Court Opinion

ID: 857738
Source: CourtListenerOpinion
Date Created: 2013-04-10 18:52:24.493814+00
Date Added: 2024-06-11T13:08:37.801931
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                             No. 11-1995

ALLFIRST BANK,

                 Plaintiff – Appellee,

           v.

PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD.,

                 Defendants – Appellants.

                             No. 11-2018

ALLFIRST BANK,

                 Plaintiff – Appellant,

           v.

PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD.,

                 Defendants – Appellees.

Appeals from the United States District Court for the District
of Maryland, at Baltimore.   Marvin J. Garbis, Senior District
Judge. (1:01-cv-02527-MJG; 1:01-cv-02991-MJG)

Argued:   December 5, 2012                  Decided:   April 10, 2013

Before MOTZ, KING, and DIAZ, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished
opinion. Judge Diaz wrote the opinion, in which Judge Motz and
Judge King joined.

ARGUED: Paul Mark Sandler, SHAPIRO, SHER, GUINOT & SANDLER,
Baltimore, Maryland, for Appellants/Cross-Appellees.   Lawrence
J. Gebhardt, GEBHARDT & SMITH, LLP, Baltimore, Maryland, for
Appellee/Cross-Appellant.  ON BRIEF: Robert B. Levin, John J.
Lovejoy, SHAPIRO, SHER, GUINOT & SANDLER, Baltimore, Maryland;
Kirk McAlpin, Jr., CUSHING, MORRIS, ARMBRUSTER & MONTGOMERY,
LLP, Atlanta, Georgia, for Appellants/Cross-Appellees.   Ramsay
M. Whitworth, GEBHARDT & SMITH, LLP, Baltimore, Maryland, for
Appellee/Cross-Appellant.

Unpublished opinions are not binding precedent in this circuit.

                                2
DIAZ, Circuit Judge:

       This          is    an    appeal    and     cross-appeal       from    the     district

court’s         judgment        in   favor    of     Allfirst     Bank   (“Allfirst”)        for

breach          of    contract.           Progress         Rail    Services        Corporation

(“Progress”)              and   Railcar,      Ltd.      (“Railcar”)      contend     that    the

district court erred in finding that an oral agreement modified

a prior written agreement between the parties and erred further

when       it    granted         Allfirst     damages       for    breach     of    the     oral

modification.              On its cross-appeal, Allfirst contends that the

district court erred in its calculation of damages due to the

court’s refusal to consider expert testimony.                            As we explain, we

affirm in part, vacate in part, and remand.

                                                   I.

                                                   A.

       Progress           and    its    wholly     owned    subsidiary,      Railcar,       sold

Allfirst 996 railcars for $13,220,351 on November 30, 1998. 1                                 To

memorialize           the       sale,   the   parties       executed     three      documents,

which they refer to collectively as the Portfolio Transaction:

       1
       Although the transaction was formally a sale of railcars,
its substance reveals that Allfirst actually loaned Progress and
Railcar $13 million.   The loan was to be repaid with interest
from the proceeds of rent paid by the lessees for the use of the
railcars.    Structuring the transaction as a sale allowed
Progress and Railcar to book a gain of $6,000,000 and remove the
depreciated railcars from their balance sheet inventory.

                                                   3
the Assignment Agreement (signed by all parties), the Service

Agreement (signed by Allfirst and Progress), and the Guaranty

(also signed by Allfirst and Progress).                  Because the railcars

were    leased    to    various    railroads,    the     Assignment       Agreement

provided for Progress and Railcar (collectively, “Defendants”)

to assign their rights in the leases to Allfirst.                       Defendants

became     Allfirst’s       agents      in     administering        the      leases,

negotiating      renewal     or    replacement        leases,     and   ultimately

selling the railcars.         If a lease terminated before the end of

the     Portfolio      Transaction’s     five-year      term,     Allfirst     could

direct Defendants to sell the railcars in lieu of negotiating a

new lease.       Any railcars still on the books at the end of the

five-year term would also be sold, with Allfirst having a right

of first refusal to buy them at a fixed purchase price.

