unit of service on a
periodic or per unit basis;
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(4) 
refusing to refund to the consumer, after a contract is
cancelled during the cancelling period allowed under
paragraph (1), any money paid that exceeds the
amount a merchant may lawfully retain:
(A) 
within 15 days, in cash or check form, if the
consumer paid in cash, money order, or
traveler’s check;
(B) 
immediately, by recrediting the consumer’s
account, if the consumer signed a credit card
slip; or
(C) 
either by returning the consumer’s check
immediately or by issuing a refund check
within 15 days after the consumer’s check
clears the merchant’s bank, if the consumer
paid by check;
(5) 
contacting, or having an agent contact, a consumer in
any manner to collect payment which exceeds the
amount a merchant may lawfully retain; and 
(6) 
in addition to any other disclosure requirement
imposed under State or Federal law, failing to include
in each contract the following disclosure in boldface
type, no smaller than 10 points, that contrasts with
surrounding text:
CANCELLATION AND REFUND
Under Montgom ery County law, you can cancel this
contract without any obligation within 3 business
days after signing it and receive a full refund.
You must notify (name of service provider) of your
decision to cancel this contract by certified mail or by
written notice delivered to (name of service
provider).
OTHER DISCLOSURES
Federal law give you certain rights to stop an
automatic charge against your credit card or bank
-4-
2
 The original plaintiffs were eight separate future service providers.  Subsequently, the parties
entered into a joint stipulation of dismissal with prejudice as to five of these merchants.  The
appellants are the remaining three merchants.
account under this contract.  The only charges or fees
you are required to pay under this contract are:
(list each charge or fee per year, month, or week, or per
unit of service).”
Finally, § 11-4A(d) governs when a future service contract is deemed cancelled, stating
that such a contract “is cancelled when the consumer delivers written notice of the
cancellation to the merchant.”  The ordinance then defines what constitutes “delivery”
of the written notice.  
Following the enactment of § 11-4A, several future service providers filed a
complaint in the Circuit Court for Montgom ery County seeking a declaratory judgment
that § 11-4A was invalid on several grounds, as well as injunctive relief and
compensatory and punitive damages.2  In their amended complaint, the appellants
alleged that, prior to the enactment of § 11-4A, many disputes arose between the
appellants and the Montgom ery County Office of Consumer Affairs regarding the
obligation of the appellants’ members to pay the unpaid portion of their membership
fee or to pay for unpaid dance lessons, and regarding the members’ entitlement to
refunds in the case of advance payments in the event that the members breached or
cancelled their contracts.  Moreover, the appellants alleged that the Office of Consumer
Affairs had solicited and received complaints about them from consumers who
breached or cancelled their contracts.  They argued that, as a result of the complaints,
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the Office of Consumer Affairs had threatened to issue citations for allegedly
committing deceptive trade practices.
In the Spring of 1992, the Office of Consumer Affairs requested that legislation
be introduced to create an equitable contractual balance wherein consumers pay only
for services received and merchants are compensated only for services actually
provided.  About a year later, the Montgomery County Council enacted § 11-4A, the
ordinance at issue in the case at bar.  
The appellants’ amended complaint challenged § 11-4A and the actions of the
Consumer Affairs Office on several grounds.  The complaint alleged as follows:  the
ordinance was preempted by State law; the County Council in enacting § 11-4A
exceeded the authority granted to charter counties by the Maryland Constitution; the
ordinance impairs the obligations of contracts in violation of Article I, § 10, cl. 10, of
the United States Constitution; the ordinance denies the appellants equal protection of
the laws under the Fourteenth Amendment of the United States Constitution and Article
24 of the Maryland Declaration of Rights; the ordinance deprives the appellants of
liberty and property without the due process of law in violation of the Fourteenth
Amendment of the United States Constitution and Article 24 of the Maryland
Declaration of Rights; the Office of Consumer Affairs’ policies and practices amount
to a regulation promulgated in violation of the Montgom ery County Administrative
Procedure Act; the Office of Consumer Affairs tortiously interfered with the
appellants’ contracts; and the Office of Consumer Affairs tortiously interfered with the
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3
In a declaratory judgment action, the trial court’s rulings on issues ordinarily must be reflected
(continued...)
appellants’ business relations.  The complaint stated that, since the appellants would
allegedly suffer immediate, substantial, and irreparable injury, they were entitled to
injunctive relief. 
