Worsham v. Greenfield

EYLER, JAMES R., J. The Circuit Court for Harford County, after making the requisite finding that the plaintiff maintained a suit without substantial justification, required the plaintiff to pay a defendant attorney’s fees, expenses, and costs attributable to the defendant’s defense of the plaintiff’s suit. The principal issue presented on this appeal is whether a defendant has “incurred” attorney’s fees, expenses, or costs within the meaning of Md. Rule 1-341 when the defendant’s fees, expenses, and costs were paid by its liability insurance carrier. 1 We shall affirm the judgment of the circuit court. ³²⁷ Factual and Procedural Background On August 25, 2003, appellant, Michael C. Worsham, pro se, 2 filed a six-count complaint in circuit court against four of his neighbors, including Robert and Romualda Greenfield, appellees. 3 The other two defendants are not involved in this appeal. The counts alleged malicious prosecution for criminal charges brought against appellant on February 5, 2000, malicious prosecution for criminal charges brought in October of 2000, defamation, false light/invasion of privacy, civil conspiracy, and aiding and abetting. 4 Appellant subsequently dismissed the defamation count because it was barred by the statute of limitations. On September 30, 2004, the circuit court (Carr, J.) granted summary judgment in favor of three of the defendants, including Mrs. Greenfield.

The malicious prosecution counts, as they related to malicious destruction of property over $300, and which applied solely to Mr. Greenfield, survived. In November 2004, the malicious prosecution counts went to trial, and at the close of appellant’s case, the circuit court (Plitt, J.) granted Mr. Greenfield’s motion for judgment. Appellant appealed to this Court, and we affirmed the judgment of the circuit court. Appellant filed a petition for writ of certiorari, which the Court of Appeals denied.

On April 27, 2006, appellees filed a motion in circuit court under Md. Rule 1-341 for attorneys fees, expenses, and costs. ³²⁸ The motion was supported by an affidavit filed by Thomas Patrick Ryan, a member of the law firm, McCarthy Wilson LLP. The affiant stated that the law firm had been retained by Erie Insurance Exchange (hereinafter “Erie Insurance”) to represent appellees in the suit filed by appellant, and that the law firm had done so. The affiant further stated that attorney’s fees in the amount of $38,693.00 and expenses and costs in the amount of $1,571.48 had been incurred in defending appellees. On September 29, 2006,- appellant filed his own motion under Rule 1-341, seeking an award of costs in the amount of $10.00 against appellees’ counsel.

In addition to seeking sanctions against attorneys with the McCarthy Wilson firm, appellant sought sanctions against H. Wayne Norman, Jr., an attorney who represented appellees with respect to the uninsured portion of the damages sought by appellant in his underlying complaint. Following a hearing, the circuit court (Plitt, J.), in an opinion and order dated February 21, 2007, denied Mr. Greenfield’s motion but, finding that Mrs. Greenfield had been joined in the action without substantial justification, granted her motion. The court also concluded that the amount of fees, costs and expenses would be determined at a later hearing. The court denied appellant’s motion, characterizing the portion of it directed at Wayne Norman as “frivolous and unprofessional.” On June 18, 2007, appellant filed a motion to recuse Judge Plitt from presiding over the hearing to determine the specific amount of fees incurred by Mrs. Greenfield.

At all pertinent times, during the pendency of the underlying case and the Rule 1-341 motions practice, appellees were and are represented by counsel selected and paid by Erie Insurance. At a July 11, 2007 hearing, Judge Plitt denied appellant’s motion to recuse and then heard argument concerning the amount of an award of fees, costs, and expenses to Mrs. Greenfield. On August 29, 2007, Judge Plitt docketed a ³²⁹ written opinion and judgment awarding Mrs. Greenfield $3,613.13 for attorneys’ fees, costs, and expenses. The circuit court arrived at the amount of the award by reviewing billing records and determining the portion of fees, costs, and expenses attributable to Mrs. Greenfield’s defense, prior to September 30, 2004, the date summary judgment was entered in her favor.

Appellant filed motions to alter or amend and to stay enforcement, both of which were denied. Questions Presented As phrased by appellant, the questions are: 1. Whether the trial court erred in granting Romualda Greenfield’s Motion under Rule 1-341, and awarding her a judgment of $3,613.13 for attorney’s fees she admits she never paid. 2. Whether the trial judge who heard the underlying criminal trial erred in not recusing himself as the judge over the subsequent civil malicious prosecution trial and Motion under Rule 1-341. 3.

