Frankel v. Friolo

SHARER, J. Once again the attorneys’ fee dispute between Douglas Frankel, M.D. and the Maryland Virginia Med Trauma Group, appellants/cross-appellees (collectively “Frankel”), and a former employee, Joy Friolo, appellee/cross-appellant, is before us. In this current appeal and cross-appeal we are asked to determine whether, on remand, the Circuit Court for Montgomery County properly awarded attorney’s fees to Friolo, in accordance with the direction of the Court of Appeals in Friolo v. Frankel, 373 Md. 501 , 819 A.2d 354 (2003)(“Friolo I ”). Moreover, we take up an issue of apparent first impression: whether counsel is entitled to be awarded fees for post-judgment litigation in which the only complaint is counsel’s ⁴⁴⁴ dissatisfaction with the fee originally awarded by the circuit court. Frankel challenges the circuit court’s fee award and presents several issues for our review, which we have distilled into: 1 Whether the circuit court’s attorneys’ fee award complies with the lodestar analysis set forth in Friolo I. Friolo’s cross-appeal presents one issue for our review which, as slightly rephrased, is: Whether the circuit court abused its discretion by failing to award Friolo attorneys’ fees for post-trial, appellate, and post-remand services.

For the reasons that follow, we shall vacate the circuit court’s award and remand for proceedings consistent with this opinion. BACKGROUND To provide perspective for our discussion, we recount briefly the facts giving rise to the original litigation between the parties. 2 Friolo was employed by Frankel in February, 1998, as a medical biller, responsible for both billing and collection. Her employment was terminated by Frankel on April 4, 1999, based upon allegations that she had treated patients rudely. In her complaint, Friolo averred that she accepted an offer made by Frankel to all employees, of a five percent ownership ⁴⁴⁵ interest in the practice if the practice was worth one million dollars by the end of 1999.

The goal was to develop and expand the practice, make it more profitable, and sell it by the end of 2004. Friolo alleged that she also was to have received a percentage of the sales price. When she filed suit following her discharge, Friolo alleged that she worked considerable overtime hours without overtime compensation. She also claimed an agreement by which she was to receive, but did not receive, on a monthly basis, a percentage of collections.

Friolo filed a ten-count complaint, sounding in: (1) breach of contract; (2) breach of an implied contract; (3) unjust enrichment; (4) fraudulent inducement; (5) violation of the Maryland Wage Payment and Collection Law, Lab. & Empl. (“LE”) §§ 3-503 and 3-505; and (6) violation of the Maryland Wage and Hour Law, LE §§ 3-415 and 3-420. Counts 7 through 10 were brought on behalf of Friolo’s husband, Victor Salazar, who alleged that he, too, worked for Frankel and was promised benefits similar to those promised to Friolo. Lastly, their complaint sought punitive damages.

Ultimately, all of Salazar’s claims were dismissed for lack of sufficient evidence. In the end, the only claims submitted to the jury were counts (1), (5), and (6). Friolo had claimed bonuses in the amount of $26,415, of which she had been paid $19,574, leaving an unpaid balance of $6,841. She also claimed entitlement to $5,237 in overtime pay.

The jury returned a verdict in Friolo’s favor in the amount of $11,778, representing $6,841 in bonuses and $4,937 in overtime pay. Frankel satisfied the $11,778.85 money judgment, but not the post-judgment interest, on or about October 28, 2002. 3 Friolo sought attorneys’ fees under LE §§ 3 — 427(d) and 3-507.1(b) which provide: § 3-427. Action against employer ⁴⁴⁶ (d) If a court determines that an employee is entitled to recovery in an action under this section, the court may allow against the employer reasonable counsel fees and other costs. § 3-507.1. Recovery of unpaid wages (b) If, in an action under subsection (a) of this section, a court finds that an employer withheld the wage of an employee in violation of this subtitle and not as a result of a bona fide dispute, the court may award the employee an amount not exceeding 3 times the wage, and reasonable counsel fees and other costs.

On July 18, 2001, Friolo filed her first request for fees and costs, $55,012.50 in attorneys’ fees, which were calculated according to the lodestar approach and reflected a 10% deduction to account for the fact that not all of Friolo’s claims were successful. Frankel opposed this motion. In a supplemental filing, on July 31, 2001, Friolo’s counsel raised the requested amount of fees to $57,059.55. Later, on November 7, 2001, Friolo filed a second supplement to her motion for attorneys’ fees, requesting $69,637.50.

