Thе principal issue in this case is whether Maryland’s statutory accountant-client privilege 1 recognizes an exception for fraud in an action under the Maryland Uniform Fraudulent Conveyance Act. 2 The case also presents the issues of whether the accountant-client privilege was waived and whether goodwill may be considered an asset in assessing an entity’s solvency under the Maryland Uniform Fraudulent Conveyance Act.
BAA, pic (“BAA”) and World Duty Free, pic (“World” or, collectively, “BAA”), petitioners and cross-respondents, argue that no such fraud exception to the accountant-client privilege exists because the statutory enumeration of exceptions does not include a fraud exception. In addition, BAA asserts that the Court of Special Appeals erred when it concluded that the word “assets” in the Fraudulent Conveyance Act does not encompass goodwill.
The respondent and cross-petitioner corporate investors (the “Noteholders”) are creditors of Duty Free International which was a subsidiary of BAA. 3 The Noteholders contend that, like the common law attorney-client privilege, the accountant-client privilege contains a fraud exception, and that the exception encompasses “fraud” within the meaning of the Fraudulent Conveyance Act. The Noteholders also assert that BAA waived the accountant-client privilege, thereby entitling the Noteholders to discovery of the accountant’s work papers. Furthermore, the Noteholders argue that the Court of Special Appeals correctly held that goodwill should not be considered an asset because Duty Free’s goodwill had no present fair market value.
We shall hold that the accountant-client privilege does not recognize an exception for fraud in an action under the Fraudulent Conveyance Act. In addition, we shall reject the Noteholders’ waiver arguments. We shall also conclude that goodwill may be considered an asset in analyzing solvency under the circumstances presented in this case.
I.
BAA, the corporate successor of the British Airport Authority, owns and manages airports, airport retail ventures, and
many related businesses, including duty-free shops. World is a wholly owned subsidiary of BAA, and is a holding company for BAA’s duty-free businesses around the world. In 1994, Duty Free was a publicly traded Maryland corporation in the business of selling duty-free goods at international airports and other locations. Duty Free issued $115 million in notes in 1994 to raise capital for its operations. The notes paid interest at the rate of 7 percent, in semi-annual installments, with the principal obligation on the notes becoming due in January 2004. The respondents/cross-petitioners, the Note-holders, purchased
In 1997, BAA purchased all of the outstanding stock of Duty Free for $24 per share. To effectuate the acquisition of Duty Free, BAA formed a new company, W & G Acquisition Corporation (“W & G”), as a subsidiary of World. BAA made a noninterestbearing loan to World of $662 million. In turn, World provided W & G with $225 million in equity capital, and turned over the remaining $437 million to W & G in the form of an interest bearing promissory note. W & G used the combined $662 million (the “Acquisition Debt”) to purchase Duty Freе’s stock. W & G and Duty Free were then merged, with the result that Duty Free (the entity surviving the merger) became liable to BAA for the Acquisition Debt.
By June of 2000, BAA decided to sell Duty Free. BAA hired the accounting firm of Deloitte & Touche to prepare an audit of Duty Free’s financial condition. BAA entered into negotia tions for the sale of Duty Free with businessmen Simon Falic, Leon Falic, and Jerome Falic, who were brothers. The Falics hired the accounting firm of Arthur Andersen, LLP, to investigate Duty Free’s assets. Arthur Andersen contacted Deloitte & Touche to review various work papers and documents prepared in connection with the latter’s audit of Duty Free. Deloitte & Touche contacted Duty Free and BAA for permission to disclose the work papers and documents. BAA granted permission on the condition that the Falics and Arthur Andersen sign a confidentiality agreement regarding the information obtained from the review of the working papers. The Falics and Arthur Andersen agreed to this condition and signed the confidentiality agreement.
In August 2001, BAA reached an agreement in principle with the Falics for the sale of Duty Free, at a purchase price of $175 million, with the Falics assuming the $115 million obligation on the 1994 notes and paying the remaining $60 million in cash. The effect upon travel-related business resulting from the terrorist attacks on September 11, 2001, however, substantially impacted the value of Duty Free. Furthermore, there apparently may have been some misunderstanding among the parties concerning the August 2001 tentative agreement. Consequently, the Falics reduced their offer to $6 million, structured such that $5,999,999 was allocated to repayment of a portion of the balance of the Acquisition Debt and $1.00 was paid for Duty Free’s stock. BAA accepted the Falics’ offer, and a Purchase Agreement was entered into. Under the Purchase Agreement, the Falics did not personally assume the obligation under the 1994 notes, but the obligation remained with Duty Free.
