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Rule 2-704 – Attorneys Fees Allowed by Contract as an Element of Damages

May 13, 2021 | Civil Prodcedure, Maryland

(a) Scope of Rule. This Rule applies to a claim for attorneys’ fees in an action in a circuit court that are allowed by a contract as an element of damages for breach of that contract. It does not apply to a claim for an award of attorneys’ fees to the prevailing party pursuant to a fee-shifting provision in a contract.

Cross reference: See Rule 2-705 for the procedure where a contract provides for an award of attorneys’ fees to a prevailing party in the litigation.

(b) Pleading. A party who seeks attorneys’ fees from another party pursuant to this Rule shall include a claim for such fees in the party’s initial pleading or, if the grounds for such a claim arise after the initial pleading is filed, in an amended pleading filed promptly after the grounds for the claim arise.
(c) Scheduling Conference and Order. If a claim for attorneys’ fees is made pursuant to this Rule, unless the court orders otherwise, the court shall conduct a scheduling conference in conformance with Rule 2-703(c).

Committee note: Unlike a claim under Rule 2-703 based on fee-shifting permitted by law, where attorneys’ fees are an element of damages for breach of a contractual obligation, any award must be included in the judgment entered on the breach of contract claim. In complex cases, however, where the evidence regarding attorneys’ fees is likely to be extensive, it may be expedient to defer the presentation of such evidence and resolution of that claim until after a verdict or finding by the court establishing an entitlement to an award. See section (d) of this Rule. In that event, the admonition in the Committee note to Rule 2-703(c) is especially critical–that, although the verdict or findings on the underlying cause of action should be docketed, no judgment should be entered thereon until the claim for attorneys’ fees is resolved and can be included in the judgment.

(d) Presentation of Evidence.

(1)Generally. Evidence in support of or in opposition to a claim for attorneys’ fees under this Rule shall be presented in the party’s case-in-chief and shall focus on the standards set forth in Rule 2-703(f)(3) or subsection (e)(4) of this Rule, as applicable.
(2)Judgment by Confession. If the party seeking attorneys’ fees has requested judgment by confession pursuant to Rule 2-611, evidence establishing entitlement to such fees and the reasonableness of the amount requested shall be included in the affidavit required by Rule 2-611(a). If judgment by confession is not entered or is stricken and the action proceeds to trial, the evidence may be submitted at trial in accordance with this Rule.
(e) Determination of Award.

(1)If No Award Permitted. If a verdict returned by a jury or findings made by the court do not permit an award of attorneys’ fees, the court shall include in its judgment on the underlying cause of action a denial of such an award.
(2)Trial by Court. If the underlying cause of action is tried by the court, the court shall determine whether an award of attorneys’ fees is required or permitted. If the court finds that an award is required, it shall determine the amount. If the court finds that an award is permitted but not required, it shall determine whether an award should be made and, if so, the amount thereof. In determining the amount of an award, the court shall apply the standards set forth in Rule 2-703(f)(3) or subsection (e)(4) of this Rule, as applicable.
(3)Trial by Jury. If the underlying cause of action is tried by a jury, the jury, under appropriate instructions from the court, shall determine, as part of its verdict, whether an award of attorneys’ fees should be made to a party based on a breach of the contract by another party and the amount of such an award. If an award is made, on motion by any party affected by the award, the court, applying the standards set forth in Rule 2-703(f)(3) or subsection (e)(4) of this Rule, as applicable, shall determine whether the amount of the award is reasonable and, if not, shall modify the award accordingly. This determination does not preclude any other relief the court may grant under Rules 2-532, 2-533, or 2-535.

Committee note: This subsection preserves to the jury, in a breach of contract case where attorneys’ fees are part of the alleged damages, the right to determine whether an award should be made and, if so, in what amount, but preserves to the trial court the right to determine whether the award is reasonable. Under this approach, in the event of an appeal, the appellate court will have available both the jury’s and the trial court’s determination of reasonableness.

(4)Limited Evidence Permitted. If the claim for an award of attorneys’ fees does not exceed the lesser of 15% of the principal amount found to be due or $4,500, the court need not require evidence on all of the factors set forth in Rule 2-703(f)(3) if the party claiming the award produces evidence otherwise sufficient to demonstrate that the amount claimed is reasonable and does not exceed the amount that the claiming party has agreed to pay that party’s attorney. The evidence shall include at a minimum:

(A) a detailed description of the work performed, broken down by hours or factions thereof expended on each task;
(B) the amount or rate charged or agreed to in writing by the requesting party and the attorney; and
(C) the attorney’s customary fee for similar legal services.

Committee note: Section (e) follows the approach set forth in Monmouth Meadows v. Hamilton, 416 Md. 325 (2010), for contractual fee-shifting cases generally. Subsection (e)(4) is intended to permit the court to excuse the need to consider all of the Rule 2-703(f)(3) factors where the claim for attorneys’ fees does not exceed the lesser of 15% of the amount due or $4,500. Fees in those limited amounts are common in consumer transactions and have been found reasonable by the General Assembly in some of those settings. See Code, Commercial Law Article, ยงยง 12-307.1 (Consumer Loans) and 12-623 (Retail Installment Sales).

(f) Part of Judgment. An award of attorneys’ fees shall be included in the judgment on the underlying cause of action but shall be separately stated.

Md. R. Civ. P. Cir. Ct. 2-704

This Rule is new.

Adopted Oct. 17, 2013, eff. Jan. 1, 2014.