Friolo v. Frankel, et al., No. 825, Sept. 2010 Term (Md. App. Sept. 7, 2011).
In Friolo IV, released September 7, 2011, the Maryland Court of Special Appeals Panel (Judge Matricciani) reversed Judge Dugan on the Circuit Court’s major points, agreeing with plaintiff Friolo that it was impermissible to peg the fee award to a standard of whether a fee paying client would ever choose to pay more than the damages she could expect to recover for representation. The Panel was persuaded to erase the erroneous circuit court idea that the fee agreement controlled what could be awarded in fee shifting, and held that there was no Rule 1.5 issue inherent in Plaintiff’s counsel attempting to recover attorneys’ fees even after the damages judgment was paid. In one key passage, the Court held: “[l]imits on a client’s liability, whether fixed or contingent, do not make fee award demands exceeding that limit “unreasonable” under the feeshifting statutes in question, and the court erred as a matter of law when it held otherwise[,]” such that it was not a violation of Rule 1.5 for counsel to continue pursuing the case, that considerations of what a hypothetical client would pay for the services was antithetical to legislative intent, and that Friolo would have been entitled to a fully compensatory fee had her success been complete.
There are some wonderful quotes in the opinion: “[I]t would be contrary to legislative intent—as exhaustively set forth in Friolo I and Friolo III—to deny recovery of fees that are reasonably necessary to prosecute successful claims under the Labor and Employment Article.” Slip Op. at 37. if a plaintiff could have recovered only a onethousand dollar verdict by virtue of one-hundredthousand dollars worth of legal work, full compensation requires that those fees be shifted, regardless of their magnitude relative to the verdict. Slip Op. at 38.
For these reasons, limits on a client’s liability, whether fixed or contingent, do not make fee award demands exceeding that limit “unreasonable” under the fee-shifting statutes in question, and the court erred as a matter of law when it held otherwise. Slip Op. at 41.
The Panel also vindicated Friolo’s decade-long argument that Defendant’s failure to plead existence of a bona fide dispute constitutes waiver of that argument, and supported Friolo in finding that that Judge Dugan erred in refusing to follow the parties’ stipulation as to hourly rates.
Having dispensed with virtually all of Judge Dugan’s wisdom, the Panel concludes that the sole issue left for it to determine is: what degree of success did Friolo achieve?
The Panel held that: “[t]he circuit court’s attempts to reconcile her fees and success were improper in light of the legislative intent underlying LE §§ 3-427(d) and 3-507.1(b).” Instead, those statutes require us to balance the parties’ incentives and account for each side’s relative contribution to causing unnecessary litigation. Had Friolo sought only what she deserved, there may have been no need for litigation at all, and had she recovered all she claimed, she would have been entitled to whatever amount of fees that required.” I do not know where this “unnecessary litigation” standard came from.
The Court cited no supportive authority for its novel approach, that since Plaintiff sought $ 79,000 “at trial” stage and won $11,000 in damages, and the record reflects that Defendants offered $3,000.00 as a settlement (even in the absence of a Rule 68 in Maryland) at the time of the pretrial statement, Friolo is 88 percent responsible for the litigation continuing and therefore collects 12% of her fees. Putting aside the novelty of the calculation method, the Court was completely wrong as to the facts of what happened at trial. In fact, out of approximately $17,000 in unpaid wages and overtime ever even mentioned by Friolo or her counsel, the jury awarded $11,778.85.00, which is indicated in the closing argument, referencing two tabular exhibits we submitted, and which is exactly what Friolo asked the jury to award, a fact that we noted in appellate briefing years ago without contravention. I haven’t been able so far to figure out where the $79,000 figure came from. As far as Defendants’ settlement offer, we offered to settle the case for $36,000.00 in a letter which I never thought of putting in the record; I will now try to supplement with it as I move for reconsideration. In any event, even using the Court’s suspect methodology and applying it to the appellate work (see below), the final award would have to be several times greater than the $45,335.28 awarded once the facts are straightened out.
