Court Opinion

ID: 9706185
Source: CourtListenerOpinion
Date Created: 2023-08-26 01:33:30.040447+00
Date Added: 2024-06-11T18:22:19.916537
License: Public Domain

RODOWSKY, Judge,
dissenting.
I respectfully dissent because I believe the Court’s holding is unsound, both practically and philosophically. As a *355practical matter this new rule of “punitive damages” will not control, but will enlarge, punitive damage verdicts. Philosophically the Court’s new rule, but for the label attributed to the additional recovery, does not involve punitive damages at all. Rather, it is a judicially adopted rule of fee shifting, contrary to this Court’s historic position of viewing fee shifting as the exercise of legislative or rule-making power.
I
The August 1986 Report of the Task Force on Litigation Issues of the American College of Trial Lawyers (ACTL) said with respect to punitive damages, in part:
“The Task Force unanimously agrees that one of the greatest problems with the current tort system is the way in which punitive damages are handled. Awards often bear no relation to deterrence and reflect a jury’s dissatisfaction with a defendant and a desire to punish, often without regard to the true harm threatened by a defendant’s conduct.”
Id. at 4. See also Jeffries, A Comment on the Constitutionality of Punitive Damages, 72 Va.L.Rev. 139 (1986) (“Punitive damages may be inflicted without adequate procedural safeguards, in the absence of meaningful substantive standards, and in virtually unlimited amounts.”).
The majority of this Court recognizes the problem. Indeed, one basis on which the majority undertakes to justify its holding is that, “because the jury will be offered objective guidance in calculating the amount of its punitive award, punitive damages will be more accurately measured and the potential for abuse decreased.” Opinion at 354. With respect to my colleagues in the majority, this is nothing but an educated guess, unsupported by any empirical data. My educated guess is that the majority’s new rule will simply increase punitive damages in both “little” and “big” cases.
*356In the little case the majority’s rule gives the conscientious jury a legitimate basis on which to make the plaintiff “truly whole” by awarding counsel fees. Opinion at 354.1 Thus, in those cases in which the trial court allows the issue of punitive damages to go to the jury, but in which the jury would not award any conventional punitive damages based solely on the defendant’s conduct, the majority’s new rule invites the jury to assess at least counsel fees simply for the sake of making the plaintiff “truly whole.” In other words, all that the majority has accomplished is to set a floor below which punitive damages will not fall. In Annot., Attorneys’ Fees or Other Expenses of Litigation as Element in Measuring Exemplary or Punitive Damages, 30 A.L.R.3d 1443 (1970), the editor, J.L. Litwin, suggests the following practice pointer:
“If the case is a strong one for a punitive award, reference to or proof of the specific expenses may tend to have a limiting effect, holding down the punitive award. On the other hand, if the case is not a particularly strong one on the punitive aspect, and especially if the compensatory damages are more or less minimal, proof of litigation expense may give the jury something concrete on which to hang a substantial punitive award.”
Id. at 1446.
Nor does it seem realistic to predict for the big case that “punitive damages will be more accurately measured and the potential for abuse decreased.” Opinion at 354. That would surely be true had the majority adopted the Connecticut approach under which the amount of “punitive” damages is limited to that which compensates the plaintiff for the expenses of litigation, less taxable costs. See Triangle Sheet Metal Works, Inc. v. Silver, 154 Conn. 116, 222 A.2d 220 (1966). But, under the majority’s rule, the basic *357standard, such as it is, for punitive damages remains the same, except that the jury will hear a number below which it will be encouraged not to drop. Juries will remain “free to base their decisions on pre-existing biases or redistributional inclinations, subject only to the uncertain constraint of judicial review.” Ellis, Fairness and Efficiency in the Law of Punitive Damages, 56 So.Cal.L.Rev. 1, 56 (1982) (footnote omitted). It is wishful thinking to suggest that adding counsel fees to punitive damages will overcome the factors identified by Ellis.