II.
In April 2002 the Noteholders filed, in the Circuit Court for Anne Arundel County, this action against BAA, World, Duty
The plaintiffs also demanded a jury trial. Prior to the submission of the case to the jury, the plaintiffs withdrew the “conspiracy” count and the request for a declaratory judgment. Subsequently, they have indicated that their “claims” are limited to alleged violations of the Fraudulent Conveyance Act and “Breach of Fiduciary Duty.” 7
In essence, both in their amended complaint and at trial, the Noteholders contended that the various transactions involving Duty Free had been without fair consideration and had rendered Duty Free insolvent, thereby avoiding liability on the 1994 notes.
8
More specifically, the Noteholders asserted that Duty Free’s incurrence of the $437 million Acquisition Debt and the subsequent repayment of $187 million
Prior to trial, the Noteholders had served a subpoena on Deloitte & Touche, seeking documents associated with Deloitte & Touche’s audit of Duty Free. Some documents were produced and others were withheld based on the statutory accountant-client privilege set forth in Maryland Code (1974, 2006 Repl.Yol.) § 9-110 of the Courts and Judicial Proceeding Article. Section 9—110(b) states in pertinent part:
“§ 9-110. Privileged communications—Accountants ....
“(b) In general.—Except as provided in subsections (c) and (d) of this section or unless expressly permitted by a client or the personal representative or successor in interest of the client, a licensed certified public accountant or firm may not disclose:
(1) The contents of any communication made to the licensed certified public accountant or firm by a client who employs the licensed certified public accountant or firm to audit, examine, or report оn any account, book, record, or statement of the client;
(2) Any information that the licensed certified public accountant or firm, in rendering professional service, derives from:
(1) A client who employs the licensed certified public accountant or firm; or
(ii) The material of the client.
(c) jDisclosures.—(1) A licensed certified public accountant or firm may disclose any data to another certified public accountant or firm that conducts a quality review.
(2) The disclosure permitted by paragraph (1) of this subsection:
(i) Does not waive the privilege required by subsection (b) of this section; and
(ii) Subjects a licensed certified public accountant or firm that conducts a quality review to the same duty of confidentiality applicable to the licensed certified public accountant or firm undergoing the quality review.
(d) Exceptions.—The privilege against disclosure required by subsection (b) of this section does not affect:
(1) The bankruptcy laws;
(2) The criminal laws of the State; or
(3) A regulatory proceeding by the State Board of Public Accountancy under §§ 2-317 and 2-412 of the Business Occupations and Professiоns Article.”
After the refusal to produce certain documents, the Note-holders filed in the Circuit Court a motion to compel production, stating that a “fraud exception” to the accountant-client privilege had been recognized by the Court of Special Appeals in
Dixon v. Bennett,
“In considering whether Duty Free was insolvent, you should consider the total amount of its assets and liabilities as of the time of the transaction. Goodwill is an intangible asset that has no liquidation or going concern value and, therefore, you must not consider goodwill in evaluating the solvency of Duty Free.”
The Circuit Court refused to give this instruction and, instead, gave instructions to the jury making no reference to goodwill:
“You have heard the term insolvency in his case. A person is insolvent if the present fair market value of his assets is less than the amount required to pay his probable liability on his existing debts as the[y] become absolute and matured.”
“In considering whether, in this case, Duty Free was insolvent, you should consider the total amount of its assets and liabilities as of the time of the relevant transactions.”
The second sentence of the Circuit Court’s instructions reflects the language of the Fraudulent Conveyance Act, § 15-202. 9 The jury returned a verdict in favor of BAA and World on all counts of the amended complaint.
The Noteholders appealed to the Court of Special Appeals, raising three issues. The Noteholders contended that the trial judge incorrectly denied their motion to compel the production of documents protected by the accountant-client privilege because the accountant-client privilege contains a fraud exception and that they had made “a prima facie showing that fraud had occurred.” The Noteholders also argued that the trial judge erred because BAA had waived the accountant-client privilege. Finally, they claimed that the trial judge incorrectly rejected their proposed jury instruction requiring that the jury ignore goodwill as an asset for the purpose of making the solvency assessment.
