Introduction

Resolution of a petition for writ of certiorari arising from the case of Frankel v. Friolo, No. 254, September Term, 2005, filed September 14, 2006 (“Friolo II”), which is presently pending before the Maryland Court of Appeals, may well have a profound impact on lawyers' ability to vindicate plaintiffs' rights under a vast number of Maryland statutes which contain provisions for shifting attorneys' fees from the defendant to the prevailing plaintiff.

Many Maryland statutes call for the shifting of attorneys' fees to a prevailing plaintiff, in order to effectuate remedial purposes underpinning the relevant statutes. See, e.g. Garg v. Garg, 163 Md. App. 546 (Md. Ct. Spec. App. 2005)(Maryland Uniform Child Custody Jurisdiction and Enforcement Act, Md. Code Ann., Fam. Law § 9.5 (2004)); Pak v. Hoang, 378 Md. 315 (Md. 2003)(Maryland Security Deposit Act, Md. Code Ann., Real Prop. § 8-203 (2003)); Caffrey v. Dep't of Liquor Control, 370 Md. 272 (Md. 2002)(Maryland Public Information Act, Md. Code Ann., State Gov't § 10-623(f)); Stavely v. State Farm Mut. Auto. Ins. Co., 376 Md. 108, 113 (Md. 2003)(Md. Code Ann. Insurance Article § 27-605 (c)).

In Friolo v. Frankel, 373 Md. 501 (2003)(“Friolo I”), a case brought under the Maryland Wage Payment and Wage and Hour statutes - Maryland Code, Labor and Employment § 3-427 and §3-507.1, Plaintiff's counsel had initially moved post-trial for $57,000 in attorneys' fees for prevailing and obtaining approximately $11,000.00 in damages. The Montgomery County Circuit Court declined to order such an award, instead awarding just forty percent of the judgment as fees. Plaintiff Friolo appealed, contending that a lodestar approach similar to that applied in federal fee-shifting cases must be utilized, beginning with a calculation multiplying hours reasonably expended times a reasonable hourly rate. The Court of Appeals granted certiorari sua sponte held in favor of Friolo, and remanded the case to the Circuit Court.

On remand, Friolo requested compensation for fees incurred in litigating the successful appeal at the Court of Appeals and the remand proceedings. The Trial Court, ordered the defendants to pay Friolo lodestar fees for the trial stage, though at slightly lower rates than those requested. Critically, however, the Court awarded nothing for the significant appellate and remand work. Friolo moved for reconsideration on this point, but that Motion was denied without further discussion of the principles involved.

The defendants appealed the Circuit Court's award of attorneys' fees for the trial-stage work as excessive, and Friolo cross-appealed, seeking an award for fees incurred during the litigation of the appeal leading to the decision in Friolo I and the subsequent remand proceedings. The Court of Special Appeals ordered a remand to the Circuit Court on Friolo's cross-appeal, with instructions that the Court render a judgment consistent with the Court of Special Appeals' ruling that Friolo was not entitled to attorneys' fees for appellate and post-judgment services that were unrelated to: (1) protecting the underlying judgment, (2) securing the specific relief afforded by the trial court, or (3) overturning a grossly disproportionate award, or an outright denial of attorneys' fees.

Friolo petitioned for a writ of certiorari because the Court of Special Appeals' ruling appears to conflict with the Court of Appeals' earlier ruling in Friolo I. Specifically, the Court of Appeals clearly held in Friolo I that the purpose of the fee-shifting provisions of §3-427 and §3-507.1–providing for awards of counsel fees was to ensure that employees would have access to counsel to enforce their statutory right to collect their wages, to compensate for the state Labor Commissioner's inability to directly enforce the law on their behalf. Friolo I at 363-64. Thus, the Court of Appeals in Friolo I had approvingly quoted the United States Supreme Court's opinion in Pennsylvania v. Del. Valley Citizens' Council, 478 U.S. 546, for the proposition that if plaintiffs are able to engage a lawyer "based on the statutory assurance that he will be paid a 'reasonable fee,' the purpose behind the fee-shifting statute has been satisfied." Friolo I at 371.