After hearing argument, and having considered memoranda filed by both parties, the circuit court: concluded first that attorney fee awards need to be “appropriate and fair,” even when “punitive.” It then noted that, under the lodestar analysis, two of the factors the court must consider are the novelty and difficulty of the litigation, but it made no finding with respect to either factor. It observed that the jury had returned a verdict of $11,778, which the court said was not inappropriate, and then stated: “What the Court is going to do by way of award is considering the [lodestar] language and the record in this matter, I deem it appropriate to — this case is interesting in looking at the computations awarding 40 percent of the judgment plus the $1,500 in court costs so that comes out ⁴⁴⁷ to $4,712.00 plus $l,500.00-$6,212.00 is the counsel fees and costs.” Friolo I, supra, 873 Md. at 510-11, 819 A.2d 354 . The circuit court’s February 28, 2002 order granted Friolo’s motion and directed Frankel to pay to Friolo or her counsel $4,711.00, for statutory attorneys’ fees, plus $1,552.00 in costs. The court based the attorneys’ fee on 40 percent of the amount of judgment.

On March 26, 2002, Friolo appealed to this Court, “complaining, in essence, that the trial court erred in failing to calculate the fees in accordance with the lodestar approach, despite what she regarded] as her ‘high degree of success before the court.’ ” Id. at 511, 819 A.2d 354 . On October 15, 2002, the Court of Appeals granted certiorari before any proceedings in this Court. Proceedings Before the Court of Appeals In its opinion filed on March 17, 2003, the Court of Appeals held that in actions under fee-shifting statutes, including the two at issue here — Maryland Code, §§ 3-427 and 3-507.1 of the Labor and Employment Article (LE) — the lodestar approach is ordinarily the appropriate one to use in determining a reasonable counsel fee. We stress, however, that the approach we approve is broader than simply hours spent times hourly rate but also includes careful consideration of appropriate adjustments to that product, which, in almost all instances, will be case-specific.

Under that approach, it is necessarily incumbent upon the trial judge to give a clear explanation of the factors he or she employed in arriving at the end result. Id. at 504-05, 819 A.2d 354 (emphasis added). The Court concluded that the circuit court did not provide a clear justification for how it arrived at its determination of attorneys’ fees, and remanded for “a further proceeding and a better explanation.” Id. at 505 , 819 A.2d 354 . ⁴⁴⁸ Proceedings on Remand On remand to the circuit court, Friolo filed yet a third supplemental petition for attorneys’ fees, on June 26, 2003, this time seeking a total of $127,810 in fees, to account for additional fees generated by the appeal. Frankel renewed his opposition to Friolo’s petition.

A hearing, consisting only of argument on the already developed record, was held on Friolo’s motion for attorneys’ fees and costs, as well as the supplemental filings, on July 15, 2003. After taking the matter under advisement, the circuit court, on October 21, 2003, issued an opinion and order awarding attorneys’ fees in the amount of $65,348. On October 23, 2003, Frankel filed a motion to alter or amend the fee award and a motion to stay enforcement of the judgment. Six days later Friolo moved to alter or amend the fee award judgment on the grounds that the court improperly denied fees for appellate and post-appellate services.

The circuit court denied all outstanding post-trial motions on December 22, 2003. On March 18, 2005, judgment was entered in favor of Friolo in the amount of $65,348. Frankel and Friolo noted their timely appeals to this Court on April 5, 2005, and April 12, 2005, respectively. STANDARD of REVIEW The decision whether to allow attorneys’ fees is discretionary and such “discretion is to be exercised liberally in favor of allowing a fee.” Friolo I, supra, 373 Md. at 512 , 819 A.2d 354 .

Where a trial court awards attorneys’ fees under a fee-shifting statute, the lodestar approach must be utilized. Id. The setting of attorneys’ fees under the lodestar approach is largely discretionary. Id.