The Court of Special Appeals, in an unreported opinion, “vacated” the judgment and “remanded” the case to the Circuit Court. Regarding the Noteholders’ motion to compel, the Court of Special Appeals relied on its recognition, in
Dixon v. Bennett, supra,
“In the event that, upon remand, appellants again move to compel production of the documents in question, the court must properly determine whether appellants have again presented a prima facie showing of fraud and, if so, must require appellees to bear their burden of rebutting that showing. In the event that appellees fail to rebut the showing, it will be necessary for the trial court to conduct an in camera review of the materials in question in order to ensure that confidential communications that are irrelevant to the issues at hand are not needlessly revealed.”
As to the issue of goodwill, the Court of Special Appeals stated that the trial court should have granted the Noteholders’ requested instruction which expressly precluded the jury from considering goodwill in the solvency analysis. The intermediate appellate court said that goodwill does not have any “present fair market value” within the meaning of § 15-202(a) of the Fraudulent Conveyance Aсt. Citing the testimony of expert and lay witnesses that goodwill cannot be separately bought, sold or borrowed against, the court concluded that goodwill does not possess any fair market value. 10
BAA filed a petition for a writ of certiorari, presenting the following questions:
“1. Does Maryland recognize a fraud exception to the statutory accountant-client privilege set forth in § 9-110 of the Courts and Judicial Proceedings Article?
2. If a fraud exception exists, may it be invoked on the basis of allegations, rather than evidence, of fraud?
3. Are intangible assets such as goodwill ‘assets’ within the meaning of Md.Code ... § 15-202(a)?”
The Noteholders filed both an answer and a separate conditional cross-petition for a writ of certiorari. The cross-petition presented the single question of “[w]hether the Court of Special Appeals erred in holding that BAA had not waived the accountant-client privilege.... ” This Court granted both the petition and the cross-petition.
BAA v. Acacia,
We shall first address the question of whether the statutory accountant-client рrivilege contains a “fraud exception” applicable in civil actions such as the instant case. 12
As previously indicated, the accountant-client privilege is entirely a creature of statute in Maryland. Unlike the attorney-client privilege, Maryland common law does not recognize an accountant-client privilege.
Sears v. Gussin,
The statute creating the accountant-client privilege specifically addresses the matter of exceptions in § 9-110(d) of the Courts and Judicial Proceedings Article, stating:
“(d) Exceptions.—The privilege against disclosure required by subsection (b) of this section does not affect:
(1) The bankruptcy laws;
(2) The criminal laws of the State; or
(3) A regulatory proceeding by the State Board of Public Accountancy under §§ 2-317 and 2-412 of the Business Occupations and Professions Article.”
The invocation of the privilege in this
civil
action under the Fraudulent Conveyance Act clearly does not “affect” the bankruptcy laws, Maryland’s “criminal laws,” or a regulatory proceeding by the State Board of Public Accountancy. While in some other contexts there might be a degree of
Directly on point is the often-repeated principle that “[w] e neither add nor delete words to a clear and unambiguous statute to give it a meaning not reflected by the words the Legislature used or engage in forced or subtle interpretation in an attempt to extend or limit the statute’s meaning.”
Taylor v. NationsBank, N.A.,
Moreover, when a statute expressly sets forth certain exceptions to the coverage of the enactment, this Court “cannot disregard the mandate of the Legislature and insert an exception, where none has been made by the Legislature,”
Johnson v. Mayor & City Council of Baltimore City,
The principle which precludes judicially inserted additional exceptions into statutes has been applied by this Court to statutory privileged communications. Thus, where the Court of Special Appeals held that public “policy” justified a particular exception to the statute creating a privilege for confidential communications between spouses, Code (1974, 2006 Repl.Vol.), § 9-105
“By statute in California there is an express statutory exception to the privilege between spouses for confidential communications made in furtherance of a crime. Authorities interpreting that state’s law, which were relied upon by the Court of Special Appeals for its holding, are therefore wholly inapplicable, since the Maryland statute contains no such exception. Absent such an exception, the rule is that the privilege is applicable. See State v. Pizzolotto,209 La. 644 ,25 So.2d 292 (1946); Dickinson v. Abernathy Furniture Co.,231 Mo.App. 303 ,96 S.W.2d 1086 (1936). Cf. Fraser v. United States,145 F.2d 139 (6th Cir.1944). Indeed, the Maryland legislature has recognized the need for an express exception to a statutory privilege protecting communications between accountants and their clients. See § 9-110(b) of the Courts Article, excepting from the privilege matters which ‘affect the criminal laws of this state.’ ”
Turning to the three statutory exceptions to the accountant-client privilege, the only one which has been suggested as a basis for a civil fraud exception is the provision that the privilege “does not affect: * * * (2) The criminal laws of the State ***”(§ 9—110(d)(2) of the Courts and Judicial Proceedings Article).
