by Steve LewickyBusiness Judgment Rule in Maryland
The Appellate Court of Maryland recently issued an unpublished opinion in the case of Special Situations Fund III QP, L.P. v. Travel Ctrs. of Am. Inc.[1], in which it analyzed the application of the Business Judgement Rule when a corporate merger is challenged. Unlike in Delaware, where the Business Judgment Rule and the duties of corporate directors have been developed solely by judge-made case law, the Business Judgment Rule in Maryland has been codified by the Legislature at Md. Corps. & Assoc. Code § 2-405.1.[2]
Directors of Maryland corporations are required to act:
(1) In good faith;
(2) In a manner the director reasonably believes to be in the best interests of the corporation; and
(3) With the care that an ordinarily prudent person in a like position would use under similar circumstances.[3]
An act by a director relating to or affecting the acquisition or a potential acquisition of control of the corporation, or any other transaction or potential transaction involving the corporation, may not be held to any higher duty or greater scrutiny than is applied through the statutory Business Judgment Rule.[4]
A director acting in accordance with the standard of conduct set forth in § 2-405.1 has immunity from liability arising from the performance of the director’s duties.[5] The statute also creates a presumption that a director acted in accordance with the Business Judgment Rule.[6]
When a party brings a lawsuit to challenge actions of a board of directors that fall within the board’s business judgment, the claimant must plead specific facts in the complaint sufficient to overcome the Business Judgment Rule.[7] This can be accomplished in either of two ways:
(1) by pleading facts showing fraud or bad faith,[8] or
(2) by pleading facts showing that a director has a conflict of interest relating to the board’s decision, i.e., that the director, or someone close to the director, has a personal financial interest in the outcome of the board’s decision.[9]
If a plaintiff pursues the second route and pleads facts sufficient to show a financial conflict of interest, then the burden will shift to the board of directors to show that its action was just and proper, and that no advantage was taken of the stockholders.[10] In other words, when pursuing the second path, a claimant must plead facts that demonstrate fraud, bad faith, unconscionable conduct, or a conflict of interest – but this can be overcome by the board by showing that the directors with an interest in a contemplated transaction disclosed their conflicts beforehand, or demonstrate that the transactions implicated by those conflicts are fair and reasonable to the corporation.[11] If the board or the stockholders were properly informed of a conflict of interest beforehand, then the contract or transaction may still be authorized, approved, or ratified by a majority of the disinterested board members or stockholders.[12]
[1] 2025 Md. App. LEXIS 1006 (Nov. 25, 2025).
[2] Special Situations Fund, p. 40, n. 3; Hanks, James J., Maryland Corporation Law, § 6.09 6-78 (2d ed. 2020, Supp. 2024).
[3] Md. Corps. & Assoc. Code § 2-405.1(c).
[4] Id., § 2-405.1(h).
[5] Special Situations Fund, p. 41.
[6] Id.
[7] Id., p. 42.
[8] Cherington Condominium v. Kenney, 254 Md. App. 261, 279 (2022); Special Situations Fund, p. 42.
[9] Kenney, 254 Md. App. at 279; Special Situations Fund, p. 43.
[10] Kenney, 254 Md. App. at 279-80; Special Situations Fund, p. 43.
[11] Kenney, 254 Md. App. at 285; Special Situations Fund, p. 61.
[12] Kenney, 254 Md. App. at 283; Sullivan v. Easco Corp., 656 F. Supp. 531, 535 (D. Md. 1987); Special Situations Fund, p. 61.
by Samantha ChanStarting a New Business in Maryland
The beginning of a new year is a popular time to launch a business. Whether you’re expanding on an existing idea or starting from scratch, the early planning stages involve many exciting decisions. But it’s important not to overlook the legal groundwork of starting a new business. A solid legal foundation can save you significant time, money, and stress if issues arise later. As you map out your next steps, here are key considerations:
1. Choose the Right Business Structure
Maryland offers several options, each with different liability and tax implications:
- LLCs – The most common for small and mid-size businesses. Popular because it may shield individuals from personal liability.
- Corporations – Better for companies seeking investors or issuing stock.
- Sole Proprietorships/Partnerships – Easy to set up, but offers little to no personal liability protection.
Filing with the Maryland Department of Assessments and Taxation (SDAT) is only the first step when starting your new business. The structure you choose affects ownership rights, management, and how disputes will be handled later on.
2. Don’t Skip the Operating Agreement
An LLC without a written operating agreement is vulnerable. Maryland law recognizes these agreements, and courts rely heavily on them during disputes.
