Category Archives: Marinas and Marine Business

Basic Contract Law – Contracts 101

Back to Basics – Contracts 101.

(Originally published in the Mid Atlantic Mariners Club Newsletter, 2010).

The first rule of contract: capture the intent of the parties.

In every profession, not just the law, we are faced with making, interpreting and abiding by contacts.  Sometimes these contracts are long and impossible to understand (mortgage refinancings, consumer warranties) sometimes they are so fleeting that one hardly notices (“I’ll pick up lunch”).  In law school, we learn that a contract consists of an enforceable promise.  It’s a promise that one can take to court, and the court can make the other comply or award damages for their failure to do so.  All contracts, though, include a major element of hope and trust and if that trust is broken, bad things happen, and the threat of a court’s intervention may not be enough to save the deal.

When a client comes to me about a contract, it is usually one of three things — reviewing a contract that someone else has prepared; papering an understanding where the framework is already in place; or protecting a client from the risks of a particular kind of deal.  The most frequent contracts for me are boat and ship purchase contracts — these often involve a significant outlay of funds before the product is near completion, and therefore require both trust and legal protections.  With all projects, I generally start with the same three questions.  What are you trying to accomplish?  What has already been agreed to?  How much do you know and trust the other party?

 When it comes to reviewing a contract that someone else has prepared for my clients’ signature, I focus on two things.  First, does it capture the items that my client thinks are being agreed to?  Many times I am given a form contract such as a boat brokerage agreement, and the parts of the deal that are most important to my client (the time of delivery and the promises that the boat will be fully commissioned to spec) are nowhere to be found.  Usually this can be handled with an addendum that sets out the specifics (Boat to be delivered to Maryland on date certain at the seller’s risk and expense), but sometimes the brokerage contracts simply will not do the trick.  Lawyers often joke about the boat brokerage and real estate contracts — they do a great job protecting the brokers or agents, but beyond that, its usually a lot of words that don’t say too much.

 My favorite project is when a client comes to me and says … “I agreed to _____ with ______ – can you write a contract for that?”  I like this kind of project (not just for the irony of the fact that there may already be an oral contract) because it usually allows me to work from the ground up, as opposed to slogging through pages of 8 point font prepared by someone else.  I get to start with “what exactly has been agreed to?”  Typically a clients’ answer to that question feels like the tip of the iceberg … “we agreed that I would sell his product for a 10% commission.”  This leaves open all sorts of lawyer-fun — how much do you have to sell; can you sell competitor’s products, too; can they hire other brokers or salespeople; where will suit take place; what happens upon termination?  And what happens if there is no agreement on all of the side issues?  I love that question.

 The Second Rule of Contract: be reasonable.

Assuming that there is enough of a contract to be a contract (generally that it is known what is being agreed to, including when it is to be done and how much it is going to cost) everything else may be an open term.  In some areas of the law, like partnerships, employment and state insurance contracts, there is a whole body of statutes that fills in the blanks.  In those areas people may “agree” to many things that they never even thought of.  If there are not default terms, then the agreement reverts to the rules of reasonableness.  These rules are essentially human instincts — most people will agree most of the time about certain things even if they have never considered them before.  If the contract is to buy a certain thing (say a house), then it is only for that particular thing, not something else.  If it is for something that is largely interchangeable (like a Blackberry), then it may not mean a specific thing, just a thing like it.  You can usually do well in contracts by staying polite and acting reasonably, but sometimes that is mighty hard.

 The rest of contracts is just simple interpretation — if the words on the paper say to do X, and X isn’t illegal or completely unreasonable, then that is what you do.  Words are notoriously tricky things, though, so one must write with care and make sure that everyone abides by at least the most important terms over time.  There are a few contracts (marine insurance, for example) where certain words and phrases have such a history behind them that their meaning is known with some certainty.  But for most contracts, even ones that have been used many times, no court has ever interpreted the key language, and everyone is operating on   hope that the words mean what they think they mean.  This is the real difficulty with “form” contracts — people trust it because its The Form, but who knows whether it captures the agreement that was really intended.

 What can you take away from all of this?  First and foremost, be sure that the contracts you enter into actually capture what is being agreed to — this can be trickier than you think.  Second, sometimes the simplest contracts are the best ones — agree to the key items, and otherwise act reasonably.  Third, there are times when a very thorough papering is necessary — like when a major asset like a house or a business is on the line.  In those cases, have clear goals and good representation that is looking out for your specific interests.

Dividing Real Estate in Maryland – Partition Actions

Dividing Real Estate in Maryland

What do you do if you own a piece of real property with someone else, but you can’t stand them anymore?  Or you need to sell the property, but they want to keep it?  In law, this implicates the doctrine known as “partition.”  In a partition action, one owner of a property files suit against another and asks that the property be divided up or sold and the money split.  It is similar to what happens in a divorce, but the owners aren’t married.  Typical examples: two brothers are made joint owners in their Grandparents will.  One brother uses the property, the other would like to sell it and use the money to work on his own house.  Also typical two people are in love and buy a house together; their love cools and one moves out.  The person that moves out wants to get her money out of the house; the one that stayed is happy with the status quo.  What to do?  File a partition action and ask the court to either divide up the land (perfect if there are two similar lots) or order the land to be sold and money split (necessary if there is one house on the property and it cannot be split in half).