13
The meaning of this exception was specifically addressed by this Court in two companion cases, heard and decided at the same times,
In re Special Investigation No. 236, supra,
After reviewing the language and history of the statutory privilege, Judge Marvin Smith for the Court in
Special Investigation No. 236,
“Thus, we turn to an examination of whether a grand jury proceeding is essentially criminal.”
Upon a detailed examination of cases and other authorities concerning grand juries, as well as limitations upon the authority of grand juries, Judge Smith for the Court concluded (
“The conclusion is inescapable that at common law the grand jury was concerned with matters criminal. The only change in that procedure in Maryland is the four statutes we have cited. Hence, it was as a part of a criminal proceeding that the subpoena duces tecum was here issued. The statutory protection afforded as between accountants and their clients is thus not applicable. It follows, therefore, that the trial judge erred when he ordered return of the subpoenaed documents to the client of the accountant.”
In
Special Investigation No. 229,
The two Special Investigation cases involved allegations of criminal fraud, but what determined the applicability of the “criminal laws” exception to the accountant-client privilege was the nature of the existing judicial proceeding— whether it was criminal or civil. These cases confirm what is apparent from the statutory language. The “criminal laws” exception to the accountant-client privilege is inapplicable in a purely civil action such as the case at bar. 17
Addressing the fact that the accountant-client privilege is entirely statutory in origin, the Court of Special Appeals in
Dixon
acknowledged that, “generally ... we look to the plain meaning of the words.”
Ibid.
Nevertheless, the
Dixon
opinion
found an exception to the plain meaning principle (
“But our inquiry does not always end there. Statutes are also to be construed reasonably with reference to the legislative purpose to be accomplished. The real legislative intention should prevail over the intention indicated by the literal meaning. Kaczorowski v. Mayor & City Council of Baltimore,309 Md. 505 , 516,525 A.2d 628 (1987).”
Based upon the Court of Special Appeals’ view of desirable “policy,” the Dixon opinion concluded that the accountant-client privilege contained a fraud exception applicable in civil actions under the Fraudulent Conveyance Act.
The
Dixon
court’s use of
Kaczorowski v. City of Baltimore, supra,
Moreover, the cases in this Court since the
Kaczorowski
opinion have consistently cited and relied upon those portions of
Kaczorowski
which emphasize the importance of the enactment’s language, instruct courts not to disregard the natural meaning of the statutory words, and warn courts not to rewrite statutes to reflect the courts’ ideas of public policy.
See, e.g., Stanley v. State,
The
Dixon
opinion’s reliance upon out-of-state federal cases, dealing with the attorney-client privilege, was also misplaced. As earlier mentioned, the attorney-client privilege was recognized at common law; it “dates back in the common law to the reign of Elizabeth I,”
Newman v. State,
IV.
We agree with the Court of Special Appeals that the Noteholders failed to establish a waiver of the accountant-client privilege by BAA. The Noteholders maintain that BAA waived the privilege by issue injection, selective disclosure, and disclosure to third parties. The record reveals, however, that BAA consistently treated the communications with Deloitte and the accountant’s documents as confidential.
This Court reviewed the accountant-client privilege and the matter of waiver in
Sears, Roebuck & Co. v. Gussin, supra,
According to the Noteholders, BAA waived the privilege by issue injection when it referred to the Deloitte & Touche audit as “a critical part of BAA’s defense to Plaintiffs’ claim that Duty Free was insolvent at the time of the conveyance.” (Brief of respondents/cross-petitioners at 34). To support their argument, the Noteholders point to a few instances from the trial where BAA made reference to Deloitte & Touche and their audit of Duty Free’s financial condition. For example, during BAA’s cross' examination of an expert retained by the Noteholders, the following occurred:
“Q. Now, in fact, this consolidated balance sheet—this is a balance sheet prepared by Duty Free, Right? Their management?
