Programmers' Consortium, Inc. v. Clark

MOYLAN, J. On the ultimate merits, the trial process managed to resolve this case without undue difficulty. Essentially what is before us on appeal are several procedural tangles. We will attempt to untangle those procedural snarls so as to effectuate what we perceive to have been the jury’s decision on the merits. ⁵¹¹ The appellee, Karl Clark, filed suit in the Circuit Court for Montgomery County against his former employer, the appellant, Programmers’ Consortium, Inc., for unpaid wages. On November 22, 2006, at the end of a two-day trial, the jury returned an award of $80,000.01 in favor of the appellee.

On September 27, 2006, the trial judge further ordered the appellant to pay attorney’s fees in the amount of $41,100 plus costs in the amount of $2,794.17. On appeal, the appellant raises the three contentions 1. that the judge erroneously permitted the jury to render its verdict on a redundant statutory claim for unpaid wages and erroneously submitted to the jury a confusing verdict sheet; 2. that the judge erroneously awarded attorney’s fees to the appellee; and 3. that the judge erroneously dismissed the appellant’s claims for trespass, conversion, and punitive damages. Factual Background Taking, as we must, that version of the facts most favorable to the prevailing party (the appellee), there was evidence to support the following version of events. The appellee was hired by the appellant on October 14, 2003, to perform computer software sales services at a base salary of $85,000 per year.

Both parties signed a written employment agreement. The appellee was to be paid, on a semi-monthly basis, a net amount, after deductions, of $3,541.67. The employment was subject to a 90-day probationary period, during which the appellee was obligated to generate nine demonstrations of the appellant’s product. The appellee successfully performed during the probationary period, scheduling the requisite number of customer demonstrations.

It was during that probationary period that the appellee first became aware that the appellant was suffering financial difficulties. Several of the appellee’s paychecks bounced. They were subsequently made good by the appellant, who explained that because of the nature of the business and the ⁵¹² fact that it was a start-up company, there were sometimes difficulties with the cash flow. The appellee accepted the explanation and continued to perform services for the appellant.

The appellee trusted the appellant and enjoyed working for it. After the conclusion of the 90-day probationary period, the appellee continued to work and was never advised that his compensation arrangement was being modified in any way. Specifically, he was never told that his compensation was being switched to a commission only basis. The appellee continued working on a full-time basis.

Over the course of succeeding months, the payment of the appellee’s salary remained irregular and intermittent. The appellant continued to explain that it needed to close some sales and that, as it did so, the appellee would be paid. The appellee remained patient. In the months of July, October, and November of 2004, the appellee received paychecks representing essentially the monthly fraction of an annual salary of $ 85,000.

At no time was there any suggestion that the appellee was being switched onto a “commission only” compensation basis. The “monthly” payments, however, remained sporadic, and the appellee, increasingly concerned, inquired more insistently about his paycheck. The appellant continued to explain that the cash in hand was in short supply and that the appellee should be patient. It was in January of 2005 that the appellant initiated discussions with the appellee about a modification of their compensation arrangement.

The appellant offered the appellee a base salary of $60,000 per year plus commissions after a certain threshold of sales had been passed. The suggested arrangement was unsatisfactory to the appellee, and he discontinued working for the appellant. Procedural Background On March 4, 2005, the appellee filed suit. The complaint consisted of two counts.

The first count charged the appellant with a breach of contract, alleging the appellant’s failure to fulfill its contractual obligation to pay the appellee’s wages pursuant to the employment agreement. The basic damages ⁵¹³ clause requested was $80,000.01 in unpaid wages. The count also sought punitive damages, court costs, and reasonable attorney’s fees. The second count was brought pursuant to Maryland Code, Labor and Employment Article, § 3-501 et seq.

That count also sought basic damages of $80,000.01, representing the unpaid wages. It also sought, pursuant to § 3-507.1(b), treble damages on the basis that the wages had been withheld “not as a result of a bona fide dispute.” Both counts were based upon the same conduct by omission, the failure to pay the wages that were due. The appellee simply based his claim, as he was entitled to do, on two alternative legal predicates — a generic breach of contract claim and a statutory claim pursuant to §§ 3-505 and 3-507.1(a). The second count also included a claim for treble damages pursuant to subsection 3-507.1(b).

