NCO FINANCIAL SYSTEMS, INCORPORATED, now known as EGS Financial Care, Inc., Plaintiff - Appellee,
MONTGOMERY PARK, LLC, Defendant-Appellant.
Argued: November 1, 2018
Amended: March 15, 2019
from the United States District Court for the District of
Maryland, at Baltimore. George L. Russell, III, District
G. Goldberg, GOLDBERG & BANKS, PC, Baltimore, Maryland,
D. Levy, BROWN, GOLDSTEIN & LEVY, LLP, Baltimore,
Maryland, for Appellee.
R. Treem, Kevin D. Docherty, Anthony J. May, BROWN, GOLDSTEIN
& LEVY, LLP, Baltimore, Maryland, for Appellee.
GREGORY, Chief Judge, and NIEMEYER and HARRIS, Circuit
NIEMEYER, CIRCUIT JUDGE
case, which involves disputes between parties to a 12-year
commercial lease of office space in Baltimore, Maryland,
comes to us for a second time. In the prior appeal, we held
that NCO Financial Systems, Inc. (the lessee) had failed to
properly exercise its right of early termination of the lease
agreement between it and Montgomery Park, LLC (the lessor)
and had, by failing to pay rent thereafter, breached the
agreement. NCO Fin. Sys., Inc. v. Montgomery Park,
LLC, 842 F.3d 816, 821-23 (4th Cir. 2016). Accordingly,
we remanded the case for further proceedings on Montgomery
Park's claim for damages.
remand, the district court conducted a bench trial at which
it received evidence regarding Montgomery Park's damages
and whether Montgomery Park had, as required by the lease
agreement, used "reasonable commercial efforts" to
mitigate its damages. The court concluded that Montgomery
Park failed to use reasonable commercial efforts to mitigate
its damages and that this failure was a condition precedent
to any damage recovery. It therefore denied Montgomery Park
any damages for NCO's breach.
appeal, Montgomery Park contends that the district court
erred (1) by concluding that the obligation to mitigate
damages was a condition precedent to the recovery of any
damages and therefore that the failure to satisfy that
condition completely barred recovery, rather than
merely reduced the amount of recoverable damages,
and (2) by concluding that Montgomery Park's obligation
to mitigate damages meant that it "was under a
contractual duty to give special care and attention" to
the space previously leased by NCO and therefore that
marketing efforts directed at leasing all vacant spaces in
the building were largely irrelevant.
agree with Montgomery Park on both points and therefore
vacate the district court's judgment and remand for
further proceedings consistent with this opinion.
First, we conclude that the district court
misconstrued the lease agreement and misapplied Maryland law
in concluding that Montgomery Park had a duty to
"endeavor to re-let the premises and minimize [its]
damages as a condition precedent to recovering"
against NCO. (Emphasis added). Because the lease
agreement's language incorporated the common law
mitigation-of-damages doctrine, which holds that a plaintiff
cannot recover damages which it could have reasonably
avoided, Montgomery Park's recovery should only have been
reduced by the amount of rent that NCO could
demonstrate would have been recovered by reasonable efforts
to re-let the space. Second, we conclude that the
district court, in evaluating the commercial reasonableness
of Montgomery Park's mitigation efforts, applied the
wrong standard. Reasonable commercial efforts to mitigate
damages did not require Montgomery Park to favor NCO's
space over other vacant space in the building. Rather,
commercial reasonableness only required Montgomery Park to
reasonably market NCO's space on an equal footing with
the other spaces that it was seeking to rent.
on March 15, 2003, Montgomery Park leased over 100, 000
square feet of office space to NCO in a building located on
Washington Park Boulevard in Baltimore, Maryland. The initial
term of the lease was 12 years, but NCO had a limited right
to terminate the lease after 8 years, provided that it gave