CR-RSC Tower I, LLC, Second CR-RSC Tower I, LLC, CR-RSC Tower II, LLC, and Second CR-RSC Tower II, LLC, (appellants or CR-RSC), appeal from a judgment entered by the Circuit Court for Montgomery County in favor of RSC Tower I, LLC and RSC Tower II, LLC, (appellees or RSC). The court entered judgment after a jury verdict in favor of appellees, finding breach of two contracts for which appellants were jointly and severally liable and awarding damages for lost profits and expenses incurred in reliance on the contracts. Appellants contend that the circuit court erred in not granting their motion for judgment. In
We conclude that appellants are not jointly and severally liable. Thus, we shall remand to the circuit court with instructions to enter the judgment in favor of RSC Tower I, LLC against CR-RSC Tower I, LLC and Second CR-RSC Tower I, LLC only and the judgment in favor of RSC Tower II against CR-RSC Tower II, LLC and Second CR-RSC Tower II, LLC only. On all other issues, we shall affirm.
Factual and Procedural Background
Appellants own a 53-acre tract of land in Montgomery County. On June 16, 2004, appellants as landlords entered into two 90-year ground leases with appellees as tenants. Appellees are partially owned and controlled by the Penrose Group, a real estate development company. One lease was for approximately three acres, and the other lease was for approximately two acres, together with easements to use certain common areas in the rest of the tract. The parties executed a “DECLARATION OF EASEMENTS AND RELATED AGREEMENTS” on June 16, 2004. At that time, the parties contemplated that appellants would develop the portion of the tract not subject to the ground leases. Indeed, in 2003, the owners of the entire tract, appellants’ assignors, and Penrose Development Company, LLC entered into a Development Services Agreement pursuant to which Penrose Development Company, LLC agreed to act as a consultant to the owners in connection with development of the tract.
Pursuant to the terms of the ground leases between the parties herein, each appellee agreed to construct an apartment building (hereinafter Tower I and Tower II) on its respective site. After construction and initial rental, the parties contemplated that appellees would sell the buildings. The parties projected that construction on Tower II would begin approximately two years after construction of Tower I. The leases contained provisions obligating the parties to cooperate with each other in the development of the apartment buildings and the rest of the tract.
After executing the leases, in late 2004 and early 2005, the parties modified their agreements to permit development of condominium buildings, a hotel, and spa rather than apartments (the “Canyon Ranch project”). The parties executed several agreements in furtherance of the Canyon Ranch project, but in September 2006, the parties abandoned the project and entered into a termination agreement. Appellees then obtained county approval to revert to the original plan to build apartments. Appellees also arranged financing with Northwestern Mutual Life Insurance Company (“NML”) to construct Tower I.
In late September, appellees requested appellants to execute estoppel certificates in which appellants would represent that appellees were not in default under the ground leases. The project’s financing terms required that appellees provide such estoppel certificates and the leases required appellants to execute such certificates to the appellees. Specifically, paragraph 14.6 in both leases provided:
Estoppel Certifícate. Each party agrees from time to time, upon no less than fifteen (15) days’ prior written request of the other, to execute, acknowledge, and deliver to the other a statement in writing certifying (i) that this Lease is unmodified and in full force and effect (or, if there have been any modifications,that the same is in full force and effect as modified and stating the modifications), (ii) the Lease Commencement Date and Fixed Rent Commencement Date, (iii) the then current amount of the Fixed Rent, (iv) the dates to which the Fixed Rent and Additional Rent has been paid, (v) to such party’s knowledge, whether there exists any uncured default by the other party and, if so, the nature of such default, and (vi) such other matters relating to this Lease as the party requesting the statement may reasonably require. Any such statement delivered pursuant to this Section 14.6 may be relied upon by any prospective purchaser or mortgagee or any prospective holder of a sublease from Tenant or any prospective assignee of any such holder of a mortgage or sublease.
Appellants disagreed with the language in the proposed certificates. The parties attempted to reach agreement on the language, were unable to do so, and appellants did not execute the certificates. Appellants also initiated proceedings to challenge the county’s approval of appellees’ site plans and building permits.
On November 8, 2006, appellees filed suit against appellants
Nothing in this Order prohibits Plaintiffs from pursuing any other remedies or rights they may have, including claims for monetary damages or claims under the Force Majure provision of the Ground Leases, resulting from these or other breaches by Defendants of Plaintiffs’ rights and/or the Ground Leases.
On April 16, 2007, appellants delivered estoppel certificates to appellees along with a cover letter reserving all rights under all agreements and all rights that they had asserted in the litigation. Appellees’ position was that the certificates did not comply with the terms of the leases, and no one, including lenders, could or would rely on them.
On April 11, 2007, appellants appealed to this Court, arguing that the circuit court had erred in issuing the injunction and in granting summary judgment. In an unreported opinion, this Court affirmed the judgment. Camalier Limited P’ship v. RSC Tower I, LLC, No. 2704, September Term 2006 (Md.Ct.Spec.App. Aug. 4, 2008). On September 3, 2008, this Court issued its mandate. After issuance of the mandate, appellants abandoned their challenge to the county approvals of the project.
On September 8, 2008, in the 2006 action, appellees filed an “Amendment by Interlineation of Plaintiffs’ Amended Verified
In the motion for supplemental relief, appellees, inter alia, alleged that the real estate and credit markets had deteriorated subsequent to the April 4, 2007 order and appellees had not been able to obtain financing for the apartment project. In addition, they alleged that Montgomery County no longer considered its prior approvals of the project to be valid. Appellees requested monetary damages and supplemental equitable relief. Appellees’ requests tracked the amended requests for relief in the amendment by interlineation. Appellees also asked the court to extend the due dates contained in the leases and to require appellants to pay certain fees and costs while appellees determined whether the project was still viable.
On December 23, 2008, appellants filed a motion to dismiss or, in the alternative, to strike appellees’ amendment by interlineation and appellees’ motion for supplemental relief. The memorandum in support of that motion is not in the record extract, but we assume that at least one of the grounds argued was that the requested relief was not available proeedurally in the 2006 action.
On March 3, 2009, appellees filed a new complaint against appellants in the Circuit Court for Montgomery County (the 2009 action). On December 8, 2009, appellees filed an amended complaint. In their amended complaint, appellees alleged essentially the same facts and sought essentially the same relief as in their amendment by interlineation and motion for supplemental relief previously filed in the 2006 action.
Also on December 8, 2009, appellees filed a motion to consolidate the 2006 and 2009 actions. On February 5, 2010, the court granted that motion.
In late 2009, appellants filed a motion to dismiss the complaint, as amended, in the 2006 action, and a motion to dismiss the amended complaint in the 2009 action. By order docketed on February 5,2010, the court denied the motions.