Section 3-507.1(a) and (b) provide: (a) In general. — Notwithstanding any remedy available under § 3-507 of this subtitle, if an employer fails to pay an employee in accordance with § 3-502 or § 3-505 of this subtitle, after 2 weeks have elapsed from the date on which the employer is required to have paid the wages, the employee may bring an action against the employer to recover the unpaid wages. (b) Aivard and costs. — 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 count may award the employee an amount not exceeding 3 times the wage, and reasonable counsel fees and other costs. (Emphasis supplied). The Maryland Wage Payment Law It will be helpful to put the statutory claim in historic perspective.

Title 3 of the Labor and Employment Article deals generally with “Employment Standards and Conditions.” Subtitle 5 thereof is the Maryland Wage Payment and Collection Law, embracing § § 3-501 through 3-509. As Judge ⁵¹⁴ Battaglia pointed out in Baltimore Harbor Charters, Ltd. v. Ayd, 365 Md. 366, 380-81 , 780 A.2d 303 (2001), the Maryland Wage Act was enacted by the General Assembly in 1966. Initially it conferred “enforcement duties and powers on the Commissioner of the Department of Labor and Industry,” thereby giving “the State the ability to litigate wage disputes on behalf of private citizens who were suffering the abuse of non-payment of wages from their employers.” With specific reference to § 3-507.1 now before us, the General Assembly, by ch. 578 of the Acts of 1993, amended the Wage Act “to provide employees with a private cause of action against employers for failure to pay wages owed to the employee upon termination of the employment relationship.” 365 Md. at 383 , 780 A.2d 303 . In Battaglia v. Clinical Perfusionists, Inc., 338 Md. 352, 356 , 658 A.2d 680 (1995), Judge Rodowsky elaborated upon that addition of a private remedy by the aggrieved employee.

Prior to October 1, 1993 Md.Code (1991), LE § 507 was the exclusive civil enforcement mechanism in the Act. It provides for initial informal mediation by the Commissioner of Labor and Industry. Id. § 3-507(a)(l). Thereafter, with the consent of the employee, the Attorney General may bring an action on the employee’s behalf, id. § 3-507(a)(2), in which “the court may award the employee an amount not exceeding 3 times the wage.” Id. § 3 — 507(b)(1).

The private remedy which Battaglia seeks to enforce was added to the Act as § 3-507.1 by Chapter 578 of the Acts of 1993, effective October 1, 1993. (Emphasis supplied). In Baltimore Harbor Charters, Ltd. v. Ayd, 134 Md.App. 188, 204-05 , 759 A.2d 1091 (2000), aff'd, 365 Md. 366 , 780 A.2d 303 (2001), Judge Adkins wrote for this Court in explaining that the “principal purpose of the private remedy provided under the Act was ‘to provide a vehicle for employees to collect, and an incentive for employers to pay, back wages.’ ” Focusing in on § 3-505, Judge Adkins pointed out that its ⁵¹⁵ particular purpose was to insure prompt payment of wages that were due following a termination of employment. The Act also requires prompt payment of wages after termination, by specifying when an employer must pay wages due for work performed before termination of employment.

Section 3-505 provides that “[e]ach employer shall pay an employee ... all wages due for work that the employee performed before the termination of employment, on or before the day on which the employee would have been paid the wages if the employment had not been terminated.” 134 Md.App. at 205 , 759 A.2d 1091 . For a violation of § 3-505 (as well as for a violation of § 3-502), § 3-507.1 is then the enforcement mechanism for an employee bringing a private action. To enforce both of these provisions, the Act creates a remedy if “an employer fails to pay an employee in accordance with” either the “regular pay” requirements of section 3-502 or the “prompt pay after termination” requirements of section 3-505 ... Section 3-507.1.

Id. “Redundant Claims” and “Inconsistent Verdicts” Against that statutory backdrop, the appellant’s first contention rings hollow. The contention is that: The Circuit Court Erred by Permitting the Jury to Render a Verdict on a Redundant Statutory Claim for Unpaid Wages That Was Not Pled in the Complaint and by Submitting a Flawed Jury Verdict Form That Resulted in a Defective, Confusing, Duplicative and Inconsistent Verdict. It is essentially a two-pronged attack on the trial judge’s verdict sheet. The judge put five questions to the jury.