       Among other things, the Service Agreement required Progress

to maintain the railcars in a condition to allow them to be

leased    at   the     “Minimum   Net   Rent,”   an    amount     defined    in   the

Assignment Agreement and due to Allfirst each month.                    J.A. 1013,

1102.     Progress was required to make all repairs throughout the

lease term unless the lessee assumed that obligation.                       Even so,

it was Progress’s responsibility to enforce the lessee’s repair

duty.     After Allfirst was paid the Minimum Net Rent each month,

any    surplus   would    first   go    to   Progress    as     reimbursement     for

                                         4
service fees, with any remainder to go to a joint account to be

held for subsequent shortfalls in rental payments.

      In the separate Guaranty, Progress made two commitments to

Allfirst.          First,    Progress      guaranteed         that       Allfirst        would

receive the Minimum Net Rent for each railcar for three years.

If the actual rent Allfirst received for a railcar fell short of

this amount, Progress agreed to pay the difference.                                 Second,

Progress    guaranteed       that       when       Allfirst    sold      or    scrapped      a

railcar, Allfirst would receive that car’s Stipulated Loss Value

(“SLV”),    listed      in   the    Assignment         Agreement.             If   the    sale

proceeds were less than the SLV, Progress agreed to pay the

difference.        The SLV of each car decreased over the five-year

term of the deal.

      Progress’s two guaranties to Allfirst were subject to a

total    limit     of   9.995%     of    the       amount   Allfirst      paid      for    the

railcars under the Assignment Agreement, plus interest.                                   This

limit was to be reduced by Progress’s payments to Allfirst under

the Guaranty, including payments for the difference between a

railcar’s SLV and sale price, and for the difference between the

Minimum Net Rent and the actual rent received.                           As an example,

the     Guaranty     limit   as     of    November          1998   was     approximately

$1,265,903.        If a railcar’s actual earned rent fell short of its

Minimum Net Rent by $1000, Progress would pay that difference to

Allfirst and then deduct $1000 from the Guaranty limit, reducing

                                               5
its total potential liability to Allfirst under the Guaranty to

$1,264,903.

                                            B.

     Of the 996 railcars sold to Allfirst, 400 were subject to

leases   that     expired     at    various       times     in   1999.         It     became

apparent    to    the   parties        that       the     railcars    would          require

extensive repairs before they could again be leased.                                In some

cases, the potential repair costs exceeded what the railcars

could earn in rent.         As a result, when the leases ended, Railcar

elected to “park” most of the cars, while continuing to remit

monthly rent payments to Allfirst. 2

     On February 10, 2000, Allfirst and Railcar met to discuss a

number     of    financing     transactions,            including     the       Portfolio

Transaction.       At   the    meeting,          Eugene    Martini,      who    was    then

Railcar’s CEO, described the condition of the 400 railcars with

expired leases and offered to pay Allfirst the SLV for each car,

scrap them all, and remove them from the Portfolio Transaction.

Martini said that Railcar would absorb the resulting losses.

Allfirst    accepted    the        offer,    but     this    agreement         was    never

reduced to writing.

     2
        We   do  not  know  why  Railcar   assumed Progress’s
responsibility under the Guaranty agreement to make the rent
payments.

                                            6
        Following       the       meeting,       Railcar       began       scrapping     the

railcars.       Railcar at first absorbed the losses on its books,

without attempting to reduce the Guaranty limit.                            In the spring

of 2001, however, Railcar, now led by Jim Smallwood, took the

position       that      the       Portfolio          Transaction         documents      were

controlling and that any oral agreement made by Martini at the

February 10 meeting was unenforceable.                      Railcar asserted instead

that    the    Guaranty       limit     should    be    reduced      by    the    difference

between the SLV and the scrap value for each of the 400 scrapped

cars.      This     meant,        according      to    Railcar,      that    it    had   paid

Allfirst in excess of the Guaranty limit and was entitled to a

$1,350,000       refund.          In    addition,       for    the     twelve     remaining

railcars      subject      to     the   February       10   agreement,       Railcar     paid

Allfirst only the scrap price for eleven and paid nothing for

the remaining one.