The right to a partition is set out in the Real Property Article of the Maryland Code.  It says:

“Decree of partition (a) A circuit court may decree a partition of any property, either legal or equitable, on the bill or petition of any joint tenant, tenant in common, parcener, or concurrent owner, whether claiming by descent or purchase. If it appears that the property cannot be divided without loss or injury to the parties interested, the court may decree its sale and divide the money resulting from the sale among the parties according to their respective rights. The right to a partition or sale includes the right to a partition or sale of any separate lot or tract of property, and the bill or petition need not pray for a partition of all the lots or tracts.” § 14-107

As the language indicates, if the property cannot be divided without losing value to its owners, then the court should order that it be sold and the proceeds divided.  That is what is known as a sale in lieu of partition.  Such sales are controlled by a section of the Maryland Rules of Civil Procedure that state: “When the relief sought is a sale in lieu of partition, the court shall order a sale only if it determines that the property cannot be divided without loss or injury to the parties interested.”  MD R PROP ACT Rule 12-401.

This is the correct result — if the property can just be split, as with two similar lots that are not improved with buildings — they should be split and the parties can keep or sell them as they see fit.  If the property cannot be split, however, it needs to be sold.

For the owners of the property, however, there are very strong reasons not to actually go through the sale as it would be ordered by the Court.  Under the Rules, the normal procedure is to appoint three commissioners who can establish a value and oversee the sale.  “When the court orders a partition, unless all the parties expressly waive the appointment of commissioners, the court shall appoint not less than three nor more than five disinterested persons to serve as commissioners for the purpose of valuing and dividing the property.”

MD R PROP ACT Rule 12-401.  These commissioners, in turn, can be paid out of the proceeds of the sale.  “Payment of the compensation, fees, and costs of the commissioners may be included in the costs of the action and allocated among the parties as the court may direct.”  MD R PROP ACT Rule 12-401.  If needed, the sale would then proceed to judicial sale –an auction on the courthouse steps.  This means that, if the owners cannot agree to sell it on the open market, it will likely go for a steep discount and then be subject to significant fees to pay the attorneys, commissioners, trustee, and related court costs.

 

The bottom line: if you own property and the other side won’t sell, or if someone has sued you to partition a property you own — you will need pragmatic, effective counsel that realizes that all fees and costs will ultimately come out of the value of the clients’ property.

J. Dirk Schwenk is a Maryland Real Estate, Waterfront Property, Civil Litigation and Maritime Lawyer from Annapolis, Maryland.  He provides civil litigation services in real estate issues, contract disputes, environmental and zoning issues, adverse possession and boundary disputes.  He graduated cum laude (with honors) from the University of Maryland School of Law in 1997 and has been in private practice in Maryland ever since.

Legal Issues with Erosion Control and Marine Contracting

The two pictures below are erosion control projects installed in the same community but by two different contractors under two different contracts.  The differences are obvious: the first picture has stone that is tightly fitted and nicely sloped.  The second picture on is not fitted and not evenly sloped.  Walking on loose stone is dangerous, and undercutting by the waves will rapidly make it more so.

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Here at Baylaw, I have had multiple cases where the primary issue was the quality and effectiveness of rip rap and erosion control measures.  The most frequent area of dispute is that the landowner anticipated a structure that was fitted and safe to walk on and the contractor delivered something that was more akin to a pile of rocks.  Such a dispute becomes a contest over the terms of the contract — which is often silent on the issue.  Without a term, expert testimony is needed to state that job was not done to a workmanlike standard, and this can be a much more difficult fact to prove.  A clear contract term at the outset is much preferable.

When the time comes to construct erosion control measures, this means that property owners need to identify a person that can design the structure to meet the terms of the code and a contractor that can do a safe, effective and attractive installation.  Sometimes the contractor may also design the project, sometimes it is better to work with a person that focuses on permits.  In either case, it is strongly recommended that the permit designer and the contractor work together on the plans to assure that the specifications are clear and can be executed in a cost-effective manner.  A land owner should also require a commitment as to what the project will look like at completion.  Unless a landowner specifies tightly packed stone (such as is typically found in government projects), there is the chance the contractor will simply dump the stone in a loose pile and leave it at that.

In the event of a dispute, one of the things to keep in mind is that marine contractors in Maryland are now required to be licensed by Maryland for any “ means construction, demolition, installation, alteration, repair, or salvage activities located in, on, over, or under State or private tidal wetlands.” Md. Code Ann., Envir. § 17-101.  Such services include dredging and filling, construction of boat houses, boat lifts, piers, etc., and installation and repair of erosion control measures.  There is a line of cases in Maryland indicating that a contractor that is not properly licensed cannot require payment in Court, so both landowners and contractors should pay close attention to the licensing requirements.

