In re Council of Unit Owners of the 100 Harborview Drive Condo.

580 B.R. 135

IN RE: COUNCIL OF UNIT OWNERS OF the 100 HARBORVIEW DRIVE CONDOMINIUM, Debtor.

Case No. 16–13049–MMH

United States Bankruptcy Court, D. Maryland, at Baltimore.

Signed: January 18, 2018

Lisa Yonka Stevens, Paul Sweeney, Yumkas, Vidmar, Sweeney & Mulrenin, LLC, Columbia, MD, Craig B. Zaller, Nagle & Zaller, P.C, Columbia, MD, for Debtor.

MEMORANDUM OPINION

MICHELLE M. HARNER, U.S. BANKRUPTCY JUDGE

This dispute involves two matters that most individuals hold very dear—their families and their homes. As such, emotions have run high throughout the various underlying administrative and judicial proceedings, which began in January 2010. The Court understands that both parties adamantly believe in their respective positions. By its analysis below, the Court means neither to diminish nor disparage how any of the parties feel they may have been treated over the past several years. The Court's evaluation of this dispute, however, must focus on the evidence in the record and the applicable legal standards.

The above-captioned Debtor's pending second Motion for Partial Summary Judgment (the "Debtor's Second Motion") [ECF 545] relates to the proofs of claim filed in this chapter 11 case by Dr. Paul C. Clark, Ms. Rebecca Delorme, and Paul Clark, Jr. (the "Creditors").^* Specifically, by the Debtor's Second Motion, the Debtor seeks summary judgment denying all aspects of the Creditors' claims based on alleged violations of the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3604 and 3617 (the "FHA Claims"). The Creditors filed an opposition to the Debtor's Second Motion (the "Creditors' Second Opposition") [ECF 567], and the Debtor filed a reply in support of the Debtor's Second Motion (the "Debtor's Second Reply") [ECF 631].¹ As explained in detail below and based on the evidence in the record, the Court finds that there are no genuine issues of material fact and that the Debtor is entitled to judgment as a matter of law on the FHA Claims.

I. Relevant Background on Chapter 11 Case

The Debtor is an unincorporated condominium association, comprising "any person, firm, corporation, trust, or other legal entity ... holding legal title to a condominium unit" in the building located at 100 Harborview Drive (the "Building"). Memorandum of Law in Support of Creditors' Motion for Partial Summary Judgment [ECF 596] Ex. 2, Art. I (q) (collectively with Creditors' Motion for Partial Summary Judgment [ECF 595] and Line attaching Affidavits [ECF 597], the "Creditors' Motion"). The Building "is a 29-story luxury residential high rise that stands on the shore of Baltimore's Inner Harbor." In re Council of Unit Owners of the 100 Harborview Drive Condominium , 572 B.R. 131, 135 (Bankr. D. Md. 2017) (J. Schneider). It "was established in 1993 as a condominium regime and contains 249 units and a health club." Id.

On March 9, 2016, the Debtor filed this chapter 11 case. The Debtor seeks to, among other things, reorganize its financial affairs and resolve years of litigation with the owners of two different units in the Building through a chapter 11 plan. Dr. Clark owns one of the units involved in this litigation—penthouse 4A ("Unit PH4A"). The Creditors' proofs of claim, at claim nos. 46, 47, and 48 (the "Claims"), collectively assert in excess of $25 million in damages against the Debtor. The Claims are based on the FHA Claims, alleged property damage to Unit PH4A, and consequential and other damages allegedly arising from those claims. On January 24, 2017, the Debtor filed objections to the Claims [ECF 264–266]. On February 23, 2017, the Creditors each filed an opposition to the Debtor's objections [ECF 316–318].

On May 18, 2017, Judge Schneider entered a Scheduling Order [ECF 393] with respect to the contested matter involving the Claims (the "Contested Matter"). The Court and the parties have subsequently amended that Scheduling Order several times. [ECF 474, 514, 618, 640]. The parties have conducted discovery and filed a total of four dispositive motions in the Contested Matter. The Court held a hearing for purposes of oral argument on three of these dispositive motions, including the Debtor's Second Motion, on January 5, 2018 (the "Hearing").² (The transcript of the Hearing is at ECF 643 (the "Transcript").) A trial on the Contested Matter is set to begin on February 6, 2018.

II. Relevant Background of Prior Administrative and Judicial Proceedings

The Creditors and the Debtor have been litigating various issues relating to Unit PH4A for several years. The Maryland Court of Special Appeals summarized "the multiplex of administrative and trial court actions and appeals involving" the Creditors and the Debtor in a 2015 reported decision. See 100 Harborview Drive Condominium v. Clark , 224 Md.App. 13, 119 A.3d 87, 93 (2015). The Court recounts only those aspects of this litigation history relevant to the pending motions.

