NCO Financial Systems, Inc. v. Montgomery Park, LLC

Filing 58

MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 12/20/13. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
NCO FINANCIAL SYSTEMS, INC.,
Plaintiff,

:
:

v.

:

MONTGOMERY PARK, LLC,

:

Defendant.

Civil Action No. GLR-11-1020

:
MEMORANDUM OPINION

THIS MATTER is before the Court on three pending motions,
including Plaintiff NCO Financial Systems, Inc.’s (“NCO”) Motion
for Partial Summary Judgment (ECF No. 51); and Montgomery Park,
LLC’s (“Montgomery Park”) Cross-Motion for Partial Summary Judgment
(ECF No. 52) and Motion for Leave to File Sur-Reply in Further
Opposition to NCO's Motion for Partial Summary Judgment (ECF No.
55).
The
necessary.

issues

have

been

fully

briefed

and

See Local Rule 105.6 (D.Md. 2011).

no

hearing

is

For the reasons

that follow, NCO’s Motion for Partial Summary Judgment will be
granted in part and denied in part, Montgomery Park’s Motion for
Leave to File Sur-Reply in Further Opposition to NCO’s Motion for
Partial Summary Judgment will be granted in part and denied in
part, and Montgomery Park’s Motion for Partial Summary Judgment
will be denied.

I. BACKGROUND1
NCO

provides

solutions.
tenants

with

business

process

outsourcing

Montgomery Park provides leasable office space to

and

business.

clients

other

services

Effective

March

attendant

to

15,

NCO

2003,

its

property

and

leasing

Montgomery

Park

entered into an Office Lease Agreement (“Lease”) at the Montgomery
Park Business Center located at 1800 Washington Park Boulevard,
Baltimore, Maryland (the “Building”).
The Lease states that NCO “leases from [Montgomery Park] . . .
approximately

106,267

rentable

square

feet

of

floor

area”

(the

“Premises”). (Pl.’s Mem. Supp. Mot. Partial Summ. J. Ex. 2, Attach.
2 (“Office Lease Agreement”), at 9, ECF No. 51-1).
for

a

term

of

twelve

years,

expiring

in

March

The Lease is
2015.

It

is

undisputed that an area known to the parties as the “Bridge” is
reflected in the approximate rentable square footage stated on the
Lease.

There is a dispute, however, as to whether the Bridge

should have been included.
The Lease also requires NCO to pay rent to Montgomery Park in
two components, “Base Rent” plus “Additional Rent,” which includes
“Real Estate Taxes” and “Operating Expenses.” (Id. §§ 2.02, 2.03).
The amount of Base Rent plus Additional Rent is based upon the
number of “rentable square feet” of NCO’s Premises. (Id. §§ 2.01,
2.02, 2.03).

1
Unless otherwise noted, the following facts are taken from
the Complaint and the parties’ briefings on the instant motions,
and are viewed in the light most favorable to the nonmoving party.

2

Under the Lease, the total “rentable square feet” of space is
calculated by multiplying the usable square feet of the Premises by
1.12. (Id. § 2.08).
Montgomery

Park

Using this formula, the amount of Base Rent

charged

NCO

was

based

upon

Montgomery

Park’s

representation that the Premises incorporates 94,881 square feet of
usable space equaling 106,267 square feet of rentable space.2

The

amount of Additional Rent NCO is obligated to pay under the Lease
is based upon its proportionate share of certain expenses for the
entire Building. This ratio was determined by the total rentable
square

footage

of

the

NCO

Premises

as

compared

rentable square footage of the entire Building.

to

the

total

All of the costs

and credits that resulted in the amount of the monthly payment due
to Montgomery Park are defined by the Lease as “Rent.” (Id. §
2.04(A))

(defining

obligations

set

“Rent”

forth

in

as
the

Base

Rent

foregoing

plus

provisions

“[a]ll

rental

[Real

Estate

Taxes and Operating Expenses] and elsewhere in this Lease”).
In 2010, Montgomery Park, at NCO’s request, provided NCO with
computer

generated

design

drawings

of

the

Building.

Using

the

industry measurement standards published by the Building Managers
and

Owners

Association

(“BOMA”),

NCO

now

contends

the

Premises

actually contained only 100,800 square feet of rentable space, as

2
Pursuant to the Lease, Base Rent for the first year was
$15.00 per square foot of rentable space, for a total of
$1,594,005. (Office Lease Agreement § 2.01(1)).
After the first
year of the Lease, the amount of Base Rent increased each year by a
percentage determined by the Consumer Price Index published by the
United States Department of Labor. (Id. § 2.01(2)).

3

opposed to the “approximately 106,267 rentable square feet of floor
space” claimed by Montgomery Park.
Additionally, the Lease provides NCO the option of accepting
janitorial services procured by Montgomery Park or procuring its
own janitorial services at its own cost and accepting a “Janitorial
Allowance.”

The “Janitorial Allowance,” as defined in the lease,

equals “$1.00 per usable square foot per annum towards the costs
incurred in obtaining janitorial services.”

(Id. § 6.01).

NCO is

responsible for any janitorial cost that exceeds the Janitorial
Allowance.

(Id.)

Beginning in April 2008, NCO exercised its right

to provide its own janitorial services.
Finally,
“Limited

the

Right

Provision”).

(Id.