On February 16, 2010, appellees filed a motion for leave to file a third amended complaint in the consolidated actions. By order dated March 1, 2010, the court granted the motion. Based on appellants’ breach of the lease, before and after April 4, 2007, appellees sought declaratory, injunctive, other equitable relief, and damages. In the third amended complaint, appellees alleged that appellants’ continued refusal to execute unconditional estoppel certificates and their efforts to hinder governmental approval of the apartment project constituted continuing or successive breaches of the leases, including breach of the implied covenant of good faith and fair dealing. In addition to other allegations, appellees alleged, for the first time, that each appellee was a third party beneficiary of the other appellee’s ground lease and was entitled to enforce it because “its terms are covenants running with the land.” Based on that allegation, appellees requested that any monetary judgment be entered against appellants jointly and severally. Appellees requested damages
in an amount no less that $52 million, plus interest, which amount reflects the monetary damages and losses caused byDefendants’ breaches of the Ground Leases and resulting interference with Plaintiffs’ valuable development rights; to the extent Plaintiffs reasonably determine that it is feasible to re-start and complete the Project, in an amount no less than $63 million to compensate Plaintiffs for the additional costs and additional equity to re-start and complete the Project; or, in an amount not less than $23 million which reflects Plaintiffs’ out of pocket expenditures incurred in furtherance of the development of the land and the Project.
Appellees also sought the costs of litigation, including attorneys’ fees.
On March 1 through 10, 2010, the case was tried before a jury. In appellees’ words:
among other things, [appellees] demonstrated that, in reliance on the ground leases and its bargained-for development rights, [they] had incurred nearly $23 million in out-of-pocket expenses ($16,770,134 in connection with Phase I and $6,226,518 in connection with Phase II). [Appellees] also introduced the contemporaneous financial analyses that it and [NML] had conducted at the time of [appellants’] breaches as to the Apartment Project’s projected profits, along with the testimony of real estate experts supporting those financial analyses. Based on that evidence and the testimony of expert forensic accountants, [appellees] argued that [they] had suffered lost profits (after the return of its out-of-pocket expenses) in excess of $28 million ($18,082,103 in Phase I and $10,491,313 in Phase II.)
(Extract and appendix references omitted.)
At the close of appellees’ case, appellants moved for judgment in their favor on the grounds that appellees (1) had failed to prove lost profits or reliance damages with reasonable certainty; (2) had failed to prove that any damages were caused by appellants’ breach of the leases; (3) had failed to establish third party beneficiary status or any basis for joint and several liability; (4) could not use the implied covenant of good faith and fair dealing to impose additional contract obligations on appellants; and (5) had not introduced any evidence to show that any breaches subsequent to April 4, 2007 had caused damages. The court denied appellants’ motion for judgment.
Appellants renewed the motion at the close of all of the evidence. The court reserved on the motion and allowed the case to go to the jury. The jury found that each appellant had breached the ground leases after the court’s April 4, 2007 order and that each appellee was entitled to enforce the other’s ground lease either as a third party beneficiary or a “third-party entitled to the benefit of a covenant running with the land.” The jury awarded damages against appellants in the total amount of $36,350,239.00. On April 9, 2010, after the entry of final judgment, appellants noted an appeal.
In July 2010, appellants filed a request for an award of attorneys’ fees and costs. In December 2010, the court granted the motion and awarded $3,654,633.40.
In January 2011, the court denied appellants’ motion for judgment, treating it as a motion for judgment notwithstanding the verdict. Appellants filed new notices of appeal.
We shall include additional facts when we discuss the issues.
Appellants’ Contentions
As phrased by us, appellants contend that:
1. The court erred in denying appellants’ motion to dismiss and motions for judgment on the ground that (a) monetary
2. The court erred in denying appellants’ motions for judgment on the ground that appellees failed to produce legally sufficient evidence that appellants’ breaches caused any lost profits damages and failed to produce legally sufficient evidence that appellees sustained lost profits damages with reasonable certainty.
3. The court erred in denying appellants’ motions for judgment on the ground that appellees failed to produce legally sufficient evidence that appellants’ breaches caused reliance damages.
4. The court erred in denying appellants’ motions for judgment with respect to joint and several liability and also erred in submitting a verdict sheet that contained questions relating to joint and several liability.
5. The court erred in evidentiary rulings (a) relating to expert testimony on damages; (b) in permitting bad conduct evidence relating to appellants that predated the April 4, 2007 order and excluding bad conduct evidence relating to appellees; and (c) violating appellants’ attorney client privilege.
6. The court erred in its instructions to the jury.
7. If a new trial is ordered by this Court, this Court should order that the case be re-tried before a different trial judge.
8. If this Court reverses the underlying judgment, this Court should reverse the attorneys’ fees and costs award on the ground that appellees were not the prevailing party within the meaning of the leases. Additionally, this Court should reverse the award in any event because the court abused its discretion.
Discussion
1. Final Judgment and Preclusion of Issues
Appellants first state that the circuit court erred in denying its motions to dismiss the 2006 and 2009 actions because (a) monetary damages could not be granted as supplemental relief in the 2006 action, which was concluded by final judgment on the merits when we filed our opinion on August 4, 2008, and the mandate on September 3, 2008 and (b) the 2009 action was barred by res judicata.
Appellants observe that, in the 2006 action, appellees asked for a declaratory judgment regarding the obligation to provide estoppel certificates but also sought and obtained injunctive relief. Appellants further observe that appellees sought damages, for the first time, in their amendment by interlineation and motion for supplemental relief, both filed in the 2006 action, and in their complaint filed in the 2009 action. They argue that the request in the 2006 action came too late to amend or alter the final judgment and that the request was not further relief within the meaning of the Maryland Declaratory Judgment Act. Maryland Code (2006 Repl. Vol.) § 3-412(a) of the Courts and Judicial Proceedings Article (“C.J.”) (“[f]urther relief based on a declaratory judgment or decree may be granted if necessary or proper”).
In response, appellees argue that this Court, in a prior unreported opinion in this case, effectively decided that the April 4, 2007 judgment did not bar further relief. CR-RSC Tower I, LLC v. RSC Tower I, LLC, No. 1605, September Term 2009 (Md.Ct.Spec.App. Nov. 10, 2010). That
Finally, regardless of whether the earlier judgment barred further relief, appellees argue that the express reservation of rights provision found in the April 4, 2007 judgment entitles them to pursue their damage claim in the 2006 action as further relief and also prevented a res judicata bar of the separate 2009 action.
In reviewing the circuit court’s denial of appellants’ motions to dismiss, we must examine principles of Maryland law. “[WJhere an order [of the trial court] involves an interpretation and application of Maryland constitutional, statutory or case law, our Court must determine whether the trial court’s conclusions are ‘legally correct’ under a de novo standard of review.” Schisler v. State,
In Maryland, there are three requirements for res judicata to act as a bar to a subsequent suit: 1) the prior suit must have resulted in a final judgment on the merits; 2) the claim involved in both actions must be substantially the same; and 3) the parties must be the same or in privity. Alvey v. Alvey,
As explained below, with respect to the procedural availability of appellees’ damage claims, we decline to rest our decision on the law of the case doctrine. Moreover, Maryland law is unclear as to whether appellees could pursue their action as “further relief’ under C.J. § 3-412(a) after entry of the declaratory judgment in the 2006 action. This is because, in the 2006 action, in addition to declaratory relief, appellees sought equitable relief, and the judgment included equitable relief. Nevertheless, regardless of whether the claim for damages is pursued as “further relief’ under C.J. § 3-412(a), or whether it is pursued in a separate action, we conclude that appellees’ damage claims are not barred because of the express reservation of rights contained in the circuit court’s April 4, 2007 order.