Your LLC operating agreement should clarify:
- Ownership percentages
- Voting and decision-making
- Profit distribution
- Buy-out provisions
- What happens if owners disagree or someone leaves
Many lawsuits arise from businesses formed with handshake agreements or online templates. A tailored operating agreement may significantly reduce that risk. If your company is structured as a corporation, then it is required to have written bylaws.
3. Use Clear, Written Contracts
Every business relationship should be documented: vendors, contractors, employees, and partners. Written contracts protect expectations and reduce misunderstandings.
Important terms include:
- Payment and deadlines
- Scope of work
- Termination rights
- Venue and dispute-resolution language
- Intellectual property and confidentiality
Even simple agreements help prevent disputes and protect your rights if one occurs.
4. Keep Good Records From Day One
New businesses often overlook evidence preservation, but maintaining good records can help resolve problems if a dispute arises later.
Build good habits early:
- Use accounting software
- Keep receipts, emails, and contracts organized
- Store digital records securely
- Have a document-retention policy
Strong record-keeping makes your business more efficient and better protected.
Whether you are just starting to form your business or are already in the thick of running it, Lewicky, O’Connor, Hunt, and Meiser has a team of experienced business attorneys who can assist you both in preventing problems before they arise and in navigating issues when they do. Schedule your consultation today for help keeping you and your business on track.
Disclaimer: Any questions regarding tax obligations, consequences, or planning should be directed to a qualified tax attorney, accountant, or other licensed tax professional. This article does not provide detailed or comprehensive information about taxation matters.
by David HisleWhat to Do After a Judgment is Entered in Your Favor
Collecting On a Judgment
Winning a lawsuit in Maryland is a significant achievement — but collecting on a judgment is not always easy. A court entering judgment in your favor does not guaranty that you will receive payment. A judgment debtor (the person who owes you money) may try to delay paying the judgment, refuse to pay, or simply be unable to pay.
Maryland law provides tools to help the holder of a judgment collect what is owed. Here are some things to consider, once a court enters a judgment in your favor:
Wait For the Judgment to Become Final
In Maryland, most civil judgments become “final” and enforceable only after 10 days have passed following the date on which the court enters the judgment on its official court docket. If the losing party files an appeal or files a motion to alter, amend, or appeal the judgment, that will further put off the date on which you can start seeking enforcement. Once the judgment is final, you can begin using the collection methods allowed under Maryland law.
Request Information From the Judgment Debtor
To initiate the collection process, you can start by asking the judgment debtor to provide financial information voluntarily. Forms for doing so may be accessed through the courts’ website – mdcourts.gov
If the judgment debtor refuses to cooperate, Maryland offers a powerful tool, known as post-judgment discovery. Through this process, you can require the judgment debtor to disclose information about:
- Bank accounts
- Employment
- Real property
- Vehicles
- Income sources
- Other assets
Post-judgment discovery may include submission of written questions to the debtor called “interrogatories”, or submitting formal requests for documents to the debtor. Alternatively, or in addition, you can ask the court to require the judgment debtor to appear in court and answer questions under oath about their assets.
Writs of Garnishment
If a judgment debtor won’t voluntarily pay a judgment, garnishment is often the most efficient means to force payment. Once a writ of garnishment is served on a financial institution or other entity holding property belonging to the judgment debtor, the person in possession of the debtor’s property will be required to turn over the money or property to the holder of the judgment (subject to some available defenses), up to the point where judgment is fully satisfied, or the court orders otherwise.
Wage Garnishment
Maryland allows garnishment of a portion of the debtor’s disposable wage earnings each pay period. Once served with a writ of wage garnishment, the judgment debtor’s employer must withhold the garnished amount and send it directly to the holder of the judgment (sometimes through the court).
Bank Account Garnishment
The holder of a judgment also may garnish a judgment debtor’s bank account to gain payment of a judgment. Once served, the bank must freeze the account and respond to the garnishment.
Place a Lien On Real Property
A judgment entered by a Circuit Court in Maryland automatically becomes a lien on any real estate that is titled in the sole name of the judgment debtor, and is located in the same county as the Circuit Court. A judgment lien can be established against property located in another Maryland county only by filing appropriate papers with the court asking it to transfer a copy of the judgment from the Circuit Court of the county in which the judgment was entered to the Circuit Court in the county in which the subject property is located.
For District Court of Maryland judgments, you must file appropriate court papers to record the District Court judgment in the Circuit Court for the county in which the property is located, in order to establish a lien against the property. Once a judgment lien against real property is established, the property thereafter cannot not be sold, refinanced, or transferred unless or until the judgment is satisfied.
