Garcia v. Foulger Pratt Development, Inc.

SHARER, Judge. The parties to this appeal, and consolidated cross-appeal, are M. Raul Garcia, appellant/cross-appellee, and three appellees/cross-appellants comprising several business entities that are engaged in the development and management of commercial real estate properties. The appeals and cross appeals are taken from a judgment and order of the Circuit Court for Montgomery County, Hon. William J. Rowan, presiding.

Garcia (plaintiff below) is one of two limited partners in the F.P. Rockville Limited Partnership (“the Partnership”), holding a 10% equity interest in the Partnership. Appellees (defendants below) are (1) Foulger Investments, Inc. (“Foulger”), the general partner of F.P. Rockville Limited Partnership, (“F.P. Rockville”), holding a 2% equity interest; (2) FP Investments, LLC (“FP Investments”), the other limited partner in the F.P. Rockville Limited Partnership, holding an 88% equity interest; and (3) Foulger-Pratt Development, Inc. (“Foulger-Pratt”). Garcia, a former salaried employee of Foulger-Pratt entered into a partnership agreement, in lieu of salary from the Foulger entities, for his services to identify and process new commercial real estate projects. The partnership agreement contemplated that new “limited partnerships” would be created to oversee development of each individual phase in the overall project site.

The new entities would be known as “Operating Partnerships.” Garcia identified a project site, and the Partnership formed a limited liability company (with an unrelated business entity) called the Rockville Metro Plaza I, L.L.C., rather than creating an off-shoot limited partnership as anticipated by the partnership agreement. Garcia brought this action against the Foulger entities alleging, among other things, that the general partner (Foul ⁶⁴⁴ ger Investments, Inc.) of F.P. Rockville Limited Partnership had breached the partnership agreement by failing to assign him a direct 5% interest in the Rockville Metro I Plaza, L.L.C. project, and for wrongfully taking a $934,000 development fee that should have enured to the Partnership. The circuit court agreed with Garcia that the Partnership was entitled to the development fee. The court, however, concluded that Garcia was not entitled to a direct 5% interest in the limited liability company because he failed to prove that the limited liability company constituted an “Operating Partnership” as contemplated by the agreement.

Garcia, therefore, raises the following questions for our review: I. Did the circuit court err in concluding that Rockville Metro Plaza I, L.L.C. (the entity formed to own the first building) was not an “Operating Partnership” as that term is defined in Paragraph 3.01 of the Partnership Agreement?

II

If this Court answers the first question in the affirmative, should appellant be assigned a direct interest in Rockville Metro Plaza I, L.L.C.?

III

If this Court rules that the general partner of the Partnership breached the Partnership Agreement by failing to assign appellant a direct interest in Rockville Metro Plaza I, L.L.C. does that ruling — coupled with the trial court’s ruling — warrant dissolution of the Partnership and the appointment of a receiver? We answer “no” to the first question, and because appellant’s second and third questions are framed in the alternative, we need not address those issues. The cross-appeal in this case deals with the award of attorneys fees to Garcia related to recovery of the development fee to the Partnership. The court awarded Garcia $96,000 in attorneys’ fees, and at the same time denied Foulger-Pratt’s request for attorneys’ fees under Maryland Rule 1-341. ⁶⁴⁵ In its cross appeal, Foulger-Pratt has raised four questions for our review which we have condensed into two questions for clarity: I. Whether the trial court abused its discretion, or otherwise erred, when it awarded Garcia his requested attorneys’ fees, including fees for unsuccessful claims that the court determined where “reasonably related” to his successful claim?

II

Whether the trial court abused its discretion, or otherwise erred, when it denied Foulger-Pratt’s request for attorneys’ fees under Maryland Rule 1-341 ? We answer “no” to both questions, as discussed more fully within, and shall affirm. FACTUAL and PROCEDURAL HISTORY In 1989, Foulger-Pratt Development, Inc., hired Garcia, under a two-year employment agreement, to manage its real estate development and investment activities. Pursuant to the employment agreement, Garcia earned an annual base salary of $85,000, plus bonuses and benefits.

After July 1, 1991, when the employment agreement had ended, Garcia continued to work for the Foulger entities, but no longer received a salary. Between 1991 and 1994, Garcia rendered services to the Foulger entities under a personal services contract. The agreement was not memorialized until April 14, 1994, but was applied retroactively to 1991 and extended his services for one additional year, until April 25, 1995. Garcia’s duties and responsibilities under the personal services contract included “the identification and processing of new business opportunities to the point that they can be developed.” In lieu of a salary, Garcia was to receive a 10% equity interest as a limited partner in a “limited partnership ... formed between [Garcia] and an assignee of FoulgerPratt [created] for the purpose of developing, constructing, and owning the project.” 1 In short, each time Garcia identi ⁶⁴⁶ fied and processed a new development “project” a new limited partnership would be created, in which Garcia would have a 10% equity interest as a limited partner.

The Foulger entities would retain a 90% equity interest in each limited partnership. Garcia identified a parcel of real estate for potential commercial development in downtown Rockville, bounded by Middle Lane and Hungerford Drive (“the Rockville Property”). He concluded a contract to purchase the property from the City of Rockville and negotiated the bureaucracy to obtain the necessary permits and support for the development of the site. As envisioned in the personal service agreement, the F.P. Rockville Limited Partnership (“the Partnership”) was created to develop the Rockville Property.