In early 2010, the Creditors filed a complaint with the U.S. Department of Housing and Urban Development ("HUD") alleging familial status discrimination stemming from a cease and desist letter, dated January 19, 2010. "In February, the complaint was referred to the Maryland Commission on Human Relations [ ("MCHR") ], which, after investigation, also made a finding of no probable cause on August 17, 2010." 100 Harborview Drive , 119 A.3d at 95. See also Debtor's Second Motion Ex. F. Creditors filed a motion for reconsideration, which MCHR denied. See id. at Ex. G.³

On October 20, 2010, Dr. Clark filed a lawsuit against the Debtor and its professional property management company, Zalco Reality, Inc. ("Zalco"), in the Circuit Court for Baltimore City. Clark v. Zalco Realty, Inc., et al. , 24–C–10–007236 (Circ. Ct. Balt. City) (the "First State Court Action"). In the First State Court Action, Dr. Clark asserted a fraudulent misrepresentation claim and violations of the Maryland Consumer Protection Act against the Debtor and Zalco. These claims involved Dr. Clark's purchase of Unit PH4A in October 2009 and the resale disclosure certificate issued by the Debtor and Zalco in connection with that transaction. The Circuit Court granted summary judgment in favor of the Debtor and Zalco in the First State Court Action, which decision was subsequently affirmed by the Maryland Court of Special Appeals. See 100 Harborview Drive , 119 A.3d at 95 (describing result of this particular action).

On September 15, 2011, the Creditors filed another HUD complaint, naming as respondents the Debtor, Zalco, and Dr. John H. Cochran (the former President of the Debtor's Board of Directors (the "Board") ). The Creditors alleged discrimination and retaliation against the respondents. HUD dismissed the complaint, finding "that no reasonable cause exists to believe that a discriminatory housing practice has occurred." See Debtor's Second Motion Ex. H.

On January 14, 2013, Dr. Clark filed a lawsuit in the Circuit Court for Baltimore City under the Maryland Condominium Act, seeking the production of certain documents from the Debtor and monetary damages. Clark v. 100 Harborview Drive Council of Unit Owners, et al. , 24–C–13–000322 (Circ. Ct. Balt. City) (the "Second State Court Action"). In the Second State Court Action, the Circuit Court held that the Debtor was not required to produce written legal advice provided to the Debtor or those documents already produced concerning the Debtor's financial affairs, but that it was required to produce certain legal invoices. See 100 Harborview Drive Council of Unit Owners v. Clark , 224 Md.App. 13, 119 A.3d 87 (2015) (describing the Circuit Court's decision and affirming in part, and vacating in part, that decision).

On May 8, 2013, Dr. Clark filed a lawsuit against the Debtor in the Circuit Court for Baltimore City, alleging that the common elements of the condominium were defective, causing mold and water infiltration into Unit PH4A. Clark v. 100 Harborview Drive Council of Unit Owners , 24–C–13–002770 (Circ. Ct. Balt. City) (the "Third State Court Action"). In the Third State Court Action, Dr. Clark asserted various causes of action, including breach of contract, negligence, and breach of fiduciary duty. The Third State Court Action is pending in the Circuit Court, but is stayed as a result of the Debtor's chapter 11 case.

On March 24, 2014, Dr. Clark filed a lawsuit against the Debtor in the Circuit Court for Baltimore City, seeking a temporary restraining order and preliminary and permanent injunctive relief that would allow Dr. Clark to send his lawyers to the Debtor's Board and committee meetings. Clark v. 100 Harborview Drive Council of Unit Owners , 24–C–14–001537 (Circ. Ct. Balt. City) (the "Fourth State Court Action"). On October 31, 2014, the Circuit Court awarded summary judgment to the Debtor, ruling that the Debtor's policy resolution barring Dr. Clark's lawyers from the Debtor's meetings "is lawful and proper." See Debtor's Second Motion Ex. I. Additionally, in the Fourth State Court Action, the Debtor counterclaimed for injunctive relief, seeking access to Unit PH4A to perform necessary maintenance and repairs on common elements affecting water infiltration into the condominium building and its units. See Debtor's Second Motion Exs. K, L.⁴ The Circuit Court entered a Permanent Injunction against the Clarks on February 18, 2015, which prevented the Clarks from denying the Debtor access to Unit PH4A. Id.

On October 3, 2014, the Creditors filed a lawsuit against the Debtor, Mr. Cochran, and Zalco, captioned Paul C. Clark, et al. v. Council of Unit Owners of the 100 Harborview Drive Condominium, et al. , No. 14–3122 JFM (the "District Court Case"). The District Court Case involved allegations by the Creditors that the Debtor, Zalco, and Mr. Cochran violated various provisions of the FHA. On March 23, 2016, the District Court entered an order granting summary judgment in favor of Mr. Cochran (the "March 2016 Order"),⁵ and administratively closed the case as to all defendants because of the Debtor's chapter 11 case...