If necessary, you can also pursue a judicial sale of the debtor’s real property to satisfy a judgment, though this is less common, can be expensive, and requires court approval.
Levy and Sale of Personal Property
In some cases, you can cause the Sheriff to seize and sell a judgment debtor’s personal property—such as vehicles, equipment, or valuable goods—through a writ of execution. This allows the Sheriff to levy property, hold an auction, and apply the proceeds to pay off the judgment. This method of gaining satisfaction of a judgment is more complex and often requires assistance from an experienced litigation attorney to identify assets and navigate the procedural requirements.
Renew the Judgment Before It Expires
Maryland judgments are enforceable for 12 years after they are entered by the court, and as the holder of the judgment, you may thereafter renew the judgment for additional 12-year periods. However, the renewal must take place before the expiration of the 12-year term. If the judgment debtor has only limited assets when the judgment is entered, but might accumulate income or property later, renewing the judgment ensures your right to pursue the judgment into the future.
Understanding your legal options under Maryland law is important, but engaging the legal assistance of a qualified lawyer is fundamental to ensuring your best interests are protected. Lewicky, O’Connor, Hunt, & Meiser have represented countless Maryland residents in lawsuits and are experienced in the post-judgement process. If you have won a lawsuit and need help collecting on the judgment or need representation for an upcoming legal dispute, contact our office today to schedule your consultation.
by Lisa WhiteWhat should you do if you are served with a civil lawsuit?
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Contact a lawyer.
Nobody likes receiving delivery of court documents and finding out they are a defendant in a civil lawsuit – but if you are named as a defendant, be sure to consult with an attorney as soon as possible who is licensed to practice in your state or jurisdiction. Don’t be afraid to ask your lawyer questions during your initial consultation. The more information you provide during this initial meeting, the better your attorney will be able to assist you.
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Be mindful of deadlines.
A response to the lawsuit will need to be filed with the court within a fixed period of time, calculated from the date on which you received written notice of the lawsuit. Read the delivered papers carefully, and be sure to ask your attorney about your responsive filing deadline.
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Know your options and your rights.
After receiving notice that you have been named in a lawsuit, you may be tempted to directly contact the person or company that filed, without first consulting an attorney. Giving a written or verbal response to the plaintiff or the plaintiff’s attorney, without first receiving advice from your own attorney, could be very detrimental to your defense. It is essential to have the benefit of professional legal advice and guidance before submitting any response to the person or company that has brought suit.
If you have been served with a lawsuit brought in courts located in Maryland or the District of Columbia, Lewicky, O’Connor, Hunt & Meiser stands ready to provide legal support to you. Call our office at (410) 489-1996 to schedule a consultation with an attorney who can provide you with options and guide you through the litigation process.
None of the information provided in this article constitutes legal advice. Every situation is different and should be thoroughly reviewed by and discussed with your legal advisors. Please do not rely on the contents of this article as the basis for making decisions regarding your particular situation.
by Kelley SingerMaryland Inheritance Tax on Domestic Partners
If you live in Maryland and are in a long-term committed relationship, you may be surprised to learn that any inheritance you receive from your partner is subject to a 10% Maryland inheritance tax – unless you marry or become registered domestic partners.
The Process of Becoming Registered Domestic Partners
In Maryland, two people may become registered domestic partners if: (1) both persons are over the age of 18 (2) neither is the domestic partner of any other person, (3) they are not married, and (4) they are in a committed relationship with each other.
If one registered domestic partner dies without a will, then the surviving partner is treated the same as a surviving spouse:
- Having priority to serve as the Personal Representative
- Being entitled to the spousal allowance (currently $10,000)
- And inheriting the same share of the decedent’s probate estate as a spouse would
The surviving domestic partner is exempt from Maryland inheritance tax, whether the decedent died with or without a will.
If You Decide to End Your Partnership
You can terminate a registered domestic partnership in the following ways:
- Through mutual consent
- By one party, so long as you provide a copy to the other domestic partner
- By abandonment of one party for a period of at least six months without contact
- By marriage of one or more of the parties
- Or by death of one or more of the parties
Unilateral termination and termination through mutual consent take effect six months after the date of filing, while termination for the other reasons listed above takes effect immediately.
If a declaration of domestic partnership is not on file with the Register of Wills, then a surviving domestic partner may still be exempt from inheritance tax on jointly held real property that is a principal residence.
If you are in a Maryland domestic partnership, contact the attorneys at Lewicky, O’Connor, Hunt & Meiser, LLC to discuss your options.
