Frivolous Lawsuit Sanctions | New Maryland Opinion

The Court of Appeals has issued an opinion regarding sanctions for bad faith claims that has a lot of lawyers on both sides of the “v” talking.

The background of the case is just plain goofy. Mr. W and Mr. G are neighbors who live in Montgomery County. Sometime in February of 2000, Mr. W is shoveling snow in his driveway when a man comes up with a video camera and starts videotaping him as he shovels snow. The man with the camera is actually Mr. G, but because there’s a large camera in his face and he’s wrapped in winter clothing, Mr. W doesn’t recognize him. Mr. W says to the man with the camera, “Can I help you?” but he gets no response. Mr. W then sets down his shovel, walks toward the man and tells him to stop videotaping. Sometime after that, Mr. W realizes the man with the camera is his neighbor, Mr. G, and at that point, Mr. W allegedly pushes the video camera out of Mr. G’s face. Obviously, these are neighbors with a history of bad blood.

I’m sure you can guess that there are two different versions of what happens next. Version 1 – Mr. W claims he was assaulted by a hostile Mr. G. Version 2 – Mr. G claims he was assaulted by Mr. W and that Mr. W damaged his video camera. The first round of criminal charges, brought by Mr. G against Mr. W were nolle prossed, but a second round of charges alleging second degree assault and malicious destruction of property went to a jury trial. The jury acquitted Mr. W of the destruction of property claim, and the jury was hung on the assault claim. Which makes sense. Who really knows what happens with these kinds of silly neighbor disputes?

After all the criminal stuff ended, Mr. W filed a six-count civil complaint against Mr. G, Mrs.G, and other neighbors (who had also been in prior litigation with Mr. W) alleging defamation, false light/invasion of privacy, civil conspiracy, and aiding and abetting. (And yes, that’s all for the snow shoveling/camera incident. Gracious.) Eventually, the trial court granted summary judgment on all of those claims, but Mr. W appealed the decision to the Court of Special Appeals (which affirmed the trial court decision) and then even petitioned for a writ of certiorari with the Court of Appeals, which was mercifully denied.

So then it was over, right? No, it couldn’t be over because this was a 1984 George Orwell war with no end. So, true to form, after all this, the G’s couldn’t just take their win and go home. They filed a motion under Md. Rule 1-341 to recover attorney’s fees, expenses, and costs associated with the litigation. They claimed that their insurance carrier expended $38,693.00 in fees and $1,571.48 in related costs defending them against Mr. W’s civil lawsuit, but they acknowledged that their insurance company had already paid those expenses.

A Circuit Court judge denied their request for sanctions in regards to Mr. G, but granted it in regards to Mrs. G, reasoning that she had been made a party to the case without “substantial justification.” So, the Court awarded the G’s the portion of the expenses attributable to Mrs. G’s defense which amounted to $3,613.13, all to be paid by Mr. W.

Here’s what MD Rule 1-341 says:

In any civil action, if the court finds that the conduct of any party in maintaining or defending any proceeding was in bad faith or without substantial justification the court may require the offending party or the attorney advising the conduct or both of them to pay the adverse party the costs of the proceeding and the reasonable expenses, including reasonable attorney’s fees, incurred by the adverse party in opposing it.

In layman’s terms, it means that if you bring a stupid lawsuit and then manage to draw it out and waste everybody’s time and money, you can be held responsible for doing so, and you may have to pay the other party for the expenses they “incurred.”
Mr. W argued that the G’s never “incurred” any expenses, because their insurance company paid their attorney’s fees (McCarthy Wilson defended the case for the G’s). I’m sure there are a lot of reasons why Mr. W didn’t want to pay any of the Gs’ legal expenses (one was the fact that Harford County Circuit Court Judge Emory A. Plitt, Jr, did not recuse himself from the case), but the issue of interest to the Court of Appeals was whether recovering their expenses would allow the G’s to “profit from the litigation.” After all, their legal expenses were paid by their insurance company. And Mr. W didn’t want to pay the insurance company either, because, according to him, allowing the insurance company to recover its’ expenses would negate the rule’s purpose by “conferring a benefit” upon a non-party to a suit. Decent arguments, but not good enough for the Court of Appeals.

