Parkway 1046, LLC v. U. S. Home Corp.

• Citation: 961 F.3d 301
• Decision Date: 03 June 2020
• Docket Number: No. 18-1556,18-1556
• Parties: PARKWAY 1046, LLC, Plaintiff - Appellee, v. U. S. HOME CORPORATION, Defendant - Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

961 F.3d 301

PARKWAY 1046, LLC, Plaintiff - Appellee,

v.U. S. HOME CORPORATION, Defendant - Appellant.

No. 18-1556

United States Court of Appeals, Fourth Circuit.

Submitted: June 1, 2020

Decided: June 3, 2020

David Marroso, Jeffrey Gurrola, John B. Sprangers, O'MELVENY & MYERS LLP, Los Angeles, California; Adam M. Carroll, Carl A. Eason, WOLCOTT RIVERS GATES, Virginia Beach, Virginia, for Appellant. Robert W. McFarland, E. Rebecca Gantt, Norfolk, Virginia, Ashley P. Peterson, MCGUIREWOODS LLP, Richmond, Virginia, for Appellee.

Before GREGORY, Chief Judge, and WYNN and HARRIS, Circuit Judges.

Affirmed in part, reversed in part, and vacated and remanded in part by published opinion. Judge Wynn wrote the opinion, in which Chief Judge Gregory and Judge Harris joined.

WYNN, Circuit Judge:

In this appeal, Defendant U.S. Home Corporation ("U.S. Home") challenges orders granting judgment, prejudgment interest, and attorneys’ fees to Plaintiff Parkway 1046, LLC ("Parkway").

Years ago, U.S. Home entered land purchase and development contracts with others not party to this suit. Under one contract governed by Maryland law, U.S. Home was to reimburse Parkway for certain expenses when the land purchase was finalized, which was expected to happen around 2008. But the matter became ensnared in litigation, and the purchase did not take place until 2017.

Once the purchase was finalized, Parkway sought the reimbursement required by the contract. U.S. Home did not pay, and Parkway filed this action. U.S. Home argues that Parkway's lawsuit is untimely under Maryland's three-year statute of limitations.

The district court held that Parkway's cause of action did not accrue until 2017, and thus this lawsuit—filed that same year—is timely. We agree. However, we conclude that the district court erred in ordering U.S. Home to pay prejudgment interest dating from May 27, 2008 and attorneys’ fees. Under Maryland law, Parkway is entitled to prejudgment interest only from the date of the purchase in 2017. And under the contract, Parkway may not be awarded attorneys’ fees. Accordingly, we reverse the award of attorneys’ fees and vacate and remand with instructions to award prejudgment interest from April 21, 2017.

I.

In 2005, U.S. Home entered a contract to purchase 1,250 acres of land in Maryland ("Purchase Agreement") from a limited liability company solely owned by two brothers (the "Sellers"). The same day, U.S. Home also executed a contract ("Development Contract") with Bevard Development Company ("Bevard Development"), which was to take some steps in developing the land. The Sellers were the majority owners of Bevard Development.

Although not a party to either contract, Parkway—another limited liability company solely owned by the Sellers—classified itself as "a third-party beneficiary" of the Development Contract. J.A. 4.¹ Specifically, under the Development Contract, U.S. Home agreed to pay Parkway approximately $2.25 million "at the time of Settlement under the [Purchase] Agreement" as reimbursement for Parkway's acquisition of certain nearby properties "for right of way purposes" ("Reimbursement"). J.A. 11, 55. The Purchase Agreement defined "Settlement" as "[t]he consummation of the purchase and sale" of the land. J.A. 279; see also J.A. 330 (same definition in an amendment to the Purchase Agreement).²

The original date of Settlement was to be in June 2006, or September 2006 at the latest. After an amendment in May 2007, the Settlement date was changed to December 2007, or March 2009 at the latest.

In April 2008, the Sellers "called for settlement to occur" the next month. U.S. Home Corp. v. Settlers Crossing, LLC , 33 F. Supp. 3d 596, 609 (D. Md. 2014). Instead of agreeing, U.S. Home filed a breach-of-contract lawsuit in Maryland federal court. Id. at 610. The Sellers, their lender, and Bevard Development counterclaimed. Id. at 611–12.

The Maryland litigation took years to resolve, during which time the Sellers lost their interest in the property to their lender. Id. at 612 & n.11. Finally, after a two-week bench trial in 2014, the Maryland federal district court found in favor of the Sellers’ lender. Id. at 599, 629. The court remarked that "[t]he evidence demonstrated that, by at least October 1, 2007, [U.S. Home] viewed the ... transaction as a financial albatross and actively sought to relieve itself of this burden" by "retain[ing] a team of high priced lawyers and consultants to search for an escape clause in the Purchase Agreement." Id. at 628 (citation and internal quotation marks omitted); see also id. at 629 (finding that U.S. Home had undertaken various tactics "to delay closing while it settled on a strategy to avoid its obligations" under the contracts—and that the maneuvers were "not made in good faith").

