NCO Financial Systems, Inc. v. Montgomery Park, LLC

134 F.4th 265

• Court: Court of Appeals for the Fourth Circuit
• Decided: April 14, 2025
• Docket: 24-1294
• Status: Published

Opinion

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PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 24-1294

NCO FINANCIAL SYSTEMS, INC.,

Plaintiff - Appellant,

v.

MONTGOMERY PARK, LLC,

Defendant - Appellee.

Appeal from the United States District Court for the District of Maryland, at Baltimore. George L. Russell, III, Chief District Judge. (1:11-cv-01020-GLR)

Argued: January 30, 2025 Decided: April 14, 2025

Before NIEMEYER, GREGORY, and HARRIS, Circuit Judges.

Affirmed in part, vacated in part and remanded with instructions by published opinion. Judge Niemeyer wrote the opinion, in which Judge Gregory and Judge Harris joined.

Stephen W. Nichols, OFFIT KURMAN, PA, Bethesda, Maryland, for Appellant. Howard G. Goldberg, GOLDBERG & BANKS, P.C., Baltimore, Maryland; John Edward McCann, Jr., MILES & STOCKBRIDGE P.C., Baltimore, Maryland, for Appellee. USCA4 Appeal: 24-1294 Doc: 35 Filed: 04/14/2025 Pg: 2 of 11

NIEMEYER, Circuit Judge:

This Dickensian litigation, begun in early 2011, prosecuted for over 14 years, and

now presented to us for the fifth time, * may finally be coming to a close — but not on the

will of the attorneys involved. It arose from a dispute over a commercial lease for about

100,000 square feet of office space in Baltimore, Maryland. The issues presented here,

which we trust will be the final ones — so as not to compete with the absurdity of Bleak

House’s “Jarndyce and Jarndyce” — involve the district court’s award of roughly $3.8

million to Montgomery Park, LLC, for the costs, fees, and expenses, including attorneys

fees, that it incurred in pursuing its remedies.

The lessee NCO Financial Systems, Inc., challenges the award, contending (1) that

Montgomery Park never made a demand for the payment of the costs, fees, and expenses,

as the lease required; (2) that fees incurred by Montgomery Park in defending against

NCO’s initial suit should not have been included in the award; and (3) that expert fees

should not have been included in the award.

In connection with the first issue, we conclude that Montgomery Park clearly made

a demand for payment when it filed its motion seeking reimbursement for costs, fees, and

* Initially, we denied Montgomery Park’s request to file an interlocutory appeal, No. 14-274 (4th Cir. July 7, 2014). And thereafter, we issued three opinions in this case: NCO Fin. Sys., Inc. v. Montgomery Park, LLC, 842 F.3d 816 (4th Cir. 2016) (holding that NCO failed to satisfy the conditions necessary for early termination of the lease); NCO Fin. Sys., Inc. v. Montgomery Park, LLC, 918 F.3d 388 (4th Cir. 2019) (holding that Montgomery Park’s obligation to mitigate damages was not a condition precedent to awarding damages); NCO Fin. Sys., Inc. v. Montgomery Park, LLC, 40 F.4th 123 (4th Cir. 2022) (affirming district court’s finding that Montgomery Park’s efforts to mitigate damages were commercially reasonable). 2 USCA4 Appeal: 24-1294 Doc: 35 Filed: 04/14/2025 Pg: 3 of 11

expenses. In so concluding, we clarify that default interest should run only from the date

of demand, not from the dates when the costs, fees, and expenses were incurred. The

default interest therefore must be recalculated. In connection with the other issues, we

affirm. Accordingly, we vacate the interest portion of the judgment and remand with

instructions to recalculate interest and enter a revised judgment.

I

On October 8, 2002, Montgomery Park, as lessor, and NCO, as lessee, entered into

a lease agreement for over 100,000 square feet of space in a large commercial building on

Washington Boulevard in Baltimore, Maryland. While the initial term of the lease was for

12 years, beginning March 15, 2003, the lease gave NCO the right to terminate the lease

after 8 years if it satisfied specified conditions. NCO sought to exercise the right of early

termination, but Montgomery Park claimed that it did not satisfy the specified conditions.

