Wednesday, October 21, 2009

Mervis Diamond Corp. v. Congressional Hotel Corp. (Cir. Ct. Mont. County)

Filed October 1, 2009
Opinion by Judge Ronald B. Rubin

Held: When there is a remand after an appeal, the prevailing party is not automatically barred from recovering fair, reasonable, and necessary contract-based attorneys' fees incurred as a consequence of the second trial.

Facts: Mervis Diamond Corporation entered into a 10 year commercial lease with Congressional Hotel Corporation ("CHC") for retail space. Under the terms of the lease, CHC was to complete certain construction work prior to providing the premises to Mervis ("Landlord's Work"). When CHC did not respond to Mervis's inquiries regarding CHC's commencement of the Landlord's Work on the premises, Mervis filed suit on March 16, 2005 in Circuit Court for Montgomery County for (1) breach of contract; (2) specific performance; and (3) a temporary restraining order to prevent CHC from demolishing the premises.

The Circuit Court ruled that CHC had breached the lease and entered judgment ordering CHC to specifically perform its obligations under the lease. The Circuit Court also enjoined CHC from performing any work on the premises other than the Landlord's Work and awarded Mervis damages for lost profits. In addition to lost profits, the Circuit Court also awarded Mervis attorneys' fees in accordance with Section 25.01 of the lease (a fee shifting provision that provided for the prevailing party to receive reasonable attorneys' fees).

On appeal, the Court of Special Appeals reversed the Circuit Court's ruling on lost profits because it concluded that the correct date to be used for calculating lost profits was the date CHC should have completed the Landlord's Work and not the date used by the Circuit Court, namely the date that CHC was to commence the Landlord's Work.

Analysis: On remand, CHC argued that Mervis was barred from recovering any amount of attorneys' fees from the second trial because Mervis's incorrect argument regarding lost profits necessitated the second trial. The Circuit Court found that the argument asserted by Mervis during the first trial, although incorrect, was not unreasonable and awarded attorneys' fees to Mervis for the second trial. Moreover, CHC, after remand, pursued an aggressive defense, raising many issues and arguments not pursued during the first trial. Thus, the Court found that the second trial bore little resemblance to the first trial.

The full opinion is available in PDF.

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