Foulger Investments, Inc., served as the general partner of the Partnership, "with a 2% equity interest. The two limited partners included FP Investments, LLC, with an 88% equity interest, and Garcia with a 10% equity interest. Pertinent provisions of the Partnership Agreement include the following paragraphs: 2 3.01 Business. The business of the Partnership shall be to negotiate contracts to acquire the parcels of real property [at the site in Rockville, otherwise known as “the Project”]; enter into option contracts with respect to the Project; make option payments, deposits and other payments to the owners of the Project; negotiate zoning variances, site plan ⁶⁴⁷ approvals, proffers, locate tenants, secure financing and equity investors; and take all other actions necessary or advisable to develop or maintain the Project.

The Project has been zoned to permit construction of over one million square feet of commercial office space as well as multi-family residential uses. The General Partner currently plans to develop the Project by constructing three commercial office buildings on the IBEW Site, two commercial office buildings on the Middle Lane Site, and a residential tower on the Middle Lane Site. However, the General Partner may change those plans as it deems appropriate. The General Partner expects to divide the Partnership pursuant to [Internal Revenue Service] Code Section 708(b)(2)(B) and establish separate limited partnerships (the “Operating Partnerships”) to own, fínance, manage, dispose of, lease and otherwise operate each building constructed as part of the Project.

The ownership of the Operating Partnerships may differ from the Interests set forth in Schedule B hereto to take into account the contributions of each of the Partners, admission of additional equity investors, and other factors. In addition, the Partnership may engage in any other lawful activity for protit permitted under the Act. 4.03 Additional Funds. If the General Partner determines that the Partnership or any of the Operating Partnerships require funds in addition to the Capital Contributions, the General Partner is authorized to admit additional Partners to the Partnership and the Operating Partnerships, from time to time, upon such terms and conditions as it determines to be appropriate, which shall result in a pro rata dilution of the Interests of the Partners, provided, such additional Partners shall not be Affiliates of the General Partner or Limited Partners, or persons related to the General Partner or Limited Partners unless the General Partner obtains the prior written consent of Raul Garcia, which consent shall not be unreasonably withheld, conditioned or delayed.! ] ⁶⁴⁸ 4.07 Issuance of Additional Interests in Operating Partnerships. Upon formation of each Operating Partnership established to own a commercial office building developed on the 1BEW site (pursuant to Paragraph 3.01), the General Partner shall issue interests therein to the Partners, including Raul Garcia, in the amounts set forth in Schedule B, provided, that (i) under the circumstances described in Paragraph 4.08(D), the General Partner may reduce the interest of Raul Garcia in certain of the Operating Partnerships, and (ii) such interests may very [sic] from Schedule B to take into account additional capital contributions of the Partners, and to reflect admission of one or more additional equity investors to the Operating Partnership(s). * * * 6.01 General Partner.

Except as provided expressly herein, the General Partner [Foulger-Pratt Development, Inc.] shall have full, exclusive and complete authority, discretion, obligation and responsibility to make all decisions affecting the business of the Partnership. The General Partner shall manage and control the affairs of the Partnership to the best of its abilities and shall use its best efforts to carry out the business of the Partnership. The General Partner shall have authority to enter into such contracts as it determines to be appropriate on behalf of the Partnership and bind the Partnership by execution of documents, including deeds, mortgage documents, deeds of trust, promissory notes, leases, construction contracts, management contracts, contracts of sale, such documents as may be required to admit equity investors, and any other document not inconsistent with the provisions of this Agreement. 6.03 Compensation; Business with Affiliates. Except as specifically provided herein, no Partner shall be entitled to compensation for services rendered on behalf of the Partnership.

The General Partner shall not cause the ⁶⁴⁹ Partnership to enter into any contract with any Partner or any Affiliate of any Partner without the prior written consent of all Partners, which consent shall not be unreasonably withheld, conditioned or delayed, provided, however, that the General Partner is specifically authorized to enter into the following contracts with its Affiliates: [A. FoulgerPratt Construction shall serve as general contractor for the project; B. Foulger-Pratt Management shall serve as the management agent for the project; and C. Pioneer Building Services, Inc., will provide cleaning services for the building]. (Emphasis added in bold italics). In order to actually develop the first building on the Rock-ville Property, the Partnership in turn entered into an “Operating Agreement” with an unrelated entity known as Reedy Creek Investments/Rockville LLC, to form an entity known as Rockville Metro Plaza I, L.L.C. (“Rockville Metro Plaza”), which would directly oversee the development of the property. 3 Both the Partnership and Reedy Creek received a 50% interest in Rockville Metro Plaza. 4 As such, Garcia now had a 5% indirect interest in the Operating Agreement (i.e., a 10% limited partnership interest in the 50% L.L.C. interest).