Despite Montgomery Park’s notice to NCO that it had not fulfilled the conditions for early

termination, NCO vacated the leased property on May 31, 2011, refusing to pay any further

rent. After NCO vacated the premises, Montgomery Park sent it a default letter dated July

13, 2011, stating:

This letter shall constitute notice of NCO’s default . . . due to NCO’s failure to pay when due the sum of $313,662.76 . . . . If the foregoing sum due under the Lease is not paid to Montgomery Park within five (5) days following NCO’s receipt of this letter, Montgomery Park reserves the right to pursue any and all legal or equitable rights or remedies available under the Lease or otherwise available in equity or at law. In addition, please be aware that late fees and interest charges accrue as provided under the Lease.

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In the context of these disputes, NCO commenced this action in February 2011

against Montgomery Park for a declaratory judgment that it had properly exercised its right

to terminate the lease early and that the rent was based on allegedly misrepresented square

footage. Montgomery Park filed an answer and counterclaim seeking both a declaratory

judgment that the lease was ongoing and a judgment for past due rent. The litigation was

contentious and aggressively pursued by both parties. Following a bench trial, the district

court found in favor of Montgomery Park, entering judgment against NCO in the amount

of $9,854,566.95, plus ongoing postjudgment interest. In its judgment, the court

established a schedule for determining Montgomery Park’s claim for costs, fees, and

expenses, as provided by the lease.

In accordance with the schedule, Montgomery Park filed a motion on August 24,

2022, requesting attorneys fees and nontaxable expenses in the amount of $1,806,786.31;

expert fees and expenses in the amount of $157,897.99; and default interest on costs, fees,

and expenses in the amount of $1,194,065.76, for a total of $3,158,750.06 “plus any and

all additional such fees and expenses and default interest thereon and on its taxable court

costs, incurred after the date of this Motion.” It relied on Section 14.04 of the lease, which

provided that upon default, NCO was required to pay Montgomery Park “all reasonable

costs, fees and expenses incurred by Landlord in pursuit of its remedies hereunder

including but not limited to attorneys’ fees and court costs” together with interest at the

“Default Rate.” The lease defined the default rate to be 5% above the prime rate of interest,

as published in The Wall Street Journal, but not to exceed 12% per annum.

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NCO opposed Montgomery Park’s motion, advancing four arguments. First, it

contended that Montgomery Park’s costs, fees, and expenses became due and payable only

upon “demand” and that Montgomery Park had “never made a ‘demand’ for the requested

fees and expenses.” Second, it contended that the district court should disallow all of the

requested fees and expenses that were incurred prior to November 29, 2016, because

Montgomery Park had incurred those fees and expenses “in defense of NCO’s fraud and

breach of contract claims” and the lease does not support recovery of such fees and

expenses. Third, it contended that the court should disallow Montgomery Park’s request

for an award of expert witness fees. And fourth and finally, it contended that “Montgomery

Park’s requested fees and expenses should be reduced due to numerous instances of

excessive hours, duplicate billing and billing for non-compensable time.”

Following extensive briefing and a hearing, the district court orally addressed and

rejected NCO’s arguments and thereafter entered an order awarding Montgomery Park fees

and nontaxable expenses in the amount of $2,074,379.88; taxable costs in the amount of

$115,942.10; and default interest in the amount of $1,576,036.07, for a total of

$3,766,358.05.

From the district court’s order, dated March 4, 2024, NCO filed this appeal.

II

In Section 14.04, the lease between the parties provides:

Upon any Event of Default, Tenant shall remain liable to the Landlord for the following amounts: . . . (c) all reasonable costs, fees and expenses incurred by Landlord in pursuit of its remedies hereunder including but not limited to attorneys’ fees and court costs. All such amounts shall be due and

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payable immediately upon demand by Landlord . . . and shall bear interest at the Default Rate until paid.

NCO points to the lease language that authorizes Montgomery Park to claim costs, fees,

and expenses only upon “demand” and maintains that “[t]here is no evidence in the record

that Montgomery Park ever made a ‘demand’ for the fees and costs.” It states, “Quite

simply, Montgomery Park never complied with one of the Lease’s express prerequisites to

recovery of its fees, costs and expenses from NCO” and therefore this failure should result

in denying Montgomery Park’s fee motion “in its entirety.” Alternatively, it contends that

the district court erred in awarding default interest on fees, costs, and expenses incurred

before demand was made.

