Friolo v. Frankel

• Decision Date: 19 May 2014
• Docket Number: Sept. Term, 2011.,No. 102,102
• Citation: 91 A.3d 1156,438 Md. 304
• Parties: Joy FRIOLO v. Douglas FRANKEL, et al.
• Court: Maryland Court of Appeals

438 Md. 304

91 A.3d 1156

Joy FRIOLO

v.Douglas FRANKEL, et al.

No. 102, Sept. Term, 2011.

Court of Appeals of Maryland.

May 19, 2014.

Leizer Z. Goldsmith (The Goldsmith Law Firm, LLC, Washington, DC), on brief, for Petitioner/Cross–Respondent.

Ilana Gelfman, Esq., Francis D. Murnaghan, Jr., Appellate Advocacy Fellow, Public Justice Center, Baltimore, MD, for Amici Curiae brief of the Public Justice Center, Employment Justice Center, Metropolitan Washington Employment Lawyers Association, Washington Lawyers' Committee for Civil Rights and Urban Affairs, American Civil Liberties Union of Maryland, and National Federation of the Blind.

Matthew J. Focht (Gerard J. Emig, Gleason, Flynn, Emig & Fogelman, Chartered, Rockville, MD), on brief, for Respondents/Cross–Petitioners.

Argued before BARBERA, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, McDONALD and ALAN M. WILNER (Retired, specially assigned), JJ.

WILNER, J.

This case is making its third appearance in this Court, having visited the Court of Special Appeals twice and having occupied the attention of the Circuit Court for Montgomery County on three occasions, one of which involved two separate proceedings. Like Kaufman and Hart's man who came to dinner, it is wearing out its welcome.

BACKGROUND

In February 1998, Joy Friolo was hired by Douglas Frankel, a physician, to handle his billings and collections, at an annual salary of $26,000. She was discharged by Frankel on April 4, 1999. In February 2000, Friolo and her husband, Victor Salazar, filed a ten-count complaint against Frankel and his practice in the Circuit Court for Montgomery County.

There were four categories of claims spread among the various counts. Friolo contended that, during her employment, she and Frankel agreed that she would receive a five percent interest in the medical practice and, as a bonus, five percent of the monthly receivables she collected. She sought $50,000 for the interest in the practice and $9,441 for unpaid monthly bonuses. She also complained that she was entitled to premium pay for 417 hours of overtime, which she calculated as $9,070. Those were her three claims. Her husband, who was never actually employed by Frankel, claimed an entitlement to recompense for 200 hours of work he did for Frankel. His compensatory claim was for $1,030.

Friolo's claim for the unpaid overtime and Salazar's claim for the 200 hours of work he allegedly performed were based, in part, on the Maryland Wage and Hour Law (Md.Code, §§ 3–401 through 3–431 of the Labor and Employment Article (LE)), which is the Maryland counterpart to the Federal Fair Labor Standards Act. Section 3–427 permits an employee who is paid less than the wage required under that Act to sue the employer to recover the difference and provides that, if a court determines that the employee is entitled to a recovery in the action, the court may allow against the employer reasonable counsel fees and costs.

The plaintiffs' claims for unpaid wages were also based, in part, on the Maryland Wage Payment and Collection Law (LE §§ 3–501 through 3–509). As we recently explained in Marshall v. Safeway, 437 Md. 542, 88 A.3d 735 (2014), that law requires that all wages that are due to an employee be paid at certain times. What was formerly LE § 3–507.1 but, due to a 2010 amendment is now LE § 3–507.2 also permits a direct action by an employee against an employer who fails to comply with that requirement. It provides that, in such an action, the court may award the employee an amount not exceeding three times the wage due and reasonable counsel fees if the court finds that the employer withheld the wage in violation of the act “and not as a result of a bona fide dispute.”

In addition to their compensatory claims, Friolo and Salazar sought attorneys' fees and treble damages under both statutes (even though there is no provision for enhanced damages under the Wage and Hour Law). In addition, based on associated claims of fraud, they sought punitive damages. Early in the case, the plaintiffs offered to settle for $36,000. No offer was made by Frankel at that time. In a Joint Pretrial Statement signed in January 2001—nearly a year into the litigation and five months before trial—Friolo said she was seeking $6,003 for unpaid bonuses and $9,070 for unpaid overtime. The plaintiffs offered to settle the case for $65,000—the increase from $36,000 principally being due to $27,000 in accumulated attorneys' fees. Frankel offered only $2,500.¹