Also, according to the Operating Agreement, the Partnership was entitled to a $984,000 development fee. 5 Rockville Metro ⁶⁵⁰ Plaza, however, paid the development fee to Foulger-Pratt Development, Inc. (Garcia’s initial employer, and an entity in which Garcia had no equity interest), rather than to the Partnership. Garcia filed a lawsuit against the various Foulger entities on September 7, 2001, alleging that (1) he should have had a 5% direct interest in any new “Operating Partnerships” (according to his interpretation of Paragraph 4.07 of the Partnership Agreement) instead of a 5% indirect interest, and (2) the development fee had been wrongfully taken by Foulger-Pratt Development, Inc. Garcia sought judgment for breach of contract, dissolution of the Partnership, and attorneys’ fees related to the breach of contract claim regarding the development fee, in addition to other causes of action not relevant to this appeal. After protracted pre-trial activity, Garcia filed a second amended complaint on June 24, 2002. 6 That second amended complaint came to trial in the circuit court July 9, 2002. During the trial, lasting four days, twenty-six exhibits were admitted into evidence and five witnesses testified.

The court took the case under advisement on July 15, 2002, and issued a memorandum opinion and order on July 29, 2002. The court ruled that appellees had not breached the Partnership Agreement by not granting Garcia a direct 5% interest in Rockville Metro Plaza, because Rockville Metro Plaza was established as a limited liability company and not a ⁶⁵¹ limited partnership, and therefore the limited liability company could not be an “Operating Partnership” as described in the Partnership Agreement. The court, however, did find that the Partnership, and not Foulger-Pratt Development, Inc., was entitled to the development fee. The court also ordered a future hearing on the attorneys’ fees that were incurred by Garcia in recovering the development fee to the benefit of the Partnership.

Lastly, the court declined to order dissolution of the Partnership. The court wrote the following in its extensive memorandum opinion: In 1998 F.P. Rockville, Limited Partnership, was created. Foulger Investments, Inc., is the general partner with a 2% interest. F.P. Investments, Inc., and Garcia are the limited partners, with an 88% and 10% interest, respectively.

(See Defendants’ Exhibit I.) The purpose of this Agreement was to take all actions necessary or advisable to develop or maintain the Rockville property purchased from IBEW. See Section 3.01. It recited that the “general partner” expects to divide the partnership pursuant to [Internal Revenue Service] Code, Section 708(b)(2)(B), and establish separate limited partnerships (the “Operating Partnerships”) “to own, finance, manage, dispose of, lease and otherwise operate each building constructed as a part of the project”. See Section 3.01.

If “Operating Partnerships” were formed, the general partner was to issue interest to the partners, “including Raul Garcia” in roughly the same percentage interest as set forth in the formation of the Limited Partnership. See Section 4.07. The Agreement contained an integration clause providing that it superseded all prior written or oral arguments among the parties concerning the subject matter. See Section 13.12.

In order to secure construction financing from Reedy Creek Investments, the Limited Partnership entered into an agreement with Reedy Creek on December 31, 2000, entitled “Operating Agreement of Rockville Metro Plaza I, ⁶⁵² LLC”. See Defendants’ Exhibit 2. F.P. Rockville, Limited Partnership, and Reedy Creek Investment each received a 50% interest. Garcia received no written interest. * * * The Court finds that [Garcia] has failed to prove by a preponderance of the evidence that the “Operating Agreement of Rockville Metro I, LLC” is an “Operating Partnership” contemplated under Section 3.01 of the Limited Partnership Agreement.

The operative words [of Section 3.01] are “expects to divide the partnership pursuant to Code, Section 708(b)(2)(b), and establish separate limited partnerships (the “operating partnerships”)”. (Emphasis supplied). Metro Plaza I, LLC, is not a “limited partnership” formed by two or more persons having one or more general partners and one or more limited partners. See Corporations and Associations Article, Section 10-101(i).

Metro Plaza I, with 50% owners, has no delineation of general or limited partners. It was not a limited partnership converted to a limited liability company under Corporation and Associations, Section 4A-211. Rather, Metro Plaza I, LLC, is a limited liability company formed under Corporation and Associations, Title 4A. No reference was made in the formation of Rockville Metro Plaza I, LLC, to IRS Code Section 708(b)(2)(B), which the Court believes significant because of the decisions in this case which were tax driven.

While Section 4.03 of the Limited Partnership Agreement does not allow the creation of a new subsidiary that is not an operating partnership for the purposes of securing additional funding (construction financing), Section 6.01 does allow under it broad powers, the general partner to direct the formation of an LLC, such as Metro Plaza I, LLC. Finally, the formation of Metro Plaza I, LLC, is referred to as an “Operating Agreement”, not an “Operating Partnership”. Accordingly, Mr. Garcia because of a failure the burden of proof is not entitled to a separate stated 5% interest in Metro Plaza I, LLC, under Section 4.07 of the Limited Partnership Agreement. ⁶⁵³ As to the development fee, (subparagraph b), the Court finds [Garcia] has proved by a preponderance of the evidence that the Limited Partnership was entitled to the payment and receipt of the development fee. Garcia filed a timely appeal.

Additional facts will be set forth as necessary. DISCUSSION I. Did the circuit court err in concluding that Rockville Metro Plaza I, L.L.C. (the entity formed to own the first building) was not an “Operating Partnership” as that term is defined in Paragraph 3.01 of the Partnership Agreement? It is undisputed that Garcia has a 5% interest in Rockville Metro Plaza.

