Why Isn't the Judge Giving Us Our Attorneys' Fees?
The New Way District Courts of Maryland Award Attorney Fees in Collection Cases
Maryland’s highest court recently issued a decision that has changed how attorneys’ fees are awarded in community association debt collection cases. Attorney fees will no longer be awarded by the District Court on a flat percentage of the principal, but will be assessed based on a number of possible subjective and objective factors. This is important because associations generally are required to pay their attorneys regardless of what the courts award.
In the past, District Court of Maryland judges awarded attorneys’ fees based on a flat 15% of the principal balance sought in a complaint. Although easily calculated, this flat percentage method did not take into consideration the time and effort needed to prepare the complaint and if necessary, appear in court. Associations with lower assessments and therefore lower principal balances were often unable to capture all of their incurred attorneys’ fees, despite having hired an attorney to perform the same amount of work as the association with the higher assessments.
Three Maryland homeowners associations agreed with the inequity of this calculation, and appealed the flat fee award. The three cases were eventually consolidated and heard by the Court of Appeals in Monmouth Meadows Homeowners Ass’n, Inc. v. Hamilton, 970 A.2d 892, 408 Md. 487 (Md. App., 2009). The associations’ position was that attorneys’ fees should be determined by calculating the number of hours reasonably spent by an attorney, multiplied by the reasonable hourly rate for work (this method is known as the Lodestar method). This Lodestar method would solve the inequity inherent when awarding 15% of the principal balance owed.
The Court of Appeals rejected both the flat percentage method and the Lodestar method. Rather, the Court held that District Court judges should use Rule 1.5 of the Maryland Lawyer’s Rules of Professional Conduct as guidance when making determinations regarding attorneys’ fees awards. Some of the factors in Maryland Rule 1.5 are:
- The time and labor required, the novelty and difficulty of the question involved, and the skill requisite to perform the legal service properly;
- The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment of the lawyer;
- The fee customarily charged in the locality for similar legal services;
- The amount involved and the results obtained;
- The time limitations imposed by the client or by the circumstances;
- The nature and length of the professional relationship with the client;
- The experience, reputation and ability of the lawyer or lawyers performing the services; and
- Whether the fee is fixed or contingent.
Since the Monmouth Meadows case, District Courts around Maryland are denying all attorneys’ fees requests unless the complaint is accompanied by a detailed attorney fee affidavit outlining the factors in Maryland Rule 1.5 listed above. Although, theoretically this is a step in the right direction, practically, the manner in which attorneys’ fees awards can and do vary from judge to judge. Additionally, over the past couple of months, despite having to submit detailed attorneys’ fee affidavits, the awards we are currently receiving are very similar to those we were awarded under the flat percentage method, except less predictable.
The full opinion can be read at www.courts.state.md.us/opinions/coa/2010/43a09.pdf
Ruth Katz is a lawyer with Lerch, Early & Brewer’s Community Associations group. Her experience encompasses a variety of litigation matters faced by condominiums, cooperatives and homeowners associations, especially in the area of collections and the levying of fines. For more information about how this opinion may impact your debt collection cases, contact Ruth at firstname.lastname@example.org or (301) 657-0188.