If the contract is not clear about the quality of the completed work, careful review of all discussions should be made to consider whether any photographs or other visual indications were discussed that would indicate the final product.  If a contractor shows a homeowner beautifully constructed, individually laid stone when giving the estimate and obtaining the business, then the landowner has the right to expect the sort of quality that was indicated (unless, of course, there was also discussions of other projects and the various costs that one might anticipate for the lower quality work).

The ability of a landowner to constuct erosion control measures is of increasing importance due to the rise of the waters in the Chesapeake region.  On December 9, 2013, The United States Coast Guard released a statement that the waters were rising along the Chesapeake at a rate of between 3.2 – 4.7 millimeters per year (the equivalent of the thickness of 3 to 5 pennies per year).  These changes were partly due to sea-level rise associated with climate change, partly due to the land subsiding. The subsidence is accelerated by human uses of groundwater.  (Here is the USCG report).  Most of the Chesapeake region consists of soft soils, and rising waters immediately attack and erode the shoreline.  Historical shoreline comparisons (like this one of the Annapolis area) give a sense of how much change has occurred in a few generations.

These natural forces work against the interests of owners of waterfront property, who would like to preserve and protect the land they have bought and paid for — and this leads inevitably to issues with the law.  There are significant issues with environmental protection and the critical areas protections — that is not the primary focus of this article, however.

Under the environmental rules, waterfront landowners to make improvements to allow for improved access (typically piers) and to prevent erosion.  “The person may make improvements into the water in front of the land to …  protect the shore of that person against erosion.”  Md. Code Ann., Envir. § 16-201.  The 2008 amendments to the Wetlands Act, however, restricted a landowner to “nonstructural shoreline stabilization measures that preserve the natural environment, such as marsh creation” except in areas specifically designated for structural shoreline or where the owner demonstrates that non-structural stabilization will not work.

 The bottom line — careful planning is crucial to avoiding issues.  If issues arise, however, capture the evidence; write down the events and if resolution cannot be reached, contact a lawyer that is knowledgeable in the particular issues.

J. Dirk Schwenk is a Maryland Real Estate, Waterfront Property, Civil Litigation and Maritime Lawyer from Annapolis, Maryland.  He provides civil litigation services in contract disputes, environmental and zoning issues, adverse possession and boundary disputes.  He graduated cum laude (with honors) from the University of Maryland School of Law and has been in private practice in Maryland ever since.

Environmental Groups Have Increased Rights To Challenge Permits

The Maryland Court of Appeals recently issued a decision which confirms that an environmental group (or other membership group) can have independent standing to challenge a permit granted by the Department of Environment in Court. The statute reviewed, however, is specific to the Department of the Environment, and the requirement that the group participate at the administrative level remains intact.

Patuxent Riverkeeper v. Maryland Dept. of Env’t, 139 SEPT.TERM 2010, 2011 WL 4502141 (Md. Sept. 30, 2011)

Opinion BATTAGLIA, J. *1 In this case, we are asked to determine whether a nonprofit environmental group, Patuxent Riverkeeper,1 Petitioner, (“Riverkeeper”), has standing2 to initiate a judicial review action of a decision of the Respondent, the Maryland Department of the Environment, (“MDE”), to issue a “non-tidal wetlands permit”3 to Petrie/ELG Inglewood, LLC, now known as Woodmore Towne Centre, LLC, Respondent (“Woodmore Towne Centre”),4 in connection with the development of the Woodmore Towne Centre at Glenarden in Prince George’s County. Specifically, Woodmore Towne Centre had applied for the permit to construct a road extension and stream crossing at Ruby Lockhart Boulevard in order to provide primary access into the development. During the administrative proceeding before MDE, Riverkeeper had submitted written comments against the permit, asserting that Woodmore Towne Centre had not demonstrated that the proposed road extension and stream crossing had “no practicable alternative” that would “avoid or result in less adverse impact on nontidal wetlands.”After MDE approved the permit, Riverkeeper initiated a judicial review action in the Circuit Court, after which both MDE and Woodmore Towne Centre filed motions to dismiss for lack of standing.5 The Circuit Court dismissed the judicial review action, and Riverkeeper petitioned this Court for a writ of certiorari, which, prior to any proceedings in the intermediate appellate court, we granted, Patuxent Riverkeeper v. Department of the Environment, 418 Md. 190, 13 A.3d 798 (2011), to address the following question:Did the circuit court err when it interpreted the federal test for standing and held that the Riverkeeper lacked standing to challenge the issuance of a Maryland nontidal wetlands and waterways permit authorizing permanent and temporary impacts to nontidal wetlands and streams where one of Riverkeeper’s members alleged that the permit would result in future and threatened harm to his recreational, aesthetic, and economic interests in the Western Branch watershed and tributary?

