MICHAEL C. WORSHAM
ROBERT GREENFIELD AND ROMUALDA GREENFIELD
Certiorari to the Court of Special Appeals (Circuit Court for Harford County), Emory A. Plitt, Jr., Judge.
Argued by Michael C. Worsham of Forest Hill, MD for Petitioner.
Argued by Thomas Patrick Ryan (Amy Leete Leone of McCarthy Wilson LLP of Rockville, MD) on brief for Respondents.
ARGUED BEFORE Barbera, C.J., Harrell, Battaglia, Greene, Adkins, [*]Bell, and [**]Murphy, JJ.
[435 Md. 351] Bell, C.J.
In this case, we must decide whether a party " incurs" litigation costs within the meaning of Maryland Rule 1-341 when those costs are paid, not by that party, but by an [435 Md. 352] insurance company on his or her behalf. We shall affirm the judgment of the Court of Special Appeals and hold that, regardless of who pays the attorney fees or of whether the fees are covered and paid pursuant to an insurance policy, attorney fees and litigation expenses are " incurred" within the meaning of Rule 1-341 when the party becomes subject to, or liable for, the services and expenses. In the case of attorney fees, that is when the services are rendered.
The events out of which this case arose began in February 2000 with a dispute between neighbors: Robert Greenfield (" Mr. Greenfield" ), one of the respondents in this case, filed criminal charges against Michael Worsham, the petitioner, alleging second degree assault and malicious destruction of property. A jury acquitted the petitioner of malicious destruction of property and was unable to reach a verdict as to the assault count. The petitioner subsequently filed a six-count complaint in the Circuit Court for Hartford County against Greenfield, his wife Romulda Greenfield (" Mrs. Greenfield" ), an additional respondent in this case, (the " respondent" ), and two neighbors, alleging, inter alia, defamation, false light/invasion of privacy, civil conspiracy, and aiding and abetting. In addition, the petitioner alleged, against Mr. Greenfield only, malicious prosecution.
Prior to trial, the Greenfields and the neighbors moved for summary judgment, which the Circuit Court granted with regard to all claims except the count for malicious prosecution. Summary judgment was granted as to that count at the close of the petitioner's case against Mr.
Greenfield. The petitioner noted an appeal of the judgment thus entered to the Court of Special Appeals, which affirmed the judgment of the trial court. The petitioner's petition for a writ of certiorari, filed with this Court, was denied. Worsham v. Greenfield, 411 Md. 599, 984 A.2d 244 (2009).
[435 Md. 353] Following our denial of " cert," the respondents filed a " Motion for Award of Attorney's Fees and Costs," pursuant to Maryland Rule 1-341, seeking recovery of the attorneys fees, expenses, and costs associated with the litigation initiated by the petitioner. They alleged that their insurance carrier, Erie Insurance Exchange (" Erie Insurance" ), had expended $38,693.00 in attorney's fees and $1,571.48 in related costs, in defending Mr. and Mrs. Greenfield. As such, the respondents candidly acknowledged that their attorney's fees, expenses, and other costs had been paid by Erie Insurance. The Circuit Court denied the respondents' motion with respect to Mr. Greenfield, but granted it with regard to the respondent, Mrs. Greenfield, finding that she had been joined in the action without " substantial justification." The court noted that, between the time that the suit was filed and the date when judgment was granted in favor of Mrs. Greenfield, there were sixty-two docket entries, manifesting " what can only be characterized as a form of 'scorched earth' litigation primarily by Mr. Worsham." The court added that it could find " no evidence" suggesting " any involvement at all by Mrs. Greenfield in any of the events" relevant to the petitioner's complaint, and that the petitioner failed to present any " colorable reason to name Mrs. Greenfield as a defendant in Counts Three -- Six." For this reason, the court concluded that it was " beyond doubt that there was no substantial justification for naming Mrs. Greenfield as a defendant in Counts Three -- Six." The court then awarded the respondent $3,613.13 for the costs attributable to her defense. It found that Mrs. Greenfield had " incurred" the costs of her defense within the meaning of Rule 1-341, notwithstanding the fact that Erie Insurance had paid all of the costs of litigation on her behalf.
[435 Md. 354] The Court of Special Appeals affirmed the trial court's award. It concluded:
" While the nature of the offending conduct is relevant to the amount, the amount must be compensatory and not designed to punish the offending party. In the case before us, the fees, costs, and expenses were in fact paid on Mrs. Greenfield's behalf, and the amount of the award was premised on reimbursement of the amount paid."
The court went on to note:
" [T]he purpose of Rule 1-341 compels us to conclude that fees, costs, and expenses incurred by a party opposing a proceeding that was maintained in bad faith or without substantial justification are awardable even though paid by the party's insurer. The Rule clearly applies to 'any proceeding' and clearly applies to parties who maintain or defend such a proceeding."
The petitioner urges us to reverse the judgment of the Court of Special Appeals, primarily arguing that the respondent did not " incur" costs under Rule 1-341, because those costs were covered
and paid by the respondent's insurer Erie Insurance. Thus, he submits, permitting a party to [435 Md. 355] recover when that party did not pay the cost of litigation him or herself would conflict with the purpose of Rule 1-341; rather than compensating the affected litigant, it would allow the recovering party to profit from the litigation. The petitioner argues further that permitting an insurance company to recover pursuant to the Rule would conflict with the Rule's purpose by conferring a benefit upon a non-party to the suit.
The respondents see the issue quite differently. They argue that Rule 1-341 applies no matter who pays the costs and expenses, and regardless of whether the party seeking the award actually paid the costs of litigation themselves. This is so, they assert, because the Rule's primary purpose is to deter abuse of the judicial system against the initiation or maintenance of frivolous actions. That purpose, they further submit, indicates that the focus of the Rule is on the actions of the [435 Md. 356] party responsible for the abusive litigation, not on who pays the ...