Whether Worsham’s Rule 1-341 [sjhould have been granted. DISCUSSION I. Appellant contends that Mrs. Greenfield lacked standing to file a motion under Md. Rule 1-341 because all of the fees, costs, and expenses she sought, including the $3,613.13 awarded to her, were paid for by the Greenfields’ insurer, Erie Insurance. Appellant argues that a party who suffered no damages cannot seek or be awarded damages that they never suffered, referring us to Seney v. Seney, 97 Md.App. 544 , 631 A.2d 139 (1993), in support of his position. Appellant adds that, under the definition of “incurred” used by the trial ³³⁰ court, 5 Mrs. Greenfield never incurred attorney’s fees, costs, and expenses because she never became or was at risk of becoming liable for such fees, costs, and expenses.

Appellant also claims that the trial court failed to consider the policy behind Md. Rule 1-341. He states that parties and their insurers are different entities with different motivations and that the trial court erred in equating the parties with their insurance company. Appellant further contends that Mrs. Greenfield’s motion was untimely. He notes that she waited until after Mr. Greenfield’s trial, the appeal to this Court, and the denial of Mr. Worsham’s petition for writ of certiorari before filing her motion.

He asserts that if Mrs. Greenfield truly felt aggrieved, she should have filed the motion under Rule 1-341 before the appellate proceedings. He thus claims that Mrs. Greenfield’s motion is untimely under a reasonableness standard. Finally, appellant contends that there was an insufficient showing of lack of substantial justification or, if there was, the court abused its discretion in making an award. Appellant does not challenge the court’s methodology in determining the amount of the award, as distinguished from entitlement, which he does challenge.

Appellant also does not contend that the court failed to make findings or failed to exercise its discretion. As noted above, he does contend that the findings were unsupported and that the court abused its discretion. Mrs. Greenfield responds that the purpose of Md. Rule 1-341 is to prevent parties and/or attorneys from abusing the judicial process by filing or defending actions without substantial justification or in bad faith. Mrs. Greenfield asserts that the focus of the Rule is on the offending party and/or attorney ³³¹ and Ms or her actions.

As a result, she claims that whether an aggrieved party personally pays the attorney’s fees or whether they are paid by a third party is irrelevant. Mrs. Greenfield states: “It does not serve the purpose of the Rule to limit its application to those instances where the litigant himself and not his insurer or some other third party paid the costs of representing him against the abusive litigation.” A. In the present case, we are asked to interpret Maryland Rule 1-341, which provides that a court, after making the necessary findings, may require the offending attorney or party to pay to the adverse party fees, costs, and expenses “incurred” by the adverse party. In Greco v. State, 347 Md. 423, 428-29 , 701 A.2d 419 (1997) (citations and footnote omitted), the Court of Appeals explained: To interpret rules of procedure, we use the same principles and canons of construction as are used to interpret statutes. When construing a rule, the Court first looks to the text of the rule, giving those words their ordinary and natural meaning.

When the words are clear and unambiguous, ordinarily our inquiry ends. When, however, the language of the rule is ambiguous, we look elsewhere to discern the legislative intent. It then becomes necessary to survey the surrounding circumstances in which the rale was drafted to accurately discern the intent of the Court of Appeals in promulgating that rule. See also Long v. State, 343 Md. 662, 668 , 684 A.2d 445 (1996) (“We look to the rule’s history to aid us in discerning the reasonable intendment of the language used in the light of the purpose to be effectuated.”) (Citations omitted). “Yet the goal remains to give the rule its most reasonable interpretation, in accord with logic and common sense, and to avoid a construction not otherwise evident by the words actually used.” Greco, 347 Md. at 429 , 701 A.2d 419 . ³³² “Incur” has been defined as “To suffer or bring on oneself (a liability or expense).” Black’s Law Dictionary 771 (7th ed.1999). “Liability” has been defined in part, as “A financial or pecuniary obligation.” Id. at 925. “Liable” has been defined, in part, as (of a person) subject to or likely to incur (a fine, penalty, etc.).

Id. at 927. Random House Webster’s College Dictionary 682 (1992) defines incur as “to become liable for: to incur debts.” “Liable” is defined as “legally responsible.” Id. 781. Appellant argues that Mrs. Greenfield did not incur fees, given the ordinary dictionary definition of the word. We disagree, and reading the Rule as a whole and in the context of its purpose, we conclude that the Rule is ambiguous as to whether a party must actually have paid the attorney’s fees, costs, and expenses in order to have incurred them or whether they were paid by a collateral source.