Lease

includes

of

Early

§

1.05).

a

provision

Termination”
Pursuant

to

that

(“Early
this

gives

NCO

a

Termination

provision,

NCO

maintained the right to terminate the Lease after eight years,
provided that NCO gave written notice to Montgomery Park ten months
in advance and paid Montgomery Park a “termination fee,” in two
fifty-percent installments (at ten months in advance of the early
termination

and

at

three

months

in

advance

of

the

early

termination) and calculated by ten times the amount of the monthly
Rent that would be owed as of the last month of the Lease. (Id.)
The text of the Early Termination Provision states, in pertinent
part:
Tenant shall have a one-time, conditional right to
terminate this Lease (the “Termination Right”), effective
on that date which is eight years after the Commencement
4

Date (the “Termination Effective Date”), upon Tenant’s
strict compliance with all of the following requirements:
(a) Tenant shall deliver to Landlord (not later than ten
(10) months prior to the Termination Effective Date (such
notice deadline, the “Termination Notice Deadline”)) a
written notice (the “Termination Notice”) stating that
Tenant elects to exercise this Termination Right; and
(b) Tenant shall pay to Landlord (50% simultaneously with
delivery of the Termination Notice and the remaining 50%
balance at least three (3) months prior to the
Termination Effective Date), a termination fee (the
“Termination Fee”) equal to ten (10) times the monthly
installment (which will be in effect as of the
Termination Effective Date) of Rent (including, without
limitation, all Additional Rent on account of Taxes or
Operating Expenses).
If (and only if) Tenant both timely delivers the
Termination Notice and timely pays the Termination Fee as
required above, then the Lease will be terminated
effective on the Termination Effective Date.
Tenant shall not have the right to terminate this Lease
if it fails either timely to deliver the Termination
Notice or timely to pay the Termination Fee.
Tenant
shall not have the right to exercise its Termination
Right if, at the time of exercise, Tenant is in default
hereunder in the payment of Base Rent and if such default
continues uncured beyond the applicable period of grace.
. . .
(Id.)
On

March

11,

2010,

NCO

sent

a

letter

to

Montgomery

Park

notifying Montgomery Park of its election to terminate the Lease
pursuant to its Limited Right of Early Termination.

On May 12,

2010, NCO sent another letter to Montgomery Park confirming its
earlier communication concerning the same.

On that same day, NCO

paid Montgomery Park $779,964.15, representing fifty-percent of the
5

Termination

Fee

as

calculated

by

the

Base

Rent

as

well

as

an

estimate of the increase in Additional Rent. On or before December
15,

2010,

NCO

paid

Montgomery

Park

an

additional

$697,100.55,

representing what it claimed to be the second fifty-percent of the
Termination Fee after deducting $79,067.70 as a janitorial credit,
to which it claims it is entitled.
Montgomery
2011,

that

Termination
stated

that

its

Park

attempt

under
its

notified

the

to

by

exercise

Lease

year-end

NCO,

was

letter

the

dated

Limited

ineffective.

accounting

review

February

Right

of

Early

Montgomery

concluded

9,

Park

that

the

second amount NCO paid to terminate the lease in connection with
the

Early

Termination

Provision

was

incorrect

because

Janitorial Allowance should not have been deducted.

the

Pursuant to

its position that it properly terminated the Lease, NCO vacated the
Premises on May 31, 2011 and has not paid Rent since.
dated

July

13,

2011,

Montgomery

Park

gave

NCO

notice

By letter
that

it

considered NCO in default for failure to pay Rent.
NCO filed its Complaint (ECF No. 1) on February 28, 2011,
alleging breach of contract (Count I), unjust enrichment (Count
II), and fraud (Count III) (collectively, the “Overcharge Claims”),3
and seeks a declaratory judgment regarding its purported exercise
of rights under the early termination clause of its lease (Count
IV).

In its counterclaim, Montgomery Park seeks a declaratory

3
These claims are all premised upon the allegation that the
rentable square footage of the Premises is less than what is stated
in the Lease.

6

judgment that the Lease was not terminated early and remains in
full force and effect.

Montgomery Park also seeks contract damages

for NCO’s default under the Lease for failure to pay Rent.
Pursuant to Local Rule 105.2(c), the parties proposed, and
this Court adopted, a briefing schedule for the parties to submit
motions for partial summary judgment. (ECF No. 50).

On May 16

2013, NCO filed the instant Motion seeking summary judgment on the
following facts and legal issues in this case: (1) the Premises, as
defined

by

the

Lease,

does

parties

as

the

“Bridge,”

percent

of

the

Termination

not

(2)

include

upon

Fee,

the

area

known

the

second

rendering

less

the

Janitorial

to

the

fifty-

Allowance

before December 15, 2011, NCO properly terminated the Lease under
the Early Termination Provision, and (3) the Parties agreed that
the number of rentable square feet to be included in the Lease
would be determined by using the then existing office measurement
standard of BOMA.
On June 17, 2013 Montgomery Park filed its Opposition to NCO’s
Motion and Cross-Motion for Partial Summary Judgment.
52).

(ECF No.

In its Cross-Motion for Partial Summary Judgment, Montgomery

Park seeks judgment barring NCO’s Overcharge Claims pursuant to the
statute

of

limitations.

NCO

filed

a

Reply

and

Response

in

Opposition to Montgomery Park’s Cross-Motion for Partial Summary
Judgment (ECF No. 53).

Montgomery Park filed a Reply.

54).

7

(ECF No.

Montgomery

Park

then

moved

for

Leave

to

File

a

Sur-Reply

seeking to address an “operating expenses” argument it contends was
untimely advanced by NCO for the first time in NCO’s Reply in
Support of its Motion for Partial Summary Judgment, and seeking to
address several misstatements of the record.

(ECF No. 55).

NCO

opposed Montgomery Park’s Motion arguing the “operating expenses”
theory

was

Janitorial

implicit

in

its

opening

Allowance

at

issue

in

Memorandum

this

case.

concerning
(ECF

Montgomery Park filed a Reply to NCO’s opposition.

No.

the
56).

The Motion for

Leave to File a Sur-Reply is now ripe for disposition.
II. DISCUSSION
A.

Standards of Review
1. The Summary Judgment Standard
Under Federal Rule of Civil Procedure 56, the Court must grant

summary judgment if the moving party demonstrates that there is no
genuine issue as to any material fact, and the moving party is
entitled to judgment as a matter of law.

