Shaw v. Litz Custom Homes, Inc.

1

GARY SHAW, ET AL. v. LITZ CUSTOM HOMES, INC

No. 960-2023

Court of Special Appeals of Maryland

August 13, 2024

UNREPORTED^[*] IN THE APPELLATE COURT OF MARYLAND

Circuit Court for Charles County Case No.: C-08-CV-20-000606

Reed Beachley, Sharer, J. Frederick (Senior Judge, Specially Assigned), JJ.

OPINION

Beachley, J.

This case returns to us as part of a near decade-long dispute between appellants Gary and Joann Shaw (the "Shaws") and appellee Litz Custom Homes, Inc. ("Litz"). In September 2014, the Shaws sued Litz in the Circuit Court for Charles County, alleging breach of contract and fraud related to "long term water intrusion" in the home Litz had built for them.^[1] The circuit court stayed the case pending arbitration as provided in the operative contract. The parties then spent five years engaged in extensive discussions about mediating and arbitrating the Shaws' claims. After the Shaws filed a demand for arbitration in February 2020, Litz petitioned the court to stay the arbitration and moved for summary judgment, alleging the Shaws had waived their right to arbitration. After a hearing, the court granted summary judgment for Litz. The Shaws appealed, and we reversed, finding that the record was insufficient to establish that the Shaws, as a matter of law, waived their right to arbitration. Shaw v. Litz Custom Homes, Inc., No. 190, Sept. Term 2021, slip op. at 1-2 (filed Dec. 9, 2021) ("Shaw I").

On remand, the circuit held two more hearings and, again, granted summary judgment for Litz on May 1, 2023. The Shaws filed a motion two days later asserting that the court "made the wrong decision" as a matter of law. The court denied their motion on June 22, and the Shaws noted an appeal within 30 days. Litz then moved to strike the Shaws' notice of appeal as untimely. The court granted Litz's motion and struck the Shaws' first notice on September 8. They timely appealed from that order.

In this appeal, we must resolve two issues:

1. Did the circuit court err in striking the Shaws' July 13, 2023 notice of appeal?

2. Did the circuit court err in determining, as a matter of law, that the Shaws waived their contractual right to arbitrate claims against Litz arising out of the contract?

Concluding that the court erred on both counts, we reverse and remand for further proceedings.

FACTS AND PROCEEDINGS

We set forth a detailed history of this dispute in Shaw I which we shall not repeat fully here. That said, because "our courts engage with the facts of each case to decide whether the party seeking arbitration has intentionally and unequivocally waived that right," Gannett Fleming, Inc. v. Corman Constr., Inc., 243 Md.App. 376, 398 (2019) (citing BarGale Indus., Inc. v. Robert Realty Co., Inc., 275 Md. 638, 643-44 (1975)), we shall recount factual and procedural history relevant to consideration of this appeal before reviewing the post-remand proceedings.

Underlying Dispute

In July 2005, the Shaws contracted Litz to build them a custom home. Shaw I, No. 190, Sept. Term 2021, slip op. at 1. The parties' contract contained an arbitration provision requiring that any dispute between them be submitted to binding arbitration conducted by a three-member panel of the American Arbitration Association ("AAA"). Id., slip op. at 2. The provision did not contain a time limit for demanding arbitration. Id., slip op. at 6.

The Shaws lived in the home without incident until September 8, 2011, when their basement flooded. Id., slip op. at 2. On September 5, 2014, just three days before the statute of limitations expired, the Shaws sued Litz in the Circuit Court for Charles County, alleging fraud and breach of contract. Id. The Shaws also sued their own homeowners insurer, Nationwide-who was not party to the arbitration agreement-in the same action alleging breach of contract. Id.

Litz moved to dismiss the Shaws' complaint, arguing the contract required that the dispute be arbitrated.^[2] Id., slip op. at 2-3. On March 17, 2015, the court denied Litz's motion without a hearing, but stayed the case pending arbitration. Id., slip op. at 3.

Both parties acknowledged that an arbitration hearing would be expensive and that, if possible, they preferred to avoid that cost. Id. Therefore, rather than immediately proceeding to arbitration, they embarked on five years of discussions focused on possibly settling the Shaws' claims through less expensive means. Id.

We shall repeat our summary of relevant events that followed the stay order:

• August 3, 2015: The Shaws' attorney advised Litz's attorney that the Shaws had "authorized [counsel] to prepare the arbitration demand," but also asked whether "a resolution of the issues between [their] clients" was possible. Id.