Montgomery Park argues that its default letter of July 13, 2011, served as demand,

albeit not using the word “demand.” That letter stated that “Montgomery Park reserves

the right to pursue any and all legal or equitable rights or remedies available under the

Lease or otherwise available in equity or at law.” (Emphasis added). Montgomery Park

argues that those remedies included those listed under Section 14.04 for “costs, fees and

expenses incurred” in pursuit of remedies.

We agree with NCO that the unambiguous language of the lease imposes on it an

obligation to pay costs, fees, and expenses contingent upon a “demand.” We also agree

that Montgomery Park’s July 13, 2011 default letter did not make a demand for payment

of costs, fees, and expenses. Indeed, a demand could not have been made at that time

because no costs, fees, and expenses had yet been incurred. Thus, the default letter could

only have noted that Montgomery Park was reserving the right to pursue costs, fees, and

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expenses in the future — after they would have been incurred and demand would have been

made.

While the record does not contain any demand from Montgomery Park for costs,

fees, and expenses made before the litigation was commenced, Montgomery Park did, in

its answer and counterclaim, request “all reasonable costs, fees and expenses incurred by

[Montgomery Park] in pursuit of its remedies hereunder including but not limited to

attorneys’ fees and court costs.” (Alteration in original). Even so, this request was still

prospective, as the litigation in pursuit of remedies had just begun. The first demand for

payment that included costs, fees, and expenses actually incurred was made by

Montgomery Park on August 24, 2022, when it filed and served its motion for costs, fees,

and expenses, in accordance with the district court’s schedule. We conclude that this

motion indeed satisfied the requirement of “demand” in the lease and that demand had not

been made before then.

NCO nonetheless contends that the lease makes “demand” a term of art and requires

that any “demand,” to be a valid notice under Section 16.01 of the lease, must be

transmitted to NCO’s address at the leased premises that it vacated. But NCO has

continuously been a party to this litigation, and Montgomery Park’s August 24 motion was

served on it, as required by the applicable rules of procedure, thus providing it with

adequate notice.

Because demand was not made until August 24, 2022, however, default interest on

the amount demanded could not begin to run until then. As the lease provides, the costs,

fees, and expenses were “payable immediately upon demand” and “shall bear interest at

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the Default Rate until paid.” (Emphasis added). We conclude, accordingly, that interest

on costs, fees, and expenses runs from August 24, 2022, when demand was first made.

We therefore vacate the district court’s award of interest in the amount of roughly

$1.6 million plus ongoing interest and remand to allow the district court to recalculate that

portion of the judgment and then to enter a revised judgment.

III

NCO next contends that, in any event, the district court’s award for costs, fees, and

expenses should be reduced to exclude those incurred by Montgomery Park in defending

against NCO’s complaint filed in February 2011. In that complaint, NCO alleged that

Montgomery Park breached the lease by overcharging for rent, unjustly enriched itself, and

committed fraud. NCO argues that Montgomery Park’s costs, fees, and expenses incurred

in defending against these claims were not those “in pursuit of its remedies,” as provided

in Section 14.04 of the lease. Not until May 25, 2012, when Montgomery Park filed its

counterclaim for past due rent, did Montgomery Park start to incur costs, fees, and expenses

in pursuit of its remedies. And NCO maintains that even after May 25, 2012, Montgomery

Park continued to incur costs, fees, and expenses in defending against NCO’s claims —

while also incurring costs, fees, and expenses in pursuing its counterclaim. It claims that

this situation continued until November 29, 2016, when we issued our opinion in NCO

Financial Systems, Inc. v. Montgomery Park, LLC, 842 F.3d 816 (4th Cir. 2016).

As a general proposition, NCO’s argument is well taken, as it was contractually

responsible for only costs, fees, and expenses incurred by Montgomery Park in pursuit of

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remedies, not those incurred by Montgomery Park in defending itself from NCO’s claims.

But, in this case, Montgomery Park’s defense against NCO’s claims and its pursuit of its

own remedies were two sides of the same coin.