As you might expect, the G’s saw this rather differently. They argued that Rule 1-341 should apply regardless of who is responsible for paying the costs and expenses of litigation. They argued that the purpose of the rule is to “deter abuse of the judicial system against the initiation or maintenance of frivolous actions,” and that the focus of the rule isn’t on who pays the costs, but on the “party responsible for the abusive litigation.” The Court sided with the G’s on this one, stating that “[t]he mere fact that an insurer covers all or part of the litigation expense does not, in and of itself, mean that the insured fails to incur litigation expenses.”

I get it. The Court doesn’t want to punish people for having insurance, but I still think this ruling allows a party to profit from litigation. The G’s got over $3,000 when they didn’t have to “pay” for their representation. Did they “incur” expenses? I’m sure they did, but they didn’t have to pay an attorney outright. Their insurance company took care of all of that.

The same logic does not apply to plaintiffs. The Court of Special Appeals of Maryland has found that in the case of contingency-fee agreements, a litigant “does not incur expenses.” Seney v. Seney, 97 Md. App. 544 (1993). So, if I want to bring a claim against opposing counsel and argue that they defended a claim in bad faith or without substantial justification, I can’t petition the court for sanctions. That’s not fair, right? The door should swing both ways.

The G’s tried to distinguish this case because Mrs. G’s counsel was actually paid for all of his time. Counsel was paid on an hourly basis and the costs were picked up by the insurer. The argument goes that the law that does not allow contingency fee clients to collect sanctions is not relevant in a case like this, where the attorney’s fees were paid.

I don’t buy that distinction. Still, I’m hesitant to feel sorry for Mr. W here, because bringing this suit was just a bad idea. I agree with the Court that the purpose of the rule is to deter frivolous litigation, and if you bring a ridiculous lawsuit, you kind of have to suffer the consequences. But, with respect to the rule, we have a real Goose v. Gander problem because plaintiffs who have hired a lawyer on a contingency fee are not afforded the same opportunity to be awarded sanctions.

Just for fun, let’s run back to something I touched on earlier – the motion to recuse the trial judge. This is from Mr. W’s brief to the Court of Special Appeals:

W moved to recuse Judge Plitt. E. 136-137. The basis was the above conflict [the fact that Judge Plitt was the criminal judge], and for additional reasons. Judge Plitt’s bizarre and outlandish ruling against W in a separate telemarketing case, W v. Premier Mortgage Funding, Inc., Case # 12-C-05-414, demonstrates bias and other problems. This separate telemarketing case is currently pending in this Court, September Term 2006, Number 2062, but has been stayed because the defendant mortgage company is in bankruptcy in Florida. In re: Premier Mortgage Funding, inc [sic]., Case # 8:07-bk-05713-CPM (M.D.Fl.). In Premier, for absolutely no reason, Judge Plitt required W to produce five years and [sic] state and federal income tax returns in a simple case involving three telemarketing calls which were not in any real dispute. W refused to produce the records, and his case was dismissed on that basis. The pending appeal may never be decided due to the bankruptcy. Also, W had previously had Judge Plitt reversed in the case W v. Nationwide Insurance Co., 138 Md. App. 487 (2001).

The chance of this argument carrying the day was absolutely zero. That is the problem with this case from the outset: the civil case has zero chance of success. Could it be that Mr. W was the innocent party that was wronged in this whole thing? Of course. No one knows but the parties involved, and they might not even know themselves. But the court system is not the place to right every wrong.

I’m sure these are smart people. But so much time and energy was devoted to all of this, with absolutely no purpose other than spite. The lawsuits where everyone loses are the ones that should not be filed. Again, I don’t know details of the facts outside of this opinion. But the criminal case, Mr. W’s civil suit, and the Gs’ motion for costs were all just a waste of the taxpayers’, the insurance company’s, and the parties’ time and money.  The whole adventure was frivolous and no one had clean hands.

I can’t tell you how few motions I have filed in my life for any sanctions, much less monetary sanctions, even as a defense lawyer.

This is a new opinion. I wrote about it because I have been falling behind in my blogging of late and an appellate ruling is always good fodder for a post. But I think I have lost 6 IQ points just writing this post. I wouldn’t do it all over again. I’m going to hit the publish button simply because I need to pretend this last hour of my life had some meaning.

If your goal is to torture yourself, you can read the full opinion here.

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