Further, the majority’s rule seemingly adds more fuel to the fires of litigation in the big case. If there is a good probability that the plaintiff will get to the jury on punitive damages, the majority rule practically assures a recovery above and beyond traditional compensatory damages, simply because the plaintiff has a lawyer. By thus cushioning the downside exposure, the rule discourages settlements and encourages the plaintiff to press on in quest of the bonanza.
II
The evidence which the jury will hear under the majority’s rule, as relevant to the issue of punitive damages, is the amount of, or manner of calculating, a reasonable fee for legal services rendered in representing a prevailing plaintiff in the very case then being tried. Evidence bearing on punitive damages will be the fee actually charged to the plaintiff, subject to a limit of reasonableness. Let us take a hypothetical case. Assume that the owner of a retail store, as the result of a single incident, causes the arrest and prosecution of three suspected shoplifters, A, B and C, under circumstances not sufficient to constitute probable cause. In a malicious prosecution suit by A, B and C a jury, under current Maryland law, could assess punitive damages by inferring malice based upon a lack of probable cause. See Safeway Stores, Inc. v. Barrack, 210 Md. 168, 122 A.2d 457 (1956). Assume further that A has agreed to a forty percent contingent fee in the event of trial, and B has *358agreed to a thirty-three percent contingent fee, while C has negotiated a twenty-five percent contingent fee. The jury would be instructed, under the majority’s rule, to consider different fees in evaluating the punitive damage claims of each plaintiff, even if the conduct of the defendant was identical as to each plaintiff. But the amount which a plaintiff has agreed to pay as counsel fees has no logical relationship to the opprobriousness of the defendant’s conduct. The fee agreement between the plaintiff and the plaintiff’s attorney has nothing to do with the extent of the malice, if any, with which our hypothetical shopkeeper acted. What was said in Day v. Woodworth, 13 How. 363, 371, 14 L.Ed. 181, 185 (1852) is still true today, namely:
“It must be evident, also, that as [the amount of ‘smart money’] depends upon the degree of malice, wantonness, oppression, or outrage of the defendant’s conduct, the punishment of his delinquency cannot be measured by the expenses of the plaintiff in prosecuting his suit. It is true that damages, assessed by way of example, may thus indirectly compensate the plaintiff for money expended in counsel fees; but the amount of these fees cannot be taken as the measure of punishment or a necessary element in its infliction.”
Thus, despite the majority’s attempt to label its product as “punitive damages,” the additional recovery is compensatory. It makes the plaintiff “truly whole” by shifting to the defendant whose conduct merits punitive damages the obligation to pay the fee agreed to between the plaintiff and the plaintiff’s attorney for services in the very action being tried.
Conceptually the question presented here is whether this Court, as a matter of decisional law, should adopt for cases in which punitive damages are awarded an exception to the American rule on counsel fees. For more than 165 years it has been settled in Maryland that fees between attorney and client are not, absent statute, awarded to the prevailing party and are not taxed as costs in the judgment. Nor are counsel fees awarded as damages, absent a contract so *359providing, or special circumstances. See Taylor v. Wahby, 271 Md. 101, 115-16, 314 A.2d 100, 107-08 (1974); Empire Realty Co. v. Fleisher, 269 Md. 278, 285-86, 305 A.2d 144, 148 (1973); New Carrollton v. Belsinger Signs, Inc., 266 Md. 229, 238, 292 A.2d 648, 652 (1972); Marney v. Stack, 261 Md. 78, 81, 273 A.2d 426, 428 (1971); Freedman v. Seidler, 233 Md. 39, 47, 194 A.2d 778, 783 (1963); Harry’s Thrifty Tavern, Inc. v. Pitarra, 224 Md. 56, 63, 166 A.2d 908, 912 (1961); Rice v. Biltmore Apartments Co., 141 Md. 507, 516-17, 119 A. 364, 367 (1922); McGaw v. Acker, Merrall & Condit Co., 111 Md. 153, 160, 73 A. 731, 734 (1909); Hollander v. Central Metal & Supply Co., 109 Md. 131, 154-55, 71 A. 442, 446 (1908); Hamilton v. Trundle, 100 Md. 276, 278-79, 59 A. 719, 719-20 (1905); Singer v. Fidelity & Deposit Co., 96 Md. 221, 224, 54 A. 63 (1903); McGraw v. Canton, 74 Md. 554, 558-59, 22 A. 132 (1891); Wood v. State, Use of White, 66 Md. 61, 69-70, 5 A. 476, 478-79 (1886); Comer v. Mackintosh, 48 Md. 374, 390 (1878); Marshall v. Cooper, 43 Md. 46, 62 (1875); Wallis v. Dilley, 7 Md. 237, 249 (1854); Kiersted v. Rogers, 6 H. & J. 282, 286-87 (1823); Strike’s Case, 1 Bland 57, 98-99, aff'd Strike v. McDonald & Son, 2 H. & G. 191 (1826).2