       Beginning      on      August    1,    2001,     Defendants        stopped     making

regular       monthly      rent    payments.           In     addition,     many    of   the

remaining railcars could no longer be leased due to maintenance

issues or were not re-leased after their initial leases ended.

When this litigation commenced, 483 railcars were still on the

books.         Allfirst sold these remaining railcars for scrap value

after trial.

                                              7
                                             C.

       Defendants sued Allfirst in the Superior Court of Fulton

County, Georgia, alleging that Progress had overpaid Allfirst

under the Guaranty and seeking a refund of $1,350,000.                      Allfirst

removed the case to the United States District Court for the

Northern District of Georgia and also filed a separate breach of

contract action against Defendants in the United States District

Court for the District of Maryland. 3                    Allfirst claimed that it

had received neither the Minimum Net Rent nor the actual rent

collected since August 1, 2001, and therefore the Defendants

were       in   default    under    the     Portfolio     Transaction.      Allfirst

sought damages for the default, including the past due Minimum

Net Rent for each railcar, the cost of unperformed repairs, lost

rents for off-lease cars that sat idle until they were scrapped,

and the difference between the scrap price received for each

railcar and the amount the car could have been sold for had it

been       properly     maintained.         Defendants    counter-claimed    in    the

Maryland        suit,     seeking     the     alleged     overpayment    under    the

Guaranty, as well as other damages.                  After the initial suit was

transferred        to     the   District       of   Maryland,    the     cases    were

consolidated.

       3
       The Portfolio Transactions documents provided that they
were to be interpreted according to, and governed by, Maryland
law. J.A. 1026, 1098, 1105.

                                              8
     During a seventeen-day bench trial, Allfirst presented the

testimony of two experts regarding the market for railcar leases

and sales.    Allfirst’s experts testified that the railcars still

subject to the Portfolio Transaction after August 1, 2001, could

have been leased had they been properly maintained.         Each expert

offered a range of rent prices they believed the cars could have

fetched on the open market.      Depending on the type of car, the

length of the lease, and the type of the lease, their estimates

ranged from $50 to $375 per month.        The experts also testified

as to the estimated value of the railcars had they been in

serviceable condition at the end of the Portfolio Transaction’s

term.    These estimates ranged from $1500 to $11,000 per railcar,

depending on the car type and its condition at sale. 4       Defendants

countered    with   expert   testimony   asserting   that    there    was

“virtually no demand” to lease one type of railcar.         J.A. 545.

     In its memorandum of decision, the district court held that

Railcar and Allfirst created a valid, enforceable contract at

the February 10 meeting, in which they agreed that Railcar’s SLV

payments to Allfirst would not reduce the Guaranty limit.            As a

     4
       Although the Service Agreement required that Progress
maintain the railcars in a condition to allow the cars to be
leased at the Minimum Net Rent, J.A. 1102, fluctuations in the
market could change the condition a car would need to be in to
earn that amount of rent. Therefore, the condition of the cars
at sale could vary, depending on the market.

                                   9
result, the court denied Progress’s claim for $1,350,000 and

awarded Allfirst damages for the difference between the scrap

price and the SLV of the twelve scrapped railcars for which

Allfirst had not yet received full payment.

      Turning its attention to Allfirst’s affirmative claims for

damages, the court held that Defendants were liable to Allfirst

for   various    unperformed    repair        obligations       and    missed      rent

opportunities related to specific leases.                 The district court,

however,     rejected    Allfirst’s          assertion     that       it    was    due

additional    compensation     for   general     missed        rent   opportunities

for   all   remaining    railcars    not      subject     to    the    February      10

agreement.      The court reasoned that Allfirst had not presented

sufficient evidence to support this component of its damages

claim.      Similarly,   the    court    rejected        Allfirst’s        claim    for

additional damages for the difference between the sale price of

the remaining railcars had they been properly maintained and the

actual sale price, finding that estimates of the cars’ potential

fair market values were not sufficiently reliable because they

were made more than a year prior to the date the cars were to be

sold under the Assignment Agreement.