“A. Yeah. These are Duty Free’s financial statements.
“Q. And because it has been audited what that means is that Deloitte & Touche, as an independent auditing firm, has performed tests that are specified in the accounting rules to verify and check the accuracy of the financial statement. Right?
“A. That’s correct.
In addition, during BAA’s direct examination of Russell Walls, the former Group Finance Director of BAA, the Noteholders point to the following exchange:
“Q. And this is the financial statement that was in fact separately audited by Deloitte & Touche. Is that right?
“A. Yes. And prepared under U.S. GAAP.[ 22 ]
“Q. And when Deloitte & Touche audited Duty Free’s financial statements, did they report back to you that Duty Free was insolvent?
“A. No.”
The Noteholders acknowledge that it was they who raised the issue of Duty Free’s solvency, but they emphasize that it was BAA’s decision to refer to the Deloitte & Touche audit. Nonetheless, BAA’s references to the audit were done only аs part of its defense to Noteholders’ claim of insolvency. The Noteholders fail to identify an instance where BAA referred to the audit for any purpose other than a defense to the Noteholders’ insolvency contention. Furthermore, BAA’s principal defense to the Noteholders’ claim that Duty Free was insolvent at the time of the conveyances rested on the testimony of its expert witness who examined Duty Free’s financial records, and the testimony of Duty Free and BAA employees who operated the company. We agree with the conclusion of the Court of Special Appeals that “it was [the Noteholders’] claims under the Act that necessarily injected the issue of Duty Free’s solvency into the underlying litigation * * *. As a general rule, a party does not waive the [accountant-client] privilege by denying the opposing accusations ...,’” quoting
Sears,
The Noteholders also incorrectly argue that BAA waived the privilege by selective disclosure. Section 9-110(b)(1) of the accountant-client privilege prеvents an accountant from disclosing “any communication made to the licensed certified public accountant or firm by a client----” Section 9—110(b)(2) prevents an accountant from disclosing “[a]ny information ... derive[d] from: (i) A client ... or (ii) The material of the client.” The Noteholders assert that “BAA produced some of Deloitte’s work papers but withheld others on the basis of the accountant-client privilege.” (Brief of respondents/cross-petitioners at 41). In support of this assertion, the Noteholders refer to the affidavit of an accounting expert, Andrew Hayes, who reviewed the documents produced in discovery. In the affidavit, Mr. Hayes stated that “[c]ertain work papers were provided with respect to the audits of the March 1998, March 1999, March 2000, and March 2001 fiscal years____ The work papers provided consisted primarily of documents obtained from Duty Free or BAA pic (‘BAA’).” There was no further description of the papers which were provided. Instead, most of the affidavit relates to what was not provided.
The rеcord reveals that BAA never ceased to treat the withheld materials as privileged and did not disclose materials subject to the privilege. The record shows that Deloitte was instructed “not to produce (1) documents that relate to confidential communications between Duty Free and Deloitte; and (2) documents that contain information that was derived from material provided by Duty Free.” Furthermore,
There is likewise no merit in the Noteholders’ argument that BAA waived the accountant-client privilege by disclosing privileged materials to third parties. The Note-
holders assert that BAA’s disclosure of Deloitte’s work papers to the Falics and their accountant, Arthur Anderson LLP, waived the acсountant-client privilege. As previously indicated, “the privilege may be waived by the client’s disclosure to third parties.”
Sears, supra,
“(c) Disclosures.—(1) A licensed certified public accountant or firm may disclose any data to another certified public accountant or firm that conducts a quality review.[ 23 ]
(2) The disclosure permitted by paragraph (1) of this subsection:
(i) Does not waive the privilege required by subsection (b) of this section; and
(ii) Subjects a licensed certified public accountant or firm that conducts a quality review to the same duty of confidentiality applicable to the licensed certified public accountant or firm undergoing the quality review.”
In light of the pending acquisition of Duty Free, the Falics and BAA had a shared interеst in the privileged documents. The Falics and Arthur Anderson, in conducting the due diligence review, were a part of the privileged relationship. Furthermore, when BAA made documents available to Arthur Andersen, it did so after the Falics signed a confidentiality agreement. The Falics agreed to the condition that “the information obtained as a result of the working papers will be limited to [the Falics’] consideration of the transaction [i.e., the purchase of Duty Free’s stock] ... and will not be shared with any person other than Arthur Andersen LLP.” Again, this confidentiality agreement evidences BAA’s constant efforts to protect the confidential character of the documents. BAA did not waive the privilege by disclosure to the Falics and Arthur Andersen.
V.
Turning to the issue of goodwill,
24
we disagree with the Noteholders
“In considering whether Duty Free was insolvent, you should consider the total amount of its assets and liabilities as of the time of the transaction. Goodwill is an intangible asset that has no liquidation or going concern value and, therefore, you must not consider goodwill in evaluating the solvency of Duty Free.”
In the instructions actually provided, the Circuit Court left the determination of whether to include goodwill to the jury. The jury was instructed as follows:
“You have heard the term insolvency in this case. A person is insolvent if the present fair market value of his assets is less than the amount required to pay his probable liability on his existing debts as the[y] become absolute and matured.”
“In considering whether, in this case, Duty Free was insolvent, you should consider the total amount of its assets and liabilities as of the time of the relevant transactions.”
Also, while not giving the Noteholders’ proposed goodwill instruction, the Circuit Court allowed both sides to present expert testimony to the jury as to whether Duty Free’s “goodwill” had any value.
The Noteholders argue that, with no value as an independent asset, goodwill cannot be considered in a solvency analysis undеr the Fraudulent Conveyance Act. Therefore, the Noteholders assert, the jury should have been instructed to exclude goodwill in determining Duty Free’s solvency.
Nothing in the Fraudulent Conveyance Act, however, precludes the consideration of goodwill in a solvency determination. We therefore hold that the Circuit Court properly refused to instruct the jury that it must discount goodwill.
The statutory language of the Maryland Uniform Fraudulent Conveyance Act does not mention goodwill in defining insolvency. Section 15-202 of the Act states as follows:
“(a) In general.—A person is insolvent if the present fair market value of his assets is less than the amount required to pay his probable liability on his existing debts as they become absolute and matured.”
The Circuit Court used the exact language from § 15-202 in its jury instruction. The
The fact that goodwill may not have a fair market value as an independent asset does not exclude it from consideration as an asset. The statutory definition refers to “any property”— not property independently possessing a fair market value. Indeed, where a business is a “going concern,” considering goodwill in a solvency analysis seems highly appropriate. There may be occasions, however, where it would be appropriate to exclude goodwill as an asset where a business is to be liquidated or is on its death-bed. See
Bay Plastics, Inc. v. BT Commercial Corp. (In Re Bay Plastics, Inc.),
Here, the business was a going concern, and the jury instructions were taken directly from the Fraudulent Conveyance Act’s definition of insolvency. The Circuit Court properly refused the Noteholders’ insolvency instruction because it would have incorrectly instructed the jury that it was required to discount an asset, goodwill, when such a determination should have been left as a question of fact for the jury.
For all of the foregoing reasons, the Circuit Court’s judgment should be affirmed.
JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED. CASE REMANDED TO THE COURT OF SPECIAL APPEALS WITH DIRECTIONS TO AFFIRM THE JUDGMENT OF THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY. COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY THE RESPONDENTS/CROSS PETITIONERS.
Notes
. Maryland Code (1974, 2006 Repl.Vol.), § 9-110 of the Courts and Judicial Proceedings Article.
. Maryland Code (1975, 2005 Repl.Vol.), § 15-201 et seq. of the Commercial Law Article.
. "Duty Free International," which was the Corporation's original name, has had several name changes during the relevant period. Hereafter, like the parties in this case, we shall refer to the Corporation simply as "Duty Free."
. The Noteholders include the following investors: Acacia Mutual Life Insurance Company; Acacia National Life Insurance Company; Baird Aggregate Bond Fund, a series of Baird Funds, Inc.; Baird Core Bond Fund, a series of Baird Funds, Inc.; Balanсed Fund, a series of First American Investment Funds, Inc.; Bond IMMDEX Fund, a series of First American Investment Funds, Inc.; California Public Employees Retirement System; General Electric Capital Assurance Company; Kansas City Life Insurance Company; Robert W. Baird & Company Incorporated; SEI Core Fixed Income Fund, a Series of SEI Institutional Managed Trust; SEI Core Fixed Income Fund, a series of SEI Institutional Investments Trust; The Prudential Insurance Company of America; Thornburg Limited Term Income Fund, a series of Thornburg Investment Trust; and U.S. Bancorp Asset Management.
