Wednesday, October 12, 2011

New Maryland Case on Attorney's Fee Awards - Fixed Percentage Fees in Promissory Notes & Post-Judgment Attorney Fee Awards

The Maryland Court of Special Appeals recently addressed an issue that affects lawyers and other contract and promissory note drafters. In Suntrust Bank v. Goldman, the Court ruled that actual reasonable attorneys' fees incurred are the proper measure of an attorney fee award even where the promissory note calls for a fixed percentage fee based on the amount of the obligation due.

In the case, Sunstrust's Credit Line agreement provided that Suntrust was entitled to an award of attorneys' fees equal to 15% of the principal due "or reasonable attorneys' fees allowed by law." Suntrust asked for an award of $60,206.00 (15% of the balance due) and the Circut Court for Baltimore County awarded actual attorneys' fees of only $3,094.00.

The Court of Special Appeals agreed with the Circuit Court. The Court's opinion is here. Specifically, the Court held: "Thus, Maryland law limits the amount of contractual attorneys fees to actual fees incurred, regardless of whether the contract provides for a greater amount. The contract may provide that the amount of fees is determined by a percentage or some other method, but to comply with the indemnification requirement, the amount of fees paid pursuant to the agreement between the claimant and its attorneys must equal or exceed the amount provided for in the contract."

The Court also dealt with the issue of attorneys' fee awards for post-judgment collection efforts, and seemingly recommended that if a creditor wanted to be able to pursue reimbursement for post-judgment colection efforts, it could include clear language in its agreements providing that the parties intend that the attorneys' fee provision shall not merge into a judgment on the agreement.

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