Maryland Legal Alert for Financial Services
Maryland Legal Alert - November 2007
MARYLAND EMPLOYERS SHOULD REVIEW VACATION/LEAVE POLICIES
As our Legal Bulletin (click here) explains, the Maryland Court of Special Appeals, in a recent unpublished opinion, Catapult Technology, Ltd. v. Wolfe, decided that a group of departing employees must be paid for earned leave time upon termination of their employment, disregarding the employer's policy under which the leave was forfeited. This is a dramatic departure from the longstanding position of the Maryland Department of Labor, Licensing and Regulation, which oversees enforcement of Maryland's wage payment laws. Existing vacation and PTO policies should be reviewed in light of the court's ruling. If you have questions about the decision or your existing policies, please e-mail Bob Kellner or Chuck Bacharach.
INSURER HAS DUTY TO DEFEND AGAINST FAIR CREDIT REPORTING ACT CLASS ACTION
On October 26, 2007, in Zurich American Ins. Co. v. Fieldstone Mortgage Co., the U.S. District Court for the District of Maryland held that an insurer's commercial general liability policy obligated defense of its insured, a mortgage lender, against a Fair Credit Reporting Act prescreening violation class action. The underlying claim alleged that the mortgage lender improperly accessed and used information in consumer credit reports. The lender requested coverage under the policy provision for sums the insured "becomes legally obligated to pay as damages because of personal and advertising injury" which was defined to include "[o]ral or written publication, in any manner, of material that violates a person's right of privacy." Relying to a great extent on the history and purposes of the FCRA, the court determined that protection of the privacy of consumer credit histories was an essential goal of Congress in passing the FCRA. As a result, the court held that a potential violation of the FCRA prescreening provisions was an "advertising injury" claim covered by the policy. The moral of the story is always consider potential available insurance coverage if claims are raised against your business. For more information, please contact Chris Rahl.
NEW MARYLAND TAX RULES FOR NET OPERATING LOSS DEDUCTIONS
Under new tax rules issued by the Comptroller of Maryland, effective October 22, 2007, a net operating loss generated outside Maryland may not be used as a tax deduction to offset Maryland income. In addition, net operating losses generated by acquired or merged corporations that were not subject to Maryland taxation at the time may not be used by the acquiring or succeeding entity to offset its Maryland income tax liability. To read the revised regulations, please click here. For more information, please contact Chris Rahl.
MARYLAND HOMEOWNERSHIP PRESERVATION TASK FORCE REPORT ISSUED
Governor Martin O'Malley's Homeownership Preservation Task Force is expected to soon issue its final report on how to combat rising foreclosure rates and preserve homeownership in Maryland. The report undoubtedly will lead to legislation being introduced in Maryland's regular legislative session beginning January 9, 2008. We expect the final report to be published at the Maryland Department of Housing and Community Development website (click here) within the next few weeks. For more information, please contact Chris Rahl.
MORTGAGE LENDERS TAKE NOTE ...
Because of a recent decision by the U.S. District Court for the District of Hawaii, lenders in Maryland and elsewhere may want to revisit prior conclusions about whether the Truth in Lending Act applies to transactions where the loan is made to a revocable living trust (or, perhaps, another type of "organization") and not to a natural person. In Amonette v. IndyMac Bank, F.S.B., the court held that the plaintiffs, an individual and her revocable living trust, had standing to sue for claims based on TILA even though the loan was made to the revocable living trust and was secured by property owned by the trust. The court rejected the lender's "plain meaning" argument, reasoning that, although the borrower technically was not a natural person, the plaintiff, as settlor, trustee and beneficial owner, "effectively owned the property" for purposes of TILA and, as a result, was entitled to its protections. For more information, please contact Chris Rahl.