                                        10
        After       resolving      other     issues,       the    court     entered     final

judgment in favor of Allfirst for $3,379,061.00. 5                           Both parties

appealed.

                                                 II.

        The    issues       before    us     are       whether    Railcar    and      Allfirst

created a valid, enforceable oral agreement at the February 10

meeting,        and    whether       the     district       court    erred       in   denying

Allfirst’s          additional       claim    for       damages    for    lost     rents   and

sales.        We consider each contention in turn.

                                                 A.

     We first consider Defendants’ assertion that the district

court       erred     in   enforcing       the     oral    agreement      reached      between

Allfirst and Railcar at the February 10 meeting.

        In general, we review the district court’s rulings on legal

issues de novo.              We affirm factual findings unless they are

clearly erroneous.                Nelson-Salabes, Inc. v. Morningside Dev.,

LLC, 284 F.3d 505, 512 (4th Cir. 2002).

    Defendants             urge    that      although       the     issue    of       contract

formation is typically a question of fact, Maryland law dictates

        5
       This sum reflects the amount awarded for the SLV of the
twelve scrapped cars for which Allfirst had not been paid, plus
additional sums not contested on appeal.

                                                 11
that    when    material    facts     are    not    in   dispute,    the    issue   of

whether a contract exists is a question of law subject to de

novo review.         Allfirst, on the other hand, asserts that the

contract issue here is a question of fact, and that therefore

the “clearly erroneous” standard should apply.

       It is settled Maryland law that the existence and terms of

an oral contract, when disputed, are for the trier of fact to

determine.      Weil v. Free State Oil Co. of Md., 87 A.2d 826, 829

(Md. 1952).         When the parties present no dispute of material

fact, however, the issue of contract creation is a question of

law.     See Weaver v. ZeniMax Media, Inc., 923 A.2d 1032, 1051

(Md. Ct. Spec. App. 2007); Mitchell v. AARP Life. Ins. Program,

N.Y. Life Ins. Co., 779 A.2d 1061, 1068 (Md. Ct. Spec. App.

2001) (“[I]f there are no genuine disputes of material fact,

then    the    reviewing    court     must       determine    if   the   trial   court

reached       the   correct    legal         result.”        (internal     quotations

omitted)).

       In this case, the parties disagree as to the terms of the

oral agreement, the basis for the agreement, and the capacity in

which Railcar acted in carrying out the agreement.                       Because the

parties dispute the material facts of the alleged agreement, we

find that the questions regarding the existence and the terms of

the    contract     are   questions    of    fact.       We    therefore    will    not

                                            12
reverse the district court’s determination unless we find it

clearly erroneous.

                                           B.

       With that standard of review firmly in mind, we turn to

Defendants’ argument that the district court erred in finding

that Allfirst and Railcar created an enforceable oral contract,

including an agreement not to deduct Railcar’s SLV payments from

the Guaranty limit.

       According to Defendants, the two parties could not have

created a valid contract because the Guaranty was not discussed

at the February 10 meeting and because the parties disagreed

afterward,      both     internally    and      with   one   another,   about    the

effect of the oral agreement on the Guaranty.                      Defendants also

note    that     although      Progress’s       rights     and   obligations    were

affected by the contract, it was not a party to the agreement,

did not offer to take the loss on the scrapped railcars, and did

not    consent      to   assuming     an   increased       obligation   under    the

Guaranty.      Relatedly, Defendants argue that enforcing the oral

agreement      in   these      circumstances      allows     Allfirst   to   reap    a

windfall.

       Allfirst responds that the February 10 arrangement was a

side agreement between Allfirst and Railcar that did not affect

Progress’s     rights     or    obligations      under     the   Guaranty.      As   a

result, Allfirst argues, Defendants’ complaint that Progress was

                                           13
not party to the oral agreement is irrelevant.                          We agree with

Allfirst.