We shall hold that Riverkeeper has standing to initiate a judicial review action, because its member, David Linthicum, had alleged sufficient harm to his aesthetic, recreational, and economic interests in connection with the issuance of the non-tidal wetlands permit in issue.Section 5–204(f) of the Environment Article, enacted by Chapters 650 and 651 of the Maryland Laws of 2009 and effective January 1, 2010, enables a person to seek judicial review of an administrative determination by the Maryland Department of the Environment regarding certain environmental permits, including those affecting non-tidal wetlands, if the person satisfies the federal rubric for standing:(f) Judicial review of final determination by Department.—A final determination by the Department on the issuance, denial, renewal, or revision of any permit issued under Title 5, Subtitle 5 or Subtitle 9, § 14–105, § 14–508, § 15–808, or § 16–307 of this article is subject to judicial review at the request of any person that: *2 (i) Meets the threshold standing requirements under federal law; and(ii) 1. Is the applicant; or 2. Participated in a public participation process through the submission of written or oral comments, unless an opportunity for public participation was not provided.Maryland Code (1982, 2007 Repl.Vol., 2010 Supp.), Section 5–204(f) of the Environment Article.

Prior to this enactment, standing to challenge permitting decisions by MDE was limited to a person who was “aggrieved” by the agency’s action, namely “one whose personal or property rights [were] adversely affected by the decision.” See Bryniarski v. Montgomery County Board of Appeals, 247 Md. 137, 144, 230 A.2d 289, 294 (1967); Sugarloaf Citizens’ Ass’n v. Department of Environment, 344 Md. 271, 288, 686 A.2d 605, 614 (1996) (“[I]n order to be ‘aggrieved’ for purposes of judicial review, a person ordinarily must have an interest ‘such that he is personally and specifically affected in a way different from … the public generally.’ ”) (citations omitted); 120 West Fayette Street, LLLP v. Mayor and City Council of Baltimore, 407 Md. 253, 270–71, 964 A.2d 662, 671–72 (2009). Moreover, a group could not establish standing to initiate judicial review of a permitting decision by an administrative agency, unless the organization had a “property interest of its own—separate and distinct from that of its individual members.” Medical Waste Associates, Inc. v. Maryland Waste Coalition, Inc., 327 Md. 596, 612, 612 A.2d 241, 249 (1992), quoting Citizens Planning & Housing Ass’n v. County Executive of Baltimore County, 273 Md. 333, 345, 329 A.2d 681, 687 (1974).In enacting Chapters 650 and 651 of the Maryland Laws of 2009, which originated as Senate Bill 1065 and House Bill 1569, the General Assembly embraced the “broader” notion of standing applied in federal courts, to enable both individuals and organizations to challenge environmental permits in judicial review actions, were certain conditions to exist:With respect to cases involving challenges to specific types of permits, Maryland courts have defined “aggrievement” to mean the ownership of property either adjacent to, or within “ ‘sight or sound’ range of the property that is the subject of [the plaintiff’s] complaint.”The Court of Appeals has held that an association lacks standing to sue where it has no property interest of its own, distinct from that of its individual members. Citizens Planning & Housing Ass’n v. County Executive, 273 Md. 333, 329 A.2d 681 (1974). In Medical Waste Ass’n [Associates ] v. Maryland Waste Coalition, 327 Md. 596, 612 A.2d 241 (1992), the Court of Appeals stated that if an individual or organization is seeking to redress a public wrong, the individual or organization has no standing unless the wrong suffered is different in character and kind from that suffered by the general public.

Federal law is broader than State law in its determination of standing. Under federal law, a party has standing if its use and enjoyment of the area is affected by the challenged action/decision or if the party has a particular interest in the property affected. Federal law also makes little distinction between individual and group standing. *3 Environmental Matters Committee Floor Report on House Bill 1569, at 4 (2009).6The touchstone Supreme Court case involving environmental standing, Friends of the Earth, Inc. v. Laidlaw Environmental Services, Inc., 528 U.S. 167, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000), drew the federal landscape in environmental actions. In that case, a judicial review action to enforce a permit authorizing the limited discharge of pollutants, pursuant to the Clean Water Act, 33 U.S.C. § 1342, the Court determined that to satisfy standing in an environmental action, a plaintiff must show that “(1) it has suffered an ‘injury in fact’ that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Id. at 180–81, 120 S.Ct. at 704, 145 L.Ed.2d at 627, quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351, 364 (1992). An environmental group can satisfy standing federally if “its members would otherwise have standing to sue in their own right, the interests at stake are germane to the organization’s purpose, and neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Friends of the Earth, 528 U.S. at 181, 120 S.Ct. at 704, 145 L.Ed.2d at 627.

