Maxima Corp. v. 6933 Arlington Development Ltd. Partnership

DAVIS, Judge. This is an appeal from an order of the Circuit Court for Montgomery County acting pursuant to a remand from this Court. Maxima Corp. v. Cystic Fibrosis Foundation, 81 Md.App. 602 , 568 A.2d 1170 , cert. denied sub nom., 319 Md. 582 , 573 A.2d 1337 (1990). The genesis of the appeal is a dispute over the provisions and implementation of a commercial lease.

Parties to the original suit were the lessor, 6933 Arlington Development Limited Partnership (Arlington), The Maxima Corporation (Maxima), an assignee of the original lease, and Cystic Fibrosis Foundation (Cystic), a subtenant of Maxima. Arlington had leased Suite 200 on the second floor of the subject property and basement space (T100) to Technassociates, Inc. (TI) under the “Master Lease,” which provided that Arlington would agree to waive the first six months of rent; to pay $260,000 to TI as a “signing Payment” upon execution of the lease; to pay $260,000 as an “Occupancy Payment” upon TI’s occupying the premises; and to pay a final $200,000 as an “Anniversary Payment” on the first anniversary of the commencement of the leased term. After Maxima acquired TI’s interest in the lease and sublet of Suite 200 to Cystic Fibrosis, a dispute arose because T100 had remained unoccupied. The dispute culminated in a rejection by Arlington of a proposed offer by Maxima to sublease T100 to Cystic.

Cystic filed a complaint naming Arlington and Maxima as defendants, seeking declaratory judgment that it was entitled to remain in Suite 200 and that it was entitled to a monetary award for tenant incentive payments. Maxima cross-claimed against Arlington, seeking damages for breach of the Master Lease, indemnity, and declaratory relief. Arlington counterclaimed against Cystic for hold-over rent as to ⁴⁴⁷ Suite 200 and filed a cross-claim against Maxima for indemnity. The trial court found that Maxima had breached its lease with Arlington and ordered it to pay damages to both Arlington and Cystic.

On appeal, this Court made the following rulings, respectively: (1) affirmed the trial court’s ruling that Maxima defaulted on the Master Lease; (2) reversed the trial court’s ruling that Arlington’s refusal to agree to Maxima’s proposed sublease was reasonable; (3) reversed the trial court’s ruling that Maxima was liable for damages to Arlington from the point at which Cystic was presented as a subtenant to Arlington; (4) affirmed that Cystic was a subtenant of Maxima and not an assignee of the Master Lease; (5) affirmed that the Master Lease was one lease and not bifurcated; (6) ruled that “Arlington may not recover from Maxima for any damage related to the T100 space beyond that incurred due to Maxi-ma’s failure to occupy the space from September, 1986 to September, 1987, the date it proposed to Arlington a subtenancy to Cystic”; (7) vacated those portions of the trial judge’s damage award as between Maxima and Arlington relating to lost rent, operating costs, taxes, and attorneys’ fees; (8) noted that “under the master lease, Arlington’s obligation to make the tenant incentive payments remained even in the face of a default,” because Maxima’s attempted cure was rejected; (9) affirmed the trial court’s ruling to deny Arlington a forfeiture against Cystic; (10) affirmed that Arlington was not entitled to holdover rent or a refund of its incentive payment because Cystic was entitled to remain in possession; (11) reversed the trial court’s denial of attorneys’ fees to Cystic from Maxima; and (12) held that Cystic was entitled to its contracted share of the incentive payments, which this Court has held that Arlington owes Maxima. On remand, the trial court issued the following pertinent orders: 1 ⁴⁴⁸ [1] that judgment be, and is hereby entered in favor of Arlington and against Maxima in the amount of $56,-154.60, representing rent for the T100 space from March 3, 1987 to September 15, 1987, plus interest and late fees until February 2, 1989, interest on this judgment to accrue at the rate of $15.38 per day from March 7, 1989; [2] that judgment be and is hereby entered in favor of Maxima and against Arlington in the amount of $255,-007.06, representing: [ (a) ] the unpaid balance of the Occupancy Payment; [ (b) ] the Anniversary Payment; and [ (c) ] the costs on appeal, interest on the judgment to accrue at the rate of $69.55 per day from the entry of this judgment; ... [3] that judgment be and is hereby entered in favor of Maxima and against Arlington in the amount of $70,-068.78 [2] as indemnification for the payment of Cystic’s net legal fees; ... [4] that Arlington submit documentation to this Court to support an award of attorney[s’] fees for the time counsel expended related to Maxima’s default under the lease with respect to its failure to pay rent from March 3, 1987 through September 3, 1987; ... and [5] in accordance with Section 41 of the Lease, that the judgment in favor of Maxima and against Arlington shall be satisfied solely from the equity in the Leased Premises.... Pursuant to this order, Arlington submitted a two page schedule of fees to the court. The schedule stated only the dates, hours spent, and billing rate.