. The Maryland Uniform Fraudulent Conveyance Act, §§ 15-201 through 15-214 of the Commercial Law Article, provides in relevant part as follows:
"§ 15-201. Definitions.
“(a) In general.—In this subtitle the following words have the meanings indicated.
"(b) Assets.—‘Assets’ means property of a debtor not exempt from liability for his debts.
"(2) 'Assets’ includes any property to the extent that the property is liable for any debts of a debtor.”
Ҥ 15-202. Insolvency.
"(a) In general.—A person is insolvent if the present fair market value of his assets is less than the amount required to pay his probable liability on his existing debts as they become absolute and matured.”
"§ 15-204. Conveyance by insolvent.
"Every conveyance made and every obligation incurred by a person who is or will be rendered insolvent by it is fraudulent as to creditors without regard to his actual intent, if the conveyance is made or the obligation is incurred without a fair consideration.”
"§ 15-206. Conveyance by a person about to incur debts.
"Every conveyance made and every obligation incurred without fair consideration when the person who makes the conveyance or who enters into the obligation intends or believes that he will incur debts beyond his ability to pay as they mature, is fraudulent as to both present and future creditors.”
"§ 15-207. Conveyance made with intent to defraud.
"Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud present or future creditors, is fraudulent as to both present and future creditors.”
. The asserted causes of action against Duty Free and the Falics were settled and dismissed, and they are no longer parties.
. Plaintiffs’ brief in the Court of Special Appeals at 1; plaintiffs' brief in this Court at 3-4. With regard to a cause of action for "Breach of Fiduciаry Duty,”
see Kann v. Kann,
. As noted by the Court of Special Appeals, at the time of trial, according to some of the parties, the unpaid principal on the 1994 notes was $39,235,000.00.
. Section 15-202(a) states that "[a] person is insolvent if the present fair market value of his assets is less than the amount required to pay his probable liability on his existing debts as they become absolute and matured.”
. The Court of Special Appeals’ opinion and judgment are somewhat vague and, if affirmed, might present problems upon remand. The vacation of the Circuit Court’s judgment seemed to be based on the privilege issue alone; the appellate court began its discussion of the jury instruction issue as follows:
“Although we shall remand on the basis of the accountant-client privilege, we shall consider, for the benefit of the parties and the court upon remand, appellants’ challenge to the jury instruction on solvency.”
While stating that the Circuit Court’s ruling concerning the Noteholders’ requested instruction on insolvency constituted error, the Court of Special Appeals at no point in its opinion or judgment indicated that there should be a new trial. A direction for a new trial was not implicit because the intermediate appellate court also stated that "there is some question as to whether appellants properly preserved their [jury instruction] argument for appellate review,” but the Court of Special Appeals did not rule upon the appellees’ contention that the issue had not been preserved. The entire judgment and the mandate were as follows:
“JUDGMENT VACATED; CASE REMANDED TO THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY. APPELLEES TO PAY THE COSTS.”
A motion for reconsideration which, inter alia, pointed out these problems, was denied without opinion.
. The issue of whether the accountant-client privilege contained a fraud exception had in a previous case been raised in this Court, but we did not reach the question in that case because there was not an adequate showing of fraud.
Sears v. Gussin,
. In their brief in this Court, the Noteholders argue that BAA "waived” the argument that the privilege does not contain a fraud exception because BAA failed to make the argument beforе the trial court. (Brief of respondents/cross-petitioners at 9-12). The Noteholders made no such argument in the Court of Special Appeals, and the Court of Special Appeals decided on the merits the issue of whether the privilege has a fraud exception. More importantly, the Noteholders did not raise this particular waiver issue in their cross-petition for a writ of certiorari. Consequently, the issue is not before us.
See
Maryland Rule 8—131 (b);
Boyd v. State,
Even if the issue were before us, the Noteholders' argument would have no merit. In the trial court, BAA’s opposition to the Noteholders’ motion to compel production stated as follows:
"Contrary to the assertion in the Plaintiffs’ motion, the Maryland legislature has not expressly provided for a 'fraud exception’ to the accountant-client privilege. In fact, it is unclear whether the Dixon court's recognition of that exception would be upheld by the Court of Appeals. In Sears Roebuck & Co. v. Gussin,350 Md. 552 , 568-569,714 A.2d 188 (1998), the court declined to reach the question whether the fraud exception exists in Maryland, finding that even if it exists, the facts of that case would not support its application.” (Emphasis in original).