A. Law of the Case Analysis
Under the law of the case doctrine, “[o]nee an appellate court has answered a question of law in a given case, the issue is settled for all future proceedings.” Stokes v. American Airlines,
Here, this Court, in a prior unreported opinion in this case, affirmed the award of litigation expenses to the appellees, awarded after the final judgment entered in September, 2008. CR-RSC Tower I, LLC v. RSC Tower I, LLC, No. 1605, September Term, 2009, filed November 10, 2010.
Appellees now contend that their claim for damages must also be considered “further relief’ under C.J. § 3-412 based on the law of the case doctrine. We decline to do so. The claim which was the subject of our prior opinion was a contractual claim for fees and expenses, not a claim for damages stemming from a continuing breach after the final judgment. While the governing principles may be the same, the holding in that case and the issue presented in this case are not sufficiently similar for the law of the case doctrine to be dispositive.
B. “Further Relief’ Analysis
In Maryland, it is unclear whether appellees’ claim for monetary damages qualifies as a request for “further relief’ under C.J. § 3-412(a) because, although appellees sought a declaratory judgment in the 2006 action, the appellees also sought equitable relief and received all the relief requested. Under Maryland law, the preclusive effect of a declaratory judgment is limited to matters actually raised and decided, not matters which could have been decided. Bankers and Shippers Ins. Co. of New York v. Electro Enterprises, Inc.,
The Court in Bankers explicitly declined to decide the preclusive effect of a declaratory judgment, however, when the original request also included a claim for “coercive or other relief.” Id. at 655 n. 6,
It is unnecessary for us to decide this issue because the express reservation in the earlier judgment prevents a res judicata bar, regardless of whether the damages claim would otherwise qualify as further relief under C.J. § 3-412(a).
Regardless of whether the claim for damages can be considered further relief under C.J. § 3-412(a), the express reservation provision in the earlier judgment prevents a res judicata bar, whether in the form of further relief in the declaratory action or in a separate action. Res judicata will not act as a bar when a court expressly reserves the plaintiffs right to pursue a second action. Restatement (Second) of Judgments § 26(1)(B) (1982); 18 Charles A. Wright, Federal Practice and Procedure § 4413 (1981) (“A judgment that expressly leaves open the opportunity to bring a second action on specified parts of the claim or cause of action that was advanced in the first action should be effective to forestall preclusion.”). See, e.g., King v. Provident Life & Accident Ins. Co.,
Here, the circuit court did not err in denying appellants’ motions to dismiss. The trial court’s reservation in its declaratory judgment allowed for the award of monetary damages as further relief in the 2006 action and prevented the application of res judicata to the 2009 action. In its final order on April 4, 2007, the circuit court expressly reserved appellees’ rights to bring an action for damages. The circuit court’s April 4, 2007 order included the following paragraph:
Nothing in this Order prohibits Plaintiffs from pursuing any other remedies or rights they may have, including claims for monetary damages or claims under the Force Majure provision of the Ground Leases, resulting from these or other breaches by Defendants of Plaintiffs’ rights and/or the Ground Leases.
This express reservation of rights in the original judgment allowed appellees to pursue a request for monetary damages caused by appellants’ initial failure to supply the estoppel certificates as well as for any continuing or subsequent breach. Therefore, this express reservation allowed appellees to pursue “further relief’ in the 2006 action and also prevented res judicata from barring the 2009 action. It should be noted, however, that principles of collateral estoppel apply, and matters finally litigated could not be re-litigated.
2. Sufficiency of Evidence for Lost Profits caused by appellants’ breach(es)
Appellants allege that the circuit court erred in denying their motions for judgment because the evidence was legally insufficient to. support a finding of lost profits caused by their breaches. During"‘trial, appellees relied heavily upon real estate projections made in 2006 in order to prove damages. Gregory Leisch, a real estate consultant, opined that the 2006 projections made for Tower I and Tower II were reasonable when made. Had the project gone forward as planned, he opined that Tower I would have been stable, or fully
Mr. Leisch explained that in order to determine the value of a rental building, a preferred method is to capitalize projected income. He expressed his opinion that a conservative capitalization rate for Tower I was 6 percent at the beginning of construction and 6.5 percent at completion. Mr. Leisch opined that a conservative capitalization rate for Tower II was 6.5 percent at the beginning of construction and 7 percent at completion.
Wiley Wright, an accountant, testified as an expert and, based on Mr. Leiseh’s testimony, expressed his opinion as to the market value of Tower I at the end of 2010 and Tower II at the end of 2012. Mr. Wright then subtracted the projected development costs and estimated costs of sale to determine the amount of lost profits, assuming the buildings had been completed, stabilized, and sold. Appellees claimed lost profits in a total amount of $34,852,137.00 for Tower I and $16,717,831.00 for Tower II.
Under Maryland law, in order to recover lost profits damages, a plaintiff must show that (1) the breach by the defendant was the proximate cause of the plaintiffs loss; (2) the defendant could reasonably foresee that a loss of profits would result from the breach; and (3) the amount of lost profits can be proved with reasonable certainty. M & R Contractors & Builders, Inc. v. Michael,
As noted above, in reviewing the denial of a motion for judgment or judgment notwithstanding the verdict, we review questions of law de novo. Schisler v. State,
A. Proximate Causation
Appellants claim that appellees failed to prove at trial that any breaches by appellants caused any damages. First, appellants assert that appellees intended to create a new entity, Sorrento, to construct the apartment buildings and that Sorrento was the proper plaintiff rather than appellees. Second, appellants argue that the evidence was insufficient to support a finding that the failure of financing caused any loss because 1) appellants already had obtained financing through another entity; 2) other conditions precedent to financing had not been fulfilled; and 3) appellees could have constructed the development without outside financing.
First, appellants allege that appellees did not sufficiently prove proximate causation because the real damaged party was Sorrento, an un-formed entity that was to eventually construct the apartment buildings. We disagree.
The fact that appellees may have subsequently assigned their interest in the ground leases to a new entity if the financing had in fact occurred does not negate causation as a matter of law for breach of contract damages. The Memorandum of Understanding entered into between NML and appellees regarding financing for the project contemplated that the venture would either move forward by “forming” a new entity, Sorrento, or by purchasing an existing company. The loan commitment provided RSC the right to assign the loan commitment to another entity; it did not require it to do so. The loan commitment, signed by Olav Kollevoll as RSC’s representative, identified Sorrento as an entity “in the process of being formed by RSC.” Appellees held the interest in the ground leases, had obtained financing and county approvals, and had incurred significant expenses. The fact that appellees may have intended to form another entity, to serve as assignee had no breach occurred, does not change the fact that appellees were parties to the contracts and sustained damages caused by appellants’ breach(es). The continuing nature of the initial breach prevented pursuit of the project. Furthermore, the declaratory judgment entered on April 4, 2007, affirmed on appeal, identified appellees as the damaged parties. It is too late to re-litigate this issue.
