CR-RSC Tower I, LLC v. RSC Tower I, LLC
429 Md. 387
| Md. | 2012Background
- Two adjoining landowners leased to tenants to develop two high-rise towers; breach by landlords impeded estoppel certificates and permits, killing financing and the project.
- Tenants sued for lost profits; discovery revealed landlords relied on attorney advice, including a “stop the bastards” email to counsel.
- Trial court barred post-breach market evidence as to damages; Tenants’ experts used pre-breach projections to estimate profits; jury awarded about $36.35 million jointly and severally; trial court awarded attorneys’ fees.
- Court of Special Appeals reversed the joint-and-several damages award but affirmed other rulings; Maryland Supreme Court granted certiorari and affirmed the Court of Special Appeals on the damages issues.
- The court addressed (a) post-breach market evidence, (b) time-of-breach vs foreseeability in measuring consequential damages, (c) attorney-client privilege waiver by testimony, (d) joint-and-several liability for damages, (e) whether interposed Sorrento/third-party interests affected recovery, and (f) allocation of attorneys’ fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Post-breach market evidence admissibility | Tenants—post-breach market data should prove foreseeability and amount | Landlords—post-breach data necessary to prove losses | Post-breach market evidence not admissible; contemplation at contract time governs consequential damages |
| How to measure lost profits (time of breach vs foreseeability) | Lost profits should reflect anticipated profits at breach using pre-breach projections | Damages must reflect market conditions as of breach or be limited | Damages tied to the contemplated performance at time of contracting; post-breach market changes alone do not set damages; foreseeability controls |
| Attorney-client privilege waived by testimony | Waiver should apply to defendant's use of counsel advice to defend, enabling inquiry | Waiver should be limited and not apply to sole denials of bad faith | Implied waiver applies when a party relies on counsel advice as a defense and testifies about it; privilege waived for related communications |
| Joint and several liability for damages | Court should treat damages as joint and several if covenants running with the land and uniform plan of development support it | Damages should be limited to each tenant’s own contract; no joint liability for unrelated covenants | No joint-and-several liability for damages; separate covenants/parties; however, joint-and-several fees can be maintained under governing standards |
| Third-party beneficiary status and uniform plan of development | Ground leases created intended third-party beneficiaries for each tenant | No clear intent to create third-party beneficiaries; covenants not inserted to benefit the other party | No intended third-party beneficiaries; covenants running with the land did not create joint liability for unrelated breaches; uniform plan doctrine does not apply to these facts |
Key Cases Cited
- David Sloane, Inc. v. Stanley G. House & Assocs., Inc., 311 Md. 36, 532 A.2d 694 (Md. 1987) (damages measure under Restatement; loss of profits and value of performance)
- Lanahan v. Heaver, 79 Md. 413, 29 A. 1036 (Md. 1894) (post-breach market evidence not admissible where market value uncertain)
- Macke Co. v. Pizza of Gaithersburg, Inc., 259 Md. 479, 270 A.2d 645 (Md. 1970) (actual substitute performance relevant to computing lost profits)
- M & R Contractors & Builders, Inc. v. Michael, 215 Md. 340, 138 A.2d 350 (Md. 1958) (mitigation and substitution considerations in damages measure)
- 120 W. Fayette St., LLLP v. Mayor of Balt., 426 Md. 14, 43 A.3d 355 (Md. 2012) (third-party beneficiary and uniform plan defects; Restatement guidance)