E-Alert Case Updates

Federal Test Inappropriate to Determine Whether or Not an Award of Attorneys’ Fees Should Be Granted Under the WPCL

Daniel J. Barufaldi v. Ocean City, Maryland Chamber of Commerce, Inc. et al.
No. 270 (Md. Ct. Spec. App. June 29, 2012)
by Natalie Scurto, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

In Barufaldi v. Ocean City, Maryland Chamber of Commerce, the Court of Special Appeals, in an opinion written by Judge Graeff, reversed the Circuit Court’s denial of an award of attorneys’ fees and remanded the case to the lower court for further proceedings. The intermediate appellate court found that the lower court erred in its application of a test created by federal courts used to determine the appropriateness of awarding attorneys’ fees.

This case addressed the second appeal arising from an employment contract dispute between the Ocean City Chamber of Commerce ( the “Chamber”) and Barufaldi. In April 2008, Barufaldi filed a successful suit against the Chamber alleging violations of the Maryland Wage Payment and Collection Law (“WPCL”). Barufaldi also filed a motion for attorneys’ fees, pursuant to the WPCL’s fee-shifting provision, which the Circuit Court denied. Barufaldi appealed, and the Court of Special Appeals affirmed the jury’s verdict, but vacated the trial court’s denial of attorneys’ fees and remanded the case for further proceedings.

On remand, the Circuit Court denied Barufaldi’s request for attorneys’ fees once again. At the urging of the Chamber, the Circuit Court adopted the factors that the federal courts use to determine whether to apply the fee-shifting provision of the Employee Retirement Income Security Act (“ERISA”). Upon application of the test, the trial court found that an award of attorneys’ fees to Barufaldi was not warranted.

Under the WPCL, employers are required to “pay whatever wages are due on a regular basis and to pay all that is due following termination of the employment.” Friolo v. Frankel, 373 Md. 501, 513 (2003). If employers do not pay wages as required, employees may bring lawsuits against their employers, and courts are authorized to award attorneys’ fees and treble damages for successful claims. The fee shifting statute was put in place to further the WPCL’s goal of enabling claimants of unpaid wage violations to obtain counsel and receive access to justice. An award of attorneys’ fees under the WPCL involves a three-step process. First, there must be a determination as to whether or not the withholding of the wages was “not as a result of a bona fide dispute.” MD. CODE LAB. & EMPLOY. § 3-507.2(b). In this case, the jury found that the Chamber’s failure to pay wages to Barufaldi was not the result of a bona fide dispute. Second, a court must determine whether to award fees. The Court of Appeals has stated that, “courts should exercise their discretion liberally in favor of awarding a reasonable fee . . .” Friolo, 373 Md. at 518. If the court decides to award fees, then the last step is to determine the appropriate amount of fees to award.

The ERISA test that was adopted by the Circuit Court requires the consideration of five (5) factors to determine whether or not attorneys’ fees should be awarded to the successful plaintiff in an ERISA claim. These factors include:

(1) The degree of opposing parties’ culpability or bad faith; (2) the ability of opposing parties to satisfy an award of attorneys’ fees; (3) whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances; (4) whether the parties requesting attorneys’ fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself[;] and (5) the relative merits of the parties’ positions.

Quesinberry v. Life Ins. Co., 987 F.2d 1017, 1029 (4th Cir. 1993).

Barufaldi argued that case law established a presumption in favor of awarding attorneys’ fees under the WPCL. He also argued that the Circuit Court erred when it applied the ERISA test for determining whether an award of attorneys’ fees is appropriate. He contended that the ERISA test conflicts with the remedial principles underlying an award of attorneys’ fees and cost under the WPCL. The Chamber argued the opposite. The Chamber asserted that there is no presumption in favor of attorneys’ fees under the WPCL and that the ERISA test is an appropriate method of determining when a court should grant such an award. Additionally, the Chamber stressed that the Court of Special Appeals should weigh heavily the fact that the Chamber would be unable to survive a fee award.

The Court looked to the legislative history of the WPCL before agreeing with the Chamber in one aspect and holding that there was not a presumption in favor of awarding attorneys’ fees under the law. The Judge Graeff, writing for the majority, found that when a statute gives the court discretion to award attorneys’ fees, courts have generally been reluctant to adopt a presumption in favor of awarding the fees. Furthermore, the WPCL provides that the court “may” award attorneys’ fees to a prevailing plaintiff. If Maryland’s General Assembly had intended to create a presumption in favor of an award, the word “shall” would have been used. Although there may be policy reasons supporting the presumption in favor of attorneys’ fees, it is not the Court’s place to change the plain meaning of a statute.

The Court did, however, find that the Circuit Court erred when it applied the ERISA test. It held that the factors considered were not relevant to the underlying goals of the WPCL and the test was therefore inappropriate. Additionally, the first and fifth factors of the test are issues that are reserved for a jury. Lastly, the Court also found that consideration of an employer’s ability to pay an award of attorneys’ fees is irrelevant to the decision to award attorneys’ fees and doing so would undermine the goal of the fee-shifting provision in the WPCL.

For the reasons above, the Court of Special Appeals reversed the Circuit Court’s denial of attorneys’ fees to Barufaldi and remanded the case for further proceedings consistent with its opinion.