Fed.R.Civ.P. 56(a).

In reviewing a motion for summary judgment, the Court views
the

facts

Anderson

in

v.

a

light

Liberty

most

Lobby,

favorable

Inc.,

to

477

the

U.S.

non-moving

party.

242,

(1986)

255

(citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970)).
Once a motion for summary judgment is properly made and supported,
the opposing party has the burden of showing that a genuine dispute
exists.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475

U.S. 574, 586-87 (1986).

“[T]he mere existence of some alleged
8

factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is
that there be no genuine issue of material fact.”

Anderson, 477

U.S. at 247-48.
A “material fact” is a fact that might affect the outcome of a
party’s

case.

Id.

at

248;

JKC

Holding

Co.

v.

Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001).

Wash.

Sports

Whether a fact

is considered to be “material” is determined by the substantive
law, and “[o]nly disputes over facts that might affect the outcome
of the suit under the governing law will properly preclude the
entry of summary judgment.”

Anderson, 477 U.S. at 248; Hooven-

Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001).
A “genuine” issue concerning a “material” fact arises when the
evidence

is

sufficient

to

allow

a

reasonable

verdict in the nonmoving party’s favor.

jury

to

return

a

Anderson, 477 U.S. at 248.

Rule 56(c) requires the nonmoving party to go beyond the pleadings
and

by

its

own

affidavits,

or

by

the

depositions,

answers

to

interrogatories, and admissions on file, designate specific facts
showing that there is a genuine issue for trial.
Catrett, 477 U.S. 317, 324 (1986).

Celotex Corp. v.

The nonmoving party “cannot

create a genuine issue of material fact through mere speculation or
the building of one inference upon another.”

Beale v. Hardy, 769

F.2d 213, 214 (4th Cir. 1985).
Because

this

case

arises

under

the

Court’s

diversity

jurisdiction, the substantive law to be considered is that of the
9

state in which the action arose.

Estrin v. Natural Answers, Inc.,

103 F.App'x 702, 704 (4th Cir. 2004).

In this case, Maryland law

applies.
2. Contract Interpretation Standard
“Leases are contracts and, as such, are to be construed by
application

of

the

well

established

[sic]

rules

of

contract

interpretation.”

Chesapeake Bank of Md. v. Monro Muffler/Brake,

Inc.,

384,

891

A.2d

390

(Md.Ct.Spec.App.

2006).

interpretation is a matter of law, not fact.

Contract

Sy-Lene of Wash.,

Inc. v. Starwood Urban Retail II, LLC, 829 A.2d 540, 544 (Md.
2003).

The parol evidence rule precludes parties from attempting

to contradict written terms of an agreement through the use of
prior oral or written declarations.

Sagent Tech., Inc. v. Micros

Sys., Inc., 276 F.Supp.2d 464, 468 (D.Md. 2003).
“is

only

admissible

ambiguous.”

after

the

court

finds

the

Parol evidence
contract

to

be

Sy-Lene, 829 A.2d at 544.

“In determining whether a writing is ambiguous, Maryland has
long

adhered

contracts.”

to

the

law

of

the

objective

interpretation

of

Calomiris v. Woods, 727 A.2d 358, 363 (Md. 1999).

Under the objective view, a contract is only ambiguous when it is
susceptible
person.”
context

to

Id.
and

more

than

one

meaning

by

a

“reasonably

prudent

“The terms of the contract must be interpreted in
be

given

their

ordinary

and

usual

meaning.”

Middlebrook Tech, LLC v. Moore, 849 A.2d 63, 79 (Md.Ct.Spec.App.
2004).
10

If a contract is unambiguous, its terms will not be overridden
by what the parties thought or intended the contract to mean when
they executed it.

Id.

[W]hen the language of the contract is plain and
unambiguous there is no room for construction, and a
court must presume that the parties meant what they
expressed. In these circumstances, the true test of what
is meant is not what the parties to the contract intended
it to mean, but what a reasonable person in the position
of the parties would have thought it meant. Consequently,
the clear and unambiguous language of an agreement will
not give away to what the parties thought that the
agreement meant or intended it to mean.
Gen. Motors Acceptance Corp. v. Daniels, 492 A.2d 1306, 1310 (Md.
1985).

Thus,

evidence

of

the

negotiations are not admissible.
B.

parties’

prior

intentions

and

Id.

Analysis
1.

BOMA Office Measurement Standards

The

Court

finds

that

even

if

it

were

to

consider

parol

evidence under the “conditional delivery” exception to the parol
evidence rule, there exists a genuine dispute of material fact as
to whether the parties agreed to be bound by BOMA.

Accordingly,

NCO is not entitled to summary judgment on this issue.
The Lease is silent on the standards used to arrive at the
number of usable square feet of the Premises for the purposes of
calculating rent.

It is undisputed, however, that before the Lease

was finalized and signed, the parties agreed that the number of
usable square feet of the Premises would be determined pursuant to
the BOMA office measurement standard.
11

As a result, NCO argues the

effectiveness

of

the

Lease

was

conditioned

on

Montgomery

Park

having measured the Premises according to the BOMA standard.

The

Court disagrees.
The notion of conditional delivery has long been recognized in
Maryland

–

introduction

that

“the

of

parol

parol

evidence

evidence

rule

does

indicating

not

that

prevent
the

the

written

instrument was not to become effective as an instrument, until a
prior condition or event had occurred.”

Foreman v. Melrod, 263

A.2d 559, 562 (Md. 1970) (citing Jenkins v. First Nat’l Bank, 106
A. 174 (Md. 1919); Ricketts v. Pendleton, 14 Md. 320 (1859)); see
also Saliba v. Arthur Fulmer Charlotte, Inc., 270 A.2d 656, 659
(Md. 1970) and Smith v. Rosenthal Toyota, Inc., 573 A.2d 418, 422
(Md.Ct.Spec.App. 1990) (allowing parol evidence to establish that
agreements signed prior to the conditions set forth were not to
become effective until the condition or event had occurred).

Even

where there is an integration clause, as there is here (Office
Lease

Agreement

§

17.01),

“[w]here

the

parties

to

a

written

agreement agree orally that performance of the agreement is subject
to

the

occurrence

of

a

stated

condition,

the

integrated with respect to the oral condition.”

agreement

is

Smith, 573 A.2d at

422 (quoting Restatement (Second) of Contracts § 217 (1981)).
written

document

must

not

be

sufficient

not

standing

alone,

The
to

determine that “the contract never came into existence by reason of
the failure of the condition.”

Saliba, 270 A.2d at 660 (quoting

Brantley on Contracts 304 (2d Ed. Rev. 1922) (internal quotation
12

marks omitted); see also Smith, 573 A.2d at 422 (discussing the
principle of allowing parol evidence of oral conditions).
NCO concedes the occurrence of the measurement was a condition
precedent to the signing of the Lease.

Pursuant to that agreement,

the measurements were concluded and inserted into the Lease prior
to NCO signing it.

Simply because the approximate rentable square

footage was determined before the Lease was executed, however, does
not

mean

the

occurrence

of

to

the

effectiveness

Nevertheless,

even

precedent

legal
if

the

that

Court

measurement

were

of
to

was

the
look

a

condition
itself.4

Lease
beyond

the

four

corners of the Lease, the parol evidence creates a material dispute
of fact as to whether the parties agreed to be contractually bound
by BOMA.
NCO first directs the Court’s attention to the August 1, 2002
Letter of Intent, which requires that the “[t]enant area shall be
measured in accordance with BOMA standards of measurement.”
Mem.

Supp.

According

Mot.
to

Partial

the

Summ.

deposition

J.

Ex.

2,

testimony

Attach.

of

1,

Montgomery

(Pl.’s
at

1).

Park’s

architect, Peter Notari, and its Director of Development at the
time,

Peter

measurement

Garver,
of

the

Montgomery
Premises

Park

pursuant

did
to

in
the

fact
BOMA

provide

the

standards

of

4
NCO argues Section 2.08 of the Lease provides that the
formula for determining the number of Rentable Square Feet required
the number of Usable Square Feet to be determined before the
execution of the Lease. When viewed in the context of the Lease in
its entirety, however, Section 2.08 seems to indicate only how the
approximate rentable square footage was calculated for purposes of
arriving at the Rent due under the Lease.

13

measurement.

(Notari Dep. 45:4-7, Dec. 20, 2012); (Garver Dep.

30:15-31:2,

Dec.

11,

consciously

agreed

2012).

not

standard in the lease.

to

The

be

parties,

contractually

however,

bound

by

later

the

BOMA

(See Mem. Opp’n Pl.’s Mot. Partial Summ. J.

& Supp. Cross-Mot. Partial Summ. J. [“Def.’s Mem. in Opp’n”] Ex. 2,
at 64) (appearing to be a prior draft of the Lease in which a
specific reference requiring the parties to be bound by BOMA in
section 2.08 is stricken). Accordingly, NCO is not entitled to
summary judgment that the Parties agreed the number of rentable
square feet to be included in the Lease would be determined by
using the then-existing office measurement standard of BOMA.
2.

The Bridge

The

Court

concludes,

as

a

matter

of

law,

that

the

Lease

clearly and unambiguously excludes the Bridge from its Premises
and, therefore, the area should not have been considered rentable
square footage.

Accordingly, NCO will be granted summary judgment

with respect to this issue.
It is undisputed that an area known to the parties as the
“Bridge” is reflected in the approximate rentable square footage
stated on the Lease and referred to as the “Premises.”
Park

argues,

because

the

“approximately

106,267

Montgomery

rentable

square

feet” indisputably includes the square footage of the Bridge, this
is evidence that the Bridge is part of the Premises as defined in
the Lease.

The Court disagrees.

14

After identifying the “approximately 106,267 rentable square
feet” as the “Premises,” the Lease then defines Premises as “(i)
Section 2 on the first floor and (ii) Sections 1, 2, and 4 . . . on
[the] second floor . . . .” (Mem. Supp. Mot. Partial Summ. J. Ex.
2, Attach. 2, at 9).

Thus, the rental square footage identified as

the Premises should include only those designated areas of the
building intended to be part of NCO’s Premises as defined in the
Lease.

The parties’ agreement that the Bridge is included in the

calculation of rentable square footage is not evidence that it
should

have

been

included

or

that

either

party

knew

it

was

included.
The written definition of the Premises then identifies Exhibit
A-1

as

a

more

particular

illustration

of

the

Premises.

(Id.)

Montgomery Park further argues the drawings, attached to the Lease
as exhibits and purporting to further define the Premises, creates
both

patent

and

latent

ambiguities

such

that

the

Court

must

consider parol evidence to glean the parties’ intent with respect
to whether the Bridge was intended to be part of the Premises.

The

Court similarly disagrees.
Page 4 of Exhibit A-1 is identified as “NCO Call Center –
Second Floor Key Plan.”

It indicates cross-hatching in Sections

marked 1, 2, and 4, and the absence of cross-hatching in Sections
marked 3 and 5.
connects

Sections

The Bridge, which appears as a narrow area that
4

and

5,

is

not

cross-hatched.

The

cross-

hatching directly corresponds to those sections identified in the
15

written definition.

Thus, under the clear language of the Lease,

the Court finds that a reasonable person would interpret the crosshatching as intending to define the leased Premises.
Page 5 of Exhibit A-1 is a more detailed drawing of the entire
second floor of the building.
to

work

together.

Page

4

The drawings on pages 4 and 5 appear
first

identifies

and

defines

the

designated areas of the building included in NCO’s Premises and
page 5 then compliments with additional architectural detail.

Page

5 of the Exhibit does not, however, identify or designate which
portions of the second floor further define the Premises.

Even

though the drawing on page 5 includes the Bridge and portions of
Sections 3 and 5 that are not defined in the written definition of
the property, there is no ambiguity when considering pages 4 and 5
together.
Moreover, Exhibit G of the Lease, titled “Space Plans for NCO
Premises,” consists of a Cover Sheet, a First Floor and Second
Floor

Life

Safety

Plan,

four

Architectural

Plans

and

Reflected

Ceiling Plans for each of the areas of the building designated as
being part of the Premises in the written definition, and four wall
types and toilet room elevations sheets.

In the lower right hand

corner of each page is a miniature drawing identical to the one at
page 4 of Exhibit A-1.
is

identified

through

In each instance, the corresponding section
shading

similar

to

the

cross-hatching

appearing on the original diagram at page 4 of Exhibit A-1.
Bridge is never identified or shaded.
16

The

“In interpreting a contract provision, [the Court] look[s] to
the entire . . . agreement, not merely a portion thereof.”

Nova

Research, Inc. v. Penske Truck Leasing Co., 952 A.2d 275, 283 (Md.
2008).

Thus, the Court must consider the written description of

the Premises together with Exhibits A-1 and G.

Neither the written

description nor any of the drawings of the Premises in the Lease
include the Bridge.

As such, the Lease is not subject to more than

one reasonable interpretation with regard to whether the Bridge is
part of NCO’s premises.
An ambiguity cannot be created from extrinsic evidence when
the contract is clear on its face.

See United Capitol Ins. Co. v.

Kapiloff, 155 F.3d 488, 495 (4th Cir. 1998) (“In the event of
ambiguity, Maryland courts consult extrinsic evidence . . . .”).
To the extent that Montgomery Park relies on inadmissible extrinsic
evidence to identify ambiguities in the Lease, those arguments will
not be addressed.
Finally, Montgomery Park contends that the Bridge’s inclusion
in the leased Premises is not a “material fact” that might affect
the outcome of case and, therefore, NCO is not entitled to summary
judgment.

This argument, however, is misplaced.

NCO seeks partial

summary judgment with respect to this one very narrow issue.

How

this issue impacts the merits of NCO’s underlying case does not
bear on whether it is entitled to summary judgment on that narrow
issue.

Only disputes over material facts that might affect the

outcome of whether the Bridge is included in the leased Premises
17

under the governing law will properly preclude the entry of summary
judgment on this issue.
After

considering

the

parties’

arguments,

the

written

definition of Premises used in the Lease, and Exhibits A-1 and G,
as attached to the Lease, the Court finds that the Lease clearly
and unambiguously does not include the Bridge as part of NCO’s
Premises.

Accordingly,

NCO

is

entitled

to

summary

judgment

declaring the same.
3.

Termination Fee
a.

Motion for Leave to File Sur-Reply

The Court finds good cause to allow Montgomery Park leave to
file a sur-reply with respect to NCO’s operating expenses argument.
Unless otherwise ordered by the court, sur-reply memoranda are
not permitted to be filed.

See Local Rule 105.2(a) (D.Md. 2011).

“Surreplies may be permitted when the moving party would be unable
to contest matters presented to the court for the first time in the
opposing party's reply.”

Khoury v. Meserve, 268 F.Supp.2d 600, 605

(D.Md. 2003), aff’d, 85 F.App’x 960 (4th Cir. 2004).
Montgomery
providing

tenant

Park

contends

janitorial

NCO’s

services

claim
was

an

that

the

“Operating

costs

of

Expense”

within the meaning of the Lease and constituted, therefore, a form
of “Additional Rent” was raised for the first time in NCO’s Reply
to Montgomery Park’s Opposition to NCO’s Motion for Partial Summary
Judgment thereby necessitating a sur-reply on that issue.
Court agrees.
18

The

NCO argued, in its Motion for Partial Summary Judgment, the
Janitorial Allowance was a “credit against rent” due under the
Lease.

In its Opposition to Montgomery Park’s Motion for Leave to

File a Sur-Reply, NCO concedes that it did not make this argument
specifically

in

terms

of

“Operating

Expenses”

and

“Additional

Expenses” under the Lease, but maintains that the distinction is
immaterial.

(Mem. Opp’n Montgomery Park’s Mot. Leave to File Sur-

Reply 2, ECF No. 56-1).

NCO states that implicit in its “credit

against rent” argument is the concept of the Janitorial Allowance
qualifying as a component of rent through the operating expense
provision in the Lease.

(Id. at 3).

The terms “Operating Expenses,” “Additional Rent,” and “Rent”
are specific terms defined in the Lease.

The term “credit against

rent” is a concept NCO asks the Court to read into the Lease.

In

its Reply to Montgomery Park’s Opposition, NCO first articulates
its right to take a credit against rent specifically under the
operating expense provision in the Lease.

Moreover, the phrase

“operating expense” never even appears in NCO’s Motion for Partial
Summary Judgment.
In addition to addressing NCO’s operating expenses argument,
Montgomery

Park

seeks

to

use

its

sur-reply

misstatements of the record in NCO’s Reply.

to

address

alleged

Where the proposed

sur-reply, however, does not attempt to address matters presented
for the first time in the opposing party’s reply and instead seeks
merely to re-open briefing on the issues raised, the motion for
19

leave to file a sur-reply will be denied. See Interphase Garment
Solutions, LLC v. Fox Television Stations, Inc., 566 F.Supp.2d 460,
467 (D.Md. 2008) (denying a motion to file surreply because it
sought to re-open briefing and challenge Defendants’ explanations
of cited case law).
Accordingly, Montgomery Park’s Motion for Leave to file a SurReply will be granted with respect to NCO’s operating expenses
argument

but

denied

with

misstated the record.

respect

to

its

allegations

that

NCO

Exhibit 1 to Montgomery Park’s Motion for

Leave to File Sur-Reply (ECF No. 55-1) will be deemed filed, and
only

the

portion

addressing

NCO’s

untimely

operating

expenses

argument will be considered in connection with the Court’s decision
on the parties’ motions for summary judgment.
b. Analysis
NCO seeks a finding as a matter of law that upon rendering the
second fifty-percent of the Termination Fee, less the Janitorial
Allowance

before

December

15,

2011,

it

properly

Lease under the Early Termination Provision.

terminated

the

Montgomery Park seeks

a finding that, by deducting the annual Janitorial Allowance from
the

Termination

Fee,

NCO

did

not

pay

the

Termination

Fee

as

required by the Lease, and thus, the Lease remains in full force
and

effect.

calculation

The
of

the

Court

finds

Termination

that

Fee,

its

despite
good

NCO’s
faith

improper

attempt

to

strictly comply with the conditions precedent set out in the Early

20

Termination Provision of the Lease amounts to proper performance
with respect to effectuating its early termination option.
(1) The Janitorial Allowance Should Not Have been
Included in the Calculation of the Termination
Fee
Two separate “components” of rent are detailed in Article II
of the Lease.

Section 2.01 sets out “a minimum annual rent,”

referred

“Base

to

as

Rent.”

(Office

Lease

Agreement

at

19).

Section 2.04(A) identifies all rental obligations, outside of Base
rent, as “Additional Rent.”

Sections 2.02 and 2.03 then identify

the additional rental obligations to include Real Estate Taxes and
Operating Expenses.
When

read

unambiguously
rent.

together,

set

forth

Sections
“Operating

2.03

and

Expenses”

2.04(A)
as

a

clearly

and

component

of

“Operating Expenses” are defined as “all expenses, costs and

disbursements of every kind and nature incurred in connection with
the ownership, management, maintenance, repair and operation of the
Property, including but not limited to. . . common area janitorial
services.”

(Id. § 2.03(A)) (emphasis added).

Conversely, Section

6.01 states that:
[L]andlord shall procure janitorial services for Tenant
at the Premises at Tenant’s request, unless Tenant
contracts (at Tenant’s election) with its own janitorial
service provider; provided, however, Landlord shall
provide Tenant with an annual janitorial allowance (the
“Janitorial Allowance”) of up to $1.00 per usable square
foot per annum towards the costs incurred in obtaining
janitorial services.

(Id. § 6.01) (emphasis added).
21

Based on the plain language of the Lease, Operating Expenses
include only common area janitorial costs.
component

of

Rent

is

silent

on

the

The Operating Expenses

issue

of

tenant-specific

janitorial costs, which are plainly addressed in a separate section
that is specific with respect to how those costs will be allocated
between the parties.

Thus, on the face of the Lease, Montgomery

Park’s

obligation

annual

Allowance

is

credit

unambiguously

with

separate

respect
from

to

the

NCO’s

Janitorial

monthly

rent

obligation.
Unlike “Rent,” which is the payment obligation of NCO, the
Janitorial

Allowance

is

a

credit

obligation

of

Montgomery

Park

toward the costs incurred in obtaining janitorial services whether
procured by the Landlord or the Tenant.
on May 31, 2011.
Park

nor

NCO

were

NCO vacated the Premises

Under circumstances in which neither Montgomery
no

longer

incurring

the

costs

of

janitorial

services, NCO is not entitled to the Janitorial Allowance.

Thus,

the Court finds that NCO did not properly calculate the required
Termination Fee.

To the extent that NCO relies on inadmissible

extrinsic evidence in support of its position, those arguments will
not be addressed.
(2)

NCO Did Properly Exercise its Early
Termination Option

Montgomery Park argues, by improperly deducting the annual
Janitorial

Allowance

from

the

Termination

Fee,

NCO

failed

to

effectuate its early termination option because it did not strictly

22

comply with the Early Termination Provision’s conditions precedent.
The Court disagrees.
The words and phrases specifically employed in Section 1.05 of
the Lease clearly and unambiguously provide that exercise of the
early termination option requires strict compliance with specified
conditions precedent:5

“Tenant shall have a one-time, conditional

right to terminate”; “upon Tenant’s strict compliance with all of
the following requirements”; “[i]f (and only if) Tenant both timely
delivers . . . and timely pays”; and “Tenant shall not have the
right to terminate this Lease if it fails . . . .”

(Office Lease

Agreement at § 1.05) (emphasis added).
Under Maryland Law, the exercise of an option must be in
“exact accord with the terms of the option.”

Foard v. Snider, 109

A.2d 101, 106 (Md. 1954); see also Katz v. Pratt St. Realty Co.,
262 A.2d 540, 547 (Md. 1970) (“It is well settled that to be valid,
the exercise of an option must be unequivocal and in accordance
with the terms of the option.”).

Maryland courts have differed,

however, as to the extent in which the exact matching requirement

5
See Chesapeake Bank of Md., 891 A.2d at 391 (“The
question whether the stipulation in a contract constitutes a
condition precedent is one of construction dependent on the
intent of the parties to be gathered from the words they have
employed . . . . Although no particular form of words is
necessary in order to create an express condition, such words
and phrases as ‘if’ and ‘provided that,’ are commonly used to
indicate that performance has expressly been made conditional
. . . .”) (citing Chirichella v. Erwin, 310 A.2d 555, 557 (Md.
1973) (internal quotation marks omitted)).

23

is applied when determining whether an option has been permissibly
exercised.

Elderkin v. Carroll, 941 A.2d 1127, 1133 (Md. 2008).

Most recently, in Elderkin, the Maryland Court of Appeals outlined
three inquiries for determining whether the exercise of an option
is valid:
(1) [I]s the acceptance in accordance with the terms of
the offer? (2) Do the non-matching terms fall under any
of the exceptions enunciated in Bramble? (3) Where the
terms are not in accordance, was it merely an ‘additional
term’ that could be rejected by the optionor or was it a
non-material covenant rather than a condition?
Id. at 1135.
It

was

in

Beckenheimer's

Inc

v.

Alameda

Associates

Ltd.

P'ship, 611 A.2d 105, 109 (Md. 1992) the Maryland Court first made
the distinction between an absolute condition, which would have to
be fulfilled in order to trigger the acceptance of an option, or a
mere covenant, which would not bar an otherwise valid attempt to
exercise

an

option.

In

Beckenheimer's

Inc.,

the

trial

court

granted summary judgment to the optionor after finding that the
optionee had failed to renew the sublease in accordance with its
terms.

Beckenheimer's Inc., 611 A.2d at 109.

The optionee gave

timely notice of its intent to renew the lease, but failed to
include a statement of financial worth, a requirement which was
included

in

the

condition

provision

condition language by parentheses.

but

separated

Id. at 107-08.

from

the

On appeal, the

Court of Appeals of Maryland found the requirement to include a
financial statement with the notice of renewal to be a covenant and

24

not

a

condition,

and

further

found

the

optionee’s

failure

to

include the financial statement a non-material breach. Id. at 11314.
Here,

there

are

two

Termination Provision:

express

conditions

in

the

Early

(1) NCO’s delivery to Montgomery Park of a

written notice, and, (2) payment of a termination fee.6 (See Office
Lease Agreement at § 1.05).

It is undisputed that NCO both timely

delivered the Termination Notice and timely paid the Termination
Fee.
Montgomery Park contends the language of the Early Termination
Provision describing the termination fee as being equal to ten
times the monthly installment of Rent is part of the condition
precedent to timely pay.

Having unilaterally rejected the first

two exceptions to the “exact matching” requirement laid out in
Elderkin, the Court now considers whether proper calculation of the
termination

fee

was

a

required

condition,

or

a

non-material

covenant, which if not matched exactly, will not bar NCO’s early
termination.

“Unless the agreement makes it clear that the event

is required as a condition, it is fairer to apply . . . more
flexible rules.”

See Beckenheimer’s Inc., 611 A.2d at 114.

6
“[W]hether expressly declared to be so or not,” time is of
the essence in option contracts, “both in law and in equity.”
Beckenheimer’s Inc., 611 A.2d at 111 (quoting Foard v. Snider, 109
A.2d 101, 105-06 (Md. 1954)).
Thus, despite the durational terms
being separated from the conditions by parentheses, the Court finds
all durational requirements to be express conditions.

25

The Court concludes that the Lease does not make clear that
proper calculation of the termination fee is a required condition
of early termination.

Section 1.05 of the Lease contains competing

clauses

to

with

respect

the

required

conditions.

First,

the

provision indicates: “If (and only if) Tenant both timely delivers
the

Termination

Notice

and

timely

pays

the

Termination

Fee

as

required above, then the Lease will be terminated effective on the
Termination Effective Date.”

(Office Lease Agreement at § 1.05).

The Next sentence, however, indicates: “Tenant shall not have the
right to terminate this Lease if it fails either timely to deliver
the

Termination

(Id.).

While

Notice
the

or

first

timely
clause

to
may

pay

the

suggest

Termination
proper

Fee.”

calculation

should be considered a condition to the right to terminate, the
immediate following clause does not.
Further,

implicit

in

the

fact

that

the

“Additional

Rent”

component must be calculated into the termination fee, is that the
parties would have to engage in an accounting of those additional
expenses before ultimately determining appropriate adjustments in
the final fee.

Under the interpretation suggested by Montgomery

Park, it could dispute any amount estimated by NCO to be the proper
termination

fee

in

identically

to

its

the
own.

event

NCO’s

The

calculation

Court

concludes

did
that

not

match

such

an

interpretation would lead to an “absurd or unreasonable result,”
and, therefore, declines to adopt Montgomery Park’s interpretation.
See Chesapeake Bank of Md., 891 A.2d at 401 (quoting Middlebrook
26

Tech, LLC v. Moore, 849 A.2d 63, 79 (Md.Ct.Spec.App. 2004)) (“[T]he
court’s interpretation should not permit an absurd or unreasonable
result.”).

Thus, the Court will apply a more flexible standard

than “exact matching” in determining whether NCO effectuated its
Early Termination option.
NCO timely delivered to Montgomery Park a termination notice
accompanied

by

$779,964.15,

Termination

Fee

as

estimate
delivered

of
to

the

calculated

increase

Montgomery

in
Park

representing
by

the

fifty-percent

Base

Additional

Rent

Rent.

$697,100.55,

of

the

as

well

as

NCO

then

timely

representing

what

an

it

estimated to be the second fifty-percent of the Termination Fee,
albeit less the Janitorial Allowance the Court previously found it
was not entitled to take.

The Court, however, concludes that under

these facts, NCO’s good faith attempt to strictly comply with the
conditions precedent amounts to proper performance of the Early
Termination option, and that NCO’s failure to properly calculate
the Termination Fee was a non-material breach subject to remedy.
Thus, there is no genuine dispute of material fact, and the Court
finds NCO properly terminated the Lease under the Early Termination
Provision without prejudice to Montgomery Park’s right to reconcile
the disparities in the final amount.
4. Overcharge Claims
The

Court

finds

that

Maryland’s

three-year

limitations does not bar NCO’s Overcharge Claims.