Following cross-motions for partial summary judgment, and at the conclusion
of a hearing, the circuit judge orally stated that, with the exception of subsection (c)(5),
the ordinance was a valid local law and did not violate either the state or federal
constitutions.  The court held that subsection (c)(5) was severable from the remainder
of the ordinance.  The Circuit Court granted Montgom ery County’s motion for partial
summary judgment regarding the ordinance’s validity, except for subsection (c)(5).
Stating that subsection (c)(5) of the ordinance was unconstitutionally vague and in
violation of Article 24 of the Maryland Declaration of Rights and the Due Process
Clause of the Fourteenth Amendment, the Circuit Court simply granted the appellants’
motion for partial summary judgment as to subsection (c)(5) only.  The Circuit Court
did not file a written declaratory judgment reflecting its oral rulings.
After an attempted interlocutory appeal was dismissed by the Court of Special
Appeals, the appellants’ non-constitutional claims, based on alleged actions of the
Office of Consumer Affairs, and the claim for money damages, were dismissed with
prejudice.  The Circuit Court then entered an order declaring that subsection (c)(5)
violated due process and was unconstitutional.  The declaration did not include the
court’s rulings on the validity of the remainder of § 11-4A.3  The Circuit Court also
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3
(...continued)
in a separate written declaratory judgment.  See Glover v. Glendening, 376 Md. 142, 154-156, 829
A.2d 532, 539-540 (2003), and cases there cited.
permanently enjoined Montgom ery County from enforcing subsection (c)(5).  
The appellants noted an appeal and Montgom ery County noted a cross-appeal
from the final judgment.  This Court issued a writ of certiorari before the Court of
Special Appeals heard the case.  Holiday v. Montgomery County, 371 Md. 261, 808
A.2d 806 (2002).  
Before this Court, the appellants raise three issues:  First, whether § 11-4A is a
“local law” authorized by Article XI-A of the Maryland Constitution;  second, whether
State law preempts the ordinance; and third, whether the Circuit Court properly severed
subsection (c)(5) from the remainder of the ordinance.  Montgom ery County challenges
the declaration that subsection (c)(5) was invalid.  Because we shall hold that § 11-4A
is not a “local law” under Article XI-A of the Maryland Constitution, it is unnecessary
for us to reach the last two issues raised by the appellants or the issue raised by
Montgom ery County. 
II. 
Montgom ery County is a charter home rule county under Article XI-A of the
Maryland Constitution.  See Tyma v. Montgomery County, 369 Md. 497, 504, 801 A.2d
148, 152 (2002); McCrory Corp. v. Fowler, 319 Md. 12, 16, 570 A.2d 834, 835 (1990);
Montgomery Citizens League v. Greenhalgh, 253 Md. 151, 155-162, 252 A.2d 242,
245-247 (1969).  The so-called Home Rule Amendment, Article XI-A of the Maryland
-8-
Constitution, “enabled counties, like Montgom ery County, which chose to adopt a
home rule charter, to achieve a significant degree of political self-determination.”
Tyma v. Montgomery County, supra, 369 Md. at 504, 801 A.2d at 152.  As this Court
stated in McCrory Corp. v. Fowler, supra, 319 Md. at 16, 570 A.2d at 835-836, “[i]ts
purpose was to transfer the General Assembly’s power to enact many types of county
public local laws to the Art. XI-A home rule counties,” citing generally, Board of
Election Laws v. Talbot County, 316 Md. 332, 344, 558 A.2d 724, 730 (1989); Griffith
v. Wakefield, 298 Md. 381, 384, 470 A.2d 345, 347 (1984); Town of Forest Heights v.