      The    “[c]reation      of    a   contract      requires    an    offer     by   one

party and acceptance by the other party.”                      Cochran v. Norkunas,

919   A.2d    700,     713   (Md.   2007).          “Acceptance    of    an   offer     is

requisite       to      contract        formation,       and      common        to     all

manifestations of acceptance is a demonstration that the parties

had   an      actual     meeting        of    the    minds     regarding        contract

formation.”      Id.     “[I]n other words, to establish a contract the

minds of the parties must be in agreement as to its terms.”

Mitchell, 779 A.2d at 1069 (citation omitted).

      We conclude that the district court did not clearly err in

finding that Allfirst and Railcar created a valid, enforceable

oral contract regarding the disposition of the 400 railcars.

Martini testified that in proposing to scrap the railcars and

pay the SLV, Railcar was offering to absorb the loss.                            Martini

echoed this statement in his subsequent memo to Smallwood, which

also supports the district court’s finding that Railcar offered

to make payments to Allfirst that would not reduce the Guaranty

limit.      John Cook, an Allfirst executive present at the February

10 meeting, also stated that Railcar offered to take the loss in

removing the railcars from the transaction, and Cook thanked

Railcar      representatives        for      “not   making     [their]     loss      [his]

                                             14
loss.”          J.A. 256-57.         Finally, the parties acted in accordance

with the agreement for nearly a year.

       It        is     true       that      certain       evidence--including             other

statements            made    by   Martini     at       trial   and    an       internal    memo

suggesting Allfirst’s uncertainty about the effect of Railcar’s

payments on the Guaranty limit--weighed against finding a valid

contract.         We are mindful, however, of the deference accorded to

the district court as the finder of fact at a bench trial.

Because sufficient evidence was presented to support the court’s

view       of   the     facts      finding    the       existence     of    a    contract,    we

decline to disturb that ruling.

       Nor       are    we    persuaded       by    Defendants’       argument       that    the

February 10 agreement was not valid because Progress was not

party to it.             The oral agreement between Allfirst and Railcar

did    not       alter       Progress’s      obligations        to    Allfirst      under    the

Guaranty, and so Progress was not a necessary party. 6                               Prior to

the February 10 agreement, if a railcar was scrapped for less

than its listed SLV, Progress was required to pay Allfirst the

difference between the SLV and the scrap price.                             This amount was

deducted from the Guaranty limit, reducing Progress’s potential

       6
       For this reason, the agreement did not violate Maryland’s
Statute of Frauds provision requiring that modification of
guaranties be in writing. See Md. Code Ann., Cts. & Jud. Proc.
§ 5-901(1).

                                                   15
obligation to Allfirst.        After the February 10 agreement, if one

of the 400 railcars was scrapped, Railcar would send the SLV to

Allfirst, and then Railcar would collect only the scrap price

from Progress after Progress scrapped the car.                   The February 10

agreement did not require Progress to pay Allfirst the SLV, nor

did Progress do so.         J.A. 316-17.       Because Progress did not pay

Allfirst the SLV, Progress had no right to deduct the SLV amount

from the Guaranty limit.           Accordingly, the February 10 agreement

did not alter Progress’s obligations to Allfirst, and thus it

does not matter that Progress had no say in it. 7

     Finally,   we    reject    Defendants’      contention      that   affirming

the district court’s ruling allows Allfirst to reap a windfall,

in that it received the SLV from Railcar without deducting it

from the Guaranty limit.           To begin with, any benefit received by

Allfirst is not a “windfall,” but is instead the result of a

mutually    beneficial      agreement    between     it    and   Railcar.     The

evidence at trial showed that Railcar believed that paying the

SLV would maintain both its standing in the relatively small

railcar    industry   and    the    goodwill    of   its   longtime     customer,

     7
        Defendants attempt to avoid this conclusion by asserting
that Railcar was acting as Progress’s agent in remitting the SLV
payments to Allfirst.    Defendants, however, did not raise this
agency argument until their reply brief, which means they waived
it.    See, e.g., Hunt v. Nuth, 57 F.3d 1327, 1338 (4th Cir.
1995).

