Court Opinion

ID: 992751
Source: CourtListenerOpinion
Date Created: 2013-07-03 23:57:03.445515+00
Date Added: 2024-06-11T15:11:33.051149
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: JOSEPH SMITH & SONS,
INCORPORATED; In Re: RICHARD
WYBROUGH,
Debtors.

FRED G. ZEHNER; CONTAMINATED
SOIL CONSULTANTS, INCORPORATED,
Claimants-Appellants,

and
                                                               No. 96-2744
BENEDICT A. WIDMER,
Claimant,

CLAUDE B. SHAFFER,
Party in Interest,

v.

JOSEPH SMITH & SONS,
INCORPORATED,
Debtor-Appellee.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
William M. Nickerson, District Judge.
(CA-96-137-WMN, BK-94-12947)

Argued: July 7, 1997

Decided: August 5, 1997

Before WILKINSON, Chief Judge, and WILKINS and
HAMILTON, Circuit Judges.

_________________________________________________________________
Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Bruce Montgomery Marshall, DURRETTE, IRVIN &
BRADSHAW, P.C., Richmond, Virginia, for Appellants. Richard R.
Page Wyrough, CAIN & WYROUGH, Upper Marlboro, Maryland,
for Appellee. ON BRIEF: Douglas Scott, DURRETTE, IRVIN &
BRADSHAW, P.C., Richmond, Virginia; Martin B. Ellis, SCHUL-
MAN, TREEM, KAMINKOW & GILDEN, P.A., Baltimore, Mary-
land, for Appellants.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Contaminated Soil Consultants, Inc. (CSC) and its president and
primary shareholder, Fred G. Zehner (Zehner) (collectively the Credi-
tors), appeal the district court's affirmance of the bankruptcy court's
order disallowing their claims against the bankruptcy estate of Joseph
Smith & Sons, Inc. (JSS) for damages flowing from JSS's alleged
abuse of civil process. The bankruptcy court disallowed the Creditors'
claims on the basis that they could not establish all the elements of
the tort of abuse of civil process under Maryland law. The district
court agreed. We affirm.

I.

The facts material to resolution of this appeal are not in dispute. At
all times relevant to this case, CSC and JSS were both participants in
the waste management industry in the State of Maryland. Specifically,
both companies sold a product known as "fluff," a byproduct of the

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process of recycling scrap metal. Fluff is used to cover up refuse in
landfills. After JSS was generally accused of selling contaminated
fluff and falsifying lab reports, it filed suit against the Creditors in
Maryland state court, alleging various causes of action, including,
among others, fraud, conspiracy to commit fraud, defamation and
intentional interference with business relations (the Tort Action). The
complaint alleged in part that the Creditors conspired with a former
disgruntled employee of JSS to harm JSS by delivering a letter to
every member of the Prince George's County Council that contained
false statements about JSS and by delivering to the same persons cop-
ies of false laboratory analyses that were alleged to be from fluff man-
ufactured by JSS.

While the Tort Action was pending, JSS filed for bankruptcy in the
United States Bankruptcy Court for the District of Maryland. Thereaf-
ter, JSS removed the Tort Action to the bankruptcy court. Following
extensive discovery between JSS and the Creditors, JSS made a
motion to voluntarily dismiss the Tort Action. The bankruptcy court
granted the motion.

Each creditor subsequently filed a proof of claim in the JSS bank-
ruptcy case for $2.5 million. The proofs of claims listed the tort of
abuse of civil process as their basis. According to the proofs of
claims, JSS's filing and subsequent maintenance of the Tort Action
"caused [them] severe financial damages . . . in the form of loss of
business and loss of financial investment." (J.A. 41, 44).

JSS objected to the Creditors' claims on the basis that they did not
allege facts necessary to establish the tort of abuse of civil process
under Maryland law. After conducting a hearing on the matter, the
bankruptcy court sustained JSS's objections and disallowed the Credi-
tors' claims. The Creditors appealed to the district court, alleging var-
ious points of error, including that the bankruptcy court had
improperly allocated the burden of proof between the parties. The dis-
trict court affirmed the bankruptcy court, and the Creditors noted a
timely appeal.

II.

As do district courts, we review the factual findings of a bank-
ruptcy court for clear error and its conclusions of law de novo. See

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In re Johnson, 960 F.2d 396, 399 (4th Cir. 1992). Here, our review
reveals that the bankruptcy court did not err in sustaining JSS's objec-
tions and disallowing the Creditors' claims.

The parties agree that the Creditors' claims must be tested under
Maryland law. As most recently articulated by the Court of Appeals
of Maryland, the elements of the tort of abuse of civil process in
Maryland are: (1) a willful use of civil process on the part of the
defendant after the process has issued in a manner not contemplated
by law; (2) an ulterior motive; and (3) damages resulting from the
defendant's abuse of process in the form of arrest of the person or sei-
zure of property of the plaintiff. See One Thousand Fleet Ltd. Part-
nership v. Guerriero, 1997 WL 324389, at *4, *9 (Md. June 12,
1997). In elaborating on the last element, the court in One Thousand
Fleet, Ltd. quoted the following passage from Bartlett v. Christhilf, 14
A. 518 (Md. 1888), with approval:

          All the cases upon this subject depend either upon the arrest
          of the person or seizure of his property; and we have been
          referred to none where this action was sustained for an
          injury to the plaintiff's business or good name. Any
          unfounded suit may result in such injury; but it will hardly
          be seriously contended that where there has been no wrong-
          ful deprivation of liberty or no illegal seizure of property,
          that each unfounded suit is to be treated as such an abuse of
          process of the law as will sustain action against the one who
          instituted it.

One Thousand Fleet Ltd., 1997 WL 324389, at *9 (quoting Bartlett,
14 A. at 522).

In accord with this statement of Maryland law, the court in One
Thousand Fleet, Ltd. affirmed a trial court's dismissal of an abuse of
process claim, because the plaintiff, a Maryland limited partnership
engaged in real estate development in Baltimore City, Maryland, only
alleged that it "lost money, suffered a delay of[one of] its project[s],
and faced increased construction, legal and financing costs" as a result
of the defendant's alleged abuse of process. Id. at *9-10. The plaintiff
did not allege arrest of the person or seizure of its property. Id. at *10.

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Here, we need not consider whether the Creditors' claims meet the
first and second elements of an abuse of civil process claim under
Maryland law, because they obviously fail to meet the third element.
Rather than alleging damages in the form of arrest of the person or
seizure of property, the Creditors have only alleged damages in the
form of loss of business and loss of investment. Under Maryland law
as most recently articulated in One Thousand Fleet, Ltd., such allega-
tions, even if proven to be true, cannot meet the third element.
Accordingly, we affirm the district court's decision affirming the
bankruptcy court's order sustaining JSS's objections and disallowing
the Creditors' claims.

AFFIRMED

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