Indeed, one scholar has generalized that “[a]s far back as one can trace, courts in this country have allowed winning litigants to recover their litigation costs from losers only to the extent prescribed by the legislature.” Leubsdorf, Toward a History of the American Rule on Attorney Fee Recovery, 47 Law & Contemp. Probs. 9 (1984) (footnote omitted).
While the American rule was being reaffirmed by this Court over the decades, the General Assembly from time to *360time has made selective exceptions to the general rule. Statutes enacting specific exceptions are listed in the majority opinion at page 346 n. 6. I do not believe those statutes represent “legislative tool[s] for punishing wrongful conduct.” Opinion at 347. Many of the statutes cited by the majority are consumer protection statutes where provision has been made for fee shifting in favor of a prevailing plaintiff in order to attempt to equalize the position of the parties. Rowe, The Legal Theory of Attorney Fee Shifting: A Critical Overview, 1982 Duke L.J. 651, 663-64 describes the concept:
“When one side in a particular type of litigation regularly has the advantage of superior resources, holding out the prospect of reimbursement of fees can improve the position and stiffen the resolve of the relatively weaker side. In many types of litigation, of course, no regular imbalance may occur, regardless of the disparities that arise in individual cases. Much general tort and contract litigation probably falls into this category. But when a legislature perceives a regular imbalance, it can seek to match adversaries more evenly by adopting some form of fee shifting to prevent disproportionate advantage in access to and use of the legal process.”
(Footnote omitted).3
Historically, in Maryland, creation of exceptions to the American rule has been allocated to legislative or rulemaking *361action.4 The majority’s prediction of the benefits to be achieved in punitive damage cases by creating an exception to the American rule for those cases is too tenuous a prediction, in my view, to justify departing from the historic pattern. If there is some public support for fee shifting in punitive damage cases, the General Assembly is in a better position than this Court to weigh the probability of the majority’s prediction by taking testimony on how the rule has worked in the handful of jurisdictions which have adopted it.
*362Nor am I persuaded that the prediction of accurate measurement and of decreased abuse in punitive damage cases will be realized because ten jurisdictions now allow counsel fees to be included in an award of punitive damages. See opinion at 349 nn.7 and 8.5 The majority compares that number of states with the number of states which either do not allow punitive damages at all or which have expressly rejected the inclusion of counsel fees as part of punitive damages. I suggest that the proper comparison on the issue here, that of fee shifting, is to jurisdictions which apply the American rule even in cases where punitive damages are awarded. What the majority has done is to compare the jurisdictions which award attorneys’ fees within or as punitive damages with those jurisdictions in which there was an unsuccessful attack on the American rule when punitive damages were awarded. I suggest that the absence of a decision on point in a particular jurisdiction means that the American rule is being applied. Classifying fifty common law jurisdictions in the United States (including the District of Columbia and excluding Louisiana) on that basis would produce a substantial majority which do not permit fee shifting in all punitive damages cases as a matter of common law.
