LODESTAR AND BEYOND: Litigating Statutory Attorneys’ Fees in Maryland After the Court of Appeals’ Opinion in Friolo v. Frankel

By: Leizer Z. Goldsmith, Principal, The Goldsmith Law Firm, LLC[1]

INTRODUCTION: THERE IS NO MAJOR DIFFERENCE BETWEEN MARYLAND AND FEDERAL LAW FOR FEE-SHIFTING IN STATUTORY EMPLOYMENT CASES

This paper has been prepared for dissemination and discussion at the inaugural MELA convention on September 29, 2005. Its purpose is to explain the current state of the law with regard to the award of statutory attorneys’ fees to prevailing plaintiffs in employment litigation brought pursuant to Maryland law. In preparation, I re-read Friolo v. Frankel[2] and surveyed the cases since Friolo decision in 2003, and reached the conclusion that only one Maryland Court of Appeals case, Flaa v. Manor, appears to have interpreted, followed or distinguished Friolo in any way.

In the wake of Friolo, there does not at present appear to be any significant difference between federal and Maryland law in the principles to be applied to adjudicating attorneys’ fees disputes in employment discrimination cases. Both the federal and Maryland law look to the principles set forth in federal cases such as Hensley v. Eckerhardt[3] and Farrar v. Hobby.[4] One important caveat flowing directly from the language of the statute, is that for wage payment claims (though not wage and hour cases) in Maryland, no fees are available if there is no finding of an absence of a bona fide dispute.[5]

I. FRIOLO v. FRANKEL: THE LODESTAR ANALYSIS MUST BE UNDERTAKEN; FEES MAY, IN APPROPRIATE CIRCUMSTANCES, BE GREATER THAN THE UNDERLYING DAMAGES AWARDED

In Friolo v. Frankel, a case brought under the Maryland Wage Payment and Wage and Hour statutes in which counsel initially asserted $57,000 in attorneys’ fees for prevailing and obtaining approximately $11,000.00 in damages, the Maryland Court of Appeals held that in adjudicating attorneys’ fees under statutes permitting awards to the prevailing party, the lodestar method favored in the federal courts is the presumptively appropriate methodology, and remanded the case to the trial court to determine the appropriate fee.[6]

A second important holding of Friolo appears to have answered a question raised in earlier Maryland litigation, particularly Attorney Grievance Comm’n Of Maryland v. Pennington.[7] In Pennington, the trial court found that an employment discrimination plaintiff’s counsel had violated Rule 1.5 of the Rules of Professional Conduct by accepting final compensation that was in excess of half the total dollar recovery of the plaintiff.[8] The Court of Appeals reversed, but in a decision that appeared at least in dicta not to reject the notion that if counsel received over fifty percent of the true total value of the monetary and non-monetary recovery, there might have been a violation. However, despite the fact that the litigation originated in an employment discrimination retainer agreement, there is no indication that the Pennington Court considered any arguments one way or the other as to whether the purposes of the statutory fee shifting statutes might trump Rule 1.5 and permit otherwise appropriate fee agreements that can ultimately result in counsel receiving more than fifty percent of the total recovery.

The question was answered in Friolo. Thus, although the Court went on to note that it would be a worthy goal in a given case to harmonize the general contingency principle with the principles inherent in the fee-shifting statutes when possible, it clearly and soundly rejected the dangerous notion that fees under employment statutes would have to be controlled or limited by the amount of the judgment, as the trial judge had initially done in awarding “40% of the judgment.”

The Court held that otherwise applicable limits on contingency fees relating to the amount of recovery could not be applied under remedial employment statutes. It stated that although it would otherwise “have been impermissible under Rule 1.5 for counsel to charge Ms. Friolo $ 57,000 based on a less-than-$ 12,000 recovery,” such was not the case under the remedial employment statutes. The Court strongly noted that when: “the predominant purpose of [a statute] which is to permit the favored suitor to obtain counsel that, because of legal or practical fee limitations, might otherwise be unavailable,” application of [Rule 1.5] “may well clash with the public policy behind statutory fee-shifting provisions. . . because it would likely preclude individuals seeking to recover relatively small amounts from procuring the assistance of private counsel, other than on a pro bono publico basis, and thus would frustrate the very purpose of the statute.” Through this ruling, the Court appears to have resolved any question left by its not having addressed the issue squarely in Pennington.[9]