• August 17, 2015: Litz's counsel requested further documentation to support the Shaws' claims, and conveyed he would be "happy to look at any documentation" before initiating arbitration. Id.

Over the next year, the parties continued communicating and sharing information about the Shaws' damages. Id. We resume our summary of events:

• August 12, 2016: The Shaws' attorney sent Litz's attorney a letter stating, "per our discussion I will contact, for arbitration purposes, retired Circuit Court Judges in our area who perform this service which as you and I discussed would be substantially preferable to utilization of the [AAA]." Litz's counsel promptly responded that he was "willing to discuss the manner in which this case is arbitrated[.]" Id., slip op. at 4.

• The court issued a Notification of Contemplated Dismissal under Rule 2-507 on March 3, 2017, and the Shaws moved to defer dismissal, stating their anticipation that the arbitration process could be completed within 60 days. The court deferred dismissal until July 31, 2017. Id.

• July 13, 2017: The Shaws' counsel filed a "Status Update" advising the court that the parties had agreed to use Judge Sothoron as a mediator, but acknowledging that Litz's counsel "would prefer a different Arbitrator." Id.

• Between August 2017 and July 2018, the parties exchanged multiple letters attempting to schedule mediation with Judge Sothoron. Id.

• July 17, 2018: The circuit court issued a second Notification of Contemplated Dismissal. Id.

• August 1, 2018: The Shaws moved to defer the contemplated dismissal, asserting that "if this matter is not resolved within the next six (6) month period," they intended to file a "Motion to Compel Arbitration." Id.

• August 30, 2018: The parties (including Nationwide) filed a Stipulation of Dismissal. Id.

• September 5, 2018: The Shaws' counsel sent the Shaws a letter advising them of the dismissal and stating that "Litz has reaffirmed its obligation to submit to the binding arbitration" under the contract. Id.

• Between September 2018 and March 2019, counsel exchanged letters and emails between themselves and Judge Sothoron attempting to schedule mediation. In the end, mediation was never scheduled. Id.

• April 5, 2019: The Shaws' attorney advised Litz's attorney that he was withdrawing from the case. Id.

• February 4, 2020: The Shaws file a written "Demand for Arbitration" with the AAA. Id., slip op. at 4-5.

• September 21, 2020: An AAA panel issued an Order, in response to Litz's motion to dismiss or for summary judgment, that a court, not the arbitration panel, must decide whether the Shaws waived their right to arbitrate the controversy. Id., slip op. at 5.

• October 14, 2020: Litz petitioned the circuit court to stay arbitration pending the ruling on Litz's motion for summary judgment on whether the Shaws waived arbitration. The Shaws consented to the stay. Id.

• March 9, 2021: After a hearing at which the court considered the parties' arguments on Litz's motion, the court granted summary judgment for Litz, concluding that the Shaws' conduct waived their right to arbitration under the contract. Id.

The Shaws timely appealed. Id.

Shaw I

The issue in Shaw I was whether, as a matter of law, the Shaws had unequivocally and intentionally waived their right to arbitration by "wait[ing] too long to assert the right . . . and instead 'engag[ing] [themselves] substantially in the judicial forum.'" Gannett Fleming, 243 Md.App. at 394 (quoting The Redemptorists v. Coulthard Servs., Inc., 145 Md.App 116, 141 (2002)). We held they had not.

In short, we were unconvinced that the circuit court had even relied on the Shaws' delay as a basis for granting summary judgment. Shaw I, No. 190, Sept. Term 2021, slip op. at 8. On that point, we concluded:

[W]e see no evidence that the court expressly or implicitly determined that the Shaws engaged in a course of delay with the intention of disavowing arbitration. The court did not equate the Shaws' delay to an intentional and unequivocal waiver of arbitration; to the contrary, the court noted that "if the matter was not resolved by mediation then the parties would have arbitrated." Accordingly, we reject Litz's broad interpretation that the delay in this case provided the basis for the circuit court's grant of summary judgment.

Id., slip op. at 8-9.

We proceeded to hold that, even if the court relied on the Shaws' delay as a basis for summary judgment, that determination "would not support a finding that the Shaws intentionally and unequivocally waived arbitration." Id., slip op. at 9. We stated that "the post-stay communications between the parties [were] equivocal at best (and perhaps even favorable to the Shaws' position that they did not intentionally waive arbitration)," and therefore the facts, viewed in a light most favorable to the Shaws, did not support granting summary judgment. Id., slip op. at 10. We also concluded that the circumstances of the Shaws' engagement in the judicial forum suggested that they had "legitimate...