See Twine v. State, 395 Md. 539, 550 , 910 A.2d 1132 (2006) (“If a statute has more than one reasonable interpretation, it is ambiguous.”) (citation omitted); Price v. State, 378 Md. 378, 387 , 835 A.2d 1221 (2003) (“[Bjefore judges may look to other sources for interpretation, first there must exist an ambiguity within the statute, i.e., two or more reasonable alternative interpretations of the statute.”) Our research has uncovered no reported case law in this State determining, under Md. Rule 1-341, whether a party has incurred attorney’s fees, costs, and expenses when the fees, costs, and expenses were paid by an insurer. Nevertheless, the principles discussed in the following cases, cited by appellant, are relevant to our analysis. In United States Health, Inc. v. State, 87 Md.App. 116 , 589 A.2d 485 (1991), cert. denied 324 Md. 69 , 595 A.2d 482 (1991), the Maryland Commission on Human Relations denied United States Health’s “profusion of motions” to compel depositions and enforce discovery because there was no statutory authority for the relief sought. Id. at 119 , 589 A.2d 485 .

United States Health then filed a series of appeals. Id. at 119-20 , 589 A.2d 485 . First, United States Health appealed to the Commission’s Appeal Board, which struck the notice of appeal ³³³ because an appeal did not lie from a ruling on pre-hearing discovery matters. Id. at 119 , 589 A.2d 485 .

Second, it appealed to the Circuit Court for Baltimore City, which dismissed the appeal because there was no final order from the Commission. Id. at 119-20 , 589 A.2d 485 . Third, it appealed to this Court, which concluded that “under no stretch of the imagination” could the denial of the motions be considered a final order. Id. at 127 , 589 A.2d 485 .

United States Health’s claims were “simply preposterous[.]” Id. at 127 , 589 A.2d 485 . We also concluded that the appeal to this Court was “utterly unjustified” and granted the Commission’s motion for an award of counsel fees under Md. Rule 1-341. Id. at 128 , 589 A.2d 485 . The Commission sought attorney’s fees at a rate of $175.00 per hour, which it claimed was a reasonable hourly rate for appellate advocacy.

Id. This Court recognized, however, that the Commission is a governmental agency represented by a salaried employee, that is, in-house counsel, who was not paid $175.00 an hour for his services. Id. at 129 , 589 A.2d 485 . After reviewing a series of federal cases, we wrote: It is clear that the above-cited federal cases, awarding market rate counsel fees, do so for various reasons, not the least of which is the desire to impose a penalty as a deterrence for reprehensible conduct.

The language of the statute or rule under which such awards were made is broad enough to permit the award of counsel fees that are not limited to compensation. Md. Rule 1-341, however, authorizes the court only to order the offending party or attorney to reimburse the other party for the costs and expenses incurred in opposing the improper action. It does not speak of imposing sanctions, and therefore does not suggest, as does Fed. Civil Rule 11, that its purpose is to punish. Nor does it provide for an award of reasonable counsel fees, as does U.S.C. Title 42, § 1988; it provides for reimbursement of expenses, including reasonable counsel fees, actually incurred.

We recognize that when in-house counsel performs legal services in prosecuting or defending a civil action the employer does incur expenses for those services, because the ³³⁴ salaried time spent by counsel on the case could have been spent performing other services for the employer. The fees charged by independent counsel include the attorney’s overhead: rent, utilities, secretarial and other assistance, maintenance of a library, supplies, postage, etc. An agency or firm represented by in-house counsel also has expenses for logistical support for the attorneys. It may be difficult to determine and prove the actual cost and expense to the employer for each hour of its counsel’s legal services in order to recover those expenses when such recovery is permitted by rule or statute. But that difficulty does not permit us to ignore the fact that Rule 1-341 permits recovery for actual expenses incurred, not for an amount that would have been incurred had the party retained outside counsel who charged an amount that the Court ivould ■ accept to be a reasonable fee.

Recognizing that we might not allow recovery based upon “market rates,” appellee submitted a supplementary affidavit supporting an alternate basis for its claim. That affidavit reduces to an hourly rate counsel’s annual salary and other financial benefits ($ 26.72), the cost of support staff ($ 14.82), and other administrative and operating costs ($ 8.36). The claimed expense thus computed, $ 648.70 ($ 49.90 per hour for the 13 hours spent on the appeal itself), has not been disputed by appellant and is certainly reasonable by any standard. We shall grant it.

Id. at 130-31, 589 A.2d 485 (emphasis added). In Seney v. Seney, 97 Md.App. 544 , 631 A.2d 139 (1993), Mr. Seney appealed an award of attorney’s fees to Mrs. Seney’s attorney, who had been hired on a contingency fee basis. Id. at 550 , 631 A.2d 139 . Mrs. Seney lost the case, and thus, under the contract, she was not liable for any attorney’s fees.

