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PJC Argues Attorneys Fees In Routine Collection Cases Against Homeowners Should Be Limited

Homeowners’ Association Appeal

On November 6, 2009, the Public Justice Center (PJC), along with Civil Justice, the Legal Aid Bureau, and the Maryland Consumer Rights Coalition filed a friend-of-the-court (amicus) brief in three cases which were consolidated on appeal in the Maryland Court of Appeals: Monmouth Meadows Homeowners Association, Inc. v. Hamilton, No. 43, Sept. Term 2009, Montpelier Hills Homeowners Association, Inc. v. Thomas-Ojo, No. 44, Sept. Term 2009, and Constant Friendship Homeowners Association, Inc. v. Tillery, No. 45, Sept. Term 2009.  PJC and the other amici curiae participated in support of the Respondents, Ms. Hamilton, Mr. and Mrs. Thomas-Ojo, and Mr. Tillery, who were unrepresented.

The Respondents own or owned homes that are within the Petitioners’ homeowners’ associations.  All three of them, at some point, became unable to pay their annual assessments to their respective associations.  Attorneys for the homeowners’ associations pursued the homeowners for their debts, which ranged from about $550 to $1,280, by sending form collection letters and eventually filing district court small claims suits, which were uncontested for the most part.  In the district courts, the Petitioners sought not only the assessment arrears, but also attorney’s fees pursuant to fee-shifting provisions that appeared in the contracts between the homeowners and the associations.  The amount of the requested attorney’s fees ranged from about 70% to over 160% of the underlying debt.  When the district courts awarded a lower amount of fees, equal to 15% of the principal in two of the three cases, the homeowners associations’ initiated de novo appeals in the circuit courts that were also largely uncontested.  Before the Court of Appeals, the Petitioners argued that they were entitled to recover the full measure of attorney’s fees they incurred in attempting to collect the debt and appeal the district court rulings to the circuit courts, even to the extent that these fees approached or exceeded the damages otherwise in dispute.

The amicus brief drafted by Murnaghan Appellate Advocacy Fellow Monisha Cherayil argued that trial courts retain discretion to limit attorney’s fees incurred in private, contractual debt-collection actions to a portion of the monetary damages.  An award equal to approximately 15% of damages is particularly appropriate in the context of high-volume debt-collection litigation, which involves completing rote letters and filing boilerplate pleadings rather than performing complex legal work. The brief distinguished the homeowner’s associations’ fee demands from those put forth by plaintiffs in “private attorney general” litigation.  Whereas private attorney generals enforce public policy when they prosecute, for example, civil rights or labor law violations, creditors merely protect their own private rights when they enforce debt- collection contracts.  Accordingly, the brief argued, homeowners’ associations should not be entitled to collect fees approaching or exceeding the amount of the underlying debt.  The brief further argued that a creditor, like a homeowners’ associations, should not be entitled to recover attorney’s fees incurred in appealing an unsatisfactory attorney’s fee award where the debtor has not contested the proceedings.  Saddling small-scale debtors with the burden of paying substantial attorney’s fees serves no public purpose while potentially pushing these debtors, frequently persons of limited means, closer to financial ruin.

On December 8, 2009, Ms. Cherayil argued on behalf of the amici curiae in the Court of Appeals.  At the close of the argument, Chief Judge Robert Bell thanked the PJC on the record for participating in the case, explaining that the Court would not have been able to fully understand the pro se Respondents’ position had it not been for the amicus briefing and argument.

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