The jury returned five verdicts that seem to us to have made perfect sense. Verdict Form: 1. Under Count 1, did the defendant The Programmers’ Consortium breach a contract between Karl Clark and The Programmers’ Consortium? ⁵¹⁶ Verdict: Yes. Verdict From: 2.

State the amount of damages suffered by Mr. Clark as a result of the breach of contract by the defendant The Programmers’ Consortium. Verdict: $1.00 plus reasonable counsel fees. Verdict Form: 3. Under Count 2, did the defendant The Programmers’ Consortium fail to pay wages due to Karl Clark at the conclusion of his employment?

Verdict: Yes. Verdict Form: 4. What amount of wages are due to Karl Clark from The Programmers’ Consortium? Verdict: $80,000.01.

Verdict Form: 5. Were the wages to Mr. Clark withheld in violation of the law and not as a result of a bona fide dispute between the parties? Verdict: No. Two of those issues submitted to the jury, # 2 and # 4, concern only the amount of damages. Issues #1, #3, and # 5 concern liability. “Redundant” Claims?

Contrary to the appellant’s argument, Issue # 1 (under Count 1) and Issue # 3 (under Count 2) are not impermissibly “redundant.” For the grievance of unpaid wages Maryland law now provides an employee with no less than two avenues of redress. One is a common law action for breach of contract. Additional statutory redress is now, as we have discussed, available pursuant to §§ 3-505 and 3-507.1 of the Wage Payment Law. It is a common practice for a plaintiff to bring charges under both of these alternative avenues of relief. 1 See Battaglia v. Clinical Perfusionists, 338 Md. at ⁵¹⁷ 354, 658 A.2d 680 (“Battaglia filed a two-count complaint ... alleging in Count 1 breach of her employment contract and in Count 2 a violation of the Act.”) (emphasis supplied); Baltimore Harbor v. Ayd, 134 Md.App. at 195 , 759 A.2d 1091 (“Ayd filed a complaint against BHC alleging breach of contract, quantum meruit, unjust enrichment, and a violation of Maryland’s Wage Payment and Collection Law.”) (emphasis supplied).

Liability may be based on either or both of those alternative legal theories. The only thing that is barred is double recovery. “Unpled” Claims? Neither is it true that Issue #3 dealt with a “statutory claim for unpaid wages that was not pled in the complaint.” Issue # 3 dealt with Count 2 and Count 2 expressly described itself as a “Statutory violation” and alleged that its statutory predicate was “Labor and Employment Article, Sects. 3-501, et seq.” The appellant appears to be asking, it seems to us disingenuously, how a single count (Count 2) could give rise to two separate issues (Issue # 3 and Issue # 5) and to two separate answers. The answer is quite simple.

Count 2, as submitted to the jury, gave rise to a compound question, and the trial judge had the foresight to break the compound question down into its component parts. A failure to pay wages after an employee’s termination under § 3-505 may be pursued as a private action pursuant to § 3-507.1. A violation under § 3-507.1 may be of either a basic and unaggravated variety, under subsection (a), or of an aggravated variety, under subsection (b). The two are not mutually exclusive.

Indeed, the unaggravated variety is a lesser, included violation within the aggravated variety. The judge simply posed the basic violation (Issue ⁵¹⁸ #3) and the aggravation (Issue # 5) as separate questions. In Baltimore Harbor v. Ayd, 134 Md.App. at 217 , 759 A.2d 1091 , this Court recognized that potentially double-barreled impact of § 3-507.1: The statutory damages available under section 3-507.1 are both compensatory and punitive. Self-evidently, that double-barreled potentiality created the possibility of 1) compensatory damages alone or 2) compensatory damages plus enhanced damages.

The jury, therefore, needed some medium through which it could communicate its choice of one or both. Hence the bifurcated inquiry on the verdict sheet. If, by contrast, only a single compound question had been put to the jury, the answer could have been frustratingly ambiguous. If the jury had been asked only whether an aggravated violation of § 3-505 had occurred, giving rise to the possibility of treble damages, the answer “No” would have left the court very much in the dark.

