Under Armour, Inc. v. Ziger/Snead, LLP
158 A.3d 1134
| Md. Ct. Spec. App. | 2017Background
- Under Armour contracted Ziger/Snead (architect) for design and professional services for a Visitor Center; disputes arose and Under Armour withheld $56,249.
- Ziger/Snead sued in Baltimore City Circuit Court for the withheld fees; Under Armour counterclaimed for alleged design and management defects.
- A jury found for Ziger/Snead on its amended complaint and on Under Armour’s counterclaim and awarded $58,940.
- The contract’s addendum §11.10.2 (an expense-shifting clause) entitled Architect to reimbursement of “attorneys’ fees, costs, expenses, and losses” incurred in enforcing the agreement; parties treated it as a prevailing-party provision.
- After the verdict Ziger sought $288,617 under §11.10.2 (fees, costs, expenses, and $62,190 in “losses” consisting of firm principals’ and employees’ time diverted to enforcement); the court awarded approximately $287,920, including the $62,190.
- Under Armour appealed only the award for “losses,” arguing §11.10.2 did not authorize recovery for diverted employee time and that the valuation method (hourly billing rates) was improper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §11.10.2’s term “losses” permits recovery for value of employee time diverted to enforcement | Ziger: “Losses” includes harms from diversion of employee time; parties negotiated the addendum and intended broader recovery beyond fees/costs/expenses | Under Armour: “Losses” is too vague to cover garden‑variety staff time; if intended it would have specifically said staff time; employees would have been paid regardless, so no actual loss | Court: “Losses” can include value of diverted employee time; clause must be read as whole and the negotiated term is not superfluous — recovery allowed |
| Whether valuation by employees’ usual hourly billing rates was appropriate | Ziger: Use of employees’ billing rates reasonably measures the value of lost services and revenue | Under Armour: Billing rates are not an appropriate measure; no evidence employees would have been engaged in billable work then | Court: Hourly rates and time records were admissible and reasonably measured loss; Ziger’s affidavit supported that the time could have been billed to projects |
| Standard of review for contract construction and admissibility | Ziger: N/A (invokes contract language) | Under Armour: challenges admissibility of evidence and scope of clause | Court: Contract construction reviewed de novo; admissibility depends on relevance (legal question here) — de novo review applies |
| Whether fee‑shifting provisions should be strictly construed to exclude staff time absent explicit language | Ziger: “Losses” is a general term intended to capture varied harms; limiting it narrows parties’ negotiated allocation | Under Armour: Fee‑shifting is an exception to the American Rule and should not be extended by implication | Court: While fee‑shifting is construed carefully, “losses” here is sufficiently broad and was separately negotiated; courts commonly recognize value of diverted employee time as compensable |
Key Cases Cited
- Nova v. Penske, 405 Md. 435 (clarifies strict construction principles for contractual fee‑shifting)
- Pines Plaza v. Berkley Trace, 431 Md. 652 (explains de novo review for contract construction)
- Convoy Co. v. Sperry Rand Corp., 672 F.2d 781 (9th Cir.) (diverted employee time can be compensable as deprivation of services)
- Pacific Shores Props., LLC v. City of Newport Beach, 730 F.3d 1142 (9th Cir.) (recognizes recoverability of staff time in damage calculations)
- State v. Rouse, 647 N.W.2d 286 (Wis. App.) (collecting authorities holding employee lost‑services recoverable)