Even using the majority’s basis of comparison, the count is at least ten to nine. In its note 9 at page 350 the majority lists six states as rejecting its position (California, Nebraska, New Jersey, Pennsylvania, Vermont and Wisconsin). To these must be added Massachusetts and Washington which do not allow any punitive damages at all as a matter of common law, but only by statute. See J. Ghiardi & J. Kircher, Punitive Damages L. & Prac. (1985, 1989 *363Cum.Supp.), § 4.19, at 37-42 Table 4-1, “Summary of States’ Positions on Punitive Damages.” In addition, by statute in 1986 New Hampshire has abolished all punitive damages except those specifically authorized by statute. Id., § 4.11.5, at 20.
Further, classifying as punitive damages a recovery which is in its nature compensatory will confuse possible legislative attempts to address the problems now prevailing in punitive damage awards. The March 1989 ACTL Report on Punitive Damages of the Committee on Special Problems in the Administration of Justice recommended that, “[p]unitive [a]wards [s]hould [n]ot [b]e a [surrogate for [c]ompensatory [d]amages.” Id. at 10. That report gave the following reasons:
“The civil justice system should not recognize punitive awards for the purpose of compensating successful plaintiffs. The common law over time has recognized new rights and measures for compensation and is fully capable of doing so in the future. Economic and noneconomic losses are compensable today, and a clear distinction ought to be maintained between awards of that nature and those which are imposed solely to punish and deter. The maintenance of this distinction is important in administering the rules because there should be differences in the process for obtaining the two types of awards.”
Id. (footnote omitted). The March 1989 ACTL Report goes on to recommend, inter alia, a clear and convincing standard of proof for punitive damages and a flexible cap on punitive damages of “twice the amount of the compensatory award or $250,000, whichever is greater.” Id. at 15.
The importance of maintaining clear concepts is illustrated by statutes which allow both fee shifting and punitive damages. For example, by Ch. 598 of the Acts of 1989 the General Assembly enacted the Maryland Uniform Trade Secrets Act, Md.Code (1975, 1983 Repl.Vol., 1989 Cum. Supp.), §§ 11-1201 through -1209 of the Commercial Law Article. Section ll-1203(a) provides that “a complainant is entitled to recover damages for misappropriation.” Subsec*364tion (b) provides that those damages “may include ... the actual loss caused by misappropriation[.]” Subsection (d) permits the court to award “exemplary damages in an amount not exceeding twice any award made under subsection (a) of” § 11-1203, “[i]f willful and malicious misappropriation exists[.]” Section 11-1204(3) allows the court to award reasonable attorneys’ fees to the prevailing party if “[w]illful and malicious misappropriation exists.”
These provisions of the Maryland Uniform Trade Secrets Act make complete sense under present law. Counsel fees are not part of traditional actual loss. Counsel fees are not part of exemplary damages. They may be awarded by the court pursuant to the terms of the fee shifting statute. Inasmuch as the majority has today decided that counsel fees are an element of punitive damages, if a statute of this type is enacted or amended in the future, does the plaintiff recover counsel fees twice, once as part of punitive damages and again under the express, fee shifting statute? Do present fee shifting statutes continue to apply if common law punitive damages are also awarded?
By, in effect, enacting a fee shifting statute for punitive damage cases the majority has also confused the functions of court and jury. When the General Assembly responds to a perceived problem by enacting a fee shifting statute, it almost always provides that the reasonable fee allowed is to be set by the court. Providing for fee shifting by allowing that form of recovery within punitive damages permits a jury to consider evidence of a legal fee in any amount unless the trial court can exclude the fee as unreasonable under all interpretations of the evidence. Under the traditional, statutory approach the court pinpoints and awards the precise fee. This is simply another way in which the majority’s holding will encourage claims for punitive damages.
I agree that the law of punitive damages is “broke” and needs “fixing.” I cannot agree, however, that making attorneys’ fees part of punitive damages is the way to fix the break.
