NCO FINANCIAL SYSTEMS, INC., now known as EGS Financial Care, Inc. v. Montgomery Park, LLC

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-2370
NCO FINANCIAL SYSTEMS, INC., now known as EGS Financial Care, 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, District Judge. (1:11-cv-01020-GLR)
Argued: May 3, 2022 Decided: July 5, 2022
Before GREGORY, Chief Judge, and NIEMEYER and HARRIS, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Chief Judge
Gregory and Judge Harris joined.
ARGUED: Stephen Warren Nichols, OFFIT KURMAN, PA, Bethesda, Maryland, for
Appellant. Howard G. Goldberg, GOLDBERG & BANKS, PC, Pikesville, Maryland, for
Appellee. ON BRIEF: Frances C. Wilburn, OFFIT KURMAN, PA, Bethesda, Maryland,
for Appellant. John Edward McCann, Jr., MILES & STOCKBRIDGE PC, Baltimore,
Maryland, for Appellee.

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NIEMEYER, Circuit Judge:
This protracted litigation concerning a 12-year commercial lease comes to us on the
merits for the third time.
On the first occasion, we held that NCO Financial Systems, Inc. failed to satisfy the
conditions for exercising the lease’s early termination option and that its vacation of the
leased premises left it potentially liable for the payment of rent for the full term. See NCO
Fin. Sys., Inc. v. Montgomery Park, LLC, 842 F.3d 816, 818 (4th Cir. 2016).
On the second occasion, we held that Montgomery Park, LLC’s obligation to
mitigate damages was not a condition precedent to an award of damages and that it also
did not require Montgomery Park to “develop a unique, preferred plan for leasing the NCO
space . . . at the expense of its other vacant spaces” in the building. NCO Fin. Sys., Inc. v.
Montgomery Park, LLC, 918 F.3d 388, 393–94, 396 (4th Cir. 2019). We concluded that it
was required only “to reasonably market NCO’s space on an equal footing with the other
spaces that it was seeking to rent” in the building. Id. at 390. Accordingly, we directed
the district court to determine whether Montgomery Park’s “generalized marketing efforts”
of the entire building, including NCO’s vacant space, were commercially reasonable. Id.
at 396.
And now we are presented with the question of whether the district court, on
remand, clearly erred in finding that Montgomery Park’s efforts to mitigate damages were
commercially reasonable. NCO also raises the question of whether the damages award can
include both late fees and interest.
For the reasons that follow, we affirm.

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I
By a lease agreement dated October 8, 2002, NCO leased roughly 100,000 square
feet of commercial space from Montgomery Park in its large commercial building in
Baltimore, Maryland, which has over 1.2 million leasable square feet. When NCO entered
into its lease, roughly 780,000 square feet were still vacant in the building, and when NCO
vacated the property in 2011, after its ineffective effort to terminate the lease early,
Montgomery Park was left with roughly 500,000 vacant square feet to lease.
While both the terms of the lease and common law required Montgomery Park to
mitigate damages after NCO breached the lease by using commercially reasonable efforts
to re-lease NCO’s space, the reality confronting that effort was nonetheless formidable
because NCO’s space was but part of some 500,000 vacant square feet — a difficult
situation, to which NCO’s breach of its lease contributed.
After we held that Montgomery Park was not required to give preference to re-
leasing NCO’s space over its other vacant space, we directed the district court to assess the
commercial reasonableness of Montgomery Park’s efforts at leasing its vacant space as a
whole, including NCO’s vacant space. See NCO Fin. Sys., 918 F.3d at 390, 396.
On remand, the district court received briefing, conducted a hearing, and made
findings of fact supporting its conclusion that Montgomery Park did indeed use
commercially reasonable efforts to re-lease NCO’s space. It found that those efforts
included “the creation of brochures, hanging banners, engaging with prospective tenants,
conducting tours of the premises, including several tours of the NCO space, as well as
holding meetings regarding leasing of the Montgomery Park space in general.” The court

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also noted that Montgomery Park hired the firm Colliers International, which it found was
“an international brokerage firm which is designed to lease space which provided notice
nationally and even internationally, but certainly nationally of the property and the space
that was available.” At bottom, it found that “Montgomery Park did engage in
commercially reasonable efforts to lease this property for the time that it was vacated by
NCO through the damage period of time.” It noted that following those efforts, offers were
made, but unfortunately “very few, if any, were accepted for the purpose of leasing any
space within Montgomery Park, much less the NCO space in this case.” The court
observed that not only were there no offers made to re-lease the NCO space, but that
Montgomery Park did not receive offers during the damage period to lease any of its vacant
500,000 square feet, except for a relatively small 7,000-square-foot space.
After finding that Montgomery Park satisfied its obligation to mitigate damages by
using commercially reasonable efforts to re-lease NCO’s space, the court awarded
Montgomery Park damages, including both late fees and interest, in the total amount of
$9.85 million.
II
NCO does not challenge any historical fact found by the district court. Rather, it
contends, for its main argument, that the conclusions that the district court reached in
finding Montgomery Park’s re-leasing efforts commercially reasonable were inconsistent
with its earlier conclusions, reached before our last decision, when it found the efforts were
not commercially reasonable. In particular, NCO notes that before our last decision, the