In Friends of the Earth, the Court emphasized that injury in fact has included a negative impact on the organizational representatives’ recreational or aesthetic appreciation of the affected area, in that case the demonstrably diminished ability or desire to hike, camp, picnic, swim, canoe, boat or fish in a river contaminated by pollutants. 528 U.S. at 181–82, 120 S.Ct. at 704–705, 145 L.Ed.2d at 627–28. In addition, the Supreme Court determined that a person may suffer an injury in fact when his economic interests are negatively impacted, for instance, lower home prices due to proximity to a hazardous waste incinerator. Id. at 182–83, 120 S.Ct. at 705, 145 L.Ed.2d at 628. The Court noted that an injury to aesthetic, recreational, or economic interests need not be consummated, so long as an individual can demonstrate reasonable concerns about the effects of the challenged activity. Id. at 183–84, 120 S.Ct. at 705–706, 145 L.Ed.2d at 628–29.Such aesthetic, recreational, or economic interests or values, however, must be based upon a demonstrable record of regularly utilizing the affected area, as well as a desire to do so in the future. In Summers v. Earth Island Institute, 555 U.S. 488, ––––, 129 S.Ct. 1142, 1150, 173 L.Ed.2d 1, 10 (2009), the Supreme Court reasoned that an organizational representative’s affidavit indicating a desire to “visit several unnamed National Forests in the future” was not sufficiently particularized to establish a cognizable aesthetic or recreational interest. Moreover, asserting a past injury to aesthetic or recreational interests, arising for example, from “past … development on Forest Service land,” without demonstrating a continuing or future harm, further does not suffice. Id. at ––––, 129 S.Ct. at 1150, 173 L.Ed.2d at 9–10. The Court also has opined that a genuine nexus must exist between the alleged injury and the challenged conduct, Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351, 364 (1992), and that the remedy requested must “effectively abate[ ] [illegal] conduct and prevent [ ] its recurrence.” Friends of the Earth, 528 U.S. at 185–86, 120 S.Ct. at 706, 145 L.Ed.2d at 630.7 *4 At the time the new standing test was embraced by the Maryland Legislature, not only had the Supreme Court spoken, but other federal appellate courts already had an opportunity to interpret the tenets of the Supreme Court cases.

The application of these precepts prior to the enactment of Section 5–204(f) of the Environment Article in 2009 illustrates the boundaries of standing in environmental cases to which the General Assembly had referred when it enacted the statute.8 In Sierra Club v. Franklin County Power of Illinois, LLC, 546 F.3d 918, 925 (7th Cir.2008), the Court of Appeals for the Seventh Circuit determined that a Sierra Club member adequately alleged an injury by asserting that she and her family had taken trips to “fish, kayak, camp, and enjoy the natural beauty and clean environment” of a lake, located three miles from the site of a proposed power plant, and that if the plant were built, she would cease her recreational trips. Similarly, in American Canoe Ass’n, v. City of Louisa Water & Sewer Comm’n, 389 F.3d 536, 542 (6th Cir.2004), the Court of Appeals for the Sixth Circuit reasoned that an environmental group representative had demonstrated a sufficient injury when he alleged that he previously recreated in a river near a water treatment plant, but that he presently refused to do so, because of pollution caused by discharges from the plant. In so doing, federal appellate courts have noted that a plaintiff may express reasonable concerns about the future impacts of the challenged activity. See Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 160 (4th Cir.2000) (reasoning an environmental group member “need not wait until his lake becomes barren and sterile or assumes an unpleasant color and smell before he can invoke the protections of the Clean Water Act”).The injury alleged must share a specific nexus with the harm asserted. In Natural Resources Defense Council v. Southwest Marine, Inc., 236 F.3d 985, 995 (9th Cir.2000), the Court of Appeals for the Ninth Circuit determined that the plaintiff had adequately demonstrated such a nexus by indicating that sediments in defendant’s marine leasehold contained elevated concentrations of pollutants, that defendant had discharged such pollutants, and that defendant’s marine leasehold was “devoid of life.” In contrast, in Center for Biological Diversity v. Lueckel, 417 F.3d 532, 540 (6th Cir.2005), the Sixth Circuit reasoned that although the environmental group representatives had shown that they had suffered concrete injuries to their aesthetic, recreational, and scientific interests in the scenic rivers in question due to commercial logging, the plaintiffs had failed to demonstrate the requisite connection because they had not referred to specific evidence that the United States Forest Service’s failure to enact a “comprehensive resource management plan” had caused the approval of the environmentally harmful projects. *5 According to the federal appellate court, an aggrieved party also must show that a favorable decision will likely, not merely speculatively, relieve the injury alleged. Alleging a previous injury, for instance, without referencing a continuing or future harm, will not suffice. Lueckel, 417 F.3d at 537 (reasoning that “plaintiffs … must show that actual, site-specific activities are diminishing or threaten to diminish their members’ enjoyment of the designated river segments”).9