*365Chief Judge MURPHY and Judge McAULIFFE have authorized me to state that they concur in the views expressed in this dissenting opinion.

. The second justification by the majority for its new rule is that "the plaintiff can be made truly whole in precisely those kinds of cases in which the defendant’s wrongful conduct is found to be at its most flagrant, for only in such cases are punitive damages warranted." Opinion at 354.

. Illustrations of special circumstances are cases where the defendant’s wrongful conduct has involved the plaintiff in litigation with others, see McGaw v. Acker, Merrall & Condit Co., 111 Md. 153, 160, 73 A. 731, 734 (1909), certain implied indemnity actions, see Jones v. Calvin B. Taylor Banking Co., 253 Md. 430, 253 A.2d 742 (1969), and actions resulting in declaratory judgments that a liability insurer must defend the insured in a particular action, see Bankers & Shippers Ins. Co. v. Electro Enterprises, 287 Md. 641, 415 A.2d 278 (1980).

. In its note 6, opinion at 346, the majority cites three statutes which are said specifically to refer to counsel fees as a penalty. Md.Code (1974, 1988 Repl.Vol.), § 8-208 of the Real Property Article deals with prohibited provisions in residential leases. Section 8-208(c)(2) provides that, upon a landlord’s violation of § 8-208 "the tenant may recover any actual damages incurred as a reason [sic] thereof, including reasonable attorney’s fees.” The catchline to subsection (c) is "[pjenalties for a violation.” That catchline was included in the legislative bill. See Ch. 375 of the Acts of 1974. As introduced the bill would have provided for recovery by the tenant of “an amount up to $500" in addition to actual damages and reasonable attorneys' fees. That civil penalty provision was deleted in course of passage. Id.
*361Md.Code (1982), § 4-301 of the Health-General Article prohibits, with exceptions, the unauthorized disclosure of specific medical information by a medical care provider. Under subsection (d), "[a] provider of medical care who knowingly violates any provision of this section shall be liable to a plaintiff for any damages recoverable in law or equity, including reasonable attorney’s fees.” The catchline to subsection (d) is u[p]enalty" a catchline which appeared in the enacting legislative bill, Ch. 21 of the Acts of 1982. By SECTION 4 of that bill it was further enacted that “the Revisor’s Notes and catchlines contained in this Act are not law and may not be considered to have been enacted as a part of this Act.” 1982 Md. Laws at 1090.
Md.Code (1957, 1988 Repl.Vol.), Art. 78, § 28A is intended to protect underground facilities of public service companies. Subsection (g) imposes a civil penalty of $1,000 for each offense, or ten times the cost of repairing the damage to an underground facility, on a person who excavates without first notifying the appropriate public service company. Actions to recover the civil penalty may be brought either by the public service company owning the damaged facilities or by the Attorney General. The last sentence of subsection (g) (which appears to be in need of amendment or construction) literally states: "All penalties recovered from such action, including reasonable attorney’s fees, shall be paid into the General Fund of the State Treasury.” The majority does not propose that its newly created form of punitive damages be paid into the public treasury.

. The sanction provided by Maryland Rule 1-341 for maintaining or defending a proceeding in bad faith or without substantial justification is a product of the constitutional rulemaking power of this Court. While clearly designed to deter the objectionable conduct, it is not analogous to punitive damages. The remedy under Rule 1-341 is to award to the adverse party reasonable expenses, including reasonable attorneys’ fees, incurred by the adverse party in opposing the objectionable proceeding. This standard makes the adverse party whole with respect to the cost of a proceeding which should not have been endured, and is, in that sense, compensatory.

. The majority includes Connecticut in its count of nine states which “regularly allowed jury consideration of attorney’s fees on the issue of punitive damages." Essentially Connecticut allows only fee shifting, which it calls punitive damages, but which are not analogous to the unlimited punitive damages, including attorneys’ fees, which the majority advocates. Thus I count eight states in the majority’s footnote 7 plus two states in the majority’s footnote 8, for a total of ten jurisdictions.