Bainbridge St. Elmo Bethesda Apartments, LLC v. White Flint Express Realty Group Limited Partnership, LLLP, 071817 MDCA, 30

Docket Nº:30
Opinion Judge:RAKER, J.
Judge Panel:Barbera, C.J. Greene Adkins McDonald Hotten Getty Raker, Irma S. (Senior Judge, Specially Assigned), JJ.
Case Date:July 18, 2017
Court:Court of Appeals of Maryland




No. 30

Court of Appeals of Maryland

July 18, 2017

Argued: December 6, 2016

Circuit Court for Montgomery County Case No. 362334-V

Barbera, C.J. Greene Adkins McDonald Hotten Getty Raker, Irma S. (Senior Judge, Specially Assigned), JJ.



This dispute concerns the award of attorney's fees in a construction contract dispute. At the heart of this appeal is whether White Flint Express Realty Group Limited Partnership, LLLP ("White Flint"), respondent, was entitled to recover attorney's fees expended in connection with an action to enforce the contract between White Flint and Bainbridge St. Elmo Bethesda Apartments, LLC ("Bainbridge"), petitioner. The Court of Special Appeals held that the contract provided expressly for attorney's fees to be recovered in a first-party indemnification action. Bainbridge St. Elmo Bethesda

Apartments, LLC v. White Flint Express Realty Grp. Ltd. P'ship, LLLP, No. 0376 SEPT. TERM 2014, 2016 WL 1321205, at *6 (Md. Ct. Spec. App. Apr. 5, 2016), cert. granted sub nom. Bainbridge St. Elmo Bethesda v. White Flint Express Realty Grp. Ltd. P'ship, LLLP, 449 Md. 408, 144 A.3d 704 (2016). We granted Bainbridge's petition for writ of certiorari to address the following question: "Did the CSA undermine the clarity provided by this Court in Nova Research[, ] [Inc.] v. Penske Truck Leasing Co., 405 Md. 435 (2008), concerning the limited circumstances under which a contractual indemnity provision can be read as a first-party fee shifting provision overriding the American Rule that each party bears its own attorneys' fees?"

Petition for Writ of Cert., Bainbridge St. Elmo Bethesda Apartments, LLC v. White Flint Express Realty Grp. Ltd. P'ship, LLLP, No. 162. We shall affirm the judgment of the Court of Special Appeals, and hold that the contract contains express provisions authorizing first-party fee shifting, entitling White Flint to attorney's fees. Bainbridge, an entity formed by the Bainbridge Companies to manage the construction and operation of a new 17-story high rise apartment building in Bethesda, owns the property immediately adjacent to 4904 and 4909 Fairmont Avenue ("the Fairmont Properties"). Located on the Fairmont Properties were two one-story concrete buildings owned by White Flint that were leased to a restaurant and a children's dance studio. Bainbridge engaged sub-contractor Turner to build the 17-story apartment building on its property for an estimated cost of $45, 000, 000. The construction project required excavation of a 50-foot-deep hole on the property, to be held open by steel cables protruding under and onto White Flint's property1 to prevent soil and sub-surface structures from moving toward or into the excavation area. Bainbridge sought an easement from White Flint for access to the space "under, over, across and on the Fairmont Properties." Bainbridge also wanted additional easements to swing a crane and extend scaffolding above the Fairmont properties.

On September 7, 2011, after several months of negotiation, and before construction began, Bainbridge and White Flint entered into a "Crane Swing, Tie Back and Swing Scaffold Easement Agreement" ("the Agreement"). Bainbridge agreed to pay White Flint $425, 000 as consideration for the Agreement and the requested easements.