Several dates indicated well over twenty-four hours charged without specifying the names of the attorneys performing the services. The trial ⁴⁴⁹ court, by letter dated February 26, 1993, requested a more detailed schedule. By letter dated March 10, 1993, Arlington requested an in camera inspection of the bills after unrelated charges were redacted. Maxima indicated its opposition to the in camera inspection in a letter dated March 11,1993.

On June 9, 1993, the trial judge ordered an award of attorneys’ fees in favor of Arlington in the amount of $127,945. Maxima, appellant/cross-appellee, presents the following issues: I. Whether the [trial c]ourt erred in granting Appellee Arlington $127,945 in legal fees.

II

Whether the [trial cjourt erred in denying appellant Maxima’s claim for relief, including pre-judgment interest, post-judgment interest and legal fees. III. [Whether the trial court erred when it ruled that damages awarded to Maxima against Arlington should be satisfied solely from the equity in the leased premises.] [3] Arlington, appellee/cross-appellant, presents the following issue: IV. Whether the trial court erred in granting Maxima $105,406.90 against Arlington as indemnification for the payment of Cystic’s attorneys’ fees assessed against Maxima. FACTS The facts giving rise to the original appeal were detailed in our opinion, Maxima, 81 Md.App. at 606-609 , 568 A.2d 1170 , and, therefore, will only be repeated as necessary.

The premises located at 6391 Arlington Boulevard, Bethesda, Maryland, had been originally leased by Arlington to Technassociates, Inc. Arlington extended to Technassociates certain tenant incentives including waiver of the first six months of ⁴⁵⁰ rent, payment of $260,000 as a “signing Payment,” payment of $260,000 as an “Occupancy Payment,” and an Anniversary Payment to be made on the first anniversary of the commencement of the leased term. Arlington paid TI the signing payment. Subsequently, Maxima acquired TI’s interest in the lease and sublet Suite 200 to Cystic. When Cystic moved into Suite 200, on October 3, 1986, Maxima demanded the $260,000 Occupancy Payment.

Arlington refused to make the Occupancy Payment because T100 remained unoccupied, but later offered a partial payment if Maxima assumed responsibility for an alleged 30 day delay in occupancy of the premises leased to Cystic. Thereafter, Arlington tendered to Maxima partial payment—a $204,441.55 check—the negotiability of which was conditioned on Maxima’s signing of an attached addendum to the lease recognizing September 3, 1986 as the commencement date of the lease; thus the six month waiver period would end in February and rent payments would begin accruing on March 3, 1987. Maxi-ma negotiated the check but did not sign the addendum. In July 1987 renovation of T100 was complete, and Arlington notified Maxima that it would be in default if it did not occupy that space.

After a series of negotiations, Maxima offered to sublease T100 to Cystic. Arlington rejected the proposal and notified Maxima and Cystic that it would repossess the leased premises. Cystic filed a complaint naming Arlington and Maxima as defendants, seeking a declaration that it was entitled to remain in Suite 200 and that it was entitled to a monetary award for tenant incentive payments. Maxima cross-claimed against Arlington, seeking damages for breach of the Master Lease, indemnity, and declaratory relief.