2. Failure of Financing
Next, appellants argue that appellees did not sufficiently establish that appellants’ breach prevented the project from going forward. First, appellants argue that the evidence was insufficient to support a finding that the failure to obtain financing from NML directly caused any loss because appellants already had sufficient financing through Wachovia Bank. Second, appellants claim that there was no proximate causation because there were other unfulfilled conditions precedent to obtaining financing in addition to the failure to provide the estoppel certificates. Finally, appellants claim that appellees and their principals could have financed the project without obtaining financing from other sources.
Appellants argue that in the fall of 2006 there was a construction loan in place with Wachovia Bank as the lender that was sufficient to construct Tower I without any additional financing from NML, and therefore, the project could have been completed regardless of appellants’ breaches. However, evidence introduced at trial supported a contrary conclusion. Appellees produced evidence that, at the time of the breach in late 2006, appellees had a maximum of $62.5 million available through the Wachovia loan, but the cost at that time to complete Tower I was approximately $92.3 million. Furthermore, Mr. Kollevoll testified that, even if appellees pursued financing solely through Wachovia Bank, appellants still would have had to provide the contested estoppel certificates. In fact, according to Mr. Kollevoll, the estoppel certificates were initially requested for Wachovia Bank. There was evidence to support a conclusion that appellants’ failure to provide estoppel certificates proximately caused the failure of financing to enable the project to go forward.
Next, appellants argue that appellees did not establish proximate causation because appellees did not fulfill additional conditions precedent to financing other than not providing the estoppel certificates. Under Maryland law, the element
Finally, appellants argue that the failure of financing was not a proximate cause of appellees’ damages because appellees could have financed the construction of the project through its investors rather than through a financing company. Specifically, appellants claim that appellees could have completed construction of the project by making a “cash call” on investors such as the Kadan family. Mr. Kollevoll testified at trial, however, that at the relevant time, the Kadans wanted out of the business deal. He testified that if appellees had attempted to make a cash call against them, there was no method for appellees to actually obtain the money if the family was unwilling to provide it. Furthermore, appellants never established that the family actually had the financial resources to finance construction of the buildings. The evidence presented at trial was legally sufficient for a jury to find that appellants’ breach caused appellees’ damages.
B. Reasonable Certainty
Appellants charge that the evidence presented at trial was not legally sufficient to prove lost profits damages with reasonable certainty. Appellants argue that 1) the circuit court erred in excluding evidence of post-breach actual market conditions and 2) appellees’ December 2006 market projections were too speculative to support an award, particularly because the claims were based on collateral, and not direct, lost profits.
1. Post-Breach Market Conditions
As mentioned above, appellees’ claim for lost profits was based on market projections as of December 2006, the time of appellants’ initial breach. While this case was on appeal to this Court from the summary judgment entered in the 2006 action, the real estate market deteriorated significantly, thus making the project unfeasible. Before trial in early 2010, appellees moved in limine to exclude evidence of post-breach actual market conditions, and the court granted it. In opposition to the motion, appellants argued that because Tower I was projected to not be fully leased until 2010 and Tower II was projected to not be fully leased until 2012, actual market conditions in that time frame were relevant and would show that, had the apartment buildings been built as planned, appellees would not have made a profit because of changed market conditions. Appellees reasoned that the law provides that damages are measured as of the time of breach, and therefore, evidence of post-breach market conditions was inadmissible.
“[T]he admission of evidence is committed to the considerable and sound discretion of the trial court.” Merzbacher v. State,
While the Court of Appeals has stated and applied the general rule, there are very few appellate cases in Maryland in which the Courts have applied the general rule to claims for direct lost profits, when the issue was contested, and seemingly none that have applied it to claims for collateral lost profits. Direct lost profits result “immediately from the performance of the contract broken.” M & R Contractors & Builders v. Michael, supra, (quoting Corbin, Contracts, § 1020 (1951)). Collateral lost profits result from the loss of “other contracts collateral to the one broken,” to which the defendant was not a party. Id. In M & R Contractors, the Court of Appeals stated that the plaintiffs direct lost profits damages for a breach of contract should be measured “under the circumstances that existed at the time of the breach.” Id. at 349,
A possible explanation as to why there are no Maryland cases which address whether the traditional rule measuring contract damages at the time of the breach should apply to collateral lost profits cases is because, until relatively recently, collateral lost profits damages were considered too speculative to be awarded. The Court of Appeals and this Court first approved the recovery of collateral lost profits damages in the late 1970s, and then only in cases in which the plaintiff proved that collateral contracts had already been entered into at the time of the breach. See Impala Platinum, Ltd. v. Impala Sales, Inc.,
Only in 2007 did this Court first uphold an award of collateral lost profits damages in a case in which there were no existing collateral contracts at the time of breach. See Hoang,
Other jurisdictions have differed on whether lost profit contract damages should be measured at the time of the breach. The Supreme Court touched on this issue in a breach of contract action for failure to execute applications for a patent. Sinclair Refining Co. v. Jenkins Petroleum Process Co.,
In contrast, the United States Court of Appeals for the District of Columbia Circuit held that evidence of favorable post-breach market conditions is inadmissible to show increased direct lost profits. J.D. Hedin Constr. Co. v. F.S. Bowen Elec. Co.,
Citing 22 Am.Jur.2d Damages § 78 (2011), appellants argue that the general rule that contract damages are measured at the time of the breach does not apply to “anticipated profits or to other expectancy damages that, absent the breach, would have accrued on an ongoing basis over the course of the contract.” We note that the case cited in Am.Jur. for that proposition, Energy Capital Corp. v. United States, merely reduced to present value the damages that would have arisen after the date of judgment (“future lost profits”).
However, citing Energy Capital Corp., the United States Court of Appeals for the Federal Circuit recently held that the trial court did not abuse its discretion by considering post-breach evidence in order to determine direct lost profits damages. Anchor Sav. Bank, FSB v. United States,
Maryland cases have been consistent with the principle set forth in Am.Jur., although they do not cite to it directly. The Court of Appeals in Macke Co. v. Pizza of Gaithersburg, Inc.,
Similarly, in Fowler v. Printers II, Inc., this Court advocated the use of actual experience during the post-breach period when projections based on past profits for the business were too speculative.
In both Macke and Fowler, the Court determined that using past profits of the business for the damages period would be speculative because of evidence that factors affecting profits during that period may have changed significantly from the past. The Court then allowed the parties to present post-breach evidence of lost profits based on profits made by others related to the contract. However, both cases are distinguishable from this case. The claimed lost profits in Macke and Fowler, and the other cases cited above in support of the statement in Am.Jur. § 78, would have been ongoing over the course of the contract, absent the breach. Here, the non-breaching parties were not operating businesses which were expected to produce profits on an ongoing periodic basis over the course of the contract. Instead, appellees claimed profits that would have accrued once: on sale after the apartments had stabilized. In addition, in those cases
Under the current state of Maryland law, the general principle is that breach of contract damages are measured at the time of the breach. We see no distinction, relevant to this issue, between direct and collateral lost profits. Thus, the circuit court did not abuse its discretion in barring evidence of post-breach market conditions.