The Agreement recognized Bainbridge's right to access the air space above and the ground below White Flint's Property, and it provided White Flint a means to seek redress for any potential damage from the construction. Under Article 3, Bainbridge promised that it would not use a "pile-drive" system to secure the hole, and would follow the appended plan's use of tie-backs and bracket piles placed into pre-drilled holes. Article 7 provided that Bainbridge would ensure that all excavation and foundation work conformed to applicable professional standards of care while minimizing the inconvenience to White Flint, would protect all individuals in and around the properties, and would not undermine the improvements on the Fairmont Properties. In Article 9 of the Agreement, Bainbridge agreed to permit White Flint to engage, at Bainbridge's expense, consultants: "[T]o monitor performance of the work by Bainbridge, and identify any perceived deficiencies that could result in injury to people occupying or visiting any part of the White Flint Property, or in damage to the White Flint Property."

If White Flint's consultants identified a Major Deficiency (over $25, 000), Bainbridge had the right to have its own consultant "review and assess the perceived Major Deficiency." Article 9 provided that if Bainbridge's consultants did not agree with White Flint's consultants as to a perceived Major Deficiency, the parties were obligated to "work together in good faith to find a mutually acceptable resolution." And then if a resolution could not be reached within 60 days, the dispute would be submitted to binding arbitration. Finally, Article 9 included a fee-shifting agreement specifying that: "The prevailing party in any arbitration shall be awarded reasonable counsel fees, expert and non-expert witness costs and expenses and all other costs and costs and expenses reasonably incurred, directly or indirectly, in connection with said arbitration, and all costs and frees of such arbitration shall be borne exclusively by the non-prevailing party."

Article 16 established Bainbridge's responsibility to either repair and restore White Flint's property to its original condition or reimburse White Flint for doing so. Article 17(a)-(b) provided that Bainbridge would pay White Flint $425, 000 upon entering into the Agreement, and established an escrow account to reimburse White Flint for costs associated with negotiating and monitoring Bainbridge's compliance with the Agreement.

Most relevant to the present appeal is Article 19, the indemnification clause of the contract, which provided as follows: "Indemnity. Bainbridge hereby indemnifies, and agrees to defend and hold harmless White Flint . . . from any and all claims, demands, debts, actions, causes of action, suits, obligations, losses, costs, expenses, fees, and liabilities (including reasonable attorney's fees, disbursements, and litigation costs) arising from or in connection with Bainbridge's breach of any terms of this Agreement or injuries to persons or property resulting from the Work, or the activities of Bainbridge or its employees, agents, contractors, or affiliates conducted on or about the White Flint Property, including without limitation, for any rent loss directly attributable to any damage to the White Flint Property caused by the construction of the Project, however Bainbridge shall not be liable for matters resulting from the negligence or intentional misconduct of White Flint, its agents, employees, or contractors. The indemnification obligations set forth herein shall survive the termination of this Agreement indefinitely."

During the Project's excavation stage, White Flint's experts detected damage to White Flint's Property, alerted Bainbridge to the damage, and asked for assurances that the damage would be remedied. White Flint claimed that Bainbridge and its contractors did not drill the holes properly for the steel beams, resulting in soil loss beneath the Fairmont Properties, and that pile-drivers were used instead of drills to install the steel beams, in contravention of the express language of the Agreement. White Flint complained that the use of the pile-driver caused the buildings to shake, causing additional damage and soil movement underneath the buildings. By February 2012, the owner of the children's dance studio on White Flint's property reported seeing numerous cracks in the walls, that she feared a roof collapse on her students, and that many parents would not bring their children to class until she received assurances by Montgomery County that the building was safe.

Turner, Bainbridge's general contractor for the Project, stopped the excavation and braced White Flint's buildings to prevent further damage. Bainbridge hired a structural engineer, Allyn Kilsheimer, who on February 27, 2012, advised that Turner should "[p]erform no additional construction work within 20 horizontal feet" of the White Flint Property, other than work necessary to stabilize the site. He recommended evacuation of the White Flint building and that it remain unoccupied for precautionary purposes until the completion of the investigation. Because of building movement and damage, on March 7, 2012, Montgomery County stopped all but safety work on the project.

In response to Mr. Kilsheimer's recommendation, White Flint determined that Bainbridge was in breach of Article 7 of the Agreement...

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