CBRE Realty Finance TRS, LLC v. McCormick

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 10-1130

CBRE REALTY FINANCE TRS, LLC; RFC TRS, LLC, f/k/a CBRE
Realty Finance TRS, LLC,

Plaintiffs - Appellees,

v.

BRIAN A. MCCORMICK; CHARLES W. MOORE,

Defendants - Appellants.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, District Judge.
(1:08-cv-01964-JFM)

Submitted: December 15, 2010 Decided: March 4, 2011

Before SHEDD, DUNCAN, and WYNN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Ryan D. Sullivan, BODOFF & ASSOCIATES, Boston, Massachusetts,
for Appellants. Jennifer Quinn-Barabanov, George R. Calhoun, V,
Jeffrey M. Theodore, STEPTOE & JOHNSON, LLP, Washington, D.C.,
for Appellees.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

Brian McCormick and Charles W. Moore (herinafter

“McCormick & Moore”) appeal the district court’s order granting

summary judgment in favor of RFC TRS, LLC (formerly known as

CBRE Realty Finance, hereinafter “RFC”), finding McCormick &

Moore liable for $23,342,188.38 in damages, plus post-judgment

interest, and denying McCormick & Moore’s motions to extend

discovery and for further discovery. We affirm.

On appeal, McCormick & Moore raise myriad issues, but

their argument can be distilled into two claims of error: the

district court erred in granting summary judgment; and the

district court erred in denying their motion to extend discovery

and for further discovery. Importantly, with respect to summary

judgment, McCormick & Moore concede that they breached their

guaranties to RFC, and only argue that the district court erred

in its damages calculation.

I. Summary Judgment

This court reviews de novo a district court’s grant of

summary judgment. Howard v. Winter, 446 F.3d 559, 565

(4th Cir. 2006). Summary judgment is appropriate when the

“pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and the

2
moving party is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(c). The parties do not dispute that Maryland

substantive law applies to this diversity action.

Maryland law employs an “objective approach to

contract interpretation, according to which, unless a contract's

language is ambiguous, [Maryland courts] give effect to that

language as written without concern for the subjective intent of

the parties at the time of formation.” Ocean Petroleum Co. v.

Yanek, 5 A.3d 683, 690 (Md. 2010) (internal citations omitted).

“Thus, 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.”

Id.

a. Scope of the Guaranty

McCormick & Moore argue that the district court

improperly granted summary judgment in favor of RFC because

their breach was not the cause of the damages incurred by RFC.

Specifically, McCormick & Moore argue that they are not liable

for any expenditures made by RFC after their default. They

argue that the guaranties only make them liable for the harm

suffered by RFC if they failed to cause taxes to be timely paid,

not necessarily for the amount of the taxes themselves.

Similarly, McCormick & Moore claim that “while the failure to

substantially complete the project on time and on budget would

3
perhaps tend to diminish the ability of RFC to be repaid its

debt, the harm, if any, to RFC cannot be understood without

evidence to demonstrate how much worse off RFC was” because of

the failure. RFC claims that this issue is waived, but after

reviewing the record, we conclude it was raised before the

district court in McCormick & Moore’s opposition to RFC’s motion

for summary judgment.

The flaw in McCormick & Moore’s argument is that once

they have conceded that they breached the agreement, the causal

chain to RFC’s alleged damages is quite clear. As the district

court noted, McCormick & Moore’s failure to complete

construction and pay property taxes caused liens to be placed on

each property. In order to protect its security interest in

those properties, RFC (whose interests were junior to other

lenders) had to remove the encumbrances caused by McCormick &

Moore’s breach. Under McCormick & Moore’s theory, it is unclear

what damages could ever be fairly traceable to the breach if not

those incurred by actions taken in direct response to a breach

of a guaranty to protect a security interest.

b. Duty to Mitigate

McCormick & Moore next argue that they are not liable

for certain damages because RFC had a duty to mitigate and did

not do so. They argue that RFC has not explained why it made

protective interest payments when the real estate market was in

4
a state of disarray caused by an economic recession. Moreover,

they claim that they could not offer evidence in favor of its

mitigation claim because they were denied further discovery.

We conclude that McCormick & Moore’s argument on this

point is without merit. First, the burden of proving that

proposed damages are the result of economically wasteful

decisions “is on the party that breached the contract and that

invokes the doctrine” in an effort to limit the plaintiff’s

damages to market value. Andrulis v. Levin Constr. Corp., 628

A.2d 197, 208 (Md. 1993). We have reviewed the record and

conclude that McCormick & Moore have not carried their burden in

this regard. Even if they had been able to present more

evidence on this point, however, we agree with the district

court that the mitigation defense is, in this context, not

viable. See Restatement (Second) of Contracts § 347

(Illustration 10).

c. Assumption of Trade Payables

In their summary judgment motion, RFC claimed damages

for its assumption of trade payables when it sold, at a

discount, a property at issue in this dispute. It apparently

did not include these damages in response to McCormick & Moore’s

interrogatories. In the district court, McCormick & Moore

argued that those damages should be stricken as a sanction for

RFC’s failure to supplement their responses. We agree with the

5
district court that striking the damages is not appropriate

here.