It would not have known whether the jury had found an unaggravated violation of § 3-505, pursuant to § 3-507.1(a), or not. Fortunately, the trial judge forfended such an unresolved ambiguity by sensibly breaking down the compound question into its two parts. We see nothing amiss in that. “Inconsistent” Verdicts? The appellant finally argues that by “permitting the jury to consider appellee’s wage claim twice, once as a breach of contract claim alleging only failure to pay wages and again as a statutory claim for non-payment of those same wages,” the result “was unfair to appellant and was likely to lead to confusion and an inconsistent verdict.” The alleged “inconsistency” was between 1) under Issue # 2, the $1.00 in damages for the breach of contract, and 2) under Issue #4, the $80,000.01 in damages for the Wage Law violation.

The appellant seems to be saying that if it were, indeed, liable for the unpaid wages under both Count 1 and Count 2, logical consistency should have required the jury to award damages of $80,000.01 under each count, for a total damages award of $160,000.02. By dumb luck or by prescience, however, the ⁵¹⁹ jury did no such thing. The appellant does not persuade us how it was prejudiced by that act of ostensibly “inconsistent” grace. 2 In cases where the jury is not as prescient as this one was in avoiding a double and undeserved recovery, it is the judge who then has to take the necessary remedial measures. In Battaglia v. Clinical Perfusionists, the jury gave the plaintiff an award under the breach of contract count and a separate award for the violation of the Wage Act.

The trial judge cured the double recovery problem by granting a judgment notwithstanding the verdict. 338 Md. at 355 , 658 A.2d 680 . The Court of Appeals also noted, 338 Md. at 358 , 658 A.2d 680 : We were further advised that both parties assumed that, if the verdict on Count II had been allowed to stand, it would have been reduced by the amount of the verdict on Count I, in order to avoid a double recovery. (Emphasis supplied). In Baltimore Harbor v. Ayd, this Court also dealt with a double recovery problem.

The jury awarded the plaintiff $76,099.33 “on his breach of contract claim, and made an identical award on his unjust enrichment claim.” 134 Md.App. at 195 , 759 A.2d 1091 . The fact that the second recovery was for unjust enrichment rather than for a violation of the Wage Law is inconsequential. The trial judge solved the problem of double recovery by persuading the plaintiff to accept a remittitur for the precise amount of the duplicate award. This Court put its seal of approval on the remittitur as we pointed out that the trial court recognized the peculiarity in the jury awarding precisely the same amount of dollars and cents for both the ⁵²⁰ breach of contract and the unjust enrichment claims, and concluded that the jury became confused about how to deal with the unjust enrichment claim. 134 Md.App. at 201 , 759 A.2d 1091 (emphasis supplied).

A double recovery was deftly avoided in this case, and that is no cause for regret. In the last analysis, the verdict sheet was not “flawed;” the charge of having violated the Wage Payment Law was not “unpled;” and the verdicts were not “inconsistent.” The Award of Attorney’s Fees The trial judge ultimately ordered the appellant to pay to the appellee attorney’s fees in the amount of $41,100 plus costs in the amount of $2,794.17. The appellant contends that the judge had no authority to do that. There were, of course, only two bases on which an award of attorney’s fees could have been made.

The jury found the appellant liable for a breach of promise under Count 1. The jury also found the appellant liable for a violation of the Wage Payment Law under Count 2. Breach of Contract And the “American Rule” We fully agree with the appellant that the judge had no authority to award attorney’s fees to the appellee for the breach of contract. The appellee, indeed, does not contest this.

The prevailing law was definitively stated for this Court by Judge Davis in Wells Fargo Bank v. Diamond Point Plaza, 171 Md.App. 70, 103 , 908 A.2d 684 (2006): Upon considering a request for attorney’s fees, Maryland courts adhere to the “American Rule,” which states that “attorney’s fees are ordinarily not recoverable by a prevailing party in a lawsuit ... ‘[t]he general rule is that costs and expenses of litigation, other than the usual and ordinary Court costs, are not recoverable in an action for [compensatory] damages.’ ” We have previously noted that “[t]his is true whether the action seeking fees sounds in contract or tort.” In some instances, “a trial court may award attorneys’ fees only in the unusual situation where the trial court is authorized to award the prevailing litigant reason ⁵²¹ able attorneys’ fees or where, as more common, a contract between the parties specifically authorizes attorneys’ fees.” (Emphasis supplied). See also Hess Construction Co. v. Board of Education of Prince George’s County, 341 Md. 155, 159-61 , 669 A.2d 1352 (1996); Chang v. Brethren Mutual Insurance Co., 168 Md.App. 534, 551-52 , 897 A.2d 854 (2006); Stevenson v. Branch Banking and Trust Corp., 159 Md.App. 620, 662-64 , 861 A.2d 735 (2004); Maxima v. 6933 Arlington Development, 100 Md.App. 441, 452-53 , 641 A.2d 977 (1994). There was in this case no contractual agreement between the parties with respect to attorney’s fees. Section 3-507.1(b) If an award could be properly authorized in this case, it could only be by virtue of the Wage Payment Act and, more specifically, by § 3-507.1(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. The appellant’s contention that the award of attorney’s fees was erroneous relies exclusively on the jury’s verdict on the fifth of the issues submitted to it. Verdict Form: 5. Were the wages to Mr. Clark withheld in violation of the law and not as a result of a bona fide dispute between the parties?

Verdict: No. We agree with the appellant that under § 3-507.1(b) neither enhanced damages may be awarded nor may the payment of attorney’s fees and costs be shifted to the non-prevailing party for an ordinary violation of the Wage Payment Act. Section 3-507.1(b) only comes into play when the basic violation is aggravated by the additional factor that the employer withhold the payment of wages without an even plausibly good reason for having done so, to wit, “not as a ⁵²² result of a bona fide dispute.” In Admiral Mortgage, Inc. v. Cooper, 357 Md. 533, 546 , 745 A.2d 1026 (2000), Judge Wilner noted the difference between a basic violation of the Wage Payment Law and an aggravated violation. Admiral views § 3-507.1(a) as establishing the private right of action by an employer to recover unpaid wages--- Section 3-507.1(b), however, deals with penalties, not the basic right to recover the wages. (Emphasis supplied).

The Separate Questions of What? and Who? Under § 3-507.1(b), there are two types of questions calling for decision. There is the substantive question of, “What must be decided?” There is, quite distinctly, the procedural question of “Who shall do the deciding?” In terms of what must be decided, there are several different substantive questions: 1. Did the aggravating circumstance of the wages being withheld “not as a result of a bona fide dispute” occur so as to trigger the possibility of 1) enhanced damages and/or 2) the shifting of attorney’s fees and/or costs? 2.

If the triggering event occurred, in what amount, if any, should up to the treble damages be awarded? 3. If the triggering even occurred, in what amount, if any, shall the attorney’s fees and/or costs be awarded? As to each of these substantive questions, there is the further procedural question of who, in a jury trial, gets to answer each of those substantive questions, judge or jury. To fill the matrix of substantive and procedural combinations with definitive answers, the Maryland law has been at work for eight years.

The effort began with Admiral Mortgage v. Cooper, supra, in 2000 and was followed by the succeeding stages of the Friolo v. Frankel saga: Friolo v. Frankel, 373 Md. 501 , 819 A.2d 354 (2003) (“Friolo I ”); Frankel v. Friolo, 170 Md.App. 441 , 907 A.2d 363 (2006) (“Friolo II”); and Friolo v. Frankel, 403 Md. 443 , 942 A.2d 1242 (2008) (“Friolo III”). ⁵²³ Early on in the saga, it became clear that the substantive issue of in what amount to award enhanced damages, up to the level of treble damages, would be exclusively within the discretion of the jury. It was also clear, on the other hand, that the substantive issue of in what amount to award attorney’s fees and/or costs to the prevailing party would be exclusively within the discretion of the trial judge. In Admiral Mortgage v. Cooper, as in this case, an employee successfully sued his employer for unpaid wages pursuant to §§ 3-505 and 3-507.1. The employee also sought,