On May 19, 2014, Maryland’s highest court (the Court of Appeals) issued a significant decision setting forth the rights of prevailing plaintiffs’ attorneys to recover their fees in successful wage claim litigation against employers.
In Friolo v. Frankel, the Court of Appeals heard this case for the third time, following two previous visits to the Maryland Court of Specials Appeals, and appearances in the Circuit Court for Montgomery County on three other occasions. (In its opening paragraph, the Decision written by the seven judge panel, stated: “Like Kaufman and Hart’s man who came to dinner, it [this case] is wearing out its welcome.”)
Most significantly, the new ruling permits recovery of fees for appellate work, which in this case consumed more than 80 percent of the litigation.
The Court, in apparent irritation or exasperation, stated (via Judge Wilner, who authored the Decision): “This simple case, which has been in litigation for more than 14 years, should have ended years ago. Instead we have the spectacle of the demand for attorneys’ fees of nearly $400,000 (without regard to fees that surely will be claimed for this appeal) to win a judgment of less than $12,000 – a judgment that was paid more than 11 years ago.”
The court noted that a party should not be permitted to increase its fee award by prolonging litigation, such as by making an unreasonable settlement demand, or rejecting reasonable settlement offers. However, these circumstances do not apply here.
At the trial court level, the circuit court considered the plaintiff’s petition for $63,000 in attorneys’ fees, but that court awarded her 40 percent only of the jury’s award, or $4,711 in attorneys’ fees.
On appeal, the Court of Appeals noted that this case presented the “judicial equivalent of the perfect storm,” containing not only inflated demands by plaintiff’s counsel, but also “a scorched earth policy by defense counsel.”
Aside from technical discussions beyond the scope of this Blog, the important bottom line is that the Maryland Court of Appeals established several principles regarding the proper method for awarding fees in this type of litigation. That is, lower courts should use the so-called “lodestar approach”, which starts with the formula of multiplying a reasonable hourly fee by the number of hours reasonably expended in the litigation. Further, the Court of Appeals established that when a plaintiff obtains relief under wage statutes, obtaining an award of attorneys’ fees at the trial court level and, on appeal, is successful, “attorneys’ fees incurred during the appeal should be considered as part of the lodestar analysis”. Therefore, recovery of fees for successful appellate advocacy is appropriate and proper.
The trial court should not restrict fees to those that may have been set forth in a retainer agreement. Nor should it limit the fees based upon the size of the underlying judgment. The trial court had (erroneously) awarded only a $4,700 fee, based on approximately 40 percent of an $11,788 judgment. (The attorneys, however, at that stage of the litigation had claimed $69,637, based upon 275 hours’ work.)
An important factor in the case was that the employee had offered early on to settle the case for $36,000, but the employer never made an offer that could be regarded as reasonable. Therefore, prolonging of the dispute and litigation was not due to churning by the plaintiff’s attorneys.
Previously, the issue had been unresolved in Maryland as to whether attorneys’ fees were awardable for time spent in appealing only the fees, and not the underlying judgment. The Court of Appeals concluded: “It is as important to compensate counsel for ensuring that the trial court gets it right, even if to do so requires counsel to appeal, as it is to ensure that counsel is compensated for services rendered at trial”. The court concluded that to rule otherwise would be a disincentive for competent counsel to pursue successful appellate proceedings.