2. Reasonable Certainty of the 2006 Damage Projections
Even if evidence of post-breach market conditions was properly excluded, appellants claim that the 2006 damage projections used to determine lost profits were legally insufficient to prove damages with reasonable certainty. Appellants argue that it was pure speculation whether Tower I would be constructed, leased, and sold.
In addition to the requirements that damages must be both foreseeable and proximately caused by the breach, damages must also be established at trial with reasonable certainty. Reasonable certainty means that evidence must demonstrate “the likelihood of damages being incurred as a consequence of the breach, and their probable amount.” Hoang v. Hewitt Ave. Assocs., 177 Md.App. 562, 595,
This Court recently examined the case law behind collateral lost profits damages in Hoang, which involved a breach of contract for the sale of real estate. We held that collateral lost profits were proved at trial with reasonable certainty even though the development was in the “planning stage” and there were not yet any “collateral re-sale contracts from which its profits would be generated.” Id. at 608,
3. Sufficiency of Evidence for Reliance Damages
Next, appellants claim, in various parts of their brief, that appellees failed to establish sufficient evidence to sustain a damages award for Tower II based upon either lost profits or costs incurred in reliance on the contracts. As to reliance damages, appellants argue that reliance damages for Tower II were too speculative because it was speculative whether appellees would have ever been able to recoup the costs expended on the project.
The circuit court denied appellants’ motion for judgment, in which appellants asserted that appellees did not sufficiently prove damages at trial. In reviewing the denial of a motion for judgment or judgment notwithstanding the verdict, we review questions of law de novo. Schisler v. State,
A. Tower II: Lost Profits or Reliance Damages?
Before addressing the question of the sufficiency of the evidence for Tower II damages, it is necessary to determine what type of damages were awarded: lost profits or reliance. Based upon the amount awarded, appellants take the position in their brief that the jury awarded lost profits for Tower I. Appellants then focus at length on the asserted failure to prove reliance damages for Tower II.
When a general verdict is returned without any mention of the theory of recovery relied upon, this Court must affirm a favorable verdict for the plaintiff if any theory of recovery was supported by legally sufficient evidence and there was no other reversible error. “It is counsel’s responsibility to assure that all critical issues are submitted to the jury.” Edwards v. Gramling Eng’g Corp.,
B. Sufficiency of the Evidence
Appellees presented sufficient evidence at trial to prove reliance damages for Tower II. Under Maryland law, a party may recover for “expenditures made in reliance on a contract but not strictly in part performance of it, or as necessary preparation for performance.” Dialist Co. v. Pulford,
1. Reliance
Appellants argue that, for a large portion of the expenses, appellees presented no evidence that the expenses were incurred in reliance on the leases, as opposed to reliance on the earlier development services agreement and the Canyon Ranch hotel condominium project documents. Appellants also argue that appellees cannot recover reliance damages because appellees wrongfully continued to make expenditures after learning of the breach.
First, appellants argue that the evidence presented was not legally sufficient because some of the evidence admitted dealt with expenses incurred before either lease was signed. Although the relevance of those costs for the purpose of reliance damages is questionable because a party may only recover reliance damages for expenditures made after a contract is entered into, appellants should have objected to the evidence’s admission at trial on that basis rather than argue that its admission makes the totality of evidence of reliance legally insufficient.
Second, appellants dispute the award of reliance damages for Tower II because the damages included reimbursement of expenditures made towards the Canyon Ranch project that appellants claim could not have been made in reliance on the ground leases. There was evidence that all parties agreed to pursue the Canyon Ranch project, however. There was also evidence presented at trial that appellees relied upon the ground leases when pursuing the Canyon Ranch project. Olav Kollevoll, a representative of appellees, testified at trial that he would not have pursued the Canyon Ranch Project if the ground leases were not in effect. Mr. Kollevoll testified that he believed that if the Canyon Ranch project was not successful, appellees would have recouped the expenditures made by developing the property as apartments through the ground leases.
Finally, appellants maintain that appellees cannot recover reliance damages for expenses incurred after the 2006 breach because appellees incurred additional expenses after knowing of the
2. Foreseeability
Appellants dispute the award of reliance damages on the basis of a lack of foreseeability. Appellants claim that appellees did not prove that appellants had reason to foresee that appellees would rely upon the ground leases by making expenditures towards the Canyon Ranch Project. However, Mr. Davis testified on behalf of appellants that when the parties executed the Canyon Ranch sales contracts in September 2005, the parties also amended the ground leases to state that the ground leases would remain in full force until the Canyon Ranch sales contracts closed. The parties also amended the ground leases to extend the time period for the construction of the apartment buildings in order to accommodate the Canyon Ranch deal. Mr. Davis further testified that appellees were willing to proceed with the necessary expenditures on the Canyon Ranch deal because they would still be able to enforce the ground leases under the September amendments. Appellees relied upon the modification of the original ground lease contracts in making expenditures towards the Canyon Ranch deal. Thus, appellees presented sufficient evidence at trial to support the jury’s verdict that the expenditures on the Canyon Ranch project were made in foreseeable reliance on the modified terms of the ground leases.
3. Damages Amount
In addition to questioning reliance and foreseeability of the expenditures, appellants argue that evidence of the amount of reliance damages was speculative. Appellants state that there was no evidence that appellees would have broken even on Tower II, noting that there was no financing in place, no final building plans, no permits, and no construction contract.
First, appellants argue that appellees failed to prove that they would have generated enough revenue from the project to recoup their expenses made in reliance on the ground leases. However, reliance damages are only awarded when “future gain cannot be measured with any reasonable degree of reliability.” Wartzman v. Hightower Productions, Ltd.,
Appellees introduced legally sufficient evidence of reliance damages at trial to create a jury issue. Even minimal evidence, when given its greatest weight, can be sufficient to prove the elements of a plaintiffs case. Evidence indicated that
Although appellants argue that Mr. Foote did not testify as to whether appellees actually relied upon the ground leases in making all of the expenditures, the evidence presented to the jury was sufficient for it to make its own determination regarding appellees’ reliance. For example, Plaintiffs Exhibit 250, which was the Tower II ledger, clearly delineated the vendor, date, description, and amount for each cost transaction. Mr. Foote also testified as to specific transactions and the costs associated with them. Appellants were free to, and in fact did, cross-examine Mr. Foote on his findings, including transactions that may have been incurred prior to the formation of the ground leases and transactions that may have been spent in reliance on other parts of the development. Appellees presented sufficient evidence to create a jury question as to reliance damages.
U. Joint and Several Liability
Appellants contend the judgments must be vacated because there is no basis for joint and several liability. Appellants begin by arguing that it was unduly prejudicial for the court to permit the filing of the third amended complaint, which included the claim for joint and several liability.
Appellants then argue that the circuit court should have granted their motion for judgment because (1) the evidence was legally insufficient to support a finding of third party beneficiary status and (2) the presence of covenants running with the land in the leases was not a valid legal basis for joint and several liability. Appellees argue that the leases, projections, and testimony all indicated that the two towers were inextricably intertwined and each was intended to benefit the other. Alternatively, appellees maintain that there was a uniform plan of development, and in that situation, any property owner in the development can enforce covenants running with the land.