Fed. R. Civ. P. 37(c)(1) states that “If a party fails

to provide information or identify a witness as required by Rule

26(a) or (e), the party is not allowed to use that information

or witness to supply evidence on a motion, at a hearing, or at a

trial, unless the failure was substantially justified or is

harmless.” This court “gives particularly wide latitude to the

district court’s discretion to issue sanctions under Rule

37(c)(1).” S. States Rack & Fixture, Inc. v. Sherwin-Williams

Co., 318 F.3d 592, 595 (4th Cir. 2003). Citing to Roberts ex

rel. Johnson v. Galen of Va., Inc., 325, F.3d 776, 782

(6th Cir. 2003). McCormick & Moore argue that the burden is on

the party seeking to include the information in a later motion

to show harmlessness.

We have reviewed the record and conclude, after

reading RFC’s reply in support of their summary judgment motion,

that they have carried their burden. They correctly note that

McCormick & Moore can show no prejudice here, as they have

always been on notice about the nature of the damages sought.

Accordingly, we decline to conclude that the district court

abused its discretion in not striking the challenged damages.

6
 II. Discovery Motions

We review the district court’s handling of discovery

matters for an abuse of discretion. Wells v. Liddy, 186 F.3d

606, 618 n.12 (4th Cir. 1999). We will not reverse the denial

of a Fed. R. Civ. P. 56(f) motion absent a clear abuse of

discretion or a real possibility that the party was prejudiced

by the denial. Strag v. Bd. of Trs., 55 F.3d 943, 954

(4th Cir. 1995).

a. Motion to Extend Discovery

Prior to the completion of discovery, McCormick &

Moore moved on an “emergency” basis for an extension of time to

complete discovery. The district court denied the motion,

noting that if, at the close of discovery, McCormick & Moore

required additional discovery, they could file a motion for

further discovery pursuant to Rule 56(f). Fed. R. Civ. P.

16(b)(4) allows for modification of a discovery schedule only

for good cause and with the court’s consent.

After reviewing the record, we conclude that the

district court did not abuse its discretion in requiring

McCormick & Moore to seek relief pursuant to Rule 56(f).

Discovery had not yet ended at the time the “emergency” motion

was made, and the court allowed McCormick & Moore to pursue

alternative avenues of relief if they thought, after a summary

judgment motion, that such relief was required. The court

7
simply exercised its discretion to regulate the discovery

process, and we decline to disturb the court’s decision.

b. Rule 56(f) Motion

Finally, McCormick & Moore argue that the court abused

its discretion in denying their Rule 56(f) motion for further

discovery. According to Rule 56(f), if a party opposing a

motion for summary judgment shows by affidavit that, for

specified reasons, it cannot present facts essential to justify

its position, the court may: (1) deny the motion; (2) order a

continuance to enable affidavits to be obtained, depositions to

be taken, or other discovery to be undertaken; or (3) issue any

other just order. Fed. R. Civ. P. 56(f). We will affirm the

denial of a Rule 56(f) motion “where the additional evidence

sought for discovery would not have by itself created a genuine

issue of material fact sufficient to defeat summary judgment.”

Strag, 55 F.3d at 954. In their motion, McCormick & Moore argue

that RFC’s production was untimely, that they had no time to

test their theories of liability and a failure to mitigate

damages defense.

We have reviewed the record, and conclude that the

district court did not err in denying the Rule 56(f) motion.

First, the court properly noted that the materials that

McCormick & Moore sought in their Rule 56(f) motion could have

been sought during the discovery period. The basis for relief

8
was clear on the face of the complaint, and McCormick & Moore do

not allege that they were surprised by anything in RFC’s

document production such as to require more discovery, after the

close of the discovery period.

Next, the court correctly found that McCormick & Moore

have not been diligent in pursuit of their discovery rights.

Even if, at the close of discovery, they lacked the information

they needed to defend against RFC’s claims, they certainly could

have pursued that discovery earlier in the proceedings. As the

court discussed, Rule 56(f) is not designed to protect “those

who slumber upon perceptible rights.” Ayala-Gerena v. Bristol

Myers-Squibb Co., 95 F.3d 86, 92 (1st Cir. 1996) (internal

citations omitted).

Finally, the court properly concluded that McCormick &

Moore’s claims were nonspecific, and to the extent they

articulate a defense that they could have developed with further

discovery, that defense is insufficient (as we noted above) as a

matter of law to defeat RFC’s claims.

Accordingly, we affirm the judgment of the district

court. We dispense with oral argument because the facts and

legal contentions are adequately presented in the materials

before the court and argument would not aid the decisional

process.

AFFIRMED

9