What is disputed, however, is whether his interest is direct or indirect (i.e., a 10% interest in the Partnership’s 50% interest in Rockville Metro Plaza). Garcia contends that he has a direct 5% interest pursuant to the Partnership Agreement, and that he has been significantly harmed by the difference. 7 Specifically, Garcia points to the language of the Partnership Agreement, Paragraph 4.07, 8 which he reads together with Paragraph 3.01, 9 to support his position. ⁶⁵⁴ Garcia posits that the matter is one of pure law (contract interpretation), and therefore the issue is subject to de novo review. See Turner v. Turner, 147 Md.App. 350, 403 , 809 A.2d 18 (2002). Appellees posit the opposite-that the issue is strictly one of fact-and that the trial court’s factual findings should be affirmed unless they are clearly erroneous.

See Md. Rule 8-131 (c); Brown & Sturm v. Frederick Road Limited P’ship, 137 Md.App. 150, 170 , 768 A.2d 62 (2001). Both are correct and incorrect at the same time. The issue before us raises mixed questions of law and fact because our inquiry actually raises two different sub-issues, for which two different standards of review apply. We must first determine whether, as a matter of law, the term “Operating Partnership” in the Partnership Agreement includes limited liability companies (in this case Rockville Metro Plaza).

Second, assuming that the term “Operating Partnership” does not encompass limited liability companies, we must determine whether, as a matter of fact, Rockville Metro Plaza is, or should be considered, an “Operating Partnership” for purposes of the Partnership Agreement. Given the two differing standards of review, this Court’s discussion in Gregg Neck Yacht Club, Inc. v. County Comm’rs of Kent County, 137 Md.App. 732 , 769 A.2d 982 (2001) is instructive. There, Judge Hollander wrote: When, as here, an action is tried without a jury, we review the case on both the law and the evidence. We will not set aside the judgment of the trial court on the evidence unless clearly erroneous.

Rule 8-131; see Gwynn v. Oursler, 122 Md.App. 493, 502 , 712 A.2d 1072 , cert. denied, 351 Md. 662 , 719 A.2d 1262 (1998); see also Murphy v. 24th Street Cadillac Corp., 353 Md. 480, 497, 727 A.2d 915 (1999); Innerbichler v. Innerbichler, 132 Md.App. 207, 229 , 752 A.2d 291 , cert. denied, 361 Md. 232 , 760 A.2d 1107 (2000). The clearly erroneous standard requires an appellate court to “ ‘consider the evidence produced at trial in a light most favorable to the prevailing party.’ ” Murphy, 353 Md. at 497 , 727 A.2d 915 (citation omitted). A trial court’s findings ⁶⁵⁵ are clearly erroneous when they are not supported by substantial evidence. Id.

The clearly erroneous standard only applies to the lower court’s findings of fact, however. B & P Enter, v. Overland Equip. Co., 188 Md.App. 583 , 602, 758 A.2d 1026 (2000); Nationwide Ins. Companies v. Rhodes, 127 Md.App. 231, 235 , 732 A.2d 388 (1999); Piper v. Layman, 125 Md.App. 745, 754 , 726 A.2d 887 (1999).

When we consider conclusions of law, our review is more expansive. Narayen v. Bailey, 130 Md.App. 458, 461-62 , 747 A.2d 195 (2000). We do not accord any deference to “[p]ure conclusions of law.” Oliver v. Hays, 121 Md.App. 292, 306 , 708 A.2d 1140 (1998); see B & P Enter., 133 Md.App. at 602 , 758 A.2d 1026 ; Porter v. Schaffer 126 Md.App. 237, 259 , 728 A.2d 755 , cert. denied, 355 Md. 613 , 735 A.2d 1107 (1999). Instead, we must determine whether the trial court was legally correct.

Andy’s Ice Cream, Inc. v. City of Salisbury, 125 Md.App. 125, 137 , 724 A.2d 717 , cert. denied, 353 Md. 473 , 727 A.2d 382 (1999). Id. at 751-52 , 769 A.2d 982 . Construction of The Partnership Agreement Implicit in the trial court’s holding is its finding that the Partnership Agreement’s term, “Operating Partnership”, does not include limited liability companies. Garcia correctly points out that “[t]he construction of a written contract is a question of law, subject to de novo review by an appellate court.” Turner, supra, 147 Md.App. at 403 , 809 A.2d 18 (citation omitted).

The principle rule in construction of a contract, here the Partnership Agreement, is to “ascertain and effectuate the intention of the contracting parties.” Id. at 403 , 809 A.2d 18 . In order to do so, we look at the plain-meaning of the contract itself, and review the entire document. Id. at 403-04 , 809 A.2d 18 . “[T]he terms of the agreement are construed consistent with their usual and ordinary meaning, unless it is apparent that the parties ascribed a special or technical mean ⁶⁵⁶ ing to the words.” Id. at 404 , 809 A.2d 18 (citations omitted). Because Maryland follows the law of objective contract interpretation, “[t]he clear and unambiguous language of an agreement will not give way to what the parties thought the agreement meant or was intended to mean.” Blakehurst v. Baltimore County, 146 Md.App. 509, 523 , 807 A.2d 179 (2002) (citations omitted).