The parties in the present case differ, though, not regarding the test for standing, but in its application to the factual circumstances presented. Riverkeeper asserts that its member, Mr. Linthicum, suffered an injury in fact, because his aesthetic, recreational, and economic interests in the Patuxent River, particularly the Western Branch watershed,10 have been jeopardized by the road extension and stream crossing allowed by the permit. In particular, Mr. Linthicum asserts that the upstream impacts caused by the crossing will cause “nitrogen and other pollutants” to leach into waters downstream. Woodmore Towne Centre counters that Mr. Linthicum failed to satisfy the standing inquiry, because he failed to demonstrate that the issuance of the permit has negatively impacted his paddling and cartography activities on the Western Branch watershed.11In his affidavit, Mr. Linthicum described the aesthetic and recreational interests he has in paddling, wading, and clearing branches in the Western Branch of the Patuxent River:5. I visit the Patuxent River almost every other day. I have visited and will continue to visit the Western Branch every few months. When visiting the Western Branch, I paddle along the tributary, and also wade in the water to clear out branches for the purpose of waterway maintenance and navigation. I have been paddling, wading, and clearing branches and other blockages in the Western Branch for nearly ten years. Beyond my recreational interests in the Western Branch tributary and watershed, I also have aesthetic and environmental interests in the Western Branch, as the river and watershed is much healthier and cleaner than surrounding watersheds such as the Anacostia watershed.6. The area of the Western Branch tributary and watershed that I most often visit is downstream from the location of the Woodmore Towne Center Project. I sometimes paddle in the Western Branch as far north as Upper Marlboro, which is approximately 8.5 miles downstream from the areas of wetlands and streams that are impacted by the Woodmore Towne Center.He further described the negative impact of the issuance of the MDE permit on the wetlands and streams in the Western Branch, where he most often paddles and clears blockages in the waterway, jeopardizing his aesthetic and recreational interests:7. The wetlands permit pertaining to the Woodmore Towne Center will cause impacts to wetlands and streams in the Western Branch watershed. These impacts will ultimately have a direct effect on the watershed and the river downstream, where I most often paddle and clear blockages in the waterway. Specifically, the stream impacted by the Ruby Lockhart Boulevard extension on the Subject Property is the north fork of the Southwest Branch of the Patuxent River (this stream is marked “S” on a map that I prepared for the Subject Property, attached as Exhibit C). This stream runs southward from the Subject Property through developed and undeveloped land before ultimately joining the Western Branch tributary approximately five miles downstream. Smaller drainages on the north end of the Subject Property (marked as “W” on Exhibit C) also connect directly with the Western Branch and the Patuxent River itself. These smaller drainages flow into Bald Hill Branch approximately 3/4 mile from the Subject Property. Bald Hill Branch then joins the Western Branch just over a mile further downstream. *6 8. The health of the Western Branch, including the area where I most often paddle, wade, and clear trees and other blockages, will suffer as a direct result of the impacts to the connected streams and tributaries just a few miles upstream at the Woodmore Towne Center site.9. Diverting and/or compromising the streams on the Subject Property can affect the flow rate and the ecology of the tributaries of the Patuxent River. Moreover, drainage of stormwater from the impervious surfaces of the Woodmore development into the surrounding streams and watershed will further degrade the water quality of the Western Branch. Western Branch is a system already in decline due to the vast amount of paving, construction, channelization and other human intervention in its natural functions.

Like many tributaries, streams, and creeks elsewhere in Prince George’s County, Western Branch fails to meet Federal water quality standards, and appears to be approaching the tipping point of no return.10. The impacts to wetlands on the Subject Property will also have a negative effect on my activities downstream in the Western Branch. Wetlands provide recharge and storage of surplus water during storm events, which can lessen the impacts of flooding and property damage to downstream neighbors. Wetlands serve as natural “sponges” to absorb manmade toxins and poisons that leach from surrounding contaminated runoff caused by paved surfaces, trash, and chemicals applied to urbanized lands. The loss of the natural wetlands in a river system eventually leads to the death and desertification of a river’s tributaries and takes an equivalent toll on the waters of the main channel.11. I have reviewed recent scientific and academic literature that has discussed the connection, both in Maryland and in general, between urbanization, impacts to streams and headwaters, and the deleterious effects on watersheds and rivers downstream. One of these articles discussing this connection states: “Headwater systems are important sources of sediments, water, nutrients, and organic matter for downstream reaches. Despite the significant roles of headwater systems within the channel network, the ecological values of headwater systems are underestimated, and their processes have been extensively modified by land use.”See Takashi Gomi, Roy C. Sidle & John S. Richardson, Understanding Processes and Downstream Linkages of Headwater Systems, BioScience, Vol. 52, No. 10, Oct. 2002, at 914. I have also read that “[the] natural dendritic properties of stream networks play an intrinsic role in the delivery of nitrogen and other pollutants to downstream receiving waters from headwater locations throughout watersheds.” See Richard B. Alexander, Elizabeth W. Boyer, Richard A. Smith, Gregory E. Schwarz & Richard B. Moore, The Role of Headwater Streams in Downstream Water Quality, Journal of the American Water Resources Association, Vol. 43, No. 1, Feb. 2007, at 57. In the context of streams and wetlands, the term “dendritic” refers to the branch-like characteristics of upstream headwaters, which then funnel into a single stream or river downstream, as is the case with the Western Branch watershed and tributary. *7 (internal footnote omitted).On the basis of Mr. Linthicum’s affidavit, as well as the testimony he presented at a hearing on the motions to dismiss,12 the Circuit Court found that Mr. Linthicum is “a frequent recreational paddler” on the Western Branch of the Patuxent River and also has an “aesthetic interest in the beauty of the river and the cleanliness of its water.”