FLAA: EXTREME DEFERENCE TO THE FINDER OF FACT AND REDUCTIONS FOR IMPERFECT BILLING

A central holding of Manor Country Club v. Flaa[10] is that a statute (such as the since- rescinded provision of the Montgomery County Code) that sets forth a methodology for determining reasonable attorneys’ fees may obviate the need for a formal lodestar analysis. Since most of the employment statutes we work with do not spell out such specifics, and since the rule applied by the Court of Appeals in Flaa suggests an analysis that would have been very similar to a lodestar analysis anyway, perhaps the more important lessons of Flaa are those that we can expect to be applied under the lodestar analysis.

In Flaa, the plaintiff filed a sex discrimination in public accommodations complaint with the Montgomery County Human Relations, arguing that Manor Country Club’s membership policies were discriminatory based on sex and caused a hostile environment. She litigated her case to conclusion in the administrative process, including an appeal to the Commission’s “Panel,” which also issued a ruling in her favor that required the club to change its policies and awarded her nominal damages of $750.00 (only up to $1000.00 were possible under the statute).

With regard to fees, the Hearing Examiner initially ordered a fully compensable fee. The Panel essentially reversed, awarding just $3,000.00. An appeal was taken to the Montgomery County Circuit Court, which remanded the matter back to the Panel, which increased its award but still only to $22,440.00 (“based on our lodestar analysis of all of the factors that we are required to base this ruling upon” (alterations added) Mrs. Flaa should be awarded attorney’s fees of $ 22,440, which comprised its figure of 132 hours multiplied by the counsel’s average firm billing rate of $ 170/hour”). Further appeals were taken back to the Circuit Court (where a different judge presided) and the Court of Appeals, which ultimately held that the Hearing Examiner’s decision which had been endorsed by the first Circuit Court decision had followed the correct approach. Ultimately, the Court of Appeals reversed, thereby reinstating the panel’s decision that had awarded $22,000.00, although by this time the value of the time committed by plaintiff’s counsel to the case was in excess of $250,000.00.

The Panel’s second (affirmed) attorney’s fees calculation was made pursuant to an apparent analysis of each of the criterion contained in the former Montgomery County Code§ 27-7 (k)(1). However, the Panel awarded only a small percentage of the fees incurred, construing the case as having resulted in only limited success, and providing several other grounds for reducing the award. The Panel cut counsel’s fee severely for “bundling” time entries, “vagueness”, and not prevailing on certain claims. The Panel also asserted that its volunteer panelists simply did not have the time to carefully parse the fee petition, and were cutting further as a result.

The Court of Appeals quoted from the Panel’s decision that stated:

We cannot fathom how any person, dealing with the facts alleged, could have decided that it was worth $ 250,000 or so to litigate these issues. We believe that an attorney has a responsibility to dissuade clients or potential clients from launching costly litigation, knowing that the other party will incur enormous defense costs, where the cost/benefit ratio of that litigation is low. In this case particularly, damages were capped [at $ 1,000.00] under the statute. Rather, it is our decision on this issue that any reasonable client would not have been willing to spend more than $25,000 to pursue claims of the type made in this proceeding.[11]

The Court of Appeals also quoted the Panel’s statement that it found Flaa’s success to have been quite limited, noting that there was just one “instance” of discrimination. It further stated:

We felt compelled by the statute to award injunctive relief, regardless of whether we believed that there were systemic wrongs to be righted. As discussed above, only the argument and decision in favor of finding for the jurisdiction of the Commission was a major victory for [Mrs. Flaa]. As a result, we do not believe that [Mrs. Flaa’s] award of attorney’s fees should be adjusted upward as a result of [the relative success of the case].” [Alterations added.]

The Court of Appeals found the Panel’s invocation-and subsequent analysis of those criteria, following the earlier remand, was generally sufficient,[12] even though there was no clear way to discern which particular hours were allowed or disallowed or why, or precisely what factors had what effect on the outcome. Chief Judge Bell dissented, asserting that the Panel’s decision was nothing more than an improper cost-benefit analysis.