F.P. Rockville Limited Partnership was set up as a Maryland limited partnership. Maryland law defines a limited partnership as “a partnership formed by two or more persons under the laws of the State having one or more general partners and one or more limited partners.” Md.Code Ann., Corps. & Ass’ns § 10-101(i) (Repl.Vol.1999). Rockville Metro Plaza, on the other hand, was organized as a Maryland limited liability company. Maryland law defines a limited liability company as “a permitted form of unincorporated business organization which is organized and existing under this title.” Md.Code Ann., Corps. & Ass’ns § 4A-101® (Repl.Vol.1999 & Supp.2002).

Limited partnerships and limited liability companies are different legal entities under Maryland law, governed by separate provisions of the Corporations and Associations Article of the Maryland Code — Title 10 governs limited partnerships whereas Title 4A covers limited liability companies. Md.Code Ann., Corps. & Ass’ns Title 10 & Title 4A; see also Provident Bank v. DeChiaro Ltd. P’ship, 98 Md.App. 596, 606 , 634 A.2d 973 (1993), cert. denied, 334 Md. 210 , 638 A.2d 752 (1994). Turning to the specific language of the Partnership Agreement, the term “Operating Partnership” is defined in Paragraph 2.21 as “[a]ny limited partnership established pursuant to Paragraph 3.01, and in which Interests] are issued to the Partners hereof, and/or additional equity investors pursuant to Paragraphs 3.01, 4.03 and 4.07.” The term “limited partnership” is not defined in the Agreement, but the Agreement does refer to the Maryland Revised Uniform Limited Partnership Act (Title 10 of the Maryland Code, Corps. & Ass’ns Art.) as the governing authority. See Paragraph 2.01 and 3.01 (“[T]he Partnership may engage in any other lawful activity ⁶⁵⁷ for profit permitted under [Title 10 of the Maryland Code, Corps. & Ass’ns Art.]”).

We find that the term “Operating Partnership” is clear and unambiguous, and does not on its face include limited liability companies. Reading the contract objectively, as we must, we find that the intent of the parties was to establish “limited partnerships” as that term is defined by Maryland law. See Md.Code Ann., Corps. & Ass’ns § 10 — 101(i). Accordingly, we hold that the court did not err, as a matter of law, in its implicit conclusion that the term “Operating Partnerships” applies only to limited partnerships.

Is Rockville Metro Plaza an Operating Partnership, or Should it be Considered as Such? The second inquiry is whether, as a matter of fact, Rocvkille Metro Plaza is, or should be considered to be, an Operating Partnership for purposes of the Partnership Agreement. It is this issue that both parties have more fully addressed, and that drew the trial court’s attention as well. Garcia cites several propositions for his position, relying essentially on the fact that Rockville Metro Plaza I, has elected to be taxed as a partnership for federal income tax purposes.

He writes, “Because Rockville Metro Plaza elected to be treated as a partnership, it is therefore considered a ‘partnership’ under the federal tax laws, including the Code section applicable here.” Following this theory, Garcia also argues that the creation of Rockville Metro Plaza constitutes a “division” of a partnership which, for federal tax purposes, the resulting partnership is “considered a continuation of the prior partnership.” See 26 U.S.C. § 708 (b)(2)(B). 10 Lastly, Garcia argues that Paragraph 4.03 of the Partnership Agreement ⁶⁵⁸ precluded the Partnership from admitting equity investors (here Reedy Creek) into any entity other than an Operating Partnership. Specifically, Garcia maintains that “Paragraph 4.03 ... specifies only two ways in which the General Partner is authorized to raise funds from a third party investor: borrowing the money, or admitting the investor into the Partnership of an ‘Operating Partnership.’” In summary, Garcia’s position, in simple terms, is that even though Rock-ville Metro Plaza is not legally a “duck,” (i.e., a limited partnership) it looks, acts, walks, and sounds like one, and therefore should be treated as one. Appellees, predictably, argue the opposite. They respond by arguing, first, that simply because a business entity is treated as a limited partnership for federal tax purposes does not mean that it is, or should be, otherwise considered a limited partnership; especially if Maryland law would not treat it as such, or more importantly, when the Partnership Agreement (i.e., the contract binding the parties) does not treat it as such.

Second, appellees posit that Rockville Metro Plaza was not formed by a division of a partnership, but rather as a distinct limited liability company. Finally, appellees argue that Paragraph 6.01 authorized the general partner of the Partnership to enter into a limited liability company. In other words, appellees maintain that Rockville Metro Plaza cannot be a “duck” because, despite its appearance, it is not legally a duck. Appellees emphasize that the court’s ruling involved findings of fact on this issue, and that we must affirm unless the court was clearly erroneous.

