Programmers' Consortium, Inc. v. Clark

MURPHY, J. This case involves the relationship between Maryland Rule 2-522(c), the “special verdict” rule, 1 and § 3-507.1 of the ⁵⁵⁰ Labor and Employment Article (LE), Maryland’s Wage Payment and Collection Law. LE § 3-507.1 provides: Action to recover unpaid wages. (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) Award 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 court may award the employee an amount not exceeding 3 times the wage, and reasonable counsel fees and other costs.

For the reasons that follow, we hold that, when a jury returns a “special verdict” in which it answers “no” to the precise question of whether the employer’s withholding of the wages was “not as a result of a bona fide dispute,” the Circuit Court is without power to award counsel fees under LE § 3-'507.1(b). Background In the Circuit Court for Montgomery County, Karl Clark, Respondent, filed a two count Complaint against The Pro ⁵⁵¹ grammers’ Consortium, Inc., Petitioner, and its owner, William Lupinacci. Respondent’s Complaint included the following assertions: 4. On or about October 14, 2003, Plaintiff accepted an offer of employment to act as Sales Vice President for the Defendant, THE PROGRAMMER’S CONSORTIUM, INC., which offer was extended by Defendants.

A copy of the written employment contract is attached hereto and incorporated herein by reference as Exhibit A. 7. Pursuant to the terms of employment, Defendants agreed to provide Plaintiff with compensation that included: a. A base annual salary of Eighty-Five Thousand Dollars ($85,000.00) payable in 24 semi-monthly paychecks; b. Additional commissions based upon sales; 9.

Consistent with this accepted offer of employment, Plaintiff commenced working for Defendants. 10. Plaintiff successfully fulfilled all his contractual obligations to Defendants. 11. Thereafter, Defendants failed to pay Plaintiff his salary as agreed. 15. Defendants have failed to pay Plaintiff, since the commencement of Plaintiffs employment, the sum of Eighty Thousand Dollars and One Cent ($80,000.01) in salary, and expense reimbursement of One Hundred Thirty One Dollars and Twenty Cents ($131.20). ⁵⁵² COUNT I (Breach of contract) 17.

Defendants have materially breached their contractual obligations to the Plaintiff by failing to pay Plaintiff his base pay, incentive compensation, expense reimbursement and other benefits. * * * WHEREFORE, under Count I hereof, Plaintiff Karl Clark, requests that this Honorable Court enter a judgment against the Defendants, jointly and severally, in the amount of Eighty Thousand Dollars and One Cent ($80,000.01) in salary and expense reimbursement in the amount of One Hundred Thirty One Dollars and Twenty Cents ($131.20), punitive damages in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00), the costs of this litigation, as well as reasonable attorney’s fees. COUNT II (Statutory violation) * 4= * 21. Maryland Annotated Code, Labor & Employment Article, § 3-501, et seq., provides that if an employer withholds the wages 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 three times the wage, and reasonable counsel fees and other costs. WHEREFORE, under Count II hereof, Plaintiff Karl Clark, requests that this Honorable Court enter a judgment against the Defendants, jointly and severally, in the amount of Eighty Thousand Dollars and One Cent ($80,000.01) in salary and expense reimbursement in the amount of One Hundred Thirty One Dollars and Twenty Cents ($131.20), ⁵⁵³ treble damages, the costs of this litigation, as well as reasonable attorney’s fees.

At the conclusion of a two day jury trial, the jury was presented with a “special verdict” sheet that included the following questions: 1. Under Count 1, did the defendant The Programmers’ Consortium breach a contract between Karl Clark and The Programmers’ Consortium? 2. State the amount of damages suffered by Mr. Clark as a result of the breach of contract by the defendant The Programmers’ Consortium. 8. Under Count 2, did the defendant The Programmers’ Consortium fail to pay wages due to Karl Clark at the conclusion of his employment? 4.

What amount of wages are due to Karl Clark from The Programmers’ Consortium? 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? As to the claim asserted in Count II, the jury received the following instructions: If you find that The Programmers’ Consortium withheld the wage of Mr. Clark in violation of the law and not as a result of a bonafide dispute, you may award Mr. Clark an amount of damages not exceeding three times the wage and reasonable counsel fees as other costs. To recover damages under the Maryland Code Annotated, Labor and Employment Article Section 3-507, plaintiff has the burden of proving that there was no bona fide dispute between the plaintiff and the defendant concerning plaintiffs wages.

To find there was no bona fide dispute between the plaintiff and the defendant, you must find that the defendant acted in bad faith and without any reasonable basis in refusing to pay the plaintiff the wages that he knew were owed to the plaintiff. An employee’s right to compensation vest when the employee does everything required to earn the wages. ⁵⁵⁴ The record shows that the following transpired when the jury returned its verdict: THE CLERK: Number one, under Count 1, did the defendant The Programmers’ Consortium breached [sic] a contract between Karl [Clark] and The Programmers’ Consortium? THE FOREPERSON: Yes. THE CLERK: Number 2, state the amount of damages suffered by Mr. Clark as a result of the breach of contract by the defendant The Programmers’ Consortium.

THE FOREPERSON: $1.00 plus reasonable counsel fees. THE CLERK: Three, under Count 2, did the defendant The Programmers’ Consortium [fail] to pay wages due to Karl Clark at the conclusion of his employment? THE FOREPERSON: Yes. THE CLERK: What amount of wages are due to Karl Clark from The Programmers’ Consortium?