The court further found that Mr. Linthicum has “an economic interest in navigating the river, [because] he charts its tributaries to produce maps and guides that he sells to the Riverkeeper and others.”Despite these findings, the judge dismissed the judicial review action for lack of standing, determining that the injury Mr. Linthicum alleged on behalf of Riverkeeper was merely “conjectural or hypothetical”:On the other hand, Mr. Linthicum has never visited the actual site of the permit at issue and has never paddled on the tributary that has been altered by development of the Towne Center, nor has he testified to an intention or desire to do so. He has not seen any effects, other than seasonal ones, on the parts of the river he does travel since the completion of the work at the Towne Center. Indeed, he did not even realize there had been work impacting a wetland until a few weeks before offering his testimony to the Court, long after that work had been completed.[13]In other words, completion of the work authorized by the wetlands permit issued by MDE has not affected Mr. Linthicum’s day to day life on the river in any manner whatever. Instead, Mr. Linthicum claims that the Towne Center development will “ultimately” impact the watershed downriver where he carries on his business. Affidavit of David Linthicum ¶ 7. This is precisely the conjectural or hypothetical injury forbidden by Summers, supra. Mr.

Linthicum has a good-faith belief that continued urbanization of Prince George’s County will one day result in the erosion of the wetlands and waterways that he loves. As he testified, he fears the “death by a thousand cuts.” This is not a sufficient injury in fact to establish standing under federal law and Md.Code, Enviro. § 5–204(f).We disagree with the Circuit Court’s legal assessment.14 Mr. Linthicum alleged, and the Circuit Court found, that he had adequately asserted demonstrable aesthetic, recreational, and economic interests in the Western Branch as an avid paddler and mapmaker. The Circuit Court determined that the harm alleged, however, was not sufficiently concrete nor imminent, because Mr. Linthicum claimed that the permit allowing the road expansion and stream crossing would “ultimately” impact the Western Branch watershed downriver “where he carries on his business.” In so doing, the judge failed to credit the reasonable concern that Mr. Linthicum manifested about the future harm to the ecology of the Western Branch that would result from “diverting and/or compromising” upriver streams. *8 The injury suffered by Mr. Linthicum, moreover, shares a sufficient nexus to the issuance of the non-tidal wetlands permit, because Mr. Linthicum alleged, referring to scientific articles as well as his own experiences, that stream crossings at headwaters and wetlands, such as that constructed at Ruby Lockhart Boulevard, can cause negative affects downstream on the Western Branch watershed. Finally, at a hearing before the Circuit Court regarding the motions to dismiss, Frederick Tutman, Chief Executive Officer of Riverkeeper, described methods to abate the harm caused by the issuance of the permit, including rescission of the permit, as well as more intensive mitigation efforts:I would say in addition to the rescission of the permit, I think look at broader or more specific mitigation in line with the scope of the impacts [,] [b]ut, also, I think something of great value is being taken away from citizens adjacent to this site and the county and I don’t think it’s being put back. I think the quality of the mitigation that’s been approved by the State [,] I don’t think begins to really get to the heart of what’s being taken away.

As a result, the motions to dismiss for lack of standing on the part of Riverkeeper should not have been granted, and the judicial review action should be permitted to proceed.JUDGMENT OF THE CIRCUIT COURT FOR PRINCE GEORGE’S COUNTY REVERSED; CASE REMANDED TO THAT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION; COSTS TO BE PAID BY RESPONDENT, PETRIE/ELG INGLEWOOD, LLC, ALSO KNOWN AS WOODMORE TOWNE CENTRE, LLC.

Patuxent Riverkeeper v. Maryland Dept. of Env’t, 139 SEPT.TERM 2010, 2011 WL 4502141 (Md. Sept. 30, 2011)

Marina Purchase in Maryland

The purchase of any Maryland business can be a complicated process.  The purchase of a marina on the Chesapeake or the Coastal Bays, however, adds a number of issues that are specific to the marina’s position on the waterfront.  There are few other businesses where access must be considered from both the land and the water; where environmental regulations and controls are of such immediate consequence; and where a love for the water can be as much of a driving force as business considerations.  The list below is a truncated version of the checklist that we use at Waterfrontlaw to assist purchasers and sellers in organizing for a purchase or sale.

If you are considering a purchase or sale of a marina, we urge you to review the list below, formulate a plan of attack, and then to bring the transaction to our attention.  We can help with identifying the areas of risk that require additional research.  We can help with identifying poor transaction partners or troublesome real property before too many resources are expended.  And, of course, we can assist with preparing the papers that will form the core of the transaction.  In many cases, we may already have first hand knowledge of the property in question.