The trial court concluded that Garcia “has failed to prove by a preponderance of the evidence that the ‘Operating Agreement of Rockville Metro I, LLC’ is an ‘Operating Partnership’ contemplated under Section 3.01 of the Limited Partnership Agreement.” In so concluding, the court found the following: (1) Rockville Metro Plaza is not a limited partnership as defined by Maryland law; (2) there has been “no delineation of general or limited partners”; (3) the limited liability company had no prior existence as a limited partnership; (4) Rock-ville Metro Plaza has been organized as a. limited liability ⁶⁵⁹ company under the laws of the state; (5) “No reference was made in the formation of Rockville Metro Plaza I, LLC, to IRS Code Section 708(b)(2)(B), which the Court believes significant because of the decisions in this case which were tax driven”; (6) Paragraph 6.01 of the Partnership Agreement authorizes the general partner to form a limited liability company; (7) the formation of the limited liability company refers to a “Operating Agreement” not an “Operating Partnership.” We are unable to conclude that the trial court’s factual findings were clearly erroneous. Simply because a limited liability company chooses to be treated like a partnership for federal income tax purposes does not overcome the requirement of Maryland statutory law, or dictate its legal status for purposes of Maryland law. This is especially true given the fact that the section of the Internal Revenue Service Code which Garcia cites for his proposition (Code Section 708(b)(2)(B)) clarifies that it applies “for purposes of this section....” See 26 U.S.C. § 708 (b)(2)(B). In this regard, we reiterate that because we are reviewing facts as found by the court, those facts must be viewed in a light most favorable to appellees.

Gregg Neck, supra, 137 Md.App. at 751-52, 769 A.2d 982 . We find the court’s factual findings to be extensive, clear, and entirely supportable by the evidence in the record. Even our independent review of the record suggests that Metro Rockville Plaza is not, and should not be considered to be, an operating partnership as that term is defined and used in the Partnership Agreement. Furthermore, we agree that Paragraph 6.01 gave the general partner the authority to form a limited liability company for purposes of admitting equity investors.

There is yet another compelling reason why Garcia is only entitled to a 5% indirect interest, although the trial court never directly addressed this point. Garcia was not able to prove by a preponderance of the evidence that he was actually entitled to a direct interest versus an indirect interest. The operative language of Paragraph 4.07 the Partnership Agreement is “the General Partner shall issue interests.... ” On ⁶⁶⁰ this, we note that there is no dispute that Garcia was issued, and has, a 5% interest in the limited liability company, created through his 10% interest in the Partnership. However, nowhere in the Partnership Agreement is it provided that Garcia is entitled to a direct interest.

We find no error in the court’s rulings. ATTORNEYS’ FEES I. Whether the trial court abused its discretion, or otherwise erred, when it awarded Garcia his requested attorneys’ fees, including fees for unsuccessful claims that the court determined were “reasonably related” to his successful claim? Following Garcia’s timely appeal of the substantive issues, Garcia and Foulger-Pratt briefed the attorneys’ fees issue. Even though prevailing parties are generally barred from recovering their attorneys’ fees under the “American Rule,” Garcia sought fees associated with the recoupment of the $934,000 development fee pursuant to the “common-fund doctrine.” The trial court awarded Garcia $96,000 in attorneys’ fees.

Foulger-Pratt posits that the trial court erred in this regard. The American Rule Maryland follows the “American Rule” for attorneys’ fees. Hess Constr. Co. v. Bd. of Educ., 341 Md. 155, 159 , 669 A.2d 1352 (1996).

As such, “[i]n the absence of statute, rule, or contract expressly allowing recovery of attorneys’ fees, a prevailing party in a lawsuit may not ordinarily recover attorneys’ fees.” Bausch & Lomb Inc. v. Utica Mut. Ins. Co., 355 Md. 566, 590-91 , 735 A.2d 1081 (1999). As with most legal principles, however, exceptions do exist.

See generally Hess Constr. Co., supra, 341 Md. at 160-61,168-70 , 669 A.2d 1352 . 11 ⁶⁶¹ Exceptions to the American Rule are premised on underlying equitable or policy considerations which support the need for such recovery. See Mills v. Electric Auto-Lite Co., 396 U.S. 375, 391-92 , 90 S.Ct. 616 , 24 L.Ed.2d 593 (1970). Relevant exceptions in this case include: (1) the “common-fund doctrine”; (2) a statutory fee-shifting provision for derivative suits in a limited partnership pursuant to Md.Code Ann., Corps. & Ass’ns § 10-1004; and, as discussed infra, (3) the award of attorney fees via Md. Rule 1-341 when a lawsuit is maintained or defended in “bad faith or without substantial justification.... ” The Common-Fund Doctrine, a Common Law Exception to the American Rule In Boeing Co. v. Van Gemert, 444 U.S. 472 , 100 S.Ct. 745 , 62 L.Ed.2d 676 (1980), the U.S. Supreme Court had the opportunity to apply the common-fund doctrine as an exception to the American Rule.

Justice Powell, writing on behalf of the eight-justice majority, described the doctrine as follows: Since the decisions in Trustees v. Greenough, 105 U.S. 527 , 26 L.Ed. 1157 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 , 5 S.Ct. 387 , 28 L.Ed. 915 (1885), this Court has recognized consistently that a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney’s fee from the fund as a whole. See Mills v. Electric Auto-Lite Co., 396 U.S. 375 , 90 S.Ct. 616 , 2b L.Ed.2d 593 (1970); Sprague v. Ticonic National Bank, 307 U.S. 161 , 59 S.Ct. 777 , 83 L.Ed. 1184 (1939); cf. Hall v. Cole, 412 U.S. 1 , 93 S.Ct. 1943 , 36 L.Ed.2d 702 (1973). The common-fund doctrine reflects the traditional practice in courts of equity, Trustees v. Greenough, supra, 105 U.S. at 532-537 , and it stands as a well-recognized exception to the general principle that requires every litigant to bear his own attorney’s fees, Alyeska, Pipeline Service Co. v. Wilderness ⁶⁶² Society, 421 U.S., [240] at 257-58, 95 S.Ct. [1612], at 1621-22, H L.Ed.2d HI. The doctrine rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant’s expense.

