Each individual case was a relatively minor collection
action brought in a state District Court of Maryland. Each action was also
largely uncontested by the homeowner(s). Originally, Hamilton owed $556.82 in
back payments, the Thomas-Ojos owed $1,310, and Tillery owed $614.25. However,
the homeowners' associations sought to recover attorneys' fees and costs in the
amount of $1,131, $1,475, and $934, respectively. Clearly the attorneys' fees in
each case exceeded (sometimes significantly) the amount actually owed by the
homeowner.
Initially, two District Courts in Harford County, and
one District Court in Prince George's County awarded attorneys' fees only in
a flat percentage of the amount being sought. The District Court in Harford
County informed the associations that unless a contractual provision states
otherwise, a reasonable attorney fee will be set at 15 percent of the
principal claimed, unless there are extraordinary circumstances.
The Associations appealed the attorneys' fees award
decision to Circuit Court contending that the appropriate way to assess
reasonable attorneys' fees would be through the Lodestarmethod. The
Lodestar method is when the number of hours reasonably spent by an attorney
is multiplied by the reasonable hourly rate for the work performed. See Hensley v. Eckerhart, 461 U.S. 424 (1983). The Circuit Courts did not use
the Lodestar method as advanced by the Associations, but rather sought to
simply determine a reasonable amount of attorneys' fees based upon the work
performed.
The Circuit Courts also did not apply the Lodestar
method, but also found the flat rate percentage assigned by the District
Courts to be improper and sought to assign a reasonable amount for attorneys
fees incurred for the work performed. The Associations appealed the matter
to the Court of Appeals.
The Court of Appeals affirmed the decisions of the
Circuit Courts in each matter finding that both the Lodestar method being
requested by the Associations, and the flat percentage method used by the
District Courts were improper. The Court noted that the Lodestar method is
generally appropriate when being applied in the context of fee-shifting
statutes. That is, when there is a public policy, or civil rights issue for
which the legislature wants to encourage socially beneficial litigation.
The Court determined that the Lodestar method is
inappropriate for contractual based debt-collection actions because "they
lack the substantial public interest justification underlying [the Lodestar
method's] application in the context of true fee-shifting statutes."
Monmouth Meadows Homeowners Association, Inc. v. Tiffany Hamilton at *10.
The Court went on to note, however, that the rejection
of the Lodestar method does not mean that the time spent by the attorneys on
a given matter, and the reasonable fee for such work should not be a
considered part of a Court's analysis. Rather, the Court indicated that any
such determination should be based on the guidance of Rule 1.5 of the
Maryland Lawyers' Rules of Professional Conduct and the 8 factors contained
therein. The Court also noted that an award of attorneys' fees is within the
sound discretion of the trial court as long as the proper method is applied.
Therefore, the Court upheld each of the Circuit Court's
fee assessments as within its sound discretion based on the fact that
neither the Lodestar method, nor flat rate percentage method, were employed
by any of the three.
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