In reviewing the grant of a pre-trial amendment, the appellate court uses an abuse of discretion standard. Robertson v. Davis,
A. Third Amended Complaint
Here, there was no showing of prejudice caused by the timing of the amendment, and the circuit court did not abuse its • discretion. “Amendments shall be freely allowed when justice so permits.” Md. Rule 2-341(e). Leave of court for amendments should only be denied when the amendment would result in prejudice to the opposing party or undue delay. Robertson,
The circuit court granted leave to amend on February 16, 2010, 13 days before the start of the trial. Nevertheless, appellants fail to cite any type of prejudice except for the fact that the jury ultimately found appellants jointly and severally liable. The prejudicial nature of the jury’s verdict does not stem from the late amendment itself but rather from the evidence and the court’s instructions to the jury. The circuit court did not abuse its discretion in granting leave to amend.
B. Third Party Beneficiary Status
With respect to third party beneficiary liability, appellants argue that appellees failed to produce any evidence that each appellee was intended to be a third party beneficiary of the other’s lease. In Mackubin v. Curtiss-Wright Corp., the Court of Appeals held that a third party could enforce a contract made “expressly for the benefit of either a donee beneficiary or a creditor beneficiary.”
(1) a “donee” beneficiary as one “where it appears that the purpose of the promisee in obtaining the promise of the performance thereof is to make a gift to the beneficiary or to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary” and
(2) a “creditor” beneficiary as one “where no purpose to make a gift appears and performance of the promise will satisfy an actual or supposed or asserted duty of the promisee .... ”
Id. at 56-57,
Maryland now follows the rule set out in Restatement (Second) of Contracts § 302 (1981), which states that:
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.
See Lovell Land, Inc. v. State Highway Admin.,
First, the preliminary requirement that “recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties” is not met here. The primary method of determining the intention of the parties to a contract is to look at the language in the contract. Volcjak v. Washington County Hosp. Ass’n.,
In this case, the parties are suing for damages based on a violation of the estoppel certificate provision in each ground lease. The language of the estoppel certificate provisions themselves do not explicitly mention or contemplate the right of a non-party to the contract to request and receive estoppel certificates. Further, the language of the entire lease does not explicitly mention or contemplate the right of a non-party to the contract to enforce the provisions of the lease.
Appellees argue that the surrounding circumstances were sufficient to create a question of fact because the leases were executed simultaneously; the initial landlords were the same (Camalier Limited Partnership and Davis Brothers Montgomery Farm Limited Partnership); the project worked only if both towers were built; and cross easements between the two parcels were granted. However, those similarities do not demonstrate that the parties intended to benefit each other by entering into the ground leases. Each appellee obtained a benefit from the enforcement of the other’s ground lease and the general development of the property, but no intention can be read into the ground leases to confer any specific claim or right upon the other.
Furthermore, even if there was a preliminary demonstration of intent for the non-contractual appellee to have standing to enforce the estoppel certificate provisions in the ground leases, appellees are neither creditor nor donee beneficiaries nor their progeny under § 302(l)(a) or (b). There is no evidence of any sort of outstanding monetary obligation between appellees. There is also no evidence that the promisees intended to give the beneficiaries the benefit of the promised performances. See Weems v. Nanticoke Homes, Inc.,
C. Covenants Running with the Land
Additionally, the parties cannot be held jointly and severally liable because of any covenants running with the land. Appellants implicitly concede that the terms of the leases are covenants running with the land but argue that only an assignee can enforce the covenants, not an adjoining landholder. Appellees argue that the covenants were part of a uniform plan of development, and in that situation, a covenant can be enforced by a property owner against another neighboring property owner.
Because appellants concede that the terms of the lease are covenants running with the land, the only question presented on appeal is who may enforce those covenants. Generally, a covenant running with the land may only be enforced by the covenantee and its representatives, heirs, devisees, and assignees. See Chevy Chase Village v. Jaggers,
Appellees state that the covenants here were part of a uniform plan of development, and thus, the terms of each ground lease could be enforced against the burdened party (landlords) by a party not in privity to the original ground lease. Appellees assert that because there was a uniform plan of development, the Tower II tenants could enforce the terms of the Tower I lease against appellants and vice versa.
We recognize that, under the law for uniform plans of development, a restrictive covenant may be enforced by one property owner against a neighboring property owner even if those two parties are not in privity with one another. See Lindner v. Woytowitz,
Even if the uniform plan of development doctrine did apply to affirmative covenants made on behalf of the grantor of the property interest, appellees failed to provide sufficient evidence of a uniform plan of development between the two parcels in this case. To establish a uniform plan of development, it must be shown that a common grantor intended to adopt a restrictive covenant as part of a uniform general scheme or plan of development that will affect all the land granted by the grantor, even if granted to several different parties. See Club Manor, Inc. v. Oheb Shalom Congregation,
Consequently, as a matter of law, appellants can not be held jointly and severally liable. The circuit court below erred in submitting the issue to the jury, in giving the instructions to the jury regarding third party beneficiary status and covenants, and in including the joint and several liability questions on the verdict sheet. A new trial is not required based on this issue alone, however, because the jury awarded a finite amount of damages against each appellant: $82,696,612 against Tower I appellants and $3,653,627 against Tower II appellants. We remand to the circuit court with instructions to correct the judgment.
5. Evidentiary Issues
Appellants assert that the circuit court erred in 1) barring the testimony of appellants’ expert witness Larry Johnson; 2) admitting evidence relating to appellants’ intent and motivation to breach; and 3) admitting evidence allegedly protected by the attorney-client privilege.
We review the admission or exclusion of evidence, including expert testimony, for an abuse of discretion. See Brown v. Contemporary OB/GYN Assocs.,
A. Expert Testimony of Larry Johnson
Appellants discuss the court’s grant of appellees’ motion in limine to exclude evidence relating to post-breach market conditions, but then appear to challenge all evidentiaryrulings excluding testimony by appellants’ experts, most notably Larry Johnson, an accountant.
Appellees argue that the circuit court barred the testimony of Mr. Johnson because of a lack of qualifications and untimely disclosure. Appellees explain that the issue arose because the court had excluded testimony by appellants’ real estate experts because they relied on post>-2006 market conditions, and when the court ruled that evidence inadmissible, appellants sought to re-tool Mr. Johnson. Appellees observe that the court offered to hear Mr. Johnson’s testimony out of the presence of the jury and make a final ruling, but appellants declined, admitting that Mr. Johnson had no expertise in making real estate projections. Appellees add that Mr. Johnson’s opinions were untimely.
In deciding whether to admit expert testimony, the trial court will analyze “(1) whether the witness is qualified as an expert by knowledge, skill, experience, training, or education, (2) the appropriateness of the expert testimony on the particular subject, and (3) whether a sufficient factual basis exists to support the expert testimony.” Md. Rule 5-702. Again, we review this determination for an abuse of discretion.