Frank, 291 Md. 331, 342, 435 A.2d 425, 431 (1981); Cheeks v. Cedlair Corp., 287 Md.
595, 597-598, 415 A.2d 255, 256 (1980).  See also H. P. White v. Blackburn, 372 Md.
160, 167, 812 A.2d 305, 309 (2002); Montrose Christian School v. Walsh, 363 Md.
565, 579, 770 A.2d 111, 119 (2001).
In McCrory Corp. v. Fowler, supra, 319 Md. at 16-17, 570 A.2d at 836, we
discussed the origins of a charter county’s authority to enact ordinances under Article
XI-A:
“Sections 1 and 1A of Article XI-A empower . . . the counties
of Maryland to adopt a charter form of local governm ent.  Section
2 directs the General Assemb ly to provide a grant of express
powers for charter home rule counties. The General Assemb ly
followed that directive and enacted the Express Powers Act by
Ch. 456 of the Laws of Maryland of 1918, codified as Code (1957,
1987 Repl. Vol.), Art. 25A.  Section 3 of Article XI-A provides
(emphasis supplied):
‘From and after the adoption of a charter by the City of
Baltimore, or any County of this State, as hereinbefore
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provided, the Mayor of Baltimore and City Council of the
City of Baltimore or the County Council of said County,
subject to the Constitution and Public General Laws of this
State, shall have full power to enact local laws of said city
or county . . . upon all matters covered by the express
powers granted as above provided. . . .’”
The McCrory opinion then emphasized that “Article XI-A ‘does not constitute
a grant of absolute autonomy to local govern ments.’  Ritchmount Partnership v. Board,
283 Md. 48, 56, 388 A.2d 523, 529 (1978).  This Court’s decisions . . . make it clear
that the Home Rule Amendment limits the Montgomery County Council to enacting
‘local laws’ on matters covered by the Express Powers Act.”  McCrory Corp. v.
Fowler, supra, 319 Md. at 17, 570 A.2d at 836.  See also H. P. White v. Blackburn,
supra, 372 Md. at 167-168, 812 A.2d at 309 (“As made clear by the language of Article
XI-A, § 3, of the Constitution . . . the law-making authority of a home rule county is
limited to the ‘power to enact local laws of said . . . County’”); Sweeney v. Hartz
Mountain Corp., 319 Md. 440, 573 A.2d 32 (1990).  Moreover, we reiterated in
Montgomery County v. Broadcast Equities, Inc., 360 Md. 438, 441 n.1, 758 A.2d 995,
996 n.1 (2000), that “[i]f . . . an ordinance enacted by a charter county does not
constitute a ‘local law’ within the meaning of Article XI-A, it is beyond the authority
of a charter county and, therefore, is unconstitutional.”  
Section 4 of Article XI-A explicitly states that “[a]ny law so drawn as to apply
to two or more of the geographical subdivisions of this State shall not be deemed a
Local Law, within the meaning of this Act.”  As this Court stated in Dasch v. Jackson,
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170 Md. 251, 260, 183 A. 534, 537-538 (1936), apart from the limitation expressed in
§ 4 of Article XI-A, “[the Home Rule Amendment] attempts no definition of the
distinction between a local law and a general law, but leaves that question to be
determined by the application of settled legal principles to the facts of particular cases
in which the distinction may be involved.”
In attempting to draw the line between a local law and a general law, this Court
has observed that a local law “in subject matter and substance” is “confined in its
operation to prescribed territorial limits. . . .”  Steimel v. Board, 278 Md. 1, 5, 357 A.2d
386, 388 (1976).  On the other hand, the Steimel Court noted, a general law “‘deals with
. . . a subject which is of significant interest not just to any one county, but rather to
more than one geographical subdivision, or even to the entire state.’”  Ibid.  We have
also cautioned that one must look beyond the form of the ordinance to its substance:
“some statutes, local in form,” are “general laws, since they affect the interest of the
whole state.”  Cole v. Secretary of State, 249 Md 425, 434, 240 A.2d 272, 278 (1968).
