137 A.3d 377
Md. Ct. Spec. App.2016Background
- Maryland enacted Chapters 286 and 290 in 2007 reforming the historic 99-year ground-lease system: Chapter 286 replaced ejectment/reentry remedies with a lien-and-foreclosure procedure; Chapter 290 required lease recording or risk loss of reversionary interest.
- Ground-lease owners sued the State challenging Chapter 286 as an uncompensated taking (inverse/ regulatory taking) and for Contract-Clause and federal claims; the State was the sole named defendant.
- The trial court dismissed physical-taking claims, certified a liability class, denied early summary judgment, and later (after Muskin) granted plaintiffs’ partial summary judgment on State constitutional grounds; the Court of Appeals affirmed in State v. Goldberg.
- On remand plaintiffs’ counsel filed a fee petition seeking over $5.5 million plus a multiplier; the circuit court awarded $5 million against the State based on § 1988, the common-fund doctrine, RP § 12-106, and Md. Rule 1-341.
- The Court of Special Appeals reversed, holding the circuit court had no legal authority to order the State to pay plaintiffs’ attorneys’ fees under any of the theories relied upon.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to recover fees under 42 U.S.C. § 1988 | Fee award permissible because plaintiffs pressed substantial federal constitutional/federal claims (including § 1983 theories) | No § 1983 claim was pled against the State; a State is not a “person” under § 1983, so § 1988 cannot authorize fees against Maryland | Rejected: § 1988 inapplicable because plaintiffs neither brought viable § 1983 claims nor sued a § 1983 “person” |
| Fee award via common-fund doctrine | Counsel restored substantial intangible value (~$60M) to class; impractical to collect from class, so State should pay | No monetary common fund was created; doctrine applies only to fees paid out of an existing fund and typically from the class’s recovery | Rejected: no common fund existed and doctrine does not permit shifting fees to the losing party absent a fund |
| RP § 12-106(b)(5) (condemnation costs) | Statute permits award of reasonable legal fees where government action took property — should apply to inverse-condemnation result | Statute applies only to eminent-domain/condemnation proceedings and awards fees to a defendant when the plaintiff is the condemnor; does not authorize fees against the State in inverse-condemnation cases | Rejected: statutory text confines the remedy to condemnation proceedings and to fees "actually incurred" by defendants; it cannot be read to authorize the award here |
| Md. Rule 1-341 (bad-faith litigation sanctions) | State defended Chapter 286 in bad faith and without substantial justification; fees should be awarded as expenses incurred opposing bad-faith defense | State’s defense was colorable and fairly debatable (novel issues, Court of Appeals opinions split); no bad faith; plaintiffs/counsel had not "incurred" the fees awarded | Rejected: clear error to find lack of substantial justification or bad faith; Rule 1-341 awards limited to fees actually incurred; here plaintiffs did not incur the awarded fees |
Key Cases Cited
- Muskin v. State Dep’t of Assessments & Taxation, 422 Md. 544 (2011) (held recording penalty statute took property without just compensation and discussed vested reentry rights vs. remedies exception)
- State v. Goldberg, 437 Md. 191 (2014) (Court of Appeals affirmed that Chapter 286 unconstitutionally impaired ground-lease owners’ vested right to reenter)
- Will v. Michigan Dep’t of State Police, 491 U.S. 58 (1989) (a State is not a “person” under § 1983)
- Alyeska Pipeline Serv. Co. v. Wilderness Soc., 421 U.S. 240 (1975) (federal courts cannot create fee-shifting doctrines beyond statutory exceptions)
- Hafer v. Melo, 502 U.S. 21 (1991) (state officials sued in their individual capacities are "persons" under § 1983)
- Nova Research, Inc. v. Penske Truck Leasing Co., 405 Md. 435 (2008) (recapitulation of the American Rule and narrow exceptions permitting fee shifting)
- Inlet Assocs. v. Harrison Inn Inlet, Inc., 324 Md. 254 (1991) (standard of review and discussion of Rule 1-341 sanctions)
- Brewer v. School Bd. of Norfolk, 456 F.2d 943 (4th Cir. 1972) (Fourth Circuit’s quasi-common-fund fee approach in nonmonetary relief cases; Court here declined to extend its reasoning)