Harmonizing Friolo And Flaa

As Chief Judge Bell’s dissent notes in Flaa, the Panel appears to have engaged in a cost-benefit analysis. One could be forgiven for concluding that the Court of Appeals majority actually endorsed such an approach, considering its neutrally-presented citation to the Panel’s assertion that Ms. Flaa should have been prescient, recognized that the case would cost $250,000.00 when it started many years earlier, and then engaged in her own cost-benefit analysis and eschew litigating the rights of women to participate equally at a country club.

Nonetheless, it is worth noting that even if the Court of Appeals is permitting a cost-benefit analysis to be applied, it is doing so in the context of a non-employment case in which Ms. Flaa chose to litigate in a forum in which she could never have received more than $1,000.00 plus the equitable relief of the right to be treated in a non-discriminatory way at the country club. Accordingly, the facts are somewhat distinguishable from most employment cases, where an individual’s livelihood is at stake and where only very rarely will the potential available damages total so little and thereby present such a tempting target for severe reduction.

Perhaps some of the following non-cost/benefit conclusions could be construed as aspects of the relevant Flaa holdings: first, that great deference will be paid to the administrative agency or trial court empowered to make the findings of fact as to attorneys’ fees (even here, where a hearing examiner was even closer to the action and disagreed with the Panel); second, that a plaintiff who pleads claims that later fail does so at her peril. Here, Flaa unsuccessfully litigated both hostile environment and disparate treatment claims, such that Chief Judge Bell construed her to have prevailed on half her claims since she was successful on the jurisdictional issue of whether Manor was a place of public accommodation and on her claim that she was discriminated against when she was removed from the course on one occasion; third, the Court will apparently defer to an agency or trial court’s determination that the value of success that clearly was achieved is not that significant; fourth, the Court will not require the fact finder to infer that particular billings are reasonable and should be credited, or that some fraction of them are, where the fact finder views the bills as not clearly and properly presented to it.

Learning From Flaa

The best possible advice for counsel in dealing with Flaa might be as follows: first, when possible, it is advisable to avoid spending substantial time litigating in an administrative forum when a private right of action is available, since if counsel later needs to file suit anyway, plaintiffs will necessarily have incurred excess time that may not ultimately be compensable. The administrative forum is also questionable because the administrative body may be less likely to correctly follow the law and issue a fair decision on fees. Next, counsel must be careful and scrupulous in preparing the billing information to be submitted, and make the best record possible at the trial level. The fee petition should never be a mere afterthought, notwithstanding the oft-repeated judicial admonition not to make it a second major litigation. Finally, plaintiffs should avoid inclusion of weak secondary causes of action, since they may be penalized for losing them even when very little time has been spent on them, indeed, even if they are successful but deemed by the court as insufficiently successful.

CONCLUSION

Attorneys’ fee-shifting law under Maryland employment statutes after Friolo closely follows federal law. While the principles applied will therefore be familiar to experienced practitioners, as in federal court, counsel must begin preparing for the fee litigation before the complaint is even filed, by carefully selecting claims and arguments, avoiding unnecessary litigation steps, submitting well-documented, legally supported fee petitions and, of course, always winning the case.

[1] 1900 L Street, NW, Suite 614, Washington, DC, 20036. Telephone: 202-775-0040. Internet: www.goldsmithfirm.com

[2] 373 Md. 501 (2003)

[3] 461 U.S. 424.

[4] 506 U.S. 103 (1992)

[5] Maryland Code, Labor & Employment Article, §3-501

[6] On remand, the case is currently on appeal and cross-appeal to the Maryland Court of Special Appeals. The principal issues from Friolo’s point of view is whether the trial court erred on remand by failing to award any fees for Friolo’s successful appeal to the Court of Appeals. For Frankel, the main issue on appeal is his assertion that trial court erred on remand by not cutting deeply into the original $57,000.00 fee request, since, in his mistaken view, the Court of Appeals’ decision states explicitly that the fee was much too high.

[7] 355 Md. 61 (1999).

[8] Rule 1.5(a) provides as follows: “A lawyer’s fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.”

[9] Dr. Frankel, the employer in Friolo, attempted to convince the Court that statutory wage cases were different from civil rights cases, but the Court declined to adopt any such distinction. The Court also rejected the notion that the statutes’ “permissive” language (that fees may be awarded) could in any way undermine the fact that their purpose is remedial and that the usual result when the Plaintiff wins should be an award of fees.

[10] 387 Md. 309, 874 A.2d 1020 (2005)

[11] Id. at 309.

[12] Id. at 316

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