Arlington counterclaimed against Cystic for holdover rent as to Suite 200 and cross-claimed against Maxima for indemnity. LEGAL ANALYSIS I Maxima argues that the trial court committed reversible error because (a) it did not comply with Md.Rule 2-522(a) ⁴⁵¹ and “dictate into the record or prepare and lile in the action a brief statement of the reasons for the decision and the basis of determining” 4 the amount of attorneys’ fees relating to Maxi-ma’s failure to occupy space T100 from September 1986 to September 1987; and (b) the amount of attorneys’ fees awarded is excessive. Appellant further suggests that the trial court erred when it examined, in camera, the only detailed attorneys’ fee schedule submitted and did not permit appellant or appellant’s counsel to review or challenge the fee schedule. In response, appellee contends that the record leading up to the trial judge’s order reveals that Arlington was awarded attorneys’ fees for the litigation against Maxima regarding the occupancy of T100 from September 1986 to September 1987.

Examples supporting this claim, asserts appellees, include this Court’s mandate requiring the trial court to recalculate attorneys’ fees; the trial court’s order dated September 24, 1992, which ordered “that Arlington submit documentation to this Court to support an award of attorney[s’] fees for the time counsel expended related to Maxima’s default under the lease with respect to its failure to pay rent from March 3, 1987 through September 3, 1987”; 5 and a February 26, 1993 letter from the trial judge to Arlington (a copy was sent to Maxima’s counsel), requesting more detailed information delineating what services were rendered and how the charges related to Maxima’s default. We are unpersuaded by appellee’s assertions. Although the record sets forth why, generally speaking, attorneys’ fees were awarded, the record fails to disclose sufficiently why the amount awarded was reasonable. Moreover, the court’s statement failed to comport with Rule 2-522(a); the record does ⁴⁵² not provide sufficient competent evidence to support the amount of fees awarded (Rule 8-131(c)) and the trial judge’s review of Arlington’s attorneys’ fees in camera was a plain error of law.

A The legal basis for Arlington’s award of attorneys’ fees is Master Lease Sections 25 and 15, which provide, in pertinent part: Section 15. Indemnity. ... In case Landlord or Tenant shall be made a party (ies) to any litigation commenced by or against the parties based on an act or omission of either party, then Tenant and Landlord shall protect and hold each other harmless, and shall pay all costs, expenses and reasonable attorneys’ fees incurred or paid by the other in connection with such litigation. Tenant and Landlord shall also pay all costs, expenses and reasonable attorneys’ fees that may be incurred or paid by the other in successfully enforcing the covenants and agreements in this Lease.

Section 25. Defaults of Tenant..... (e) ----In addition to the foregoing, Tenant shall pay to Landlord reasonable attorneys’ fees with respect to any lawsuit or action instituted by Landlord to enforce the provisions hereof. As a general rule, a trial court may award attorneys’ fees only in the unusual situation where the trial court is authorized to award the prevailing litigant reasonable attorneys’ fees or where, as more common, a contract between the parties specifically authorizes attorneys’ fees.

Reisterstown Plaza v. General Nutrition Centers, Inc., 89 Md.App. 232, 241-42 , 597 A.2d 1049 (1991) (citing cases); Maxima, 81 Md.App. at 622 , 568 A.2d 1170 ; see also Bankers and Shippers Ins. Co. v. Electro Enter., Inc., 287 Md. 641, 661 , 415 A.2d 278 (1980). Moreover, in this jurisdiction, “as a general rule the question of attorneys’ fees is a factual matter which lies within the ‘sound discretion of the trial judge and will not be overturned unless clearly erroneous.’ ” Reisterstown Plaza, ⁴⁵³ 89 Md.App. at 248 , 597 A.2d 1049 , quoting Dent v. Simmons, 61 Md.App. 122, 127 , 485 A.2d 270 (1985), quoting Foster v. Foster, 33 Md.App. 73, 81 , 364 A.2d 65 , cert. denied, 278 Md. 722 (1976). In circumstances in which attorneys’ fees are awarded based on a contractual right, the losing party is “entitled to have the amount of fees and expenses proven with the certainty and under the standards ordinarily applicable for proof of contractual damages.” Bankers, 287 Md. at 661 , 415 A.2d 278 .