If, however, “the record does not support a conclusion that the trial court actually used that approach, there would be an error of law.” Id. (emphasis added). Upon finding that an error of law has occurred, we must remand to the trial court “for a further proceeding, in which the court can apply the lodestar approach and determine a reasonable fee.” Id. ⁴⁴⁹ Whether the circuit court’s attorneys’ fee award complies with the lodestar analysis set forth in Friolo I. In Friolo I the Court of Appeals adopted the lodestar approach for determining reasonable attorneys’ fees under Maryland’s fee-shifting statutes. See Garcia v. Foulger Pratt Dev., Inc., 155 Md.App. 634, 672-73 , 845 A.2d 16 (2003).

The Court stressed, however, that this approach “is broader than simply hours spent times hourly rate but also includes careful consideration of appropriate adjustments to that product, which, in almost all instances, will be case-specific.” Friolo I, supra, 373 Md. at 505 , 819 A.2d 354 (emphasis added). Due to the case-specific nature of this approach, the Court emphasized that “it is necessarily incumbent upon the trial judge to give a clear explanation of the factors he or she employed in arriving at the end result.” Id. (emphasis added). Such findings are imperative “so that the parties and any reviewing appellate court can follow the reasoning and test the validity of the findings.” Id. at 529, 819 A.2d 354 .

Following remand to the circuit court, Friolo supplemented her petition for attorneys’ fees, seeking an additional $58,172.50 to account for the work done on the first appeal. This amount, together with the $69,637.50 for trial work sought in Friolo’s second supplement, brought the total request for attorneys’ fees to $127,810. After hearing the arguments of counsel on Friolo’s total request, and taking the matter under advisement, the circuit court issued its opinion and order. The opinion’s “discussion” section provided: Using the lodestar system, this court determined a judgment of reasonable attorney’s fees.

The lodestar system calculates a fee by determining the number of hours expended on the litigation multiplied by a reasonable hourly rate. This calculation provides an objective basis on which to make an “initial estimate” of the value of the attorney’s services. Hours that are excessive, unnecessary and redundant are excluded from calculation. The trial court may, in its discretion, eliminate specific hours or simply reduce the ⁴⁵⁰ award to account for the limited success of particular parts of litigation as there is no precise rule or formula for making those determinations.

The accompanying order stated: ORDERED, that [Friolo’s] Motion is GRANTED. [Frankel] shall forthwith pay to [Friolo] and her counsel attorneys’ fees in the lodestar amount of $65,348, which was calculated by multiplying [Friolo’s] counsel’s reasonable hourly rate of ($295 per hour and $200 per hour) by the reasonable number of hours [Friolo’s] counsel expended in connection with this matter (194.4 hours at an hourly rate of $295; 35 hours at an hourly rate of $200)[ 4 ], This calculation takes into consideration the reasonable hours expended, the complexity of the litigation, the success rate of the different parts of the litigation and the uniqueness of the issues. (emphasis added). It is clear that the circuit court used the basic lodestar calculation — multiplying Friolo’s counsel’s reasonable hourly rate by the reasonable number of hours expended in connection with this case. Additionally, the court’s order indicates that the attorneys’ fees determination took into consideration “the reasonable hours expended, the complexity of the litigation, the success rate of the different parts of the litigation and the uniqueness of the issues.” There is, however, a noticeable absence of any clear explanation of the factors utilized by the court in awarding $65,348, as opposed to the amount requested, or any other amount.

Nor is there any explanation of the substantial increase in the award of fees and costs by more than $59,000. It is also unclear whether the fee awarded included both trial and post-trial work and, if so, how the fees were apportioned. Thus, based on the circuit court’s order it is difficult, if not impossible, to “follow the reasoning and test the validity of the ⁴⁵¹ [court’s] findings.” Friolo I, supra, 373 Md. at 529 , 819 A.2d 354 ; see also Stevenson v. Branch Banking & Trust Corp., 159 Md.App. 620, 666 , 861 A.2d 735 (2004). While the court indicates that it did consider several factors in making its award, without a clear explanation of those factors applied to the determination of the fee, the record does not support the conclusion that the circuit court actually used the lodestar approach as articulated by the Court of Appeals in Friolo I, supra, 373 Md. at 505 , 819 A.2d 354 .

Thus, we find that the court erred, as a matter of law, in its award of attorneys’ fees. We shall remand this case to the circuit court for further proceedings, in which the court must apply the