The appellants in this case are subject to regulation under §11-4A.  As required
by §11-4A(b), they provide services under a contract in which the performance of the
contract takes place on a continuing basis or some time after the contract is signed.
They are within the class of merchants named in §11-4A(b)(2), and they are engaged
in business in and outside of Montgom ery County. 
The appellants correctly assert that § 11-4A is not a local law because it has
substantial territorial effect beyond Montgom ery County.  Indeed, the County concedes
-11-
4
 During a Circuit Court hearing, the County’s counsel stated that the word “primary” means
fifty-one percent.
that, in resolving whether an ordinance is a local law, one must focus, inter alia, upon
whether the ordinance is essentially limited to the territorial boundaries of the enacting
jurisdiction.  Under § 11-4A(b)(1)(C), the Montgom ery County ordinance applies to
contracts for future services that will “primarily be provided in [Montgomery] County 4
or under a contract signed in [Montgomery] County” (emphasis added).  Thus, it is
undisputed that the ordinance could directly apply in a jurisdiction outside of
Montgomery County.  By its own language, the ordinance makes clear that it would
apply to a contract signed outside of Montgom ery County, by parties residing outside
of Montgom ery County, where as much as forty-nine percent of the performance of the
contract takes place outside of Montgom ery County.  Even more significantly, the
ordinance applies to a contract fortuitously signed in Montgom ery County, by parties
who reside outside of Montgom ery County, where none of the performance takes place
within Montgom ery County.  Any contract for services of the type covered by the
ordinance, regardless of where in the entire world the contract is to be performed, is
regulated by the ordinance if the contract happens to be signed in Montgom ery County.
Numerous opinions of this Court have set forth principles for determining
whether an enactment violates the local law limitation imposed by Article XI-A of the
Maryland Constitution.  For example, a Montgomery County ordinance which extended
benefits to domestic partners of Montgom ery County employees, in Tyma v.
Montgomery County, supra, 369 Md. 497, 801 A.2d 148, was upheld as a valid local
-12-
law.  This Court stated that “the Act affects only the personnel policies of Montgom ery
County. . . . [T]he only employer this ordinance impacts is the County; it has no effect
outside the County. . . .”  369 Md. at 515, 801 A.2d at 158.  
The Court in Gaither v. Jackson, 147 Md. 655, 128 A. 769 (1925), however, held
that a statute providing for the gubernatorial appointment of auctioneers in Baltimore
City only, with their license fees paid to the State, was not a “local law” under Article
XI-A of the Constitution because it “affect[ed] the interests of the people of the whole
State.”  147 Md. at 667, 128 A. at 773.  
Other legislative enactments, directly operative on events in one subdivision, or
triggered by events in one subdivision, have been held not to be local laws because of
their effect upon persons in the rest of the State.  Thus, in Norris v. Baltimore, 172 Md.
667, 192 A. 531 (1937), this Court held that a statute requiring the use of voting
machines in one subdivision was not a local law because the elections covered state and
federal officials.  
Similarly, in Dasch v. Jackson, supra, 170 Md. at 261, 183 A. at 538, an
enactment concerning the licensing of paper hangers in Baltimore City was not deemed
a local law because, inter alia, it affected “the right of persons not residing in the City
of Baltimore . . . to engage in the business of paper hanging in Baltimore City.” See
also Bradshaw v. Lankford, 73 Md. 428, 21 A. 66 (1891) (Prohibition of oyster
dredging in Somerset County was not a local law, as it deprived persons in the rest of
the State from dredging for oysters in that County).
-13-
Although the enactmen ts in the Gaither, Norris, Dasch, and Bradshaw opinions
appeared to be local in character, they were held to be general, and not local, laws
because of the impact on persons throughout the State.  The same is true of the
Montgom ery County ordinance at issue in this case.  It could have a major impact on
services performed for people in the rest of the State, or even the rest of the world,
based simply on a contract having been signed in Montgomery County.  Moreover,
§ 11-4A of the Montgom ery County Code purports to regulate a service provided in
another county of the State if fifty-one percent of the service is provided in
Montgomery Cou nty.  Under our cases, the impact of the ordinance upon persons
outside of Montgom ery County is too great for the ordinance to be a local law under
Article XI-A of the Constitution.