The Court of Special Appeals' Approach Would Chill Vindication of Plaintiffs' Rights Under Fee-Shifting Statutes

The Court of Special Appeals' opinion that would apparently deny Friolo any compensatory fees for prevailing and succeeding in her Friolo I appeal, is diametrically opposed to Friolo I's animating principle. The Court of Special Appeals' opinion dangerously holds that, with only narrow exceptions, fee judgments that are contrary to the purpose and spirit of the fee-shifting provisions in the statutes or that fail to follow the lodestar method –no matter how emphatically– may not be appealed by the employee-plaintiff except at her own ultimate expense. This clear and unmistakable holding creates a vast exception to the principles laid down by this Court of Appeals in Friolo I.

The Court of Special Appeals applied its own new set of criteria not established by the Court of Appeals, and never before applied by any other court, which distinguishes those attorneys' fees incurred from appealing an adverse ruling on the shifting of attorneys' fees, from those incurred from efforts relating to obtaining remedies other than fees or from the trial-level presentation of a fee motion. The Court of Special Appeals' holding thereby appears to preclude Friolo from obtaining fees for her counsel's successful efforts to alter the improper initial post-judgment fee determination by taking a winning appeal, because the initial fee award of forty percent of the judgment may not have been “patently unreasonable” or “grossly disproportionate,” and it is not the case that an award was denied outright, since forty percent of the damages judgment was awarded at that time. The implementation of the Court of Special Appeals' test thus creates an unnecessary, chilling constraint on the legislature's attorneys' fees remedy that certainly would not enhance vindication of the public policy behind the wage payment and overtime statutes.

Shifted Attorneys' Fees Are An Essential Element Of A Plaintiff's Make-Whole Relief, Not A Mere Windfall For Attorneys

The Court of Special Appeals' opinion misapprehends the nature and purpose of shifted attorneys' fees. The text of § 3-507.1 clarifies that shifted fees are in fact a central part of the plaintiff's remedy, by authorizing an award of attorneys' fees to a prevailing plaintiff in the very same sentence in which it discusses the remedy of additional damages “not exceeding 3 times the wage.” Furthermore, in Friolo I, the Court of Appeals clarified that the purposes of those provisions are consistent with the fee-shifting provisions of the federal civil rights statutes. In Evans v. Jeff D., 475 U.S. 717, 730 (1986), the United States Supreme Court held that Congress enacted the federal fee-shifting provisions as "an integral part of the remedies necessary to obtain" compliance with civil rights laws, to further the same general purpose -- promotion of respect for civil rights -- that led it to provide the other remedies including damages and injunctive relief. Id; Venegas v. Mitchell, 495 U.S. 82, 87 ( U.S. 1990). Thus, shifted fees are nothing less than a critical form of relief that is integral to making a plaintiff whole, and indeed, it is the party, rather than the lawyer, who obtains the entitlement to a shifted fee.

The Court of Special Appeals' decision in Friolo II appears to have negated this central principle by asserting that the payment of the damages judgment had already made Friolo --the client-- “whole” at the time of the appeal in Friolo I, without even acknowledging the attorneys' fees and costs of bringing her suit to trial on liability and damages that were not awarded by the mistaken original Circuit Court opinion, much less attempting to recoup any compensation for her successful appeal of that error.

The Court of Special Appeals further mischaracterized Friolo's successful litigation before the Court of Appeals in Friolo I as a matter of “counsel's dissatisfaction with the trial court's fee award” (emphasis added). Slip Op. at 13. However, the Friolo I appeal was no mere matter of a lawyer not liking his fee, but rather reflected an effort to persuade the Court as to the principles and methods (lodestar) to be applied in determining Friolo's overall relief for having been cheated out of her rightful wages and overtime. The Court of Appeals had ultimately agreed and held that the principles and methods sought by Friolo apply generally under the wage payment and overtime statutes, and other remedial Maryland statutes that allow shifting of fees.