In Bankers , the Court of Appeals reversed the trial court’s award of only 30 percent of the total attorneys’ fees sought. The Court remarked that the informal hearing conducted by the trial court neither required any real proof of the amount of the fees and expenses claimed nor provided Bankers with a realistic opportunity to challenge those fees and expenses.... Instead, the parties merely submitted, prior to the hearing, informal fee and expense petitions and made short, oral representations at the hearing of the amounts claimed. On remand, there should be a proper trial regarding the damages incurred....

Id. at 661-62 , 415 A.2d 278 . Other jurisdictions have delineated the detail required and the quantum of information that the prevailing party must provide. The overwhelming authority holds that (a) the party seeking the fees, whether for him/herself or on behalf of a client, always bears the burden of presenting evidence sufficient for a trial court to render a judgment as to their reasonableness; (b) an appropriate fee is always reasonable charges for the services rendered; (c) a fee is not justified by a mere compilation of hours multiplied by fixed hourly rates or bills issued to the client; (d) a request for fees must specify the services performed, by whom they were performed, the time expended thereon, and the hourly rates charged,; (e) it is incumbent upon the party seeking recovery to present detailed records that contain the relevant facts and computations undergirding the computation of charges; (f) without such records, the reasonableness, vel non, of the fees can be deter ⁴⁵⁴ mined only by conjecture or opinion of the attorney seeking the fees and would therefore not be supported by competent evidence. Kaiser v. MEPC American Properties, Inc., 164 Ill.App.3d 978 , 115 Ill.Dec. 899, 902-03 , 518 N.E.2d 424, 427-28 (1987) (collecting Illinois case law for the foregoing propositions).

Accord Kinsey v. Preeson, 746 P.2d 542, 552 (Col.1987) (trial court’s findings regarding award of attorneys’ fees were insufficient where determination of reasonableness was based on an affidavit submitted after trial and no opportunity was provided to challenge the affidavit); Sperber v. Penn Cent. Corp., 150 A.D.2d 356 , 540 N.Y.S.2d 877, 878 (1989) (absent evidence regarding specifics as to the time and labor required, the record was insufficient to determine reasonable attorneys’ fees); see also Bosch Die Casting, Co. v. hunt Mfg. Co., 236 Ill.App.3d 18 , 177 Ill.Dec. 476, 482-83 , 603 N.E.2d 546, 552-53 (Ill.App.Ct.1992). Once presented with these facts, the trial court must still evaluate the reasonableness of the fees.

Again, the burden is on the party seeking recovery to provide the evidence necessary for the fact finder to evaluate the reasonableness of the fees. 6 Maryland courts consider a variety of factors including, but not limited to, those delineated in Md.Rule 1.5. Those factors are: “(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; “(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; “(3) the fee customarily charged in the locality for similar legal services; “(4) the amount involved and the results obtained; “(5) the time limitations imposed by the client or by the circumstances; ⁴⁵⁵ “(6) the nature and length of the professional relationship with the client; “(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and “(8) whether the fee is fixed or contingent.” Reisterstown Plaza, 89 Md.App. at 247 , 597 A.2d 1049 ; Attorney Grievance Comm’n v. Korotki, 318 Md. 646, 664-65 , 569 A.2d 1224 (1990). B Arlington submitted below only a very cursory schedule of its attorneys’ fees that included the rate charged, the number of hours worked, and the dates that work was performed. Arlington urged, via letter, apparently to the trial judge’s satisfaction, that it could not be ordered to submit its detailed fee schedule because it was “concerned with the disclosure of attorney/client information that may be set forth in these statements, even after redacting various portions of the statements.” Nonetheless, detailed fee schedules were included for an in camera inspection only, and a suggestion was made that a hearing be held if the court thought that it was necessary for Maxima’s counsel to review the statements.

