High Court Denies Chamber’s Inability To Pay Award Defense

OCEAN CITY — The Greater Ocean City Chamber of Commerce’s inability to pay is not a valid reason for denying an award of thousands of dollars in attorney fees and costs to a former executive director that successfully sued the organization, the Maryland Court of Special Appeals opined last week.

In the latest chapter of a case that has moved up and down the appeals ladder for the last several years, the Maryland Court of Special Appeals last week issued an opinion reversing the decision of the Worcester County Circuit Court to deny an award of attorney fees and costs totaling over $160,000 to former Ocean City Chamber of Commerce Executive Director Dan Barufaldi, who sued the chamber for back wages in 2008. A Worcester County jury awarded Barufaldi $60,000 in back compensation in the suit, and the former executive director filed a motion in an attempt to recover the $160,000-plus he spent on attorney fees and other costs.

A Worcester County Circuit Court judge denied Barufaldi’s motion for an additional award for attorney fees, and the former executive director filed an appeal with the state’s Court of Special Appeals. Last week, the high court reversed the decision and remanded the case back to the Circuit Court level for further proceedings.

Throughout the process, the chamber has argued being forced to pay over $160,000 in attorney fees to Barufaldi on top of the $60,000 awarded to the former director would create a financial hardship on the organization from which it might not be able to recover. In an affidavit cited in the Court of Special Appeals opinion released last week, current Chamber Executive Director Melanie Pursel said an award of attorney fees and costs to Barufaldi could threaten the organization’s viability.

“Any meaningful award of fees and costs in this case would jeopardize in a very real sense the existence and continuing financial viability of the chamber, which has existed as an important promoter of the business community for over 50 years,” Pursel said in the affidavit.

Pursel added in her affidavit the chamber, a private, non-profit entity organized to promote tourism and commerce in Ocean City, had not earned any net profit for over a decade, and that to secure a stay of enforcement of the money judgment, the chamber had to borrow the $60,000 from a financial institution. Having borrowed the $60,000 to pay into the court registry in order to stay enforcement of the judgment, the affidavit goes on to assert that an award of attorney fees would likely render the chamber insolvent.

However, Barufaldi, who now works in New Hampshire, countered the chamber’s assertion was factually questionable, arguing the chamber is a membership organization that received dues from its members and it could assess its members for other obligations. In short, Barufaldi argued the financial condition of the chamber was irrelevant as a factor in considering an award of attorney fees.

The parties have different views regarding whether the Circuit Court applied the proper standard in denying Barufaldi’s request for attorney fees. Barufaldi contends the Circuit Court erred in its analysis. The chamber contends that the Circuit Court did not abuse its broad discretion in denying Barufaldi’s claim for attorney fees and costs, asserting the court’s “decision to do so was amply supported and explained with reference to multiple valid reasons.”

In its lengthy opinion citing dozens of similar cases, the Court of Special Appeals pointed out it would not be practical for an attorney to first research a party’s financial situation as a determining factor in seeking an award of attorney fees and costs.

“Indeed, we agree with the argument that it would undermine the goal of the fee-shifting provision if an attorney approached to represent a claimant first had to investigate the employer’s financial condition to determine the likelihood that attorney fees would be awarded if the employee prevailed in the lawsuit,” the opinion reads. “We hold that the financial situation of the defendant is not a relevant factor to consider in determining whether to award attorney fees in a WPCL case.”

For that reason, the high court denied the chamber’s assertion its financial situation should be determining factor in the decision to award fees and costs to Barufaldi.

“Because the court applied an improper test in determining to deny an award of attorney fees, we reverse the judgment of the Circuit Court,” the opinion reads. “On remand, in assessing whether to award fees and costs, the Circuit Court should exercise its discretion liberally.”

The Court of Special Appeals decision essentially sends the issue of an award of attorney fees and costs back to the Circuit Court level for further review.

“Accordingly, we must reverse the Circuit Court’s ruling denying attorney fees and costs and remand for further proceedings,” the opinion reads. “Neither party cited any Maryland case recognizing the ability of the defendant to pay as a relevant factor in determining whether to trigger a fee-shifting provision.

One comment on “High Court Denies Chamber’s Inability To Pay Award Defense

  1. Well lesson learned for the Greater Ocean City Chamber of Commerce. Next time pay your employees and that won’t happen. Shame of you!

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