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district court itemized Montgomery Park’s marketing efforts, characterizing them as a
“significant effort,” but finding them not to be commercially reasonable. The court
explained that the efforts were directed only to Montgomery Park’s entire vacant “space
[in the building] as a whole, with no serious effort to target or re-lease NCO space.”
(Emphasis added). NCO notes that now, after our remand, the district court, relying
essentially on the same facts, found Montgomery Park’s efforts commercially reasonable.
This inconsistency, it argues, renders the court’s factfinding “clearly erroneous due to
incoherence and lack of subsidiary fact findings.”
While most of the mitigation facts were developed in the prior proceeding, where
the district court found Montgomery Park’s marketing efforts to lack commercial
reasonableness, the court reconsidered those facts on remand, along with others it found in
a subsequent hearing, to conclude that Montgomery Park had in fact engaged in
commercially reasonable efforts. The difference in conclusions, it explained, was
attributable to the different standard that it applied the second time around.
In its first ruling on the mitigation of damages, the district court acknowledged
Montgomery Park’s “significant effort,” but it concluded that such efforts were not
commercially reasonable because they were directed at the entire vacant space in the
building — some 500,000 square feet — and not just NCO’s vacant space of 100,000
square feet. The court explained:
Simply put, if you had the real estate space that you need to lease, reasonable
efforts require that you advertise it and promote it specifically and not
generally as part of an overall scheme to fill a larger vacant space.

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(Emphasis added). Under that standard, the court concluded that despite Montgomery
Park’s substantial efforts to lease any or all of the vacant space in its building, the efforts
were not commercially reasonable as to NCO’s space because Montgomery Park was
required “to target” NCO’s space.
On appeal, we recalibrated the standard that the district court applied and held that
“[r]easonable commercial efforts to mitigate damages did not require Montgomery Park to
favor NCO’s space over other vacant space in the building.” NCO Fin. Sys., 918 F.3d at
390. Rather, in recognition that it was NCO that breached the lease, “commercial
reasonableness only required Montgomery Park to reasonably market NCO’s space on an
equal footing with the other spaces [in the building] that it was seeking to rent.” Id. We
thus concluded that the district court had erred in determining that “Montgomery Park
became obligated to develop a unique, preferred plan for leasing the NCO space and then
to market that space at the expense of its other vacant spaces.” Id. at 396.
Accordingly, after remand, the district court began its findings by recognizing the
recalibrated standard, stating:
This case was remanded to me for the purpose of making a determination on
whether or not Montgomery Park attempted to mitigate its damages by
leasing the NCO space in a commercially reasonable manner, the standard is
by which the space should be marketed as a whole and the building as a
whole without a specific obligation to market the NCO space by
Montgomery Park.
The court noted that it had “reviewed the record, conducted a trial in this case, [and] made
findings of fact.” It then reiterated its earlier findings and found further that “there were
tours that were offered as well as conducted by Montgomery Park in an attempt to woo

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prospective lessees. There were offers made. Unfortunately, very few, if any, were
accepted for the purpose of leasing any space within Montgomery Park, much less the NCO
space in this case.” Indeed, the court specifically noted that during the damage period,
Montgomery Park was only able to lease a 7,000-square-foot space within the 500,000
square feet that were available for rent, which included NCO’s space. The district court
then concluded:
I am going to find based upon what I stated here, as well as what’s contained
based upon the record in this case and submissions and oral argument that
I’ve heard that Montgomery Park did engage in commercially reasonable
efforts to lease this property for the time that it was vacated by NCO through
the damage period of time.
Based on the court’s findings, this was not a case where Montgomery Park sat on
its hands so that it could benefit from NCO’s ongoing rent obligation. Rather, it made
substantial efforts to mitigate damages in the context of leasing its vacant space.
Unfortunately, these efforts were made in the context of a difficult market with a difficult
building — a situation made yet more difficult by NCO’s breach. NCO certainly has not
demonstrated a likelihood of a better result with any other combination of marketing
tactics.
In these circumstances, we do not find that the district court’s findings were clearly
erroneous.
III
NCO also focuses on particular strategies that Montgomery Park did not pursue to
argue that the district court’s failure to consider them or be influenced by their omission

