Beery v. Maryland Medical Laboratory, Inc.

BLOOM, Judge. Appellant, Joanne Beery, was the attorney for Mary DePaolo in an action brought by DePaolo against appellee, Maryland Medical Laboratory, Inc., in the Circuit Court for Baltimore City. At the conclusion of the case, after dismissing counts for negligent infliction of emotional distress (Count IV in the original complaint), wrongful or abusive discharge and intentional infliction of emotional distress (Counts II and III, respectively, in both the original complaint and the amended complaint), and after granting summary judgment in favor of appellee on the sole remaining count (Count I — Slander) in the amended complaint, the court granted appellee’s motion for “sanctions” under Md. Rule 1-341 and awarded appellee a judgment against appellant and her client in the amount of $10,000, for counsel fees. An appeal resulted in our affirmance on the merits of the case itself, but a remand as to counsel fees to enable the trial court to determine whether the counts for abusive discharge, intentional infliction of emotional distress, and negligent infliction of emotional distress had been instituted or maintained in bad faith or without substantial justification.

Upon remand, the circuit court found both bad faith and lack of substantial justification and entered judgment, against appellant only, for $12,000.00 awarded as counsel fees pursuant to Md.Rule 1-341. In this appeal from that judgment, appellant presents us with a pentad of assertions of error: 1. The trial court’s finding that appellant acted with bad . faith or without substantial justification was clearly erroneous in light of its finding that appellant acted without “evil intent” and with what she believed to be “appropriate conduct.” ⁸⁵ 2. The trial court abused its discretion when it sanctioned appellant based on “all of the evidence received in this matter” instead of limiting its inquiry to the proceedings related solely to the two alternative counts of appellant’s amended complaint. 3.

The trial court erred in ruling appellant had no substantial justification for filing and maintaining the two alternative counts of appellant’s amended complaint. 4. The trial court abused its discretion when it imposed Md.Rule 1-341 sanctions against appellant solely because the appellant had “cost the defendant a substantial amount of money in counsel fees.” 5. The trial court abused its discretion when it imposed Rule 1-341 sanctions against appellant for defending a motion to dismiss two alternative counts of appellant’s amended complaint. We shall address the substance of each of those contentions, but not as appellant presented them.

Our review of the record leads us to conclude that the trial court was not clearly erroneous in finding that appellant acted without substantial justification in filing and maintaining the actions for negligent infliction of emotional distress, abusive discharge, and intentional infliction of emotional distress. We need not address the issue of whether the court was clearly erroneous in finding bad faith, since the finding of lack of substantial justification will support an award of counsel fees under Rule 1-341. The court did err, however, in arriving at the amount of $12,000 as a sanction. Accordingly, we shall vacate the judgment and remand for further proceedings to determine an appropriate award of counsel fees.

Background A summary of the anfractuous path the litigation has taken to reach this point may place the issues in proper perspective. ⁸⁶ Mary DePaolo was employed by Maryland Medical Laboratory, Inc., as an acting assistant supervisor. On 8 April 1987 she was called into the department head’s office where, in front of other employees, based primarily on information received from a co-worker, she was accused of misconduct, including acts that could be construed as theft. She was then told that she was fired. She denied the accusations and threatened to sue the company.

The company personnel manager was then called to the office, and she “suspended” the termination of employment pending further investigation. The entire incident lasted less than an hour and a half, at the end of which time Ms. DePaolo was still employed. Nevertheless, Ms. DePaolo had become emotionally upset and felt too ill to work that evening. She was told to go home and report for work the following Monday.

Ms. DePaolo never returned to work; instead, she filed a claim for worker’s compensation, alleging that the emotional damage she had sustained as a result of the incident constituted an accidental injury arising out of her employment. While her compensation claim was still pending, Ms. DePaolo, through appellant, her attorney, instituted this civil action against appellee in the Circuit Court for Baltimore City. As noted, supra, the original complaint consisted of four counts: I — slander; II — abusive or wrongful discharge; III — intentional infliction of emotional distress; and IV— negligent infliction of emotional distress. Appellee answered the complaint and filed a motion to dismiss Counts II, III, and IV for failure to state a cause of action.

As to Count II, appellee asserted that the discharge did not violate any clear mandate of public policy; Count III was challenged on the sufficiency of the averments; and Count IV was contested on the basis that Maryland does not recognize an action for negligent infliction of emotional distress. Prior to a ruling on the motion, the Workers’ Compensation Commission concluded that DePaolo had suffered a compensable injury and awarded benefits for tempo ⁸⁷ rary total disability. Appellee then amended its motion to add the defense of estoppel to Counts III and IV. The trial court (Ward, J.) dismissed Count IV with prejudice and Counts II and III with leave to amend.

DePaolo then filed an amended complaint containing three counts: slander (Count I), abusive discharge (Count II), and intentional infliction of emotional distress (Count III). Appellee responded with a motion to dismiss Counts II and III, which the court (Greenfeld, J.) granted, dismissing Counts II and III without leave to appeal. Several months later, appellee filed a motion for sanctions under Rule 1-341, contending that Counts II, III, and IV had been filed in bad faith and without substantial justification. Shortly thereafter, appellee moved for summary judgment on the remaining count, slander.

