NCO Fin. Sys. Inc. v. Montgomery Park LLC (P)

In this second appeal in a commercial-lease dispute, the district court erred in its analysis of the appellant’s obligation to mitigate damages under the lease.

Following a bench trial, the district court denied the appellant damages for breach of contract, holding that the appellant failed to use reasonable commercial efforts to mitigate its damages, which was a condition precedent to any recovery. But the district court misconstrued the lease agreement. Because the lease agreement’s language incorporated the common-law mitigation-of-damages doctrine (a plaintiff can’t recover damages which it could have reasonably avoided), the appellant’s recovery should only have been reduced by the amount of rent that the appellee could demonstrate would have been recovered by reasonable efforts to re-let the space.

In evaluating the commercial reasonableness of the appellant’s mitigation efforts, the district court also applied the wrong standard. Reasonable commercial efforts to mitigate damages did not require the appellant to favor the appellee’s space over other vacant space in the building. Commercial reasonableness required the appellant only to reasonably market the appellee’s space on an equal footing with the other spaces that it was seeking to rent.

Vacated and remanded.

NCO Fin. Sys. Inc. v. Montgomery Park LLC (P), No. 17-2226, Mar. 15, 2019. 4th Cir. (Niemeyer) from DMD at Baltimore (Russell).

Categories: 4th U.S. Circuit Court of Appeals, Opinions, Published

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