The Court Of Special Appeals' Decision Places Too Little Importance On The Advancement Of The Law Achieved By Friolo In Friolo I

The Court of Special Appeals' Friolo II holding has the anomalous result of precluding a plaintiff who was denied rightful wages from recovering compensatory attorneys' fees for the very appellate litigation in which her efforts led to reversal of the Trial Court's prior adverse decision. It also prospectively prevented Friolo from obtaining any fees for seeking implementation of this Court's Order remanding the fee issues to the Trial Court. Significantly, it renders her unable to recover compensatory fees even though the risk she took in prosecuting that litigation contributed to the general development of Maryland law on an issue of major public importance, through this Court's expression of its view that the lodestar method is– as Friolo had urged– the presumptive method for ascertaining the correct fee award under fee-shifting statutes not containing their own express fee standards in our state.

Authorities in fee-shifting litigation support the notion that Friolo's accomplishment in successfully advocating for a new statewide standard is a favorable factor that warrants a reasonable fee award. Indeed, courts have held that an enhanced attorney's fee award may be appropriate when litigation results in the development of new authority furthering important legislative policies. See Hensley v. Eckerhart, 461 U.S. 424, 435 (1983).

Friolo never sought an enhanced fee, but, rather, just a fully compensable fee based on lodestar principles. Authorities are clear that courts must consider the impact a case will have on the law and on other affected persons in adjudicating a fee shifting motion. Taylor v. Jones, 653 F.2d 1193, 1206 (8th Cir. 1981) quoting Johnson v. Georgia Highway Express, 488 F.2d 714, 718 (5th Cir. 1974). At a minimum, in considering the novelty and difficulty of the questions, a plaintiff should not be penalized for her counsel's “undertaking a case which may "make new law." Instead, [that plaintiff] should be appropriately compensated for accepting the challenge.” United States ex rel. Abbott-Burdick v. Univ. Med. Assocs., 2002 U.S. Dist. LEXIS 26986 (D.S.C. 2002) citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 718 (5th Cir.-OLD 1974).

The Court of Special Appeals failed to account for the public significance of the Friolo I litigation, in rendering an opinion that punishes Friolo for having brought the successful appeal by which this Court rejected calculating a fee award by use of a percentage of the verdict, and pronounced its future adherence to the lodestar method. Unless the Court of Appeals reverses as to this point, a major pillar of federal fee-shifting law will be severely undermined.

The Court of Special Appeals Has Enunciated An Unprecedented Exception In Fee Shifting Law, Separating Appeals Of Improper Fee Shifting Decisions From All Other Fee Shifting Litigation, By Forbidding An Award of Fees For Such Proceedings Under Many Circumstances

The Court of Special Appeals' decision in Friolo II marks a departure from the federal authorities that consistently decline to distinguish fees incurred in a fee-shifting case for successfully appealing an incorrect fee decision and those earned through the other parts of the case. See, e.g., Scarborough v. Office of Personnel Management, 723 F.2d 801 (11th Cir 1984). The Court of Special Appeals' Friolo II opinion attempts to distinguish cases where there was initially a complete denial of attorneys' fees from Friolo II, where the Circuit Court's initial decision contained a legal error in calculation of the fee. However, no court has ever previously held a plaintiff can be compensated for an outright denial of fees, but not for a successful appeal obtaining reversal of an incorrect initial fee award. Indeed, it appears likely that no court that has considered the question has ever held that a plaintiff in a fee-shifting case who prevails to obtain significant relief by way of appeal should nonetheless not be eligible for an award of attorneys' fees for the work by which the relief was obtained. To the contrary, in adjudicating a fee petition claiming hours spent litigating an appeal, a trial court should consider in its determination “the complexity and importance of the case in its posture on appeal.” Smiddy v. Varney, 574 F. Supp. 710 (C.D. Ca. 1983), citing Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9^th Cir. 1975). Resolution of the critical issue of whether the Court of Special Appeals' asserted new test for determining compensability of efforts undertaken to successfully reverse an improper fee award is in error, is of major importance, because if the Court of Special Appeals is correct and compensation is unavailable for appealing even unquestionably unlawful attorneys' fee awards, plaintiffs will have that much more difficulty obtaining the assistance of counsel in those cases where counsel must ultimately rely upon fee-shifting to obtain compensation for his or her efforts.