The court (Ward J.) granted the motion for summary judgment as to Count I, thereby making final the judgment in favor of appellee. The court also granted appellee’s motion for sanctions, ordering appellant and DePaolo to pay $10,000 in attorneys’ fees and related expenses on Counts II, III, and IV. Appellee’s supplemental motion for sanctions seeking attorneys’ fees and expenses for defending Count I was denied. Appellant and DePaolo appealed the granting of the motion for summary judgment on Count I, the dismissal of Count II, the dismissal of Count III, and the order for sanctions in the amount of $10,000.

Appellee cross-appealed on the denial of its motion for sanctions on Count I. In an unreported decision, DePaolo v. Maryland Medical Laboratory, Inc. (No. 431, September Term, 1989, filed 17 November 1989), this Court affirmed the granting of the motion for summary judgment on Count I; affirmed the dismissal of Counts II and III; affirmed the trial court’s refusal to grant appellant’s motion to withdraw her appearance; and affirmed the trial court’s denial of appellee’s motion for sanctions on Count I. We remanded the assessment of expenses in the amount of $10,000, directing the trial court to review its award in light of the then recent ⁸⁸ decision in Talley v. Talley, 817 Md. 428 , 564 A.2d 777 (1989), which held that before a court awards attorney’s fees and costs it must make an evidentiary finding of “bad faith” or “lack of substantial justification,” and that “some brief exposition of the facts upon which the finding is based and an articulation of the particular finding involved” are necessary for subsequent review. Talley, 317 Md. at 436 , 564 A.2d 777 . There being nothing in the record to indicate that those required findings specified in Talley were made, we could neither affirm nor reverse the order of the trial court with respect to the attorneys’ fees and costs. On remand, the trial court had two issues before it: a motion by appellant that Judge Ward recuse himself, and the remand by this Court on the issue of the attorneys’ fees and costs.

The recusal motion was denied, but since appellant takes no issue with that ruling in this appeal, we shall not discuss it. The trial court, in an oral decision rendered in open court on 10 August 1990, held: (1) as to Counts II (abusive discharge) and III (Intentional infliction of emotional distress), there was bad faith and lack of substantial justification; (2) as to Count IV (negligent infliction of emotional distress), there was no bad faith, but there was lack of substantial justification. In its Memorandum Opinion and Order on 17 September 1990, the trial court affirmed its finding of bad faith and lack of substantial justification articulated orally on 10 August 1990, and assessed $12,000 in attorneys’ fees and costs against appellant, Beery, only, the claim against Ms. DePaolo having been dropped. I The judgment against appellant for counsel fees was imposed pursuant to Md.Rule 1-341, which provides: In any civil action, if the court finds that the conduct of any party in maintaining or defending any proceeding was in bad faith or without substantial justification the ⁸⁹ court may require the offending party or the attorney advising the conduct or both of them to pay to the adverse party the costs of the proceeding and the reasonable expenses, including reasonable attorney’s fees, incurred by the adverse party in opposing it.

(Emphasis added.) The questions before us then, are: whether the trial court was clearly erroneous in finding that appellant, as counsel for Mary DePaolo, advised the bringing and maintaining of proceedings, i.e., three counts in a four-count complaint, two counts in the three-count amended complaint, without substantial justification and, if so, whether $12,000 represents a reasonable attorney’s fee incurred by appellee in defending the unjustified proceeding. II The court found that appellant, rather than her client, was responsible for the addition of the counts for abusive discharge and intentional and negligent infliction of emotional distress, which the court determined had no substantial justification in law or in fact, to the count alleging slander, the bringing and maintenance of which was found to be justified in light of Ms. DePaolo’s version of the facts. Appellant does not contest the finding that she advised the conduct found to be unjustified; that basis for the assessment of counsel fees against her, therefore, is not at issue. Ill Appellant stresses the fact that the trial court made a specific finding of fact that it believed there was no evil intent on appellant’s part and that she was attempting to act on behalf of her client with what she believed to be appropriate conduct.

Appellant argues that, because of this finding by the court, the finding of bad faith and lack oí ⁹⁰ substantial justification was clearly erroneous. The court’s comments, however, must be viewed in context. In its 17 September 1990 Memorandum, the court stated: During the course of the hearing, Mrs. Beery complained through' counsel that the granting of sanctions in this case against her might well embarrass her in her application for membership in the California bar. This Court offered Mrs. Berry time to bring to this Court’s attention anything in the California regulations which would substantiate her position, and this Court received no reply after a reasonable waiting period.