                                        16
Allfirst.      As a result, both Allfirst and Railcar benefited from

the February 10 agreement.

       Second, Progress too enjoyed a tangible benefit from the

oral agreement.          Without it, Progress would have been on the

hook   to     Allfirst   for    the   Minimum     Net       Rent   for    each   railcar

through the end of the Minimum Lease Term.                          The February 10

agreement, however, allowed Progress to avoid this cost.

       We therefore reject Defendants’ claim of error on appeal.

                                           III.

       We next consider the cross-appeal wherein Allfirst contends

that the district court erred in failing to award it additional

damages for rental payment and sale price shortfalls, pursuant

to the Guaranty.

       “The    calculation      of    damages     is    a    finding      of   fact    and

therefore is reviewable only for clear error, but to the extent

those calculations were influenced by legal error, review is de

novo.”      United States ex rel. Maddux Supply Co. v. St. Paul Fire

&   Marine     Ins.   Co.,     86   F.3d   332,   334       (4th   Cir.    1996).          In

addition,      the    weight    accorded     to   an   expert’s      testimony        is    a

matter for the trial court’s discretion.                    Am. Milling Co. v. Tr.

of Distribution Trust, 623 F.3d 570, 573-74 (8th Cir. 2010).

                                           17
                                       A.

     The     district      court    rejected         Allfirst’s        request    for

additional    rent      damages     because     it     found    “the      testimony

inadequate to establish any reliable estimate of rental that

could have been earned from hypothetical leases.”                         J.A. 953.

Specifically, the court determined that “[t]he evidence did not

establish industry utilization rates, average fleet operability,

bad faith on the part of Defendants, or any other basis for

awarding   Allfirst       damages   based     upon    theoretically       available

rental opportunities.”        J.A. 953.

     We consider Allfirst’s claim for additional rents to be

akin to one seeking lost profits, and so we look to relevant

Maryland law on that subject.               To recover lost profits under

Maryland law for breach of contract, a plaintiff must show that

(1) the breach by the defendant was the proximate cause of the

plaintiff’s loss, (2) the defendant could reasonably foresee,

when it executed the contract, that a loss of profits would be a

probable result of a breach, and (3) the amount of lost profits

can be proved with reasonable certainty.                 M & R Contractors &

Builders v. Michael, 138 A.2d 350, 353, 355 (Md. 1958).                     “Losses

that are speculative, hypothetical, remote, or contingent either

in   eventuality     or    amount    will     not     qualify     as    ‘reasonably

certain’ and therefore recoverable as contract damages.”                         Hoang

                                       18
v. Hewitt Ave. Assocs., 936 A.2d 915, 935 (Md. Ct. Spec. App.

2007).

       We conclude that the district court abused its discretion

by    summarily    rejecting      Allfirst’s     expert      testimony     regarding

rent damages.       The testimony of Allfirst’s experts showed that

the   railcars     could   have    been    leased      had   they   been     kept   in

serviceable condition.           Both experts also provided a range of

rents that each car could have earned through November 30, 2003,

depending on several factors.             Other than contending that there

was a weak market for one type of car (which an Allfirst expert

accounted for in his report), Defendants’ experts provided no

substantive rebuttal to Allfirst’s evidence on rent damages.

       A district court certainly has discretion to reject expert

testimony, see Pittman v. Gilmore, 556 F.2d 1259, 1261 (5th Cir.

1997), but it may not arbitrarily fail to consider it.                              Am.

Milling, 623 F.3d at 573-74.              In this case, the district court

failed    to   explain     why    it     chose   not    to    credit       Allfirst’s

evidence.      Although the court stated that the potential lease

opportunities described by the experts were “hypothetical”--one

of the permissible bases for finding that lost profits are not

“reasonably       certain”--it     did    not    explain     why    this    was     so.

Furthermore, the court provided no explanation or authority for

why an award of additional rent damages needed to be supported

by “industry utilization rates” or “average fleet operability,”

                                          19
J.A.       953,     terms      that     no   party       introduced,           explained,     or

otherwise relied on at trial. 8                   We therefore vacate the judgment

of the district court as to this component of Allfirst’s damage

claim and remand for further consideration of the issue. 9

                                                 B.