B. Intent and Motivation Evidence
Appellants appeal the denial of a motion in limine to exclude evidence of facts prior to April 2007, including their motivation to breach and communications with counsel, except those relating to causation and damages. Appellants argue that, at trial, they did not challenge the April 2007 ruling of breach; thus, any evidence of motivation or bad conduct was irrelevant and prejudicial. Appellees argue that evidence of appellants’ bad faith and intention to breach the leases was relevant to appellees’ claim that appellants breached the implied covenant of good faith and fair dealing (included in the third amended complaint). Appellants put their intent to breach at issue, according to appellees, by arguing that appellants’ blockage of the administrative approvals and their appeal of the April 2007 ruling could cause actionable damages only if done in bad faith. In addition, appellants asserted that they could not be held liable for damages accruing after they provided conditional estoppel certificates because they technically complied with the terms of the ground leases.
Appellants also appeal the grant of appellees’ motion to exclude evidence relating to appellees’ bad conduct prior to April 2007.
To reiterate, appellants acknowledged that the earlier summary judgment established that appellants had breached the leases in late 2006. At that point in time, appellees sought injunctive relief, requiring appellants to provide estoppel certificates to enable the project to go forward. After the entry of summary judgment, appellants supplied estoppel certificates
It makes no difference whether we view the appellants’ conduct in 2007 and thereafter as a continuation of the initial breach or a series of successive breaches. Based on the evidence, the result is the same. A jury could find that appellants’ actions after the April 2007 judgment affected the amount of damages that appellees incurred, because as of April 2007, the appellees could have obtained financing for the development if they had timely received valid estoppel certificates.
Evidence of appellants’ motivation and subjective intent surrounding the breach and subsequent tender of conditional estoppel certificates was relevant and probative of appellees’ claim that appellants violated the implied covenant of good faith and fair dealing. Parker v. Columbia Bank,
In contrast, any evidence of appellees’ bad conduct leading to appellants’ refusal to execute estoppel certificates was irrelevant. The actions of appellees that led to appellants breaching the contract did not make any fact in this damages action more or less probable. Any alleged fraudulent misrepresentation on behalf of the appellees took place prior to the breach in late 2006, and the circumstances of that breach have already been determined and affirmed on appeal. Appellees’ conduct was already adjudged not to be a defense to the initial breach, and therefore, it was irrelevant to appellants’ continuing breach. Appellees did not open the door to the admission of this evidence in the subsequent damages trial. Thus, the circuit court did not abuse its discretion in barring evidence of appellees’ bad conduct while admitting evidence of appellants’ bad conduct and motivations.
C. Attorney-Client Privilege
Finally, appellants maintain that the court admitted evidence that was in violation of the attorney-client privilege. Appellees argue that appellants waived any privilege by relying on advice of counsel during the cross-examination of Mr. Davis and Mr. Chris Camalier, another representative
Under Maryland law, the attorney-client privilege “prevents the disclosure of a confidential communication made by a client to his attorney for the purpose of obtaining legal advice.” E.I. du Pont de Nemours & Co. v. Forma-Pack, Inc.,
The party asserting the privilege bears the burden of establishing whether it applies to evidence in the case. E.I. du Pont de Nemours,
In the brief and reply brief, appellants did not set forth the elements necessary for the attorney-client privilege to apply and did not identify or explain how specific rulings violated that privilege. See State Roads Com. v. Halle,
First, the entirety of Mr. Hensler’s deposition is not privileged. During the deposition, Mr. Hensler discussed a variety of topics that were not within the scope of confidential communications by a client in order to secure legal advice, such as communication with appellants’ new attorney regarding a potential malpractice claim and communications with opposing counsel regarding the estoppel certificates. Without proper identification by appellants in their brief as to specific testimony or exhibits that they contend are protected by the privilege, it is impossible to determine what evidence is being challenged as privileged information.
Second, most of the deposition exhibits are not even remotely related to a confidential communication with the client concerning legal advice. The exhibits identified by appellants include a letter from a Canyon Ranch representative to appellants, an internal Hogan & Hartson e-mail requesting a conflicts check, communications between Hogan & Hartson and its opposing counsel, illegible handwritten notes that appellants do not immediately identify in the brief as belonging to any attorney or client, and copies of the subpoena and deposition notice for Mr. Hensler. On their faces, these exhibits are not protected by the attorney-client privilege.
Several other exhibits contain discussions of client objectives and concerns, but
In general, we cannot determine what specific evidence may be privileged because appellants did not meet their burden of identifying and proving the application of the privilege to specific evidence. Due to lack of specificity, to the extent that any of the exhibits are privileged, we cannot determine whether the court erred in concluding that appellants waived the privilege based on the court’s conclusion that defense witnesses had relied on advice of counsel as a defense to the claim for damages post April 2007.
In Maryland, “[a] party waives his attorney-client privilege when the party relies on the advice of counsel as an element of his defense.” ST Sys. Corp. v. Maryland Nat’l Bank,
Thus, the question becomes whether appellants, as defendants, sufficiently raised reliance on counsel as a defense to waive attorney-client privilege. Appellants reason that reliance on counsel is only sufficiently raised to negate the attorney-client privilege when the defendant’s intent is an element of the claim. Appellants also claim that the privilege is not waived when reliance on counsel is raised in response to a question on cross examination. Finally, appellants argue that the court justified an invasion of the attorney-client privilege in order to attack
Appellants waived the attorney-client privilege during the testimony of Mr. Davis and the videotaped deposition of Chris Camalier that was played at trial. Mr. Davis was affiliated with the Davis Brothers Montgomery Farm Limited Partnership and Mr. Camalier was the representative of Camalier Limited Partnership, appellants’ assignors and original defendants in this action. Both Mr. Davis and Mr. Camalier repeatedly referred to the advice of counsel to justify their actions during the pertinent time periods. For example, the attorney for appellees asked Mr. Camalier if he was aware that the continuing course of conduct of not providing unconditional estoppel certificates would result in a failure of financing for the RSC Towers. Mr. Camalier responded by stating that “[w]e were operating in good faith and operating pursuant to discussions with our attorney who felt we were doing nothing improper.” Later, Mr. Camalier stated:
We thought about it in that we sent the letter to our lawyers and asked them what, are we acting in good faith? Are we acting within our rights under the ground lease? So, to the extent, yes, we saw what Mr. Hoffman said in his letter but we did not make an independent analysis. We sent it to our lawyer. This is what they’re stating. Are we on solid ground, operating in good faith, which we were, and basically have we complied with the ground lease? We were advised, yes we were.
Mr. Davis also referred to the advice of counsel to explain why he refused to sign the estoppel certificates:
Q: Mr. Davis, is the statement in that letter that the reason you refused to sign the estoppel certificates was that you got negligent advice from Hogan and Hartson?
A: Yes.
Q: Is that a truthful statement?
A: Yes.
Mr. Davis also referred to the advice of counsel to avoid answering a question asked by appellees as to whether he knew that reserving all rights under the estoppel certificates would result in the failure of the project to go forward:
Q: Mr. Davis, will you answer my question? My question is this. When you signed that letter purporting to reserve all rights, you knew that assertion was totally inconsistent with the business purpose for which an estoppel certificate is requested?
A: We signed the estoppel certificate that the Judge ordered and once again, I did not draft this letter. It was drafted by an attorney. I did sign it and reserving all rights, I thought reserved the rights that we had under the documents as we went to the Court of Appeals.
Rather than creating a strict test that limits the waiver of the attorney-client privilege to certain defenses raised in certain actions at certain times for certain reasons, Maryland courts use a more flexible test, examining how much the defendant actually put the advice of counsel at issue and whether it was truly an attempt to negate an accusation of wrongdoing.
For example, in Harrison v. State, the Court of Appeals opined at length as to when a criminal defendant waives his attorney-client privilege and whether it is at all possible for a defendant to waive the privilege during cross examination.
Similarly, in Haley v. State, the Court of Appeals held that the defendant did not waive his attorney client privilege when defense counsel stated that he just received pertinent information from the defendant the night before.
In Fraidin v. Weitzman, this Court held that a civil defendant did not waive the attorney-client privilege when the defendant asserted that he relied on advice of counsel for an issue that was uncontroverted rather than as a defense to liability for wrongdoing.
Similarly, in ST Sys. Corp. v. Maryland Nat’l Bank, this Court found that the defendants did not waive the attorney-client privilege by invoking an advice of counsel defense even though the defendant stated that some of the reasons for their actions were based on advice of counsel.
Here, appellants’ position was that they were not liable for damages caused by failing to provide unconditional estoppel certificates after summary judgment was entered in the 2006 action. They asserted that they complied with the leases by providing estoppel certificates, albeit conditional, and they took that position in good faith in reliance on counsel. By claiming that they were following the advice of their attorneys in refusing to sign the estoppel certificates and later reserving all of their rights under the estoppel certificates, appellants
6. Jury Instructions
Appellants contend the circuit court erred in its instructions to the jury by: (1) refusing to give an instruction on nominal damages; (2) giving instructions on third party beneficiary status, covenants running with the land, and uniform plan of development; (3) refusing to give an instruction on causation in the form requested by appellants; (4) refusing to give an instruction on reasonable certainty in the form requested by appellants; (5) refusing to give an instruction on collateral lost profits; (6) refusing to give an instruction relating to actual market performance; (7) refusing to give appellants’ requested instruction relating to lost profits and reliance damages as alternative theories; (8) giving an instruction on the duty of good faith and fair dealing and, in the alternative, refusing to give appellants’ requested instruction; (9) refusing to instruct that appellees were required to prove that the project would have been profitable; and (10) refusing to instruct that, to recover for reliance damages, appellees had to prove that they would have generated sufficient revenue to recoup all project costs.
In reviewing the propriety of jury instructions, the appellate court “must determine whether the requested instruction was a correct exposition of the law, whether that law was applicable in light of the evidence before the jury, and finally whether the substance of the requested instruction was fairly covered by the instruction actually given.” Wegad v. Howard St. Jewelers,
A. Nominal Damages
First, appellants argue that the circuit court should not have refused to
B. Causation
Second, appellants assert that the circuit court erred in not including the following in its jury instruction on causation: “[t]he defendants’ conduct is not a substantial factor in bringing about harm to another if the harm would have been sustained even without the defendants’] conduct.” Instead, the jury instruction provided that “[p]roximate cause exists when the breach is a substantial factor in causing the damage.” In support of its interpretation, appellants rely on a negligence case, Peterson v. Underwood,
C. Reasonable Certainty
Third, appellants contend that it was error not to include their jury instruction on the reasonable certainty requirement for contract damages, which stated in pertinent part that “[t]o show reasonable certainty, a plaintiff must show both the likelihood and the probable amount of the damages it suffered as a result of a defendant’s breach.” Instead, the court’s instruction included language from M & R Contractors describing in part some of the recent modifications of the standard of proof for lost profits damages.
D. Collateral Lost Profits
Fourth, appellants allege that the circuit court erred in not including a statement that the reasonable certainty requirement is “strictly applied” for collateral lost profits damages. This Court has held that the requirements of proximate causation, foreseeability, and reasonable certainty for proving lost profits damages are to be “strictly applied” in the case of collateral lost profits. See Hoang,
E. Lost Profits and Reliance Damages as Alternative Theories
Fifth, appellants assert that the circuit court erred in refusing to instruct the jury that reliance damages were an alternative in the event that lost profit damages were not reasonably certain. Instead, the circuit court simply instructed the jury that “[t]he plaintiffs, as an alternative, may seek reliance damages” before explaining the definition of reliance damages. This jury instruction is sufficient, and appellants fail to establish any prejudice as the parties seemingly agree that the jury awarded lost profits damages for Tower I and reliance damages for Tower II.
Finally, appellants allege that the circuit court erred in declining to provide appellants’ requested jury instruction on the implied duty of good faith and fair dealing. Appellants requested the following instruction: “[t]he implied duty of good faith and fair dealing does not change the terms of the contract. It does not obligate a party to take affirmative actions that the party is not required to take under the contract.” The court’s instruction provided in part that “[t]he fact that a party acts in compliance with the literal and technical terms of a contract does not absolve it of liability where it failed to perform in accordance with its duties of good faith and fair dealing.” Appellants contend that this instruction was erroneous because it came from a case applying New Jersey law. See Electronics Store Inc. v. Cellco P’ship,
Furthermore, there was never any contention that appellants should have taken an affirmative action that is not explicitly required under the contract. Instead, the issue was whether appellants continually violated the implied duty of good faith and fair dealing by failing to provide unconditional estoppel certificates. Appellants have failed to establish reversible error.
7. New Trial Judge
In light of our disposition of the other issues in this case, we need not consider whether the case should be assigned to a new trial judge.
8. Attorneys’ Fees and Costs
Appellants contend that, if we reverse the judgment, we must reverse the attorneys’ fee award. As is clear, we are not doing so. Appellants also contend the court abused its discretion as to the amount of fees awarded, but offers virtually no argument in support of that contention.
CASE REMANDED TO THE CIRCUIT COURT FOR MONTGOMERY COUNTY WITH INSTRUCTIONS TO CORRECT THE JUDGMENT TO ENTER JUDGMENT IN FAVOR OF RSC TOWER I, LLC SOLELY AGAINST CR-RSC TOWER I, LLC AND SECOND CR-RSC TOWER I, LLC AND JUDGMENT IN FAVOR OF RSC TOWER II SOLELY AGAINST CR-RSC TOWER II, LLC AND SECOND CR-RSC TOWER II, LLC. JUDGMENTS OTHERWISE AFFIRMED. COSTS TO BE PAID 90 PERCENT BY APPELLANTS, IN EQUAL SHARES, AND 10 PERCENT BY APPELLEES, IN EQUAL SHARES.
The determination of the award of attorneys’ fees “lies within the sound discretion of the trial judge and will not be overturned unless clearly erroneous.” Dent v. Simmons,
Notes
. Initially, appellees also sued the assignors of appellants, but later dismissed them.
. Specifically, appellants wished to introduce evidence regarding al- " leged fraudulent misrepresentations made by appellees to appellants when asking for an extension of deadlines for the Canyon Ranch Project.
. Appellants reason that, in "sword and shield” cases, waiver only applies to a plaintiff, not a defendant. Appellants cite Ehrlich v. Grove, which held that a civil defendant does not waive attorney-client privilege by producing documents similar to the ones for which the defendant is asserting the privilege.