O.C. chamber can’t claim inability to pay, appeals court holds

Employers cannot get out of paying attorneys’ fees in a wage payment dispute by claiming they can’t afford it, the Court of Special Appeals has held.

The decision revived the fee request of Daniel J. Barufaldi, the former executive director of the Greater Ocean City, Maryland Chamber of Commerce, who left the chamber in 2007 after a dispute over his compensation package.

A jury awarded him $60,000 in damages under the Maryland Wage Payment Collection Law, but the trial court has twice refused to award him any attorneys’ fees.

In its most recent refusal, the trial court cited the chamber’s potential inability to pay the fees.

“The [appeals] court said that it’s not a good enough reason why fees should not be awarded,” said Philip Zipin, who represented Barufaldi at trial and on appeal. “I think it’s safe to say that if it were allowed, that it could be raised in any case — it would be a very popular defense.”

In a footnote, Court of Special Appeals Judge Kathryn G. Graeff, who wrote the unanimous decision, said factors that could be used in determining whether or not to award attorneys’ fees included plaintiff misconduct or rejecting a more favorable settlement offer than what the court or jury returned.

Bruce F. Bright, with Ayres, Jenkins, Gordy & Almand P.A. in Ocean City, represented the chamber on appeal. On Monday afternoon, Bright said he had not conferred with chamber leaders to decide on the next step.

Jury’s award

Barufaldi — now the economic development director for Dover, N.H. — was hired as the Ocean City chamber’s executive director in fall 2005 with a base salary of $52,000 as part of a three-year contract.

Barufaldi and chamber officials started trying to rework that contract in October 2006, according to court filings. The dispute centered on incentive pay he was supposed to have earned under the original contract.

The chamber revised Barufaldi’s contract in 2006 to reflect a $65,000 annual salary with no incentive pay. Barufaldi did not sign the contract and resigned on Jan. 23, 2007.

Barufaldi filed the original lawsuit in April 2008 claiming breach of contract and violations of the Maryland Wage Payment and Collection Law. The chamber counter-sued for breach of contract in January 2009, claiming Barufaldi failed to perform his duties, failed to complete the three-year term of the initial contract, and searched for a new job while still employed by the chamber. (Prior to resigning he had secured a job with the Charles County Chamber of Commerce in Maryland.)

A jury trial was held in Worcester County Circuit Court. After a three day trial and a few hours of deliberation, the jury awarded Barufaldi $60,000 in April 2009.

The jury also found there was no good-faith dispute over Barufaldi’s entitlement to the money, which triggered his right to seek attorneys’ fees.

Barufaldi filed a motion for $160,275 in attorneys’ fees under the wage law’s fee-shifting provision. The trial judge denied the motion, and both sides appealed.

Costs, fees mount

In 2010, the Court of Special Appeals affirmed the jury’s verdict but sent the fee award back to the circuit court for reconsideration. Barufaldi then added nearly $53,000 to his request, representing the added fees and costs of the appeal.

On remand, Melanie Pursel, the chamber’s current executive director, said that any fee award would jeopardize “in a very real sense” the financial viability of the organization. She said the chamber had not turned a profit in more than a decade and had to borrow money to meet the jury’s award. The chamber had argued that the court should apply factors used to determine fee-shifting under the Employee Retirement Income Security Act, which includes ability to pay as one of the factors.

The circuit court denied Barufaldi’s motion on March 25, 2011, leading to the appeal decided Friday.

The circuit court has not yet set a date to revisit the motion for attorneys’ fees.

What the court held

Case:

Barufaldi vs. Ocean City, Maryland Chamber of Commerce, Inc. et al., CSA No.270 Sept. 2011. Reported. Opinion by Graeff, J. Argued May 9, 2012. Filed June 29, 2012.

Issue:

Is an inability to pay, allowable as a factor under ERISA, a reason to not award attorneys’ fees under the fee-shifting provision of the Maryland Wage Payment Collection Law?

Holding:

No; remanded. The legislative history and the remedial purposes of the WPCL, a defendant’s ability to pay is not relevant in determining whether to award attorneys’ fees under the WPCL.

Counsel:

Philip B. Zipin for appellant. Bruce F. Bright, with Ayres, Jenkins, Gordy & Almand, P.A. in Ocean City, for appellee.

RecordFax # 12-0629-01 (27 pages).