PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

GOLDMARK FRIENDSHIP, LLC, a 

Nevada Limited Liability Company,

on behalf of PrimeHealth

Corporation in Receivership,

Plaintiff-Appellant,

v.  No. 01-2373

AMERICAN EXPRESS TAX AND

BUSINESS SERVICES, INCORPORATED;

WALPERT AND WOLPOFF, LLP;

JOHNSON LAMBERT AND COMPANY,

Defendants-Appellees. 

GOLDMARK FRIENDSHIP, LLC, a 

Nevada Limited Liability Company,

on behalf of PrimeHealth

Corporation in Receivership,

Plaintiff-Appellant,

v.  No. 02-1132

AMERICAN EXPRESS TAX AND

BUSINESS SERVICES, INCORPORATED;

WALPERT AND WOLPOFF, LLP;

JOHNSON LAMBERT AND COMPANY,

Defendants-Appellees. 

Appeals from the United States District Court

for the District of Maryland, at Baltimore.

Frederic N. Smalkin, Chief District Judge.

(CA-01-2344-S)
Argued: May 7, 2002

Decided: September 20, 2002

Before WIDENER and MICHAEL, Circuit Judges, and

C. Arlen BEAM, Senior Circuit Judge of the United States Court

of Appeals for the Eighth Circuit, sitting by designation.

Affirmed by published opinion. Judge Widener wrote the opinion, in

which Senior Judge Beam joined. Judge Michael wrote an opinion

concurring in the judgment and concurring in part. 

COUNSEL

ARGUED: Sunanda Kumari Holmes, Chevy Chase, Maryland, for

Appellant. James Patrick Ulwick, KRAMON & GRAHAM, P.A.,

Baltimore, Maryland, for Appellees. ON BRIEF: Laura Maroldy,

KRAMON & GRAHAM, P.A., Baltimore, Maryland; Kevin M. Murphy, Alan Titus, CARR MALONEY, P.C., Washington, D.C., for

Appellees. 

OPINION

WIDENER, Circuit Judge: 

This case concerns the procedure under Maryland and federal law

for shareholders of a corporation in receivership to sue for allegedly

negligent or wrongful accounting practices by firms hired to audit the

corporation’s records. 

I.

Goldmark Friendship LLC (Goldmark), the plaintiff, is the sole

shareholder of PrimeHealth Corp., a certified Health Maintenance

2 GOLDMARK FRIENDSHIP v. AMERICAN EXPRESS
Organization (HMO) and Managed Care Organization (MCO) organized under Maryland law.1

 In March 1998, the Maryland Insurance

Commissioner directed the Maryland Insurance Administration to

investigate the financial viability of PrimeHealth. The report of the

Administration first noted discrepancies in PrimeHealth’s accounts

receivables and liabilities, which had allowed PrimeHealth to qualify

for HMO and MCO status under Maryland law,2 and also indicated

that PrimeHealth had misrepresented its relationships with various

business entities and used funds in connection with those businesses.

Based on this report, the Commissioner sought to have himself

appointed receiver for PrimeHealth. PrimeHealth initially demanded

a hearing to contest this report, but then signed an order authorizing

appointment of the Commissioner as receiver before that hearing was

held. The Baltimore City Circuit Court placed PrimeHealth in receivership, appointing the Commissioner as receiver.3

The present suit originated with action taken by the receiver to

evaluate PrimeHealth’s financial status.4 The receiver retained Walpert & Wolpoff (Walpert), an accounting firm owned by American

Express Tax and Business Services to audit PrimeHealth as of

December 31, 1998. He employed Johnson Lambert and Co. to perform the same audit for 1999. Goldmark alleges the following against

Walpert. First, Walpert had a conflict of interest because it was

1Dr. Christian C. Chinwuba and his wife own roughly an 80 percent

interest in Goldmark. 

2The report indicated that PrimeHealth had overstated its accounts

receivable and understated its liabilities. 

3The Baltimore City Circuit Court issued an order adopting and

finalizing the report of the Administration and dismissing Goldmark’s,

PrimeHealth’s, and Dr. Chinwuba’s petitions for circuit court judicial

review which was affirmed in PrimeHealth Corp. v. Ins. Comm’r, 758

A.2d 539 (Md. App. 2000). 

4

 Goldmark, PrimeHealth, and Dr. Chinwuba have brought various

lawsuits. These actions concern, but are not limited to, the appointment

of the Commissioner as receiver; defamation, invasion of privacy, and

Constitutional violations by the Commissioner; impartiality by the Baltimore City Circuit Court judge; the validity of PrimeHealth’s consent to

receivership; and termination of the receivership proceedings. None of

these actions are presently before this court. 

