Congressional Hotel Corp. v. Mervis Diamond Corp.

KRAUSER, C.J. Congressional Hotel Corporation (“CHC”) appeals from an order of the Circuit Court for Montgomery County, awarding attorneys’ fees and costs to Mervis Diamond Corporation (“Mervis”), pursuant to a provision of the parties’ lease agreement (the “Lease”), for two bench trials and the first of two previous appeals, 1 resulting from CHC’s breach of the parties’ lease. The circuit court erred, CHC contends, by including, in that award, attorneys’ fees and costs relating to Mervis’s motion to reconsider, filed in this Court, following the first appeal and attorneys’ fees and costs relating to the second trial when it was, according to CHC, Mervis’s “errors and misconduct” that created the need for that trial. We disagree and affirm. Background This is the third time that this case has been before us.

In outlining the factual basis of this appeal, we need proceed no further than to recite the facts and circumstances, as set out in our opinion in CHC’s first appeal, Congressional Hotel Corp. v. Mervis Diamond Corp., No. 1848, Sept. Term 2006 (filed December 12, 2007) (“Congressional /”), as we did in our opinion in CHC’s second appeal, Congressional Hotel Corp. v. Mervis Diamond Corp., No. 1075, Sept. Term 2009, slip op. at 5 (filed June 17, 2010) (“Congressional II ”). They are: On July 6, 2004, Mervis and CHC executed the Lease for approximately 3,282 square feet of retail space (the “Premises”). The Premises are attached to a Ramada Inn Hotel in the Congressional Village shopping center in Rockville. ⁴⁹³ Under Section 1.02(.j) of the Lease, Mervis was required to take possession of the Premises “five (5) days after Tenant’s receipt of Landlord’s notice to Tenant that the Premises [are] ready for Tenant’s use and that Landlord has completed the work listed on Exhibit B (the ‘Landlord’s Work’).” It is estimated, in Section 1.01(q) of the Lease, that CHC would deliver Notice of Possession by February 1, 2005. ... Prior to performing the Landlord’s Work, CHC was required to obtain a building permit from the City of Rockville.

Section 2.04 of the Lease describes certain rights of CHC and Mervis related to CHC’s failure to deliver Notice of Possession by the Estimated Delivery Date of February 1, 2005.... Beginning in 2002, Congressional Village was being converted from a strip retail shopping center with surface parking into a mixed-use residential and commercial center with two elevated parking garages (Garages 1 & 2).... The City of Rockville requested a plan ... for the development and construction of Congressional Village to ensure that adequate parking was maintained.... [The City] informed the involved parties that adequate parking would have to be maintained in order to obtain occupancy permits. Garage 2, which was scheduled to be completed by mid-February of 2005, would provide retail parking for the retail tenants of Congressional Village and the Ramada Inn, including the Premises.

During construction, Ronald Cohen[, a principal in CHC,] made a decision to delay the construction of Garage 2 and, instead, commence construction of [a building] in Congressional Village, which two of Congressional Village’s largest and most prominent tenants were to occupy. [The City] approved the deviation. In December of 2004, when it was clear that ... Garage 2 [would not be completed] by mid-February, 2005, CHC ⁴⁹⁴ began to explore the possibility of razing the Ramada Inn and constructing high-rise condominiums in its place. At a meeting in January of 2005, CHC informed Mervis that it wished to terminate the Lease and, instead, build condominiums at Congressional Village.

CHC presented Mervis with architectural renderings of the project and offered Mervis the opportunity to purchase retail space. Mervis declined the offer and insisted on CHC’s adherence to the Lease. CHC tried a second time, in the same month, to terminate the Lease. Mervis rejected that proposal as well.

On the Estimated Delivery Date of February 1, 2005, CHC had not yet obtained the required building permit from the City of Rockville to commence the Landlord’s Work. It received the permit on February 15, 2005, after Mervis and CHC had finalized the terms of the Landlord’s work. On February 18, 2005, counsel for Mervis sent a letter to CHC, asking when CHC planned to commence the Landlord’s Work. CHC asked Mervis to meet and discuss its concerns, but Mervis declined.

