Friolo v. Frankel
| Decision Date | 17 March 2003 |
| Docket Number | No. 75,75 |
| Citation | 819 A.2d 354,373 Md. 501 |
| Parties | Joy FRIOLO v. Douglas FRANKEL, M.D., et al. |
| Court | Maryland Court of Appeals |
Leizer Z. Goldsmith (The Goldsmith Law Firm, on brief), Stephen Z. Chertkof (Heller, Huron, Chertkof, Lerner, Simon & Salzman, Washington, D.C.; Daniel A. Katz of Andalman & Flynn, Silver Spring) all on brief of Metropolitan Washington Employment Lawyers Association as amicus curiae.
Brief of amici curiae Public Justice Center, D.C. Employment Justice Center, CASA of Maryland, Inc., and Labor Council for Latin American Advancement, for appellant.
Wendy N. Hess, Murnaghan Appellate Advocacy Fellow, Baltimore.
Gerard J. Emig (Thomas K. McCraw, Jr. of Gleason, Flynn, Emig & Fogleman, Chartered, on brief), Rockville, for appellees.
Argued Before BELL, C.J., and ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ.
Maryland statutes permit a court, in certain actions to collect wages allegedly due an employee or former employee, to award "reasonable counsel fees" to the plaintiff if he or she is successful in the action. The issue before us is whether, in calculating such fees, the court is required to use what has become known as the "lodestar" approach—that is, to start by multiplying the reasonable number of hours expended by the attorney on the litigation by a reasonable hourly rate and then to consider appropriate adjustments to the product of that multiplication.1
We shall hold generally that, in actions under fee-shifting statutes, including the two at issue here—Maryland Code, §§ 3-427 and 3-507.1 of the Labor and Employment Article (LE)—the lodestar approach is ordinarily the appropriate one to use in determining a reasonable counsel fee. We stress, however, that the approach we approve is broader than simply hours spent times hourly rate but also includes careful consideration of appropriate adjustments to that product, which, in almost all instances, will be case-specific. Under that approach, it is necessarily incumbent upon the trial judge to give a clear explanation of the factors he or she employed in arriving at the end result. Unfortunately, the judge did not do so in this case. We shall remand the case for a further proceeding and a better explanation.
The issue presented to us arises from an action filed in the Circuit Court for Montgomery County by appellant, Joy Friolo, and her husband, Victor Salazar, against Douglas Frankel and the Maryland/Virginia Medical Trauma Group, appellees. Friolo and Salazar alleged that, in February, 1998, Dr. Frankel, a physician, hired Friolo as a medical biller, responsible for billing and collections, at a base salary of approximately $30,000. She averred that the practice, at the time, was a "failing venture," that, at some point, Frankel offered all of his employees a percentage interest "in the practice," that she accepted his offer, and that, as a result, she and Frankel agreed that she would get a 5% ownership interest in the medical practice in exchange for her participation in "evaluating and developing the practice." The goal, she said, was to make the practice worth $1 million by the end of 1999, to open four satellite offices within five years, and then to sell the entire practice in 2004. She was to get 5% of the sales price.
Friolo claimed that she worked more than 40 hours a week to maximize the recovery of receivables but that she never received any overtime pay, that she often worked at home on monthly, quarterly, and annual reports but was not paid for that time, and that she and Salazar attended strategic planning meetings and made various recommendations with respect to the practice. Salazar, though not formally employed by Frankel, asserted that he frequently worked on Frankel's behalf by attending marketing meetings, assisting in the preparation of reports, and doing clerical work. Friolo claimed that, as part of her 5% ownership interest, she was to receive, on a monthly basis, 5% of all medical insurance reimbursements and collections received, but that she did not receive full payment of those amounts. Frankel, she said, had agreed to put this arrangement in writing by December 15, 1998, but failed to do so.
Friolo went on bereavement leave from March 9 to March 25, 1999, but worked from March 26 to April 2. On Sunday, April 4, Frankel called her at home, complained that she had been rude to two patients and had not been doing her job properly, and discharged her. He denied at the time (and has continued to deny) that she had any ownership interest in the practice. Friolo claimed a right to 417 hours of overtime pay, and Salazar claimed an entitlement to compensation for his work.