GOLDMARK FRIENDSHIP v. AMERICAN EXPRESS 3
already under contract with the Administration and the Commissioner

to audit other Maryland HMO’s and MCO’s. Second, this conflict

induced Walpert to perform PrimeHealth’s audit without utilizing

generally accepted accounting procedures and generally accepted

auditing standards, ultimately rendering PrimeHealth insolvent. Third,

apart from its desire to retain the Administration’s independent auditing contract, the motivation for Walpert’s wrongful conduct was

racial bias, since both PrimeHealth and Goldmark were AfricanAmerican owned companies. Goldmark makes the same allegations,

except the racial bias claim, against the firm hired to perform the

1999 audit, Johnson Lambert and Company. In addition, Goldmark

claims that Johnson Lambert, aware of Walpert’s negligence, failed

to disclose any wrongdoings to Walpert, PrimeHealth, or the receiver.

II.

A brief procedural history of this case follows. In mid-April 2001,

Goldmark directly sued Walpert and Johnson Lambert. On June 26,

2001, the district court dismissed the case with prejudice under Rule

12(b)(6) for failure to state a claim; however, the order noted that it

did "except to the extent the plaintiff purports to maintain a derivative

claim, which is dismissed without prejudice to refiling after demand

will have been made on the Receiver." 

Goldmark filed the present derivative action in early August 2001.

Section III, paragraph nine of this complaint reads: "Goldmark made

a demand on PrimeHealth’s Receiver to sue the defendants herein,

however, he refused to do so." This allegation is corroborated by a

line filed in the Baltimore City Circuit Court. On September 21, 2001,

Walpert, American Express, and Johnson Lambert moved to dismiss

the complaint. On October 17, 2001, the district court granted defendants’ motions to dismiss for failure to state a claim upon which relief

can be granted pursuant to Rule 12(b)(6), stating that plaintiff failed

to illustrate a violation of the business judgment rule and that there

was no allegation that the receiver’s failure to bring suit had been

brought to the attention of the Maryland court overseeing the receivership, another requirement for bringing a suit such as this. Motions

for reconsideration were denied on November 12, 2001. 

On appeal Goldmark asks that we reverse the judgment of the district court, arguing along the way that it erred in denying the motions

4 GOLDMARK FRIENDSHIP v. AMERICAN EXPRESS
for reconsideration and denying leave to file an amended complaint.

We affirm the district court’s decision to dismiss the case but emphasize that our dismissal is not a decision on or an expression of opinion

with relation to the merits of the claim that Goldmark seeks to derivatively assert against Walpert and Johnson Lambert. We discuss the

decision to dismiss the case but because the amended complaint does

not allege that Goldmark has petitioned the Baltimore City Circuit

Court, which is the receivership court, to prosecute its claim against

Walpert and Johnson Lambert, the motion of Goldmark to amend its

complaint is patently without merit and we so hold. 

As noted, PrimeHealth was adjudged to be in receivership by the

Circuit Court of Baltimore City October 1, 1998, and the Maryland

Commissioner of Insurance was appointed receiver by that court. That

action was affirmed by the Maryland Court of Special Appeals in

PrimeHealth Corp. v. Ins. Comm’r, 758 A.2d 539 (Md. App. 2000).

The order appointed the Commissioner "as receiver for the purpose

of rehabilitation of . . . PrimeHealth . . . ." The order stated, among

other things:

2. The receiver shall have the powers and duties vested

in him by the provisions of Title 9 . . . Annotated Code of

Maryland . . . and shall forthwith take possession of the

property of defendant and shall conduct the business thereof

under the general supervision of the court . . . . 

The claims derivatively asserted by Goldmark against Walpert and

Johnson Lambert are claims of the corporation not the claims of

Goldmark itself. They are rights of action and a part of the property

of the corporation. We see no difference between this suit of the corporation against its employees Walpert and Johnson Lambert and the

suit of a corporation against its officers for misappropriation of its

property. In such a case, the Supreme Court held the claim "is a right

of the corporation" and continued "[t]he whole property of the corporation within the jurisdiction of the court which appointed the

receiver, including all its rights of action, except so far as already lawfully disposed of under orders of that court, remains in its custody, to

be administered and distributed by it. Until the administration of the

estate has been completed and the receivership terminated, no court

of the one government can by collateral suit assume to deal with

GOLDMARK FRIENDSHIP v. AMERICAN EXPRESS 5
rights of property or of action, constituting part of the estate within

the exclusive jurisdiction and control of the courts of the other." Porter v. Sabin, 149 U.S. 473, 478, 479 (1893). 