See, e.g., Mills v. Electnc Auto-Lite Co., 396 U.S. at 392 , 90 S.Ct. [616] at 625. Jurisdiction over the fund involved in the litigation allows a court to prevent this inequity by assessing attorney’s fees against the entire fund, thus spreading fees proportionately among those benefitted by the suit. See id., at 394 , 90 S.Ct. at 626 . Id. at 478 , 100 S.Ct. 745 .

The Supreme Court pointed out in Mills, supra, that the common-fund doctrine is primarily a “judicially-created exception ... where a plaintiff has successfully maintained a suit, usually on behalf of a class that benefits a group of others in the same manner as himself.” 396 U.S. at 392 , 90 S.Ct. 616 . Because the common-fund doctrine is an equity-based judicially-created exception, it follows that the application of the doctrine is vested within the discretion of the trial judge. The Supreme Court examined this notion in Chambers v. NASCO, Inc., 501 U.S. 32 , 111 S.Ct. 2123 , 115 L.Ed.2d 27 (1991), when it wrote, “[T]he ‘common fund exception,’ derives not from a court’s power to control litigants, but from its historic equity jurisdiction, and allows a court to award attorney’s fees to a party whose litigation efforts directly benefit others.” Id. at 45 , 111 S.Ct. 2123 (citations omitted). The Court held that the trial court had not abused its discretion in awarding attorneys’ fees.

Id. at 50 , 111 S.Ct. 2123 . Accordingly, the abuse of discretion standard is the appropriate standard of review. Id.; see also Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162 (Del.1989). Maryland law holds likewise.

Rauch v. McCall, 134 Md.App. 624, 638 , 761 A.2d 76 (2000) (“The award of attorney’s fees by the court is a ‘factual matter which lies within the “sound discretion of the trial judge and will not be overturned unless clearly erroneous.” ’ ”) (citations and quoting sources omitted), cert. denied, 362 Md. 625 , 766 A.2d 148 (2001); see also Milton Co. ⁶⁶³ v. Council of Unit Owners of Bentley Place Condos, 121 Md.App. 100 , 708 A.2d 1047 (1998), aff'd, 354 Md. 264 , 729 A.2d 981 (1999). In Maryland, the common-fund doctrine is a clearly accepted exception to the American Rule, though it is infrequently invoked. In Hess Constr. Co., supra, 341 Md. 155 , 669 A.2d 1352 , the Court of Appeals, in an opinion authored by Judge Rodowsky, discussed the various instances in which the common-fund doctrine had been previously applied in reported cases in Maryland.

The common fund theory has been applied or recognized where all of the holders of mortgage debentures were benefitted by the sale of the security, ordered over the objection of receivers for the debtor corporation, Terminal Freezing & Heating Co. v. Whitelock, 120 Md. 408 , 87 A. 820 (1913); where a stockholder’s derivative action benefitted all of the shareholders, Davis v. Gemmell, 73 Md. 530 , 21 A. 712 (1891); where all of the taxpayers of a municipality were benefitted by a taxpayer’s action resulting in reimbursement to the municipality of unauthorized disbursements, Bowling v. Brown, 57 Md.App. 248 , 469 A.2d 896 (1984); and where a successful taxpayer’s action benefitted all taxpayers of a “special tax district.” Smith v. Edwards, 46 Md.App. 452 , 418 A.2d 1227 (1980), rev’d on other grounds, 292 Md. 60 , 437 A.2d 221 (1981). Hess Constr. Co., supra, 341 Md. at 168-69 , 669 A.2d 1352 . More recently, in United Cable Television of Baltimore Ltd. P’ship v. Burch, the Court of Appeals allowed recovery of common-fund attorneys’ fees in a class action against a limited partnership, but ultimately reversed and remanded on the precise amount of fees.

The fees must be considered “reasonable” under Rule 1.5(a) of the Maryland Rules of Professional Conduct. 354 Md. 658, 686-88 , 732 A.2d 887 (1999), superced,ed by statute on other grounds; see Plein v. Dep’t of Labor, Licensing and Regulation, 369 Md. 421 , 800 A.2d 757 (2002). ⁶⁶⁴ Derivative Actions Against Limited Partnerships A Maryland statutory exception (among several) to the American Rule may be found in § 10-1004 of the Corps. & Ass’ns Article, wherein the Legislature has provided a fee-shifting provision for limited partners who successfully maintain a derivative action on behalf of the partnership. 12 This section provides: If a derivative action is successful, in whole or in part, or if anything is received by the plaintiff as a result of a judgment, compromise, or settlement of an action or claim, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, and shall direct him to remit to the limited partnership the remainder of those proceeds received by him. Md.Code Ann., Corps. & Ass’ns § 10-1004 (Repl.Vol.1999). The Case Sub Judice Following the submission of briefs by the parties, and a lengthy hearing, the trial court concluded, in part, as follows: Plaintiff’s Motion for Award of Fees and Costs Under the “Common-Fund” Doctrine Defendants argue that [Garcia] should receive no fees or costs because there was no necessary predicate of a contract or statute authorizing payment of fees and costs. Defendants also argue that since recovery was had under the breach of contract claim, which was not pled in a derivative fashion, there can be no recovery of attorney’s fees.

