ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Sunday, April 30, 2017

"Losses" in an Expense-Shifting Clause Includes Diverted Staff Time

A recent case out of Maryland, Under Armour, Inc. v. Ziger/Snead, LLP, No. 802 September Term 2016, offers an interpretation of an expense-shifting clause in a contract. The clause in question read: 

"If Architect [Ziger/Snead] employs counsel or an agency to enforce this Agreement, Owner [appellant] agrees to pay the attorneys' fees, costs, expenses, and losses incurred by Architect prior to and through any trial, hearing, and/or subsequent proceeding, relating to such enforcement."

Following a legal dispute and a jury verdict in the architect's favor, the architect moved for attorneys' fees, costs, expenses, and losses, pursuant to the contractual clause above. Under Armour refused to pay the amount characterized as "losses," which seem to have been mainly diverted employee time. Under Armour's stance was that "losses" was too vague a term to cover "staff time." Rather, Under Armour claimed that "losses" was the equivalent of the attorneys' fees, costs, and expenses that had already been listed. 

The court, however, pointed out that "losses" was a term that had been negotiated by two sophisticated parties, and so must have some meaning. Other courts have held that diverted staff time can be included in losses. Therefore, where the contract did not mention staff time one way or the other, the court held it was permissible to conclude that the term "losses" meant to cover for diverted staff time.

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