Maxima responded to the trial judge regarding Arlington’s letter, objecting to an in camera inspection and suggesting that the trial court would nevertheless need to make a detailed explanation of the basis of its fee award. The trial court ordered an award of attorneys’ fees in the amount of $127,945.00 without explanation. The trial court erred in not permitting Maxima to review the fee schedule submitted in camera, to cross-examine Arlington and its attorneys’ on those records, and to provide its own contradictory evidence. Attorneys’ bills are generally not protected by the attorney-client privilege; and to the extent that portions of a bill might have been privileged, Arlington’s blanket assertion was inadequate.

Because the attorney-client privilege has the effect of withholding relevant information from the factfinder, it is ⁴⁵⁶ applied only when necessary to achieve its limited purpose of encouraging full and frank disclosure by the client to his or her attorney. Clarke v. American Commerce National Bank, 974 F.2d 127, 129 (9th Cir.1992); accord Criminal Investigation, 326 Md. at 11 , 602 A.2d 1220 (privilege is not absolute). Moreover, the burden of establishing the privilege is on the party asserting the privilege. Id.

In In re Criminal Investigation No. 1/242Q, 326 Md. 1, 11 , 602 A.2d 1220 (1992) [hereinafter Criminal Investigation], the attorney sought to quash a subpoena on the ground that the information was privileged and confidential. In holding that the attorney’s motion should have been denied, the Court of Appeals wrote The overwhelming weight of authority holds that the attorney-client privilege is generally not violated by requiring disclosure of the payment of attorney’s fees and expenses. “Fee arrangements usually fall outside the scope of the privilege simply because such information ordinarily reveals no confidential professional communication between attorney and client, and not because such information may not be incriminating.” Id. at 7, 602 A.2d 1220 , quoting In re Osterhoudt, 722 F.2d 591, 593 (9th Cir.1983). The Court of Appeals was satisfied that the fee arrangement between an attorney and client is collateral to, and not an integral part of, the fiduciary relationship and that disclosure of the fee would not have a chilling effect on the relationship. Id.

The only exception to the general rule here pertinent is where “disclosure of the client’s identity or the existence of a fee arrangement would reveal information that is tantamount to a confidential professional communication.” Id., 326 Md. at 9 , 602 A.2d 1220 . In the instant case, the necessity of submitting fee information is addressed not to Arlington’s attorney but to the client, the holder of the privilege, and the party seeking reimbursement for its expenses. In Clarke v. American Commerce National Bank, 974 F.2d 127, 129 (9th Cir.1992), the U.S. District Court for the Central District of California wrote: ⁴⁵⁷ [T]he identity of the client, the amount of the fee, the identification of payment by case file name, and the general purpose of the work performed are usually not protected from disclosure by the attorney-client privilege. However, correspondence, bills, ledgers, statements, and time records which also reveal the motive of the client in seeking representation, litigation strategy, or the specific nature of the services provided, such as researching particular areas of the law, fall within the privilege.

In addition, regardless of the privilege, the party seeking reasonable attorneys’ fees provided by contract bears the ultimate burden of providing sufficient evidence to prove its damages. Bankers, 287 Md. at 661 , 415 A.2d 278 . The attorney-client privilege may prevent disclosure of portions of a fee schedule; it does not, however, absolve the recovering party from its burden of proving damages. An in camera inspection may be appropriate to inspect alleged confidential communications to determine whether the privilege applies.

Clarke, 974 F.2d at 129 (9th Cir. 1992). A blanket assertion is generally “extremely disfavored,” and ordinarily the privilege must be raised as to each record so that the court can rule with specificity. In the case sub judice, fees were restricted to certain services and, therefore, the attorneys were already required to review the billing record to isolate the fees associated with that specific service. A trial court’s ruling on the scope of the attorney-client privilege is a mixed question of fact and law, and we review it de novo.

See Clarke, 974 F.2d at 130 . Nonetheless, because Arlington has not made a specific and detailed motion alleging that certain portions of the numerous billing entries are privileged, we