See Corporation and Associations Article, Section 10-1001-1004. Plaintiff seeks an award of attorney’s fees under the “common fund” exception doctrine which he argues is recognized in Maryland. See Davis v. Gemmell, 73 Md. 530 , 21 A. 712 ; Hess Construction Company v. Board of Education ⁶⁶⁵ of Prince George’s County, 341 Md. 155 , 669 A.2d 1352 ; United Cable Television of Baltimore Limited Partnership v. Burch, 354 Md. 658 , 732 A.2d 887 ; Wittman v. Crooke, 120 Md.App. 369 , 707 A.2d 422 ; Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162 (Del.-1989). The Court agrees with the underlying thesis of the Plaintiffs argument that the Plaintiff represented interests of all of the partners of F.P. Rockville Limited Partnership who received the benefits of his labor.

Even though not pled as a derivative claim, the exact purpose of Corporation and Associates Article, Section 10-1001-1004 was accomplished. The judgment rendered in favor of PIP. Rockville Limited Partnership is the exact judgment that would have been rendered had the claim been made in a derivative fashion. Finally, there is nothing in Corporation and Associations Article 10-1004 that mandates that the common fund production prohibits an award of attorney’s fees if the production is achieved through a direct action as opposed to [a] derivative claim.

See also Tandycrafts, Inc. v. Initio Partners, Supra, at p. 1166, (“There is no class action or derivative suit prerequisite to an award of attorney’s fees under the common benefit exception.”) Thus, the Court holds that F.P. Rockville Limited Partnership should be required to compensate the Plaintiff with an award of a portion of the attorney’s fees and costs he incurred. Attorney’s fees awarded pursuant to the common fund doctrine may be calculated using either a percentage of the recovered benefit, the Lodestar approach (i.e., a calculation of the attorney’s reasonable hours multiplied by a reasonable hourly rate), or a combination of both. See United Cable Television of Baltimore Limited Partnership v. Burch, Supra, at p. 685-688, 732 A.2d 887 . The Court rejects the percentage method because of the arbitrariness of picking a fair percentage.

Rather the Court calculates the fee under the Lodestar approach. Plaintiffs suit sought two things: the recovery of the development fee, and the award of a direct ownership interest in Rockville Metro. The Plaintiff, for the benefit of ⁶⁶⁶ the partnership, prevailed in the first and lost on the second. Plaintiff supports his requested attorney’s fees by Affidavit of Donald Clark, Jr., Esquire, as to the reasonableness of the hourly rate and work done.

Mr. Clark’s background and experience, as set forth in the Affidavit, provides the necessary expertise. See Kirsner v. Edelmann, 65 Md.App. 185 , 499 A.2d 1313 . The Affidavit of Plaintiffs chief counsel, David Clark, Jr., Esquire, reflects that no time or services were charged where they related “solely” to the claim for an ownership interest. However, one-third of the time and services (marked “C”) where charged for those items “related predominantly to the claim for ownership services”.

The Court believes that since the Plaintiff did not prevail on the claim and it was not “reasonably related” to the other claims, all time and services related to the claim for an ownership interest should be deducted. Accordingly, there is a downward deduction of the fee sought of $140,000.00 by $11,835.00 (1/3 of $35,514.25, those items marked “C”). Fougler Pratt contends that the trial court erred by granting Garcia’s requested attorney fees under § 10-1004, because his breach of contract claim was not a derivative action. Garcia, on the other hand, argues that the court awarded the fees under the common-fund doctrine, and that under Maryland law it was appropriate to do so.

We read the trial court’s opinion as granting the attorneys’ fees based on the common-fund doctrine. That said, however, we think that the trial court found analogous support for its position from § 10-1004, and therefore chose to include this as a rationale in its written opinion. The trial court determined that if Garcia had brought his claim as a derivative action he would have been likewise entitled to fees. Nevertheless, we still must review the propriety of the court’s action, given Foulger-Pratt’s broad challenge.

Again, we are faced with a mixed question of law and fact with corresponding standards of review. See Gregg Neck Yacht Club, supra, 137 Md.App. at 751-52, 769 A.2d 982 . ⁶⁶⁷ Initially, as a matter of law, we must determine whether Garcia was entitled to attorneys’ fees under the common-fund exception. Second, if the common-fund doctrine is applicable, we must, as a matter of fact, review whether the court erred in calculating the amount and reasonableness of the fee award under that doctrine; more specifically, whether the court abused its discretion in awarding Garcia fees associated with unsuccessful claims that were related to his successful claim. We will address point each in turn.

The Common-Fund Doctrine’s Applicability to this Case Foulger-Pratt makes several arguments as to why Garcia was not entitled to fees, including that Maryland has never applied the common-fund doctrine to limited partners in a partnership. In this regard, Fougler Pratt posits that § 10-1004 is only applicable to derivative actions, and further, that this section provides the only way a limited partner may recover attorneys’ fees. Implicit in cross-appellant’s argument is the position that the legislative language of § 10-1004 has abrogated the common law, such that adherence to § 10-1004 is the only possible vehicle for