Ocean City, MD., Chamber of Commerce, Inc. v. Barufaldi
75 A.3d 952
Md.2013Background
- Barufaldi was hired by the Ocean City Chamber under a written employment agreement promising base salary plus incentive compensation; parties never agreed on the incentive baseline.
- Barufaldi resigned, sued the Chamber (breach of contract and Maryland Wage Payment & Collection Law (LE § 3-507.2)), and a jury found for him: $60,000 damages and that there was no "bona fide dispute" over unpaid wages.
- Under LE § 3-507.2(b), when an employer withheld wages and there was no bona fide dispute, the court "may award" treble damages (up to 3x) and "reasonable counsel fees and other costs." Trial court denied fees; Court of Special Appeals remanded, requiring articulated reasons to deny.
- On remand the trial court applied ERISA's five-factor fee test (Quesinberry factors) and again denied fees, citing lack of bad faith, Chamber insolvency, limited deterrent effect, case-specific impact, and a close merits question.
- The Court of Special Appeals reversed again, holding ERISA factors inappropriate for the Wage Payment statute; Maryland Supreme Court granted certiorari to decide whether federal ERISA standards apply.
Issues
| Issue | Plaintiff's Argument (Barufaldi) | Defendant's Argument (Chamber) | Held |
|---|---|---|---|
| Whether ERISA five-factor test governs fee awards under LE § 3-507.2 | ERISA factors unnecessary; statute and jury finding of no "bona fide dispute" favor liberal award of fees | ERISA factors are proper analogues and justify denial here (bad faith absent, insolvency, deterrence limited, narrow impact, close merits) | ERISA test should not be imported; statutes differ in purpose and operation, so ERISA factors are inappropriate |
| Whether a jury finding of "no bona fide dispute" can be reevaluated by the court when deciding fees | Jury verdict establishes lack of bona fide dispute (akin to bad faith) and courts should defer; fee award discretion then "liberally" favors awarding fees | Court may consider additional equitable factors beyond jury findings | The jury's finding is binding on the bad-faith inquiry; relitigating that issue at fee stage is improper |
| Whether defendant's ability to pay is a proper consideration in awarding fees under the Wage Payment Law | Ability to pay is irrelevant; fee awards are remedial to make the employee whole and to incentivize counsel | Ability to pay should be considered to avoid bankrupting small employers and to weigh deterrence | Ability to pay is not a relevant factor to deny fees under LE § 3-507.2 (statute's remedial aim controls) |
| What non-ERISA reasons (if any) justify denying fees under LE § 3-507.2 | Only limited, significant circumstances (e.g., plaintiff misconduct, rejecting a better settlement) might justify denial | Broad equitable considerations (including insolvency, limited public impact) should be allowed | Trial courts may deny fees only for good reasons consistent with the statute (e.g., significant claimant misconduct or unjustified rejection of a better settlement), but not for the ERISA factors applied here |
Key Cases Cited
- Friolo v. Frankel, 373 Md. 501 (Md. 2003) (explaining legislative purpose of fee-shifting and that courts should "exercise their discretion liberally" to award fees when no bona fide dispute exists)
- Friolo v. Frankel, 403 Md. 443 (Md. 2008) (discussing fee-shifting provision as incentive for counsel in wage disputes)
- Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017 (4th Cir. 1993) (formulation of ERISA five-factor fee test)
- Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (1975) (equitable awarding of attorneys’ fees in federal courts)
- Hensley v. Eckerhart, 461 U.S. 424 (1983) (lodestar/reasonableness principle in fee awards)
- Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285 (2009) (ERISA interpretation and trust-law backdrop)
- Sprague v. Ticonic Natl Bank, 307 U.S. 161 (1939) (equitable protection of trust funds and beneficiaries)