The Court Of Special Appeals' Ruling Improperly Encourages Fee Awards Based On Ratios, Rather Than The Lodestar Method Advocated By The Court of Appeals In Friolo I

Under the Court of Special Appeals' decision, once the trial court awards a not “grossly disproportionate” fee, compensatory attorneys' fees for a successful appeal of that award are no longer permissible. Assuming that “not grossly disproportionate”–a concept the Court of Special Appeals fails to define– means disproportionate to the amount of damages, in the first instance, this is diametrically in conflict with this Court's decision in Friolo I.

For example, imagine that the wage earner in a future case obtains a $100,000.00 judgment that took his counsel $75,000.00 worth of effort to win (not including fees later incurred in challenging the initial fee judgment). The trial court has now been educated by the Court of Special Appeals, that there can and will be no fee awarded for obtaining reversal of the Trial Court's initial fee award, so long as the trial court has initially awarded “not grossly disproportionate” fees. It would appear that this means something “not disproportionate” to the amount of the damages. Therefore, review of a decision awarding $25,000 (one-fourth), $33,000 (one-third), or $40,000 (forty percent), clearly would become non-compensable because the amount of fees awarded are perhaps not “grossly disproportionate.” This dramatically constricts an employee's ability to challenge the propriety of that fee award, by teaching that he will never be able to recoup the cost of paying his lawyer to attempt to obtain the reversal (fees are not available for challenging a “not grossly disproportionate” award). By contrast, there are no such limitations placed on an employer-defendant's ability to challenge a fee award it considers too high.

A calculation based on “proportionality” is a particular method of calculating attorneys' fees that, as noted above, the Court of Appeals just rejected specifically in Friolo I. The only thing that saves the Court of Special Appeals' decision in Friolo II from being a direct violation of the law of the case is the new distinction it raises–never before applied in this Court (or the Court of Special Appeals)– between fees incurred in seeking to obtain an “underlying judgment,” and those incurred in litigating a fee award after an initial fee award has been determined by the trial court. However, a distinction between appealing an incorrect fee award and appealing an incorrect award for any of plaintiff's other possible relief has never been previously recognized in the federal courts or here in Maryland. Not doing so is sound policy, because placing incorrect fee litigation results–even when they cannot pass muster under the governing lodestar methodology– beyond the reach of a compensable appeal, would gravely endanger vindication of the basic purpose of fee-shifting: making whole the prevailing, successful plaintiff whose rights have been adjudicated to have been violated.

The Court of Special Appeals should have instructed the trial court to apply the lodestar analysis to the fee litigation, while taking into account the usual lodestar factors as described in Johnson, Hensley and Friolo I. Under such an analysis, the Court would undoubtedly recognize and account for Friolo's success in “obtaining” important “results” after the completion of the underlying liability and damages litigation, by arguing for application of the lodestar method in wage and overtime cases under Maryland law before the Court of Appeals in Friolo I, and her success in persuading the trial court on remand to significantly increase her fee award for the original trial-level fee work whose value was not necessarily constricted by the Court of Appeals' decision.

CONCLUSION

Reversal of the Court of Special Appeals opinion in Friolo II would not open floodgates to any unreasonable or vexatious litigation. Friolo had to take a first appeal in order to have her view vindicated that the Circuit Court had applied an incorrect standard in adjudicating fee shifting on her win at trial. She has now cross-appealed on another issue of general application and importance–whether the Court of Special Appeals' assertion of a distinction in compensability between appeals of incorrect fee awards and all other litigation under the wage payment and overtime statutes is correct. A reversal could instruct future courts to follow a single, straightforward approach to all fee shifting litigation under the relevant statutes, of calculating a lodestar and if appropriate, adjusting it, without unfairly forbidding a further award of fees for appealing an incorrect trial court award.