THE FOREPERSON: $80,000.01. THE CLERK: Were the wages to Mr. Clark withheld in violation of the law and not as a result of a bonafide dispute between the parties? THE FOREPERSON: No. THE CLERK: Did the plaintiff/counter defendant Karl Clark breach a contract between The Programmers’ Consortium and Karl Clark? THE FOREPERSON: No. Petitioner’s post-trial motions were accompanied by a memorandum that included the following arguments: 4.

There Is No Basis For An Award of [AJttomey’s Fees. Plaintiff filed a motion for attorney’s fees and costs. The motion was filed prematurely, since judgment specifying an award of attorney’s fees has not been entered by the Court. Nevertheless, the Court entered a judgment for attorney’s fees.

This was inappropriate under Maryland law. ⁵⁵⁵ The jury awarded damages of one dollar ($1.00) plus attorney’s fees under Count 1 of the complaint for breach of contract. No attorney’s fees were awarded under Count II, not [sic] could any fees have been awarded under Count II because the jury found that any failure to pay wages by defendant was no [sic] willful and was the result of a bona fide dispute. The jury’s award of attorney’s fees under Count I was inappropriate. Maryland follows the “American Rule” which provides that attorney’s fees are not recoverable in a breach of contract action unless specified in a written contract.

Wells Fargo Bank Minn., N.A. v. Diamond Point Plaza, 171 Md.App. 70, 908 [A.2d] 684 (Md.App.2006). Even in a case alleging breach of contract for failing to pay wages, a prevailing plaintiff can only recover attorney’s fees if there is a written employment contract that provides for payment of attorney’s fees. Stevenson v. Branch Banking & Trust Corp., 159 Md.App. 620 , 861 A.2d 735, 756 (Md.App. 2004). In sum, there was no basis for the jury’s award of attorney’s fees for breach of contract and, accordingly, no basis for an award of attorney’s fees in this case.

The judgment must be amended to strike any award of attorney’s fees. An award of attorney’s fees was also inappropriate under any statutory wage claim. The only case authority cited by plaintiff in support of this argument, Friolo v. Frankel, 373 Md. 501 , 819 A.2d 354 (2003), states that an award of attorney’s fees is only appropriate under § 3-501.1 if a jury makes a finding that the failure to pay wages was willful. The same paragraph of Friolo quoted in plaintiffs brief plainly states that attorney’s fees are recoverable in a wage claim action “only in those situations where the employer acted willfully—in the absence of a bona fide dispute.” Id. [at 517, 819 A.2d] at 364.

This conclusion is mandated by the language of § 3-501.1, which plainly requires a finding that an employer acted willfully and without a bona fide dispute in failing to pay wages as a predicate to an award of attorney’s fees. In this case, the jury verdict was that ⁵⁵⁶ defendant had not acted willfully or without a bona fide dispute in failing to pay wages. Accordingly, there is no basis for the claim of attorney’s fees. If the Court disagrees with the foregoing argument and awards attorney’s fees, defendant contests the quantum of attorney’s fees requested in this case.

Defendant requests document production and discovery of attorney’s fees and a hearing on the issue. Counsel for plaintiff repeatedly stated that he was handling this case on a contingency basis. It is [sic] appears that the record submitted by plaintiff in support of his claim for attorney’s fees was created after the fact, and lumps large numbers of hours for work done over several months into a few time entries. (Emphasis in original).

The Circuit Court denied Petitioner’s motions and entered the following Order: UPON CONSIDERATION of the Plaintiffs Motion for Attorney’s Fees and Costs, Memorandum of Points and Authorities in Support thereof, ... Defendant The Programmer’s Consortium, Inc.’s Opposition thereto, ... the parties having been heard, and the Court having found that the attorney’s fees and costs are more than reasonable in light of the approximate two (2) year span of litigation, which included significant hours expended on a mediation, four (4) depositions, trial preparation, as well as, drafting and reviewing pleadings, letters, and other documents, it is hereby this 25th day of September, 2007, by the Circuit Court for Montgomery County ORDERED, that the Plaintiffs Motion for Attorney’s Fees and Costs, be and hereby is GRANTED, ORDERED, that $41,100.00 in attorney’s fees and $2,794.17 in costs be reduced to a Judgment in favor of the Plaintiff and again the Defendant, The Programmer’s Consortium, Inc.[.] Petitioner noted a timely appeal to the Court of Special Appeals. In Programmers’ Consortium, Inc. v. Karl Clark, 180 Md.App. 506 , 951 A.2d 914 (2008), while affirming the ⁵⁵⁷ judgment of the Circuit Court “in all other respects,” the Court of Special Appeals vacated the award of attorney’s fees and remanded the case for further proceedings on that issue. In doing so, the Court of Special Appeals stated: 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. 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). * * * We agree with the appellant that under § 3-507.1 (b) neither enhanced damages may be awarded nor may the payment of attorney’s fee 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 withheld the payment of wages without an even plausibly good reason for having done so, to wit, “not as a result of a bona fide dispute.” 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?” The appellant ... asserts, as an axiom not subject to question, that the judge, as a matter of course, is bound by the jury’s decision with respect to the threshold question. ⁵⁵⁸ * * ^ The appellant relies exclusively on the legal argument that the jury’s failure to find that the triggering event under § 3-507.1(b) occurred forecloses any such finding by the trial judge for his independent qualifying purposes.

Our holding to the contrary is that the trial judge is free to make such a qualifying determination for his purposes regardless of what the jury may have determined for its very different purposes. Our holding, however, is that the judge, before proceeding with an award for attorney’s fees, ■will be required to make such an actual threshold determination .... In this case, ... we do not know whether the trial judge erroneously awarded attorney’s fees for the breach of promise or permissibly awarded