In arguing that § 11-4A of the Montgom ery County Code does not violate Article
XI-A of the Maryland Constitution, the County contends that the Express Powers Act,
Maryland Code (1957, 2001 Repl. Vol.), Article 25A, § 5(S), grants to charter counties
“the broadest authority for local legislation” designed to “promote the general welfare”
(Montgom ery County’s brief at 4-5).  This argument misses the mark.  Even assuming,
arguendo, that the subject matter encompassed by § 11-4A is within the ambit of the
express powers which the General Assemb ly has delegated to charter home rule
counties by Article 25A, § 5(S), it is not a “local law” under Article XI-A of the
Constitution, and is, therefore, an invalid enactmen t.  
Our opinion in McCrory Corp. v. Fowler, supra, 319 Md. 12, 570 A.2d 834, is
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5
 Section 13-102 (b)(1) states (emphasis added):
“(b)  Purpose. –  (1) It is the intention of this legislation to set certain minimum
statewide standards for the protection of consumers across the State, and the General
Assembly strongly urges that local subdivisions which have created consumer
protection agencies at the local level encourage the function of these agencies at least
to the minimum level set forth in the standards of this title.”
Section 13-103 (a) and (b) provide (emphasis added):
“(a)  Intent. – This title is intended to provide minimum standards for the protection
of consumers in the State.
“(b)  Adoption of more stringent provisions. – A county, Baltimore City,
(continued...)
on point.  One of the issues in McCrory was whether a Montgom ery County ordinance,
which created a private circuit court cause of action to remedy violations of an anti-
employment discrimination ordinance, exceeded the authority delegated to charter
home rule counties under the Express Powers Act, Article 25A.  Upon determining that
the ordinance was not a “local law” under Article XI-A of the Constitution, we stated
that the “Express Powers Act . . . could not authorize Montgom ery County to enact the
ordinance.”  319 Md. at 14, 570 A.2d at 835 (emphasis added).   An ordinance enacted
by a charter county may be valid only if it is both a local law under Article XI-A of the
Constitution and is authorized by the General Assembly.
Similarly, Montgom ery County argues that the General Assemb ly expressly
invited local consumer protection legislation and enforcement because §§ 13-102(b)(1),
13-103(a) and (b) of the Commercial Law Article, Code (1975, 2000 Repl. Vol.), which
are part of the State Consumer Protection Act, state that the standards provided therein
are “minimum standards” and that a county “may adopt . . . more stringent provisio ns.” 5
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5
(...continued)
municipality, or agency of either may adopt, within the scope of its authority, more
stringent provisions not inconsistent with the provisions of this title.”
Nevertheless, just as the Express Powers Act could not constitutionally authorize
Montgom ery County to enact a non-local law, the Consumer Protection Act could not
constitutionally authorize Montgom ery County to enact a consumer protection
ordinance which is not a local law.  
Section 11-4A of the Montgom ery County Code substantially affects persons and
entities outside of Montgom ery County, many of whom would have little or no
connection with Montgom ery County.  Under our cases, it is not a local law and is
facially unconstitutional under Article XI-A of the Maryland Constitution.  The
enactment of § 11-4A was beyond the constitutionally prescribed legislative authority
of the Montgom ery County Council.  In light of this holding, the other issues raised in
this case, including the subject of Montgom ery County’s cross-appeal, need not be
reached.  The appellants are entitled to a declaratory judgment that § 11-4A violates
Article XI-A of the Maryland Constitution and an injunction restraining the
enforcement of § 11-4A.
JUDGMENT OF THE CIRCU IT COURT FOR
MONTGOMERY COUNTY REVERSED.
CASE REMANDED TO THE CIRCU IT
COURT FOR THE ENTRY OF ORDERS
CONS ISTENT 
WITH 
THIS 
OPINION.
MONTGOMERY COUNTY TO PAY COSTS.