When Personal-Professional Relationship Breakdowns Lead to Unreasonable Lengthy Litigation: Awards of Attorneys’ Fees in Maryland

When you bring in someone as a co-owner of your business, you want someone you can trust implicitly. For many people, the most trusted people in their lives are their spouses. However, when the personal relationship goes awry, so may the business relationship. When both break down, legal action is often necessary.

P.R. and M.D. were a same-sex couple who “considered themselves married, but… were never legally married.” The women also were business partners for more than a decade and a half, sharing a home in Brandywine and a second property in Accokeek which housed their business, a daycare facility.

They separated in 2017. M.D. sued, asking the court to order a sale of the two properties and the daycare business. P.R. countersued, alleging that M.D. had engaged in “embezzlement, deceit, fraudulent conversion, and breach of fiduciary duty.” The foundation of this claim was M.D.’s allegedly moving daycare funds from business accounts to personal accounts.

P.R. also sued in Delaware, asserting that M.D. had no financial rights or interests in the business. That lawsuit was unsuccessful. Here in Maryland, the Prince George’s County Circuit Court ultimately ordered the sale of the two properties.

The Circuit Court rejected P.R.’s claims of embezzlement, deceit, fraudulent conversion, and breach of fiduciary duty. The court found that P.R. had only proven that the business colleagues’ close personal relationship had led to “general sloppy keeping of the financial books and records and money being moved into personal accounts.” This, the court noted, was very common with couples who share businesses.

A ‘Long and Protected Road of Litigation’

The case was a simple one, yet it dragged out for many years. As a result, M.D. asked the court to award her compensation for her attorneys’ fees expenditures, and the court agreed. Maryland Rule 1-341(a) says that a party may recoup reasonable attorneys’ fees from the opposing side if the court makes a finding that the opponent acted “in bad faith or without substantial justification” in “maintaining or defending” her legal position.

P.R.’s conduct met that standard, according to the courts. Her legal maneuvers took a simple case and turned it into a “four[-]year long and protracted road of litigation” spanning two states, including the Circuit and Appellate Courts here in Maryland. P.R. the trial court said, waited “an extended period of time” before initiating her Delaware action, and also delayed the process by pursuing an unsuccessful appeal in Maryland. The trial judge found that P.R. took the steps she did, not because she believed her legal positions had merit, but because “she did not want to lose the properties” and protracted litigation was a way “to ensure she continued to maintain ownership of the properties.” This was bad faith that caused unjustifiable delay, which meant that it warranted an award of attorneys’ fees, according to the court.

Any divorce is painful. A divorce that represents the end of a long-term marriage and a once-flourishing business relationship can be especially anguishing… and challenging. Whether your case presents complex issues or an unhappy ex who’s decided to engage in bad faith tactics, you need a capable and powerful advocate protecting your rights and interests. When seeking diligent and effective counsel, look to the knowledgeable Maryland family law attorneys at Anthony A. Fatemi, LLC. Contact us today at 301-519-2801 or via our online form to set up your consultation to find out more about putting the experience and power of this office to work for you.

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