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rendered its findings clearly erroneous. It points mainly to the fact that Montgomery Park
failed to list NCO’s vacant space on CoStar, “the dominant online multiple listing service
for commercial real estate.” But it also points to Montgomery Park’s failure to develop a
written plan to re-lease NCO’s space, and its misdirection of prospective NCO-space
tenants to other building spaces. Particularly with respect to the failure to list on CoStar,
NCO argues that inasmuch as Montgomery Park listed other vacant spaces in its building
on CoStar but not NCO’s space, it did not give NCO’s space equal treatment.
The record shows that at the time that NCO’s space became vacant and was
available for re-lease, Montgomery Park already had over 400,000 square feet available for
rent, and all of that space was listed on CoStar. When the NCO space became available
with yet another 100,000 square feet — and other spaces in the building subsequently
became available — Montgomery Park made a strategic decision not to add any of them to
the CoStar listings. It concluded that doing so would hinder, not help, the effort to re-lease
any space, including NCO’s space. And the district court agreed, finding: “[T]he reason
for the failure to list the NCO areas, as well as these other areas[,] was primarily designed
[to avoid] the impression that the building was somehow sick or not able to be leased. And,
indeed, the building itself suffered from this.” The court added that this strategy did not
result in NCO’s space being treated differently from other spaces during the damage
period. And indeed, the record shows that, during that period, four additional spaces
became vacant and were likewise not listed on CoStar for the same strategic reason.
In short, despite NCO’s contrary argument, the court did indeed consider the
absence of a CoStar listing and found as fact that the decision not to list the NCO space on

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CoStar was designed to benefit the marketing effort and did not, as NCO argued, constitute
a failure of commercial reasonableness. And, in any event, Montgomery Park was unable
to rent any space in the building, even those spaces that it had earlier listed on CoStar,
except for the one inconsequential 7,000-square-foot space.
Similarly, as to Montgomery Park’s failure to develop a written marketing plan,
NCO has presented no evidence of any consequence from the failure. Yet, it has the burden
to demonstrate a failure to mitigate damages, not a failure to employ every idea that it
believes would have increased the chances of re-leasing the space.
Finally, NCO focuses on general anecdotal reports of prospective tenants’ being
“steered” to other spaces in the building, other than to NCO’s space. Yet, quibbling with
the district court’s failure to address every encounter with a prospective tenant achieves
little, as none of these tenants ultimately decided to rent any space in the building. As the
district court found, tours were conducted and offers were made, but “unfortunately, very
few, if any, were accepted for the purpose of leasing any space within Montgomery Park,
much less the NCO space in this case.”
While NCO’s arguments are designed to effect body punches against the district
court’s findings, NCO has, in the end, failed to demonstrate that any of the district court’s
findings were clearly erroneous.
IV
Finally, NCO contends that the district court erred in awarding Montgomery Park
both late fees (over $300,000) and interest (over $3.8 million), because doing so left

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“Montgomery Park in a far better position than it would have been in had NCO not
breached the Lease and, thus, would be a windfall prohibited under Maryland law.” We
find no error in this, however.
First, Section 2.06 of the lease agreement explicitly provides for both late fees and
interest, stating that late rent “shall be subject to a late payment charge of 5% of the amount
overdue” and, “[i]n addition,” “shall bear interest at the Default Rate from the due date
until paid.” (Emphasis added).
In addition to enforcing these lease provisions, the district court also concluded that
they did not violate Maryland law, citing Md. Code Ann., Com. Law § 14-1315(b) and
Noyes Air Conditioning Contractors, Inc. v. Wilson Towers Ltd. Partnership, 712 A.2d
126, 131 (Md. Ct. Spec. App. 1998). Section 14-1315 authorizes a lease to require the
payment of a late fee, stating that “[a] late fee imposed under this section is not . . . [i]nterest
[or] . . . [a] penalty.” Md. Code Ann., Com. Law § 14-1315(d) (emphasis added).
Moreover, the statute goes on to provide that “[t]his section does not affect . . . interest, or
any other fee or charge otherwise allowed under applicable law.” Id. § 14-1315(e)
(emphasis added); see also Swinson v. Lords Landing Vill. Condo., 758 A.2d 1008, 1010,
1013 (Md. 2000) (affirming an award of both interest and late fees); Roger E. Herst
Revocable Tr. v. Blinds to Go (U.S.) Inc., No. ELH-10-3226, 2011 WL 6409129, at *2,
*29 (D. Md. Dec. 20, 2011) (awarding both late fees and prejudgment interest in
accordance with a provision of a commercial lease). NCO has provided no authority
holding that such provisions are contrary to law.

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To make its argument, NCO relies exclusively on the general principle stated in
WSC/2005 LLC v. Trio Ventures Associates, 190 A.3d 255, 269 (Md. 2018), that “[i]n an
action for breach of contract, courts attempt to put the injured party in as good a position
as it would have occupied had the contract been fully performed by the breaching party.”
But that same case also provides that damages may include that which “may reasonably be
supposed to have been in contemplation of both parties at the time they made the contract,
as the probable result of the breach of it.” Id. (citation omitted). And, in this case, the
parties did expressly agree to the payment of both late fees and default interest, thus
signaling that they contemplated that both would be payable upon default.
Accordingly, we conclude that the district court’s award of both late fees and
interest was not only authorized by the lease agreement but also was consistent with
Maryland law.
* * *
For the reasons given, the judgment of the district court is
AFFIRMED.

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