On March 1, 2005, counsel for Mervis sent a second letter, demanding information about CHC’s plans to commence the Landlord’s Work. When it did not hear from CHC, Mervis filed this action in the circuit court fifteen days later. Mervis alleged that CHC had breached the Lease and requested specific performance and lost profit damages. Mervis also sought a preliminary injunction to prevent CHC from altering or razing the Premises.

Congressional I, No. 1848, Sept. Term 2006, slip op. at 3-10 (footnotes omitted). The first trial of this matter, a bench trial, began on June 12, 2006, and ended, six days later, on June 16, 2006. The circuit court, on September 29, 2006, issued a memorandum opinion and order (the “2006 Lost-Profits Judgment”), finding that CHC had breached the Lease “in early-March, 2005”; ⁴⁹⁵ ordering specific performance of the Lease, as Mervis requested; and awarding $2,164,500, representing lost profits from March 15, 2005, to September 29, 2006, together with, as yet, undetermined attorneys’ fees and costs. CHC thereafter noted its first appeal (Congressional I).

While CHC’s appeal was pending, Mervis moved, in accordance with the court’s award of unspecified attorneys’ fees and costs, for an award of fees and costs for the first trial, reserving the right to petition for an additional award “should there be further litigation.” On December 19, 2006, the circuit court entered an order awarding Mervis $298,979.98 in attorneys’ fees and costs, consisting of fees and costs incurred up to and including the first trial (the “2006 Fee Award”). Following that award, we issued our unreported opinion in Congressional I, vacating the 2006 Lost-Profits Judgment and holding that the circuit court had erred in calculating Mervis’s lost profits, by starting from the date that the “Landlord’s Work” was to have commenced, because it was “the failure to complete the Landlord’s Work, not the failure to commence that work, that constitute^] the breach.” Congressional I, No. 1848, Sept. Term 2006, slip op. at 18 (emphasis in original). Accordingly, we remanded the case for the circuit court to determine when that work should have been completed, leaving it to that court to determine “[w]hether a ‘mini-trial’ to determine such issues [was] necessary.” Id. We also agreed with CHC that the circuit court made certain evidentiary errors as to testimony relating to the calculation of Mervis’s lost profits, specifically in admitting opinion testimony by a lay witness, Melvin Brenner, and in allowing Ronald Mervis, an officer of Mervis, to “utilize a Blackberry during his testimony, without making the information on which he was relying available to the other side.” Id. at 41, 46-48.

But we rejected CHC’s three other claims, namely, that Mervis’s claim for lost-profit damages was barred by the terms of the Lease and by Mervis’s failure to mitigate damages, that certain of Mervis’s claims were also barred by estoppel, and that the circuit court erred in concluding that ⁴⁹⁶ CHC was not entitled to terminate the Lease. Id. at 26, 30-31, 49, 53. When Mervis filed a motion for reconsideration, we denied that motion. Before the case was retried in the circuit court, CHC undertook and completed, in four months, the Landlord’s Work.

Mervis accepted possession of the Premises on April 16, 2007; completed work of its own; and opened its store on October 15, 2007. At the second trial, which spanned six days, from March 30, 2009 through April 6, 2009, both parties presented expert testimony as to the date that CHC should have completed the Landlord’s Work and the amount of profits that Mervis lost as a result of the delay in opening its store. On April 22, 2009, the circuit court issued a memorandum opinion, finding that “CHC should have completed the Landlord’s Work in sixty days” and that Mervis was therefore entitled to damages for lost profits during the two-year period from October 15, 2005, the date Mervis would have opened its store had CHC’s work been finished in sixty days, and October 15, 2007, the date Mervis actually opened its store. Then, on July 10, 2009, the circuit court entered judgment, awarding Mervis a total of $3,456,085.50 in lost profits and prejudgment interest (the “2009 Lost-Profits Judgment”).

From that judgment, CHC noted an appeal, asserting, first, that the 2009 Lost-Profits Judgment was based on improper expert witness testimony and, second, that Mervis was not the appropriate plaintiff because the losses, if any, were actually suffered by another independent corporate entity. 2 On June 17, 2010, in a second unreported opinion involving the two ⁴⁹⁷ parties, we affirmed the judgment of the circuit court. Congressional II, No. 1075, Sept. Term 2009, slip op. at 5. Meanwhile, on July 6, 2009, after prevailing in the circuit court at the second trial, Mervis moved for a “supplemental judgment in the amount of $501,530.49” (the “2009 Fee Request”). In the 2009 Fee Request, Mervis sought attorneys’ fees and costs for the period extending from the 2006 Fee Award through the second trial in April of 2009.

That is, Mervis sought attorneys’ fees and costs for the Congressional I appeal, the motion for reconsideration of this Court’s decision in Congressional I, and the second trial, up to when the court issued its opinion following that trial. In its request, Mervis stated that it intended to move for an additional judgment of attorneys’ fees and costs for any post-trial motions and appeals relating to the second trial. Although CHC did not oppose the attorneys’ fees and costs claimed by Mervis for the Congressional I appeal, it did oppose the attorneys’ fees and costs claimed by Mervis for the trial and appellate proceedings that followed the Congressional I decision, specifically, Mervis’s motion for reconsideration of that decision and the second trial. That is, CHC claimed that Mervis was not entitled to $323,875.68 of the requested $501,530.49 because those fees and costs, CHC asserted, “should never have been incurred and would never have been incurred but for the errors [Mervis] committed in the first trial.” Two months later, on September 15, 2009, the circuit court held a hearing on Mervis’s 2009 Fee Request.

In a memorandum opinion and order, dated September 21, 2009, the circuit court found “the fees charged and the costs incurred in connection with the second trial to be fair, reasonable, and necessary,” explaining that although the Court of Special Appeals held it was error for the first trial court to use “early March 2005” as the commencement of the damages period, such an error was not the product of an unreasonable position taken by Mer-vis. ⁴⁹⁸ Furthermore, the second trial did not substantially duplicate the first trial — the mini-trial on CHC’s completion of the Landlord’s Work was held only once, at the ... second trial. The second trial bore little resemblance to the first trial, due in large measure to the new strategies employed by CHC on remand. (Emphasis in original; footnotes omitted.) The circuit court then awarded Mervis the $501,530.49 it requested in attorneys’ fees and costs (the “2009 Fee Award”). CHC now appeals from that order, but, as it did at the hearing below, contests only the $323,875.68 in fees and costs incurred by Mervis following Congressional I. Discussion Section 25.01 of the Lease provides that “if either party hereto finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to enforce any of the terms, covenants or conditions hereof, the unsuccessful party shall pay to the prevailing party a reasonable sum for attorneys’ fees.” Those fees “include attorneys’ fees on any appeal.” (Emphasis supplied.) Section 25.01 further provides that the prevailing party is also “entitled to all other reasonable costs for investigating such action, taking depositions and the discovery, travel, and all other necessary costs incurred in such litigation.” There is no dispute that Section 25.01 is valid and enforceable and that Mervis was ultimately the “prevailing party” 3 in the underlying litigation.

Nor is there any disagreement over the rates charged, or the number of hours claimed, by Mer-vis’s attorneys. What CHC does claim, however, is that “the time [Mervis] expended in the preparation of its motion for reconsideration ⁴⁹⁹ [of our decision in Congressional /] and all of the time expended by [Mervis] on the post-remand portion of this case was ‘excessive, redundant, and/or unnecessary’ ” because “the errors that led to the [s]econd [t]rial were all calculated and/or strategic acts of’ Mervis at the first trial. It was, asserts CHC, “unreasonable” for Mervis, first, to “refus[e] to use an expert” to prove how long the Landlord’s Work should have taken; second, to “try to cloak its expert’s testimony in the clothing of lay testimony”; and, third, to “[s]end[ ] its witness, Ronald Mervis, to the stand with[,] and to testify from!,] an unauthorized electronic device that contained hearsay evidence.” 4 CHC asks us to vacate the circuit court’s judgment and limit the award of attorneys’ fees and costs to either “amounts unrelated to the [s]econd [t]rial or, in the alternative, the first trial.” In awarding “fees based on a contract entered by the parties authorizing an award of fees,” a court should, the Court of Appeals instructs, “use the factors set forth in Rule 1.5[of the Maryland Lawyers’ Rules of Professional Conduct] as the foundation for analysis of what constitutes a reasonable fee.” Monmouth Meadows Homeowners Ass’n v. Hamilton, 416 Md. 325, 336-37 , 7 A.3d 1 (2010). Those factors are: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; ⁵⁰⁰ (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment of the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.