       Allfirst         also    asserts         that    Progress         did    not    properly

maintain          the   railcars        through        the    end    of        the    Portfolio

Transaction term (November 30, 2003), and that as a result the

cars could only be sold for scrap value.                         According to Allfirst,

the    district         court    should      have      awarded      it    damages      for   the

difference         between      the     value    of    the    railcars         had    they   been

maintained and their actual sale price.

       The    district          court     agreed       that    Progress         breached     its

obligation to maintain the railcars, but nevertheless held that

       8
       The district court also noted that rent damages were not
appropriate because the evidence did not show bad faith on the
part of the Defendants.       Such a showing, however, is not
necessary in a typical breach of contract action.    See Rumsey
Elec. Mfrs. v. Livers, 77 A. 295, 301 (Md. 1910).
       9
       There may well be a reasoned basis for the district court
to reject Allfirst’s claim for additional rent damages; we hold
only that we can discern no such basis on this record. In that
regard, we also note that the district court’s brief discussion
of the issue did not address all of the M & R Contractors
factors necessary to award damages for lost profits, nor did it
consider whether Progress’s breach of the Guaranty was the
proximate cause of Allfirst’s damages. We think it appropriate
for the district court to consider these issues--and any others
relevant to the question of lost profits damages--in the first
instance.

                                                 20
Allfirst could not collect sale price shortfall damages.                                 The

sole reason provided by the court was that the future estimates

of    the   railcars’      fair      market    values       provided       by    Allfirst’s

experts were made more than a year prior to the operative date

and were not “sufficiently reliable.”                  J.A. 959.

        We are constrained to find that the district court also

abused its discretion as to this issue.                     To begin with, evidence

of lost future expectations may properly be part of the damages

that a party can recover for breach of contract.                       See Johnson v.

Oroweat     Foods   Co.,      785    F.2d     503,   507     (4th   Cir.        1986).    In

Johnson, we considered the measure of damages for a breach in

which the contract’s termination date was twenty-one years after

trial.      Id. at 505-06.           Applying Maryland law, we stated that

such damages could be calculated either (1) by estimating the

future      earnings    of     the    business       over    twenty-one          years   and

discounting such earnings to calculate their present value, or

(2)   by    estimating       the     market    value    of    the    business       at   the

termination      date,       which    in    theory     should       have    equaled      the

present value of all future earnings.                  Id. at 507-08.

        Here,   Allfirst’s      experts       provided      three    separate       reports

regarding the estimated values of the railcars, dated November

20, 1998, February 28, 2002, and March 1, 2002.                                 Each report

estimated the future value of each railcar as of November 30,

2003.       Depending on car type and potential condition at sale,

                                              21
Allfirst’s experts estimated that Allfirst could have received

from    $1500     to   $11,000    per     railcar.        As   with   the     claim      for

additional rent damages, Defendants presented no testimony to

contradict this evidence.

       We   readily     acknowledge       the     broad    discretion    afforded         to

district     courts     in     evaluating    expert       testimony    as     to    future

value,      but   a    district     court        cannot    summarily     reject         such

evidence     simply      because     the     timing       of   the    trial    and       its

scheduling deadlines prevent a party from providing the court

with     estimates      made     closer     to    the     operative     date       of    the

contract. 10      While the district court did say that the evidence

was not sufficiently reliable, it gave no explanation for this

conclusion, save for the timing of the reports. 11                      We therefore

       10
       The bench trial in this case commenced on May 20, 2003,
and ended with closing arguments on July 11, 2003. The district
court entered its order addressing the damages issue on May 28,
2010.
       11
         Although Allfirst’s experts did not discount their
estimates to their present value, Defendants did not challenge
the claim on this ground, nor does it appear that the district
court denied it on this basis.      Moreover, unlike in Johnson
where   the   twenty-one-year  span   of  future   earnings was
substantial, