DAVID SCHWARTZ, d/b/a Rent A Wreck; RENT A WRECK, INC., d/b/a Bundy Auto Sales, Plaintiffs - Appellees,
J.J.F. MANAGEMENT SERVICES, INC., Third Party Claimant - Appellant, and RENT A WRECK OF AMERICA, INC.; BUNDY AMERICAN, LLC, Defendants.
Argued: March 21, 2019
from the United States District Court for the District of
Maryland, at Baltimore. Peter J. Messitte, Senior District
Michael Lichtenstein, SHULMAN, ROGERS, GANDAL, PORDY &
ECKER, PA, Potomac, Maryland, for Appellant.
Charles Simmons, GORDON & SIMMONS, LLC, Frederick,
Maryland, for Appellees.
I. Weddle, Charles E. Remus II, GORDON & SIMMONS, LLC,
Frederick, Maryland, for Appellees.
WILKINSON and KING, Circuit Judges, and DUNCAN, Senior
DUNCAN, SENIOR CIRCUIT JUDGE.
appeal represents the latest salvo in the scorched-earth
assault by Appellant J.J.F. Management Services, Inc.
("J.J.F.") and its subsidiary Rent-a-Wreck of
America, Inc. ("RAWA") on Appellee David Schwartz,
owner of a RAWA franchise territory previously awarded him by
a jury verdict over RAWA's objections. J.J.F. appeals
from the district court's denial of J.J.F.'s
third-party claim to funds in certain deposit accounts that
Schwartz sought to garnish in his effort to satisfy a
contempt award against RAWA for engaging in a pattern of bad
contends that it has priority over Schwartz's claims to
the accounts, which are owned by RAWA and Bundy American, LLC
("Bundy"), because it made loans to RAWA for which
the accounts served as secured and perfected collateral.
J.J.F. also contends that the district court erred by failing
to consider the preclusive effect of a debtor-in-possession
financing order (the "DIP Order") entered after
RAWA and Bundy filed for bankruptcy.
reasons detailed below, we affirm. We find that the district
court did not err in concluding that Maryland law permits a
trial court to require a third-party movant to establish a
bona fide claim to ownership. In so holding, we decline to
grant preclusive effect to the DIP Order, and we give effect
to the district court's authority to ensure compliance
with its contempt orders.
is the founder of two companies: RAWA, a national business
that rents used automobiles; and Bundy, a company that
brokers RAWA-brand franchises. J.J.F.'s
predecessor-in-interest purchased all outstanding RAWA stock
in 2006, and since then, Schwartz's relationship with
RAWA and J.J.F. has been defined by litigation. We begin by
summarizing the key proceedings in the parties' history
before turning to the facts underlying this appeal.
between Schwartz and RAWA have come before us multiple times.
As relevant here, after J.J.F.'s takeover of RAWA, we
affirmed a jury verdict holding that Schwartz has an implied
franchise agreement to continue operating a Rent-a-Wreck
franchise in the greater Los Angeles area. Schwartz v.
Rent A Wreck Am. Inc., 468 Fed.Appx. 238, 249 (4th Cir.
2012) (unpublished). Following this determination, the
district court ordered that RAWA's call center not
dissuade potential customers from transacting with
Schwartz's Rent-a-Wreck franchise location or otherwise
divert business away from Schwartz's franchise territory.
See Schwartz v. Rent-A-Wreck of Am., 261 F.Supp.3d
607, 613 (D. Md. 2017) (describing the district court's
prior order). The district court later held RAWA in contempt
of that order upon finding that the RAWA call center was
informing potential customers that there was no Rent-a-Wreck
location inside Schwartz's franchise territory.
Id. at 614, 622-23.
contempt order, the district court recounted RAWA's acts
of bad faith throughout the parties' relationship.
Id. at 614-15. For instance, RAWA had
"deliberately changed the address and hours it was
listing for Schwartz's franchise on its website to an
outdated address and to patently incorrect hours."
Id. at 615. RAWA also "unilaterally demanded
that Schwartz in a very short time frame either increase his
franchise's fleet size from 150 vehicles to 1, 726
vehicles or face termination of his franchise."
Id. Further, RAWA's CEO John J. Fitzgerald had
made "direct verbal threats" to Schwartz indicating
that "he was going to make things difficult for Schwartz
and take everything Schwartz had." Id.
Consequently, the district court ordered RAWA to pay Schwartz
$83, 620.80 on June 29, 2017 (the "contempt
award"). Id. at 622.
than a month after the district court ordered RAWA to pay the
contempt award, RAWA and Bundy filed a voluntary bankruptcy
petition in the Delaware Bankruptcy Court. The bankruptcy
proceedings placed an automatic stay on Schwartz's
attempts to collect on the contempt award. The bankruptcy
court later dismissed the petition, finding that RAWA and
Bundy were not insolvent, that they had not filed for
bankruptcy in good faith, and that the petitions were
"just another chapter in the attempt to terminate ...