Due Diligence Documentation

Due Diligence CategoryDocumentation TasksellerPurchaserStatus/notes/ assigned to
Business Plan, Corporate Structure, Financing
Business planCurrent five-year business plan
Corporate organizationArticles of incorporation (name, address, resident agent)
Bylaws
Recent changes in corporate structure
Parent, subsidiaries, and affiliates
Shareholders’ agreements
Minutes from board meetings
Corporate representationPost formation representation – conflict waiver – explanation of obligations.
ShareholdersCurrent shareholders, including number of shares owned, dates that shares were acquired, considerations received, and contact information
Number of outstanding shares
Stock option plan
Samples of common and preferred stock certificates, debentures, and other outstanding securities
Warrants, options, and other rights to acquire equity securities
Relevant private placement memoranda and other offering circulars
LendersBank lines of credit, loan agreements, or guarantees
Loan defaults or expected defaults
Recent corporate transactionsDescription and rationale for each transaction
Purchase and sale agreements
Real Property and Environmental
Real PropertyDeed Search to confirm ownership or deed restrictions
Neighborhood canvas – known problems; future issues with activities
Silting in/navigability
RegulationsBusiness licenses
Environmental permits
Workers’ health and safety permits
Environmental EngineeringCite reviewed for current permits; past environmental issues.
ZoningAnalysis of present zoning/need for future changes or variances
Contractual Documents
ContractsMajor contracts by product line
Support/maintenance contracts
Warranties and guarantees
Dockage Contracts
Mooring Contracts
Land Storage ContractsNote vessel owners rights to do or contract for their own service work
Other customer-related contracts
Supplier/Subcontractor contracts
Purchase Contract Issues
Assets and liabilities v. stock purchase
Warranties
Real property v. going concern
Due diligence period
Deposit – refundable v. non-refundable
Liens and creditors
Financial and Operations
Financial statementsThree years of historical statements and related documentation.

Marina Liability

This article is reprinted from the February, 2005 issue of Soundings-Trade Only, and reflects the author’s recollection of a panel discussion at the International Marina Conference in San Diego, California.  Mr. Schwenk was one of the panelists asked to address liability issues in the marina industry.  The suggestions given were necessarily of a general nature, since there were attendees from all over the world. In brief, those suggestions were: 1. Maintain best professional practices, as those reflect the best thinking in the industry; 2. Add language to one’s principal contracts to insulate your business from claims (these are “exculpatory clauses”); and 3. Make a timely, appropriate response to any problem that arises, or a small problem may spin out of control.

Liability Issues:  Fix the Problems, Avoid Lawsuits

Maintaining the “best professional practices” is called the surest way of staying out of court

By Lindsey Savin/Staff Writer

Soundings Trade Only, February, 2005

Liability issues are among a marina operator’s greatest concerns, and a panel of experts at January’s International Marina Conference in San Diego offers up some advice on how to cope with them.

The panel, moderated by Mick Bettesworth of Marina Developments Ltd. in the United Kingdom, included Mark Yearn of Universal Insurance Services; Dirk Schwenk of the maritime law firm Baylaw, LLC; and Jopie Helsen, owner of Sailor’s Wharf Yacht Yard in St. Petersburg, Fla.

Schwenk said prevention is the best approach.  Maintain the “best professional practices” possible, he said, and, “Fix the problems.”

Being certain you understand your insurance policies – what is covered and what is not – is also critical, Schwenk said.  “You need to have a good idea what’s in your contract.”

“Each facility has its own characteristics and can’t be put in a magic insurance or liability box,” Yearn said.  Still, he suggested, owners and operators can seek out specialists who can customize a facility-specific insurance program.

Because a customer can reverse charges on a credit card for up to 18 months after a transaction is made, Helsen suggested marina owners consider not accepting credit cards as a method of payment, or at the very least encouraging customers to use some other form to square up their bills.

“Taking almost anything other than a credit card is preferable,” Schwenk agreed.

Another suggestion raised by panelists was marina owners should always make sure the “added insured” box is always checked on a marina patron’s or independent contractor’s proof of insurance when presented to the facility owner.  “No good landlord would lease property to someone without proof of insurance, and [the renter should] add the landlord as an added insured,” said Schwenk.

Schwenk also suggested marina owners consider including exculpatory clauses in both their customer and supplier contracts.  These clauses, he said, “can have a chilling effect” on prospective lawsuits.  “They can stop some claims before they even start,” he said.

“Your contracts are the strength of your business,” echoed Yearn.  “The stronger your contracts are, the better off you’re going to be.”

In the end, probably the best preventative measure a marine owner can take to ensure limited liability is to fix problems at the facility as they occur and not wait for them to snowball.

Timely, appropriate response to those things is 99 percent of the battle,” Schwenk concluded.