In its complaint, NCO contended that the square footage for which Montgomery

Park was charging rent was inaccurate and was misstated in the lease. And this alleged

difference between the square footage provided in the lease and the actual square footage

contributed to NCO’s failure to satisfy the lease’s conditions for early termination. Thus,

NCO sought a declaratory judgment that it had properly terminated the lease early, based

on the rent attributable to the property’s actual square footage, as distinct from the square

footage and rent stated in the lease. In its answer and counterclaim, Montgomery Park

disputed these claims, alleging that NCO was bound by the lease as written and that it had

defaulted in the payment of rent, giving rise to Montgomery Park’s counterclaim for past

due rent.

In these circumstances, the “common core of facts” doctrine justifies Montgomery

Park’s claim for fees incurred both in defending against NCO’s claims and in pursuing its

own. As the Supreme Court has noted, in some “cases the plaintiff’s claims for relief will

involve a common core of facts or will be based on related legal theories,” such that

“[m]uch of counsel’s time will be devoted generally to the litigation as a whole, making it

difficult to divide the hours expended on a claim-by-claim basis.” Hensley v. Eckerhart,

461 U.S. 424, 435 (1983). Thus, the “lawsuit cannot be viewed as a series of discrete

claims,” and rather than attempting to so parse the case, “the district court should focus on

the significance of the overall relief obtained by the plaintiff in relation to the hours

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reasonably expended on the litigation.” Id. Maryland courts fully agree with these

principles. See Plank v. Cherneski, 231 A.3d 436, 481 (Md. 2020); Ochse v. Henry,

88 A.3d 773, 785 (Md. Ct. Spec. App. 2014); Weichert Co. of Maryland v. Faust, 989 A.2d

1227, 1237–38 (Md. Ct. Spec. App. 2010), aff’d, 19 A.3d 393 (Md. 2011). Moreover, the

Maryland courts point out that the doctrine “may be applied to both contractual and

statutory fee-shifting.” Ochse, 88 A.3d at 785. Finally, where there is a common core of

facts, as in this case, courts have discretion to apply the doctrine, see Weichert, 989 A.2d

at 1237, which recognizes the trial court’s “superior understanding of the litigation and the

desirability of avoiding frequent appellate review of what are essentially factual matters,”

Goodwin v. Metts, 973 F.2d 378, 384 (4th Cir. 1992) (quoting Hensley, 461 U.S. at 437).

We conclude that, in the circumstances of this case, the district court did not abuse

its discretion, and therefore we affirm the district court’s award of costs, fees, and expenses

incurred by Montgomery Park both in defending against NCO’s claims and in pursuing its

own counterclaims.

IV

Finally, NCO contends that the district court erred in including in its award the sum

of $157,897.99 paid as fees to expert witnesses. It maintains that “under Maryland law,

entitlement to reimbursement for expert witness fees is governed by the American Rule,

which prohibits recovery for attorneys’ fees in the absence of an express agreement

between the parties or statutory or rule authority for such awards.” (Citing Bahena v.

Foster, 883 A.2d 218, 226 (Md. Ct. Spec. App. 2005)).

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But in this case, the parties agreed in the lease to shift the costs, fees, and expenses

that Montgomery Park incurred in pursuit of its remedies. And just as Maryland law does

not “require the phrase ‘attorney’s fees’ in a contract to override the American Rule,” Nova

Rsch., Inc. v. Penske Truck Leasing Co., 952 A.2d 275, 285 (Md. 2008), neither does it

require the phrase “experts’ fees.” By generally requiring NCO to pay “fees,” “including

but not limited to attorneys’ fees,” the lease clearly indicates that “fees” is not limited to

attorneys fees but includes all fees incurred by Montgomery Park “in pursuit of its

remedies.” Since expert fees were so incurred, we find no error in the district

court’s inclusion of them in its award. See U.S. Home Corp. v. Settlers Crossing, L.L.C.,

833 F. App’x 374, 381 (4th Cir. 2020) (per curiam).

* * *

For the reasons given, we vacate the default interest portion of the district court’s

March 4, 2024 amended order of final judgment, instruct the court to recalculate the default

interest as provided therein, and direct it to enter a revised judgment. In all other respects,

we affirm.

AFFIRMED IN PART, VACATED IN PART, AND REMANDED WITH INSTRUCTIONS