The Maryland district court concluded that U.S. Home "was required to [proceed to Settlement] on May 27, 2008" and that its failure to do so was "wrongful[ ]" within the meaning of a contract amendment entitling the Sellers to interest "from the Settlement Date [of May 27, 2008] until [U.S. Home] proceeds to Settlement" if U.S. Home "wrongfully fail[ed] to make Settlement hereunder for any reason." J.A. 329, 427, 444; see J.A. 447. The court entered judgment in favor of the Sellers’ lender for the purchase price and development fee plus interest from May 27, 2008 until Settlement, which the court ordered to take place within 30 days.

This Court affirmed. U.S. Home Corp. v. Settlers Crossing, L.L.C. , 685 F. App'x 173, 174 (4th Cir. 2017) (per curiam). Shortly thereafter, on April 21, 2017, U.S. Home paid the purchase price plus interest dating back to 2008.

With the sale at last concluded, Parkway sought the Reimbursement (which, as noted above, was a sum of approximately $2.25 million to be paid "at the time of Settlement under the [Purchase] Agreement" as compensation for Parkway's acquisition of certain properties). J.A. 11. When U.S. Home did not pay, Parkway commenced this action in the Eastern District of Virginia, alleging breach of the Development Contract. U.S. Home responded that Parkway's 2017 lawsuit was untimely because its claim accrued no later than 2009 and was subject to a three-year statute of limitations.

The district court held a bench trial in April 2018. Like the Maryland district court, the Virginia district court found U.S. Home's conduct throughout the parties’ dealings to have been inappropriate, noting its "highly inequitable" behavior and agreeing with the Maryland district court that U.S. Home's failure to complete the purchase in 2008 was likely "simply a market decision." J.A. 240, 242. The court reprimanded U.S. Home for its litigation tactics, finding many of its arguments to be "pretextual," "bordering on unconscionable," "red herring," "immaterial," "absurd," or examples of "grasping at straws" or "swimming upstream." J.A. 55, 57, 62, 86, 213–16, 221, 241.

The district court concluded that Parkway's claim did not accrue until Settlement occurred in April 2017, and thus the lawsuit was timely. Parkway 1046, LLC v. U.S. Home Corp. , No. 2:17-cv-292, 2018 WL 1960774, at *5 (E.D. Va. Apr. 26, 2018). And the court noted that even if Parkway's claim was untimely, given U.S. Home's behavior, the court "would exercise its equitable tolling power" to allow Parkway to pursue its claim. Id.

Next, the district court concluded that though the breach occurred in April 2017, "given the particular circumstances of this case," the court would award prejudgment interest to Parkway beginning on May 27, 2008. J.A. 256. The court reasoned that, in light of the Maryland district court's finding that U.S. Home should have settled with the Sellers on that date, Parkway also should have received payment at that time.

Finally, the district court awarded attorneys’ fees to Parkway based on a provision in the Development Contract allotting attorneys’ fees to the prevailing party in "any litigation aris[ing] between the parties regarding th[e] Contract." J.A. 13. Parkway and U.S. Home disputed whether Parkway was a "party" for purposes of that provision. The court concluded that, "[t]hough the language may reasonably be subject to either interpretation," Parkway's argument was more persuasive, particularly in light of "U.S. Home's inequitable conduct in this matter." J.A. 259.

U.S. Home timely appealed.

II.

"Because this appeal invokes our diversity jurisdiction" to resolve a contract dispute, we apply state law. Universal Concrete Prods. v. Turner Constr. Co. , 595 F.3d 527, 529 (4th Cir. 2010). Both agreements—the Purchase Agreement and the Development Contract—are, by their terms, governed by the laws of Maryland.

"[I]n determining state law a federal court must look first and foremost to the law of the state's highest court"—here, the Court of Appeals of Maryland—and, if that court "has not directly addressed the issue, a federal court ‘must anticipate how it would rule.’ " Stahle v. CTS Corp. , 817 F.3d 96, 100 (4th Cir. 2016) (first quoting Assicurazioni Generali, S.p.A. v. Neil , 160 F.3d 997, 1002 (4th Cir. 1998) ; and then quoting Liberty Univ., Inc. v. Citizens Ins. Co. of Am. , 792 F.3d 520, 528 (4th Cir. 2015) ).

Maryland applies "the law of objective interpretation of contracts." Weichert Co. of Md. v. Faust , 419 Md. 306, 19 A.3d 393, 404 (2011). This means courts "will give effect to the plain meaning of an unambiguous term, and will evaluate a specific provision in light of the language of the entire contract." Id. We "must first determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated." Id. (quoting Myers v. Kayhoe , 391 Md. 188, 892 A.2d 520, 526 (2006) ). And "absent ‘fraud, duress, mistake, or some countervailing public policy, courts should enforce the terms of unambiguous written contracts without regard to the consequences of that enforcement.’ " Id. (quoting Calomiris v. Woods , 353 Md. 425, 727 A.2d 358,...