Id. Nonetheless, the trial court ordered Mr. Seney to pay $10,000 of Mrs. Seney’s attorney’s fees. Id. at 546 , 631 A.2d 139 . Mr. Seney noted an appeal, and we concluded that the award was improper: This court has emphasized that Rule 1-341 is not a sanctions rule in the same sense as Federal Rule of Civil ³³⁵ Procedure 11.

It does not provide for a monetary award to punish a party that misbehaves. The Rule’s purpose is to put a prevailing party in the same position as if the wrongful party’s offending conduct had not occurred. When a party takes money out of her pocket and gives it to the court or to her attorney because of the opposing party’s substantially unjustified or bad faith actions, the court may order reimbursement of that money by the opposing party, or the opposing party’s attorney, to the aggrieved party. “Rule 1-341 clearly permits a court to direct the payment of a sanction by the offending party, or attorney, or both of them. The rule directs, however, that payment be made to the adverse party, rather than to that party’s attorney.” Talley v. Talley, 817 Md. 428 , 437 n. 3, 564 A.2d 777 (1989).

When, however, a party does not incur any expense for attorney’s fees, those fees cannot be reimbursed. Mr. Evans [Mrs. Seney’s attorney] took a calculated risk in entering into the contingent fee arrangement. He expected no fee for his services if he lost. He lost.

Rule 1-341 does not offer him the opportunity to get from his client’s opponents what he cannot get from his client. We hold that Rule 1-341, in those rare cases when it is appropriate, only allows the court to award attorney’s fees actually incurred by the moving party, and that when that party’s attorney is not entitled to a fee under an agreement with the party, the court will not require that a fee be paid by an opposing party. Seney, 97 Md.App. at 552-53 , 631 A.2d 139 (footnotes and some citations omitted); Beery v. Maryland Medical Laboratory, Inc., 89 Md.App. 81, 102 , 597 A.2d 516 (1991) (“an award of counsel fees pursuant to Rule 1-341, despite our occasional use of the word ‘sanction,’ is not punitive but is intended merely to compensate the aggrieved party for their reasonable costs and expenses, including reasonable attorney’s fees, actually incurred in opposing the unjustified or bad faith conduct”). See also Zdravkovich v. Bell Atlantic-Tricon Leasing Corp., 323 Md. 200, 212 , 592 A.2d 498 (1991) (the purpose of ³³⁶ Md. Rule 1-341 “is to deter unnecessary and abusive litigation”); Major v. First Va.

Bank-Central Md., 97 Md.App. 520, 530 , 631 A.2d 127 (1993) (“This Court has emphasized that Rule 1-341 is not a sanctions rule in the same sense as Rule 11. It does not provide for a monetary award to punish a party that misbehaves. The rule’s purpose is to put the wronged party in the same position as if the offending conduct had not occurred.”); Legal Aid Bureau, Inc. v. Farmer, 74 Md.App. 707, 722 , 539 A.2d 1173 (1988) (“Rule 1-341 represents a limited exception to the general rule that attorney’s fees are not recoverable by one party from an opposing party. It is intended to prevent parties and lawyers from abusing the judicial process by filing or defending actions and proceedings “without substantial justification’ or ‘in bad faith.’ ”) (Emphasis in original); Bastian v. Laffin, 54 Md.App. 703, 719 , 460 A.2d 623 (1983) (“the rule is intended to compensate a defendant as well as a plaintiff for the consequences of the defined types of improper conduct by an opponent”).

See also Henriquez v. Hennquez, 185 Md.App. 465, 482 , 971 A.2d 345 (2009), not cited by the parties and filed after this case was fully briefed (filed May 8, 2009) (drawing a distinction between Md.Code (2006 Repl.Vol.), § 12-103 of the Family Law Article, which allows for an award of attorney’s fees when the party is represented by a non-profit legal services organization that does not charge the litigant a fee for its representation, and Md. Rule 1-341, which “limits attorney’s fees that can be awarded to fees ‘incurred’ by the party”). The above cases establish that Rule 1-341 “permits recovery for actual expenses incurred” and not for the reasonable value of services rendered, in the absence of actual fees, costs, or expenses. While the nature of the offending conduct is relevant to the amount, the amount must be compensatory and not designed to punish the offending party. In the case before us, the fees, costs, and expenses were in fact paid on Mrs. Greenfield’s behalf, and the amount