The Court addressed the appellate fees with a quick application of the above analysis, stating:
“In Friolo I, appellant claimed she was entitled to $69,637.50 in fees, while appellees maintained that she should not be awarded any fees at all. Neither of these figures reflected the proper award, which we determined above, of $8,356.50. Thus, the appeal itself was another partial success, and while Friolo demanded $85,745.58 in her petitions for appellate fees, her relative contribution to prolonging these proceedings only entitles her to a portion of that amount. Thus, we again apply our formula to Friolo’s appellate fee petitions and arrive at a proper award of $10,289.47 for fees incurred in connection with Friolo I. Finally, we can iterate our analysis and apply it again to both Friolo II and Friolo III. In those proceedings, Friolo sought a total of $163,353.83 in fees for prior work, whereas the results of that work justified only $18,645.97 in attorney’s fees. Friolo now seeks $219,963.34 for her counsel’s work in Friolo II, Friolo III (and the most recent remand), but her relative contribution to—and limited success in—those proceedings justifies only twelve percent of that amount, $26,395.60.”
The Panel’s logic is weak. For instance, it fails to take into account that there is no way that the drafters of the statute ever intended that a plaintiff should have to accept a mere 30% of her wages or face penalty forever more for seeking the rest, no matter what Stalingrad defense or judicial errors compel her to appeal. This methodology would chill Plaintiffs from seeking what they are really entitled to, and essentially render them losers even when they win significant victories. Julie Martin-Korb has already observed that a settlement offer is not an Offer of Judgment. Furthermore, Rule 68 only results in a diminution in the fee award if the Plaintiff fails to obtain a judgment in excess of the offer. Here, that standard was easily met, but the Court held Friolo to a standard far more strict; she begins to lose her fees merely for not obtaining as much as she “sought” aspirationally, not just what the Defendants were offering.
Furthermore, the Court fails to account for the attorneys’ fees that were already incurred at the point at which the $3,000.00 (or $2,500.00) was offered. Of course the Court made no inquiry into what Plaintiff had demanded in settlement—a more elegant way of applying its approach would have been to consider what Defendant admitted it owed at trial– zero, in contrast to what Plaintiff demanded at that time (here, what she was awarded by the jury and as a judgment), and/or only consider Defendant’s’ pretrial settlement offer in relation to Plaintiff’s pretrial settlement offer (here, $36,000.00, reflected in a letter not previously entered into the record). Alternatively, the Pretrial Statement states that Plaintiffs seek $65,000 and Defendants offer $2,500.00. Critically, the Court excluded fees incurred to date in its calculations. For instance, if Plaintiff’s counsel had performed $30,000.00 worth of work before the trial (or any other number), shouldn’t that amount be considered part of the recovery that Defendants’ offer would be expected to cover? If so, then Plaintiff was that much closer to the actual value the Court claims to be calculating, and Defendants are much further. Thus, if fees incurred to date at any given point had been factored into the Panel’s analysis, that would have changed the ratio and the final result.
Regarding appeals, it is simply untenable for the Court to disregard the public benefits, as well as the private advancement of Friolo’s litigation through the many appeals here. The Court of Appeals already held in Friolo III that it is “the degree of success on appeal” that should control the award for appellate work, something which Master Rowan accepted, leading him to recommend a $225,000.00 fee award. In an unhappy irony, the CSA has ordered plaintiff to pay nearly all of Judge Rowan’s master’s fee for creating the “unnecessary litigation,” even though he would have given plaintiff a far more satisfactory result.
The bottom line seems to be that the Panel came up with an ill-advised formula that I do not believe will be supportable in the Court of Appeals. It also erred glaringly as to the facts regarding who demanded what when, a consideration that should not be significant, but is, if the CSA formula is to be applied. In the coming days, I am sure I won’t be the only one working to take this logic down peg by peg. I am confident that this can be improved upon through reconsideration, and/or once the certiorari petition is, hopefully, granted. One postscript: at oral argument, Defendants’ counsel was asked if he would affirm the $5,000.00 fee award of the Circuit Court and he answered in the affirmative. The the award is now almost ten times that amount, but the CSA would punish Friolo for having brought the appeal that corrected that error, by diminishing her fee award based on her failure to accept a $2,500.00 settlement offer ten years ago at trial. Obviously, this formula is need of some serious revision, and I have a lot of work to do.
The decision is available at http://mdcourts.gov/opinions/cosa/2011/825s10.pdf.
– submitted by Leizer Z. Goldsmith