Nevertheless, this Court desires to make it clear that it does not find in Mrs. Beery’s conduct anything which should incapacitate her as a member in good standing or an applicant in good standing in either the California bar or any other bar. While it is true that Mrs. Beery’s conduct has cost the Defendant a substantial amount of money in counsel fees, this Court believes that there was no evil intent on her part, and that she was attempting to act on behalf of her client, Mary DePaolo, with what she believed to be appropriate conduct. Taken out of context, this statement by the court could be construed to lend credence to appellant’s contention that there was no finding of bad faith. The trial court, however, specifically affirmed in that same memorandum its previous findings of bad faith and lack of substantial justification.

In effect, the court indicated that it did not want to jeopardize appellant’s opportunity to practice law in California or any other state. Nevertheless, appellant argues that these statements made by the trial court negate the essential element of intentional misconduct needed to justify imposition of Rule 1-341 counsel fees as construed by Talley, since the trial court “unequivocally found no intentional misconduct.” We shall not endeavor to reconcile the court’s comments relied upon by appellant with the seemingly contradictory finding of bad faith. As we pointed out above, the finding of a lack of substantial justification, not being clearly erroneous, will suffice to support an award of ⁹¹ counsel fees under Rule 1-341. The absence of bad faith is not an excuse for an otherwise unjustified proceeding, and the court clearly found a total lack of justification for Counts II, III, and IV.

IV Appellant contends that the trial court based its assessment of Rule 1-341 counsel fees on “all of the evidence received in this matter,” when it should have focused at the point in time when appellee filed its motion to dismiss the alternative counts of the amended complaint. Then, appellant, argues, the trial court should have inquired as to whether appellant had substantial justification for responding to that motion to dismiss. The statement appellant refers to was made in the trial court’s Memorandum Opinion and Order, which addressed the court’s findings at the hearing on remand from this Court. The court stated in its Memorandum: The Court has, again, considered all of these factors, as it also considered them before but did not articulate them in writing, and for this reason is assessing Twelve Thousand Dollars ($12,000.00) in sanctions against JoAnne Beery only.

While the Court understands that the Maryland Medical Laboratory through counsel desires to obtain substantial additional sanctions in view of the large counsel fees that it has had to expand (sic) in this matter, nevertheless, based on all the evidence received in this matter, this Court feels that the above awarded amount is reasonable under all of the circumstances. Appellant’s argument would be meaningful if the trial court had found that the suit was not brought without substantial justification but was only unjustifiably continued beyond a certain point. If that had been the trial court’s finding, it would not have been appropriate for it to consider all of the evidence it had received in order to reach that conclusion. It was not inappropriate, in the case sub judice, where there was a finding of lack of substantial justification for the original filing.

It was also appropriate ⁹² for the trial judge to consider the surrounding circumstances. As we stated in Bohle v. Thompson, 78 Md.App. 614 , 554 A.2d 818 (1989), on this subject: Although a finding of bad faith does not necessarily involve an examination of the merits of the case, a finding that a cause of action was brought or maintained without substantial justification does require such an examination. Bohle, 78 Md.App. at 639 , 554 A.2d 818 (emphasis added). Appellant cites as authority for her proposition the case of Kelley v. Dowell, 81 Md.App. 338 , 567 A.2d 521 (1990), where we reversed the imposition of Rule 1-341 fees and costs.

In that case, an order passed on an ex parte motion on 17 June 1988 granted to Kelley custody of his three sons. A merits hearing was held on 15 February 1989, and the trial court terminated the ex parte order previously issued, denied Kelley custody of two of his sons and granted him custody of the oldest son. The court also ordered Rule 1-341 costs of $20,139.33; one-half to be paid by Kelley, and the other half to be paid by his attorney. After the merits hearing, the trial judge stated: The court now comes to the Ex Parte Order.

There was not the slightest evidence in this case that an emergency existed in June of ’88 or at the time this Order was signed. What Judge Burns heard and considered is unknown to me, but what happened from the evidence in this case was clearly wrong and unjustified____ The court feels that all things that have eminated (sic) from that Ex Parte Order were uncalled for, unsupported by the evidence and done wrong. Kelley, 81 Md.App. at 343 , 567 A.2d 521 . We reversed the imposition of costs and fees and held that the trial court was required to take evidence on the circumstances surrounding Judge Burns’s grant of the ex parte motion, and to determine whether that motion was substantially justified at the time it was filed.

We held that the trial judge should have limited his inquiry to the point in time when Kelly filed the motion for ex parte relief. Instead, he ⁹³ determined the lack of substantial justification for filing the action in light of all of the evidence adduced at the trial on the merits. In Kelley , the issue involved was whether Kelley filed the ex parte motion without substantial justification, and not whether his cause of action for modification of child custody and support lacked substantial justification. In the case sub judice, the trial judge expressly found both bad faith and lack of substantial justification in bringing and maintaining Counts II, III, and IV.

Because the court was addressing the issue of whether there was substantial justification for bringing the actions set forth in the second, third, and fourth counts, and not merely whether there was substantial justification for resisting the motions to dismiss them, we hold that the court did not err or abuse its discretion in declining to limit its inquiry to the proceedings related solely to the two alternative counts of appellant’s amended complaint when it imposed Rule 1-341 fees and costs against her. V Appellant contends that the trial