Summary:
In NCO Financial Systems, Inc. v. Montgomery Park, LLC, the Fourth Circuit revisited — for the fifth time — a protracted commercial lease dispute over roughly 100,000 square feet of office space in Baltimore. After NCO vacated the property prematurely in 2011, Montgomery Park prevailed in its suit for breach of the lease, ultimately obtaining a judgment exceeding $9.8 million for unpaid rent. The district court subsequently awarded Montgomery Park an additional $3.76 million in attorneys’ fees, expert witness fees, and default interest under the lease’s fee-shifting provision.
On appeal, NCO raised three main issues:
- That Montgomery Park never made a proper "demand" for costs and fees as required by the lease, and therefore was not entitled to interest;
- That the fee award should have excluded costs incurred defending against NCO’s initial claims rather than pursuing its own remedies;
- That expert witness fees were not recoverable under Maryland law.
The Fourth Circuit partially agreed. While it held that Montgomery Park’s August 24, 2022, fee motion constituted a valid "demand," the court ruled that default interest could only accrue from that date—not retroactively to when the fees were incurred. Thus, it vacated and remanded for recalculation of the interest award. On the remaining issues, however, the court affirmed: It held that the fees incurred defending against NCO’s claims and pursuing its own remedies were inextricably linked under the “common core of facts” doctrine, and that the lease's broad reference to “fees” encompassed expert witness costs.
Commentary:
The lesson is that “notice” and “demand” are not mere formalities—they are gatekeeping mechanisms that define when a party’s enforcement rights arise. In commercial settings, courts may allow a fair degree of flexibility, especially among sophisticated parties. But in consumer contexts, precision is paramount. Lenders and servicers ignore these preconditions, which often include not only statutory requirements, such as under NCGS 45-91, but also contractual preconditions like Notices of Default and explicit acceleration of the note, at their peril, as courts should not allow attorneys’ fees where those obligations are strictly followed.
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