There being no settlement, the case proceeded to trial before a jury, Judge Beard presiding. During the trial, Salazar dismissed all of his claims and Friolo dropped her claim for a 5 percent interest in Frankel's medical practice and reduced her claims for unpaid bonuses and overtime. The only claims that were submitted to the jury were Friolo's revised claim for $6,841 in unpaid bonuses and $5,237 for unpaid overtime, and, as we pointed out in our first Opinion in this case, the dispute over those items was a narrow one. Frankel acknowledged the bonus arrangement but contended that he had paid all of the bonuses that were due, and he claimed that Friolo was not entitled to overtime because she was an administrative employee. See Friolo v. Frankel, 373 Md. 501, 507, 819 A.2d 354, 358 (2003).²

The jury awarded all but $300 that Friolo requested for compensatory damages—$6,841 for unpaid bonuses and $4,937 for overtime. The jury was instructed that, if it found that Frankel withheld wages from Friolo and the withholding was not a result of a bona fide dispute, it could, if it deemed appropriate, award her extra compensation up to three times the amount “that you find she is entitled to.” Upon an objection by Friolo that the instruction was limited to the unpaid overtime pay, the court, without objection but nonetheless erroneously, modified the instruction to permit a treble damage award with respect “to both overtime and the other compensation that you feel the plaintiff is entitled to, if you rule in her favor.” Although a Special Verdict Form was used, the jury was not asked to determine whether any wages it might find were due were, or were not, withheld as the result of a bona fide dispute, and it made no such determination. It did, however, award $0 in additional damages, both with respect to the unpaid bonuses and the unpaid overtime. Judgment was entered in favor of Friolo for the aggregate of $11,778. Frankel filed a motion for new trial, which was denied. He then paid the judgment.

Two weeks after entry of the judgment, Friolo's attorney, Leizer Goldsmith, filed a motion for attorneys' fees and costs. The motion asserted that the fees should be calculated in accordance with a modified lodestar approach (reasonable hours expended times reasonable hourly rate), and it offered as reasonable a total of 263 hours expended by four attorneys in the firm at hourly rates ranging from $305/hour for Goldsmith to $90/hour for associates, for a total of $61,125. Goldsmith deducted 10 percent of that amount for claims that were not successful, for a net amount of $55,012. Thirteen days later, in a supplemental motion, he raised the amount to $57,059 based on 228 hours, and three months after that, he raised it to $69,637 based on 275 hours. Frankel responded that, because the jury did not find the lack of a bona fide dispute (and thus inferentially must have concluded that there was one), no fees were warranted under LE § 3–507.1 and that, in any event, the fees requested were unreasonable.

In a hearing on the matter, the court, through Judge Beard, though suggesting that it was considering the lodestar approach, actually awarded a $4,712 fee based on that being 40 percent of the $11,778 judgment. Friolo appealed, claiming that the court erred in not using the lodestar approach. The $4,712 fee, she contended, amounted to less than 10 percent of what a lodestar approach would have warranted. Noting that, by virtue of LE § 3–507.1, no attorneys' fees could be awarded with respect to the claim for bonuses under the Wage Payment Act unless the non-payment was not the result of a bona fide dispute, but that the court included in its fee 40 percent of that claim, Friolo urged, at least by inference, that the court must have concluded that there was no bona fide dispute regarding the bonuses. Frankel contended that there was no actual entitlement to attorneys' fees and that the court did not err in refusing to use a lodestar approach. There were basically two straightforward legal issues presented.

We answered the two questions. We acknowledged that there was no actual entitlement to attorneys' fees under either statute, but noted that the court did award fees in this case and that no cross-appeal had been taken from that decision, so the exercise of that discretion was not before us. The only issue was the appropriate method of calculating the fee, and, as to that, we held that the lodestar approach, more-or-less as it had been applied in the Federal courts, was the proper method. We set out the kinds of considerations that might justify a departure from a strict hours-times-rate calculation and remanded the case for the Circuit Court to use that approach. Friolo v. Frankel, supra, 373 Md. 501, 819 A.2d 354. In doing so, we observed that (1) even using a lodestar approach, the $57,000 fee sought by Goldsmith was not reasonable, id. at 512, 819 A.2d at 361, and (2) we were not suggesting that the $4,712 awarded by the court was unreasonable, id., at 529, 819 A.2d at 371. We noted further that, on remand, the court would need to consider that the jury had made no finding of a lack of bona fide dispute with respect to the non-payment of bonuses and whether the unsuccessful claims were truly related to the successful ones, id. at 530, 819 A.2d at 371. Because Friolo was successful in the appeal, we assessed the costs of the appeal against Frankel. SeeMd. Rule 8–607 (“Unless the Court orders otherwise, the prevailing...