Id. at 336 n. 10, 7 A.3d 1 (quoting Md. Lawyers’ R. Profl Conduct 1.5(a)). In awarding attorneys’ fees based on a contractual fee and cost shifting provision, a trial court “may consider, in its discretion, any other factor reasonably related to a fair award of attorneys’ fees” and “should consider the amount of the fee award in relation to the principal amount in litigation.” Id. at 337-38 , 7 A.3d 1 . But, in so doing, the court need not “explicitly comment on or make findings with respect to each factor.” Id. at 337 n. 11, 7 A.3d 1 . In fact, the court, in making its award, need not even “mention Rule 1.5 as long as it utilizes the rule as its guiding principle in determining reasonableness.” Id. at 340 n. 13, 7 A.3d 1 .

And, finally, the trial court’s determination of the reasonableness of attorneys’ fees “is a factual determination within the sound discretion of the court, and will not be overturned unless clearly erroneous.” Royal Inv. Group, LLC v. Wang, 183 Md.App. 406, 456 , 961 A.2d 665 (2008) (citing Nova Research, Inc. v. Penske Truck Leasing Co., 405 Md. 435 , 448 n. 4, 952 A.2d 275 (2008); Holzman v. Fiola Blum, Inc., 125 Md.App. 602, 637 , 726 A.2d 818 (1999)). In its calculation of attorneys’ fees and costs, the circuit court reviewed “the fee and cost submissions” of Mervis’s counsel, which included “detailed invoices ... along with the ⁵⁰¹ affidavit of Robert E. Greenberg, Esq., [Mervis’s] lead trial counsel.” Although it was not required to “explicitly comment on or make findings with respect to” each factor in Rule 1.5(a) of the Maryland Lawyers’ Rules of Professional Conduct, or, indeed, even mention the rule, see Monmouth, 416 Md. at 338 n. 11, 340 n. 13, 7 A.3d 1 , the court below expressly stated that the attorneys’ fees and costs requested would be denied if they did not “comport with Rule 1.5.” Applying the factors in that rule, the circuit court found that the attorneys’ fees and costs Mervis incurred in the second trial were “fair, reasonable, and necessary.” As to the factors relating to “the time and labor required, the novelty and difficulty of the questions involved ... the skill requisite to perform legal services properly,” and “the time limitations imposed,” the court, professing to be “intimately familiar with the amount of work required” in the case, found that the case “presented many novel and difficult questions of law, procedural and substantive,” and that “[c]ounsel for all parties performed at the highest level of the profession.” As to the factor relating to “the amount involved and the results obtained,” the court observed that the “stakes for both sides were enormous.” The attorneys’ fees and costs in the two awards, which amounted to $800,510.47, were not out of line with the “enormous” stakes of the underlying litigation or the results obtained by Mervis’s attorneys, specifically a judgment ordering specific performance of the Lease and awarding $3,456,085.50 in lost profits and prejudgment interest. Moreover, as to CHC’s contention that the fees and costs incurred in the second trial were “excessive, redundant, and/or unnecessary,” the circuit court specifically pointed out that “the second trial did not substantially duplicate the first trial” but, in fact, “bore little resemblance to the first trial, due in large measure to the new strategies employed by CHC on remand.” It further found that, as a result of our remand in Congressional I, CHC received, and took advantage of, “the chance to present new, different, improved, better, novel ... things [it] never thought about the first time.” And when the circuit court prevented Mervis from using, at the second trial, ⁵⁰² a “key concession” made by CHC’s damages expert at the first trial, CHC was able to advance, the circuit court pointed out, “a damages theory altogether different from, and in certain respect[s] inconsistent with, the damages theory previously espoused.” Furthermore, at the second trial, CHC employed, as the circuit court put it, a “scorched earth” strategy; “[y]ou name it, it was raised repeatedly.” CHC insists, however, that, when a party’s conduct at one trial necessitates an appeal and a subsequent trial, that party, though it may ultimately prevail, should be denied attorneys’ fees and costs for the second trial.

In support of that proposition, CHC principally relies, as it did below, on a number of federal cases involving fee-shifting statutes, asserting that courts have “generally concluded