The Court in Porter affirmed the federal circuit court which had

dismissed the case in which the state court, which appointed the

receiver, had denied a petition for stockholders to prosecute the claim

against the officers of the corporation. And the Porter Court stated

"[i]t is for that [receivership] court, in its discretion, to decide whether

it will determine for itself all claims of or against the receiver, or will

allow them to be litigated elsewhere. It may direct claims in favor of

the corporation to be sued on by the receiver in other tribunals

. . . ." 149 U.S. at 479. 

The same result was obtained in the case of Wabash R. Co. v. Adelbert College, 208 U.S. 38 (1908), in which an Ohio state court had

authorized foreclosure of a mortgage on the property of the railway

which was in receivership in a circuit court of the United States. In

the Wabash case the Court reasoned "[w]hen a court of competent

jurisdiction has, by appropriate proceedings, taken property into its

possession through its officers, the property is thereby withdrawn

from the jurisdiction of all other courts. The latter courts, although of

concurrent jurisdiction, are without power to render any judgment

which invades or disturbs the possession of the property while it is in

the custody of the court which has seized it." 208 U.S. at 54. "Those

principles [with respect to receivership] are of general application and

not peculiar to the relations of the courts of the United States to the

courts of the states; they are, however, of especial importance with

respect to the relations of those courts, which exercise independent

jurisdiction in the same territory, often over the same property, persons, and controversies; they are not based upon any supposed superiority of one court over the others, but serve to prevent a conflict over

the possession of property, which would be unseemly and subversive

of justice; and have been applied by this court in many cases . . . ."

208 U.S. at 54. 

Maryland law is the same. In Pritchard v. Myers, 197 A. 620 (Md.

1938), a bank was in receivership and certain creditors and depositors

of the bank sued directors of the bank charging neglect in the discharge of their duties. The complaint charged that the receiver of the

6 GOLDMARK FRIENDSHIP v. AMERICAN EXPRESS
bank had been requested to proceed against the directors but had

refused to act. That same situation pertains here. The Maryland court

held that the derivative suit of the bank against its directors prosecuted by the plaintiffs could not be maintained. The Court recited that

the "bill of complaint attempts to justify its inception on the allegation

that the receiver had been requested, but refused, to institute an action

against the directors for the benefit and reimbursement of the depositors and creditors." 197 A. at 626. The Court’s holding is in plain

English and is a decision on the same facts present here. It is:

The Court is of the opinion that these allegations are insufficient. The receiver is the officer of the court, and acts under

its supervision and by its direction. The refusal of the

receiver was not the act of the court, but was subject to the

court’s review and control. The plaintiffs at bar are not

shown to have invoked the court’s consideration and decision. Nor does the appeal that the receiver’s refusal was

brought to the court’s attention. The orderly course is to

present the question on petition and hearing in the pending

receivership cause. And thus obtain the court’s judgment

and order. 

197 A. at 626. And the Maryland Court of Special Appeals in Tafflin

v. Levitt, 608 A.2d 817 (Md. App. 1992), followed Pritchard and held

that in such a case, to maintain a derivative suit for the benefit of the

corporation in receivership, a demand on the receiver and a petition

of the receivership court are applicable. 608 A.2d at 820. 

Accordingly because the plaintiff did not petition the receivership

Maryland court to require the receiver to prosecute the derivative

action it now seeks to prosecute, the judgment of the district court is

AFFIRMED.

5

5

Just as the district court correctly held that merely requesting the

receiver to prosecute this suit, and his refusal of the request, is of itself

an insufficient reason to permit this case to continue, the Pritchard case

so holds. We emphasize that we do not decide that merely filing a petition in the receivership Maryland court is a sufficient predicate for perGOLDMARK FRIENDSHIP v. AMERICAN EXPRESS 7
MICHAEL, Circuit Judge, concurring in the judgment and concurring

in part: 

I concur in the judgment. In addition, I readily join in the majority’s opinion to the extent it holds that Maryland law required Goldmark Friendship, L.L.C. to petition the state receivership court for an

order directing the receiver to bring the derivative action that Goldmark seeks to prosecute itself. I respectfully decline to join the general discussion about whether federal courts can exercise authority

over property that is under the supervision of a state receivership

court.

mitting this case to proceed in this court. As Porter v. Sabin, supra, and

Wabash R. Co. v. Adelbert College, supra demonstrate, even such a petition and its refusal by action of the receivership court may well not be

sufficient predicates upon which to rest this derivative action asserting a

right of action belonging to the receiver. Indeed, in Wabash R. Co. the

Court stated: "The defendants in error [plaintiff here] must pursue their

remedy in that [receivership] court, which doubtless will consider the

decisions of the state courts on questions of state law with the respect

which the decisions of this court require." 208 U.S. at 57. 

8 GOLDMARK FRIENDSHIP v. AMERICAN EXPRESS