Moreover, in the Court of Special Appeals, the Noteholders as appellants raised the issue of whether the privilege contains a fraud exception, arguing that "the fraud exception to the accountant-client privilege” is "recognize[d],” relying upon
Dixon v. Bennett,
.
See Dixon v. Bennett, supra,
. See Article V, § 3(a)(2), of the Constitution of Maryland.
. By constitutional amendment adopted in 1980 and effective January 1, 1983, the Criminal Court of Baltimore, along with certain other courts in Baltimore City, was replaced by the Circuit Court for Baltimore City. See Ch. 523 of the Acts of 1980.
. See Briefs, Court of Appeals September Term 1982, appellant’s brief in No. 115 at 5, appellant’s brief in No. 116 at 5.
. Not only is the present case a civil action, but it is based on a section in the Fraudulent Conveyance Act which does not require аn actual intent to defraud, § 15-204 of the Commercial Law Article. The Noteholders’ brief in this Court characterizes their action under the Fraudulent Conveyance Act as follows (brief of respondents/cross-petitioners at 18):
“In this case, Plaintiffs sustained their burden of making a prima facie showing of fraud as a matter of law. Plaintiffs brought two causes of action under the Act alleging, inter alia, that Duty Free’s incurrence of the $437 million Acquisition Debt and the repayment of the $187 million on that debt constituted fraudulent conveyances because: 1) Duty Free’s incurrence of the $437 million Acquisition Debt rendered Duty Free insolvent; and 2) Duty Free did not receive fair consideration for incurring that debt or the subsequent repayments thereunder. (App. 68-69). The Act provides a remedy for such transactions, stating:
'[e]vety conveyance made and every obligation incurred by a person who is or will be rendered insolvent by it is fraudulent as to creditors without regard to his actual intent, if the conveyance is made or the obligation is incurred without a fair consideration.’
"Md.Code Ann., Commercial Law § 15-204.”
. At the time the
Dixon
opinion was rendered, this Court had not decided whether the Maryland common law attorney-client privilege contained a crime-fraud exception. In
Newman v. State,
. Section 9-108 in its entirety states:
"A person may not be compelled to testify in violation of the attorney-client privilege.”
. Even if the federal case law relied upon in
Dixon
had involved the accountant-client privilege in other jurisdictions, rather than the attorney-client privilege, it would not have justified the decision in
Dixon. See Haas v. Lockheed Martin,
“While it certainly is permissible to have recourse to federal law similar to our own as an aid in construction of Maryland statutory law, it should not be a substitute for the pre-eminent plain meaning inquiry of the statutory language under examination.”
. This Court’s opinion in In re Special Investigation No. 236 was not cited in the Dixon opinion. An examination of the briefs in Dixon discloses that In re Special Investigation No. 236 was not cited by any party.
. The record indicates that the letters stand for United States Generally Accepted Accounting Principles.
. Section 9-110(a)(7) defines “quality review” as follows:
'Quality review' means an independent appraisal, review, or study of the professional work of a licensed certified public accountant or firm in the practice of public accountancy that is made by a licensed certified public accountant or firm that is not affiliated with the licensed certified public or firm undergoing a quality review.”
. Goodwill has been defined as follows
(Detter v. Miracle Hills Animal Hosp., P.C., 269
Neb. 164, 171,
"[Tithe advantage or benefit which is acquired by an establishment beyond the mere value of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers, on account of its local position or common celebrity, or rеputation for skill or affluence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices.”
This Court in
Schill v. Remington Putnam Book Co.,
" ‘And good will is property in a very real sense, injury to which, like injury to any other species of property, is a proper subject for legislation. Good will is a valuable contributing aid to business-sometimes the most valuable contributing asset of the producer or distributor of commodities and distinctive trade-marks, labels and brands, are legitimate aids to the creation or enlargement of such good will____’ ”
See May
v.
May,
. In fact, the cases cited by the Noteholders on the issue of goodwill are from bankruptcy proceedings. See
Collins v. Kohlberg and Co. (In re Southwest Supermarkets LLC),