On these basic allegations, Friolo and Salazar made the following claims. In Count One, Friolo alleged that she and Frankel had an express contract for her to receive a 5% ownership interest in the medical practice, that pursuant to that contract, she was to receive, in addition to her base salary, 5% of the monthly receivables collected, that Frankel breached that contract by withholding $3,365 from her monthly entitlements for the period March, 1998 through February, 1999, $2,637 for March, 1999, and the entire sums for April and May, 1999. In Count Two, she alleged the existence of a similar implied contract and sought the same damages. Count Three charged Frankel with unjust enrichment—that he benefitted from Friolo's labor and failed to pay the promised consideration. Count Four charged that Frankel had fraudulently induced her to perform services by promising to give her an interest in the practice—a promise he never intended to keep. Count Five alleged that Frankel's withholding of her percentage of the receivables she collected constituted a violation of the Wage Payment and Collection Law (LE, §§ 3-503 and 3-505) (Payment Law). Count Six alleged that, by failing to pay her time-and-a-half for her overtime hours, Frankel violated the Maryland Wage and Hour Law (LE, §§ 3-415 and 3-420) (Wage and Hour Law) and claimed that she was entitled to $9,070 for 417 hours of overtime.
Counts Seven through Ten were on behalf of Salazar. Count Seven was for breach of express contract and sought recovery for approximately 200 hours that Salazar claimed he worked for Frankel from February, 1998, through February, 1999. He averred that he performed this work without compensation upon Frankel's representation that he would be compensated through the value of his wife's ownership interest in the corporation. Count Eight alleged breach of an implied contract to the same effect; Count Nine charged Frankel with unjust enrichment of the value to Salazar's 200 hours of work; and in Count Ten Salazar sought recovery of $1,030 in wages (200 hours times the minimum wage of $5.15/hour) under the Wage and Hour Law and the Payment Law. In addition to these various sums alleged in the specific counts, Friolo and Salazar sought punitive damages, pre-judgment interest, and attorneys' fees and costs.
Toward the end of trial, after Frankel testified, Friolo withdrew her claim to 5% of the practice and focused instead on the bonus arrangement she claimed she and Frankel had. Frankel testified that he never agreed to give Friolo an interest in his medical practice or to pay her 5% of all sums collected. He admitted to a bonus arrangement but claimed that there was a base amount that had to be met and that her entitlement was to a percentage of each $500 collected over that amount. He said that he had paid all bonus sums that were due under that arrangement. Frankel also contended that Friolo was exempt from the overtime requirements of the Wage and Hour Law because she was in an administrative or managerial position. The issues as to the overtime claim were (1) whether Friolo was, in fact, in a managerial position and therefore exempt from the overtime requirement, and (2) if not, how much she was owed.
At the end of the plaintiffs' case, all of Salazar's claims were dismissed on the ground that there was insufficient evidence to show any employment relationship between him and the defendants. Salazar conceded that he had failed to prove Counts Eight and Nine and consented to the dismissal of those counts. Counts Two, Three, and Four of Friolo's action were also dismissed, with her consent. The only claims submitted to the jury were those embodied in Counts One (breach of express contract to give her a 5% bonus on monthly collections), Five (failure to pay the bonuses and the overtime pay in violation of the Payment Law), and Six (failure to pay overtime rate in violation of Wage and Hour Law). With respect to the monthly bonuses, Friolo claimed an entitlement to $6,841. That was based on gross receivables of $528,320, 5% of which amounted to $26,415. Frankel had paid $19,574 of that amount under his view of what the arrangement was, leaving a balance allegedly due of $6,841. She also claimed an entitlement to $5,237 in overtime pay for 240 hours of overtime work, down from the 417 hours she had alleged in her amended complaint.
LE § 3-507.1(b), which is part of the Payment Law, provides that if, in an action under that Act, a court finds that an employer withheld the wage of an employee in violation of the Act 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 costs. In Admiral Mortgage, Inc. v. Cooper, 357 Md. 533, 745 A.2d 1026 (2000), we held that any counsel fee to be awarded under that section was for the judge, not the jury, to determine. The court instructed the jury that, if it found that Frankel withheld wages due Ms. Friolo and that such withholding was not the result of a bona fide dispute, the jury could award her extra compensation up to three times the amount she was entitled to receive, but, in accordance with Admiral Mortgage, Inc., said nothing to the jury about counsel fees.
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