27

statute

of

Montgomery

Park

argues

NCO

could

have

discovered

the

discrepancy in rentable square footage prior to executing the Lease
in

October

2002,

or

anytime

exercise of due diligence.

during

its

tenancy,

through

the

Thus, Montgomery Park argues, Counts I,

II, and III of NCO’s Complaint are barred by Maryland’s statute of
limitations.

The Court disagrees.

The parties agree that the Overcharge Claims are governed by
Maryland’s three-year statute of limitations.7

The parties also

agree that Maryland’s discovery rule applies.8

This lawsuit was

filed on February 28, 2011.
timely

filed

unless

Thus, NCO’s Overcharge Claims were

Montgomery

Park

can

establish

there

is

no

dispute NCO knew, or through the exercise of reasonable diligence,
should have known, it was being overcharged for its Rent on or
before February 28, 2008.
Montgomery Park does not suggest that NCO was actually aware
of its cause of action, but only that NCO had inquiry notice of the
facts giving rise to its overcharge claims prior to February 28,
2008.

“Being

circumstances

on

which

inquiry
would

notice

cause

a

means

having

reasonable

knowledge

person

.

.

.

of
to

7
See Md. Code Ann., Cts. & Jud. Proc. § 5-101 (West 2013);
see also Singer Co., Link Simulation Sys. Div. v. Balt. Gas & Elec.
Co., 558 A.2d 419, 424 (Md.Ct.Spec.App. 1989) (“Section 5-101
governs the limitations period applicable to common law contract
actions.”).
8
“Under the discovery rule an action is deemed to accrue on
the date when the plaintiff knew or, with due diligence, reasonably
should have known of the wrong.” Supik v. Bodie, Nagle, Dolina,
Smith & Hobbs, P.A., 834 A.2d 170, 178 (Md.Ct.Spec.App. 2003)
(quoting Doe v. Archdiocese of Wash., 689 A.2d 634, 638
(Md.Ct.Spec.App. 1997)). 

28

undertake an investigation . . . .”

Anne Arundel Cnty. v. Halle

Dev., Inc., 971 A.2d 214, 228 (Md. 2009) (citing O'Hara v. Kovens,
503 A.2d 1313, 1324 (Md. 1986) (internal quotation marks omitted)).
Montgomery Park argues (1) use of the word “approximately” in
the Lease was, in and of itself, sufficient to put NCO on inquiry
notice of an alleged measurement discrepancy; (2) between the date
NCO executed the Lease and then later occupied the Premises, it
never attempted to measure the Premises; and (3) NCO never verified
the accuracy of Montgomery Park’s measurement during its tenancy
despite having the opportunity to do so.

Thus, Montgomery Park

urges the Court to conclude, as a matter of law, that NCO was on
inquiry

notice

of

the

measurement

discrepancy

at

the

time

it

entered into the Lease and took possession of the Premises.
Despite Montgomery Park’s reference to a number of cases from
other jurisdictions purporting to be instructive on these facts,
this Court finds no controlling precedent and “little consensus in
other jurisdictions” on the issue of when a tenant is reasonably on
notice of a discrepancy in square footage.
27).

(Mem. Op. at 4, ECF No.

Moreover, this Court previously declined to rule “as a matter

of law, that even a sophisticated commercial tenant must be aware
of any material discrepancy in square footage from day one.”
id. at 5).

(See

In renewing this argument at summary judgment, as

permitted by the Court, Montgomery Park offers the same set of
facts and cites the same case law previously considered by the
Court in Montgomery Park’s Motion to Dismiss.
29

To the extent the

Court’s prior opinion addresses these arguments, it declines to
reconsider its previous decision.

See Major v. CSX Transp., 278

F.Supp.2d 597, 615 (D.Md. 2003) (“[A] court will not reconsider its
own decision rendered at an earlier stage of the litigation absent
clear and convincing reasons to reexamine the prior ruling.”).

The

Court, however, agrees that it did in fact invite the development
of a factual record demonstrating when NCO gained information that
would reasonably put it on notice of such a discrepancy.
In this respect, Montgomery Park relies upon the following
facts.
Lease,

NCO is a sophisticated tenant that, in connection with the
was

represented

outside

counsel.

October

2002,

At

did

NCO

by
no

a

commercial

time

attempt

real

prior

to

to

verify

estate

executing
the

broker

the

accuracy

and

Lease
of

in
the

approximate rentable square footage to which it later agreed to in
the Lease.

NCO agreed to forego a true-up provision in the Lease

through which it could have discovered and remedied the purported
overcharge.
These facts relate to a time period prior to the Lease being
executed.

The statute of limitations cannot begin to run prior to

the breach See Supik, 834 A.2d at 180 (“[W]e highlight the fact
that

none

of

these

tolling

concepts

is

even

relevant

until

a

plaintiff has sustained a legal injury, and a cause of action has
‘arisen.’”); See also Singer Co., 558 A.2d at 425 (“[W]hile the
discovery rule may . . . delay the accrual of a contract matter, it
cannot operate to make such an action accrue earlier than the date
30

of the breach . . . .”).

Accordingly, Montgomery Park’s Motion for

Summary Judgment will be denied.9
III. CONCLUSION
For the foregoing reasons, this Court will, by separate Order,
GRANT in part and DENY in part NCO’s Motion for Partial Summary
Judgment (ECF No. 51); GRANT in Part and DENY in Part Montgomery
Park’s Motion for Leave to File Sur-Reply in Further Opposition to
NCO’s Motion for Partial Summary Judgment (ECF No. 55); and DENY
Montgomery Park’s Cross-Motion for Partial Summary Judgment (ECF
No. 52).
Entered this 20th day of December, 2013

/s/
_____________________________
George L. Russell, III
United States District Judge

9

  Having determined the Overcharge Claims are not barred by

the statute of limitations, the Court will dispense with
analysis of NCO’s argument that it is entitled to bring its
Overcharge Claims under the “continuing harm” exception to the
statute of limitations.  
31