In most civil cases in Maryland and other states, the courts follow the “American rule” on attorney’s fees, which provides that each side pays their own attorney’s fees regardless of who wins. While this may seem counter-intuitive and promote more litigation, the rationale has always been that if parties risk having to pay the other side’s legal fees if they lose, only the rich will be able to take the risk and seek justice in the courts.
There are exceptions to this rule. If the dispute is over a contract, sometimes the contract will have a provision that the prevailing party may recover legal fees from the losing party. Certain statutes also contain such “fee shifting” provisions, as discussed this week by Maryland’s intermediate appellate court in the case of Hyundai Motor America v. Alley.
According to the Court’s opinion, Alley sued Hyundai alleging that the new car that she purchased was defective. She made claims under the Maryland Automobile Warranty Enforcement Act, the Consumer Protection Act , and federal law. On the first day of trial the parties reached a settlement, whereby Hyundai agreed to give Ms. Alley a new car with the same features, which would be worth substantially more than her old vehicle. The settlement was not approved by the trial judge, but the plaintiff reserved the right to ask for an award of attorney’s fees.
She could ask for such an award because under the state warranty act, found in the Maryland Commercial Law Article, “a court may award reasonable attorney’s fees to a prevailing plaintiff.” Under the Consumer Protection Act, a party who brings an action “and who is awarded damages may also seek, and the court may award, reasonable attorneys fees.” Alley filed a motion with the court seeking an award of attorney’s fees. The trial judge found in her favor and awarded over $12,000 in fees, and Hyundai appealed.
Hyundai first argued that since the court did not approve the settlement, it could not award legal fees, and the Court of Special Appeals held there was no requirement of court approval of the settlement agreement before such fees can be recovered. It then addressed the argument that Alley was not a “prevailing party” under the statutes. After all, the case did not go to verdict and no judgment was entered in her behalf. The court describe the standard for when a party is deemed “prevailing” under these statutes: 1) when the party’s ends are accomplished as a result of the suit, 2) if the party reaches her desired destination, regardless of how she gets there, and 3) whether the party prevailed in a practical sense.
The Court found that Alley was did prevail in her suit under this test. Her suit was over a defective car, and she wound up getting a new car worth substantially more. The court therefore had discretion to award attorney’s fees, although in this case the Court found problems with how the court did that and sent the case back to recalculate the attorneys’ fee award.
Such laws as consumer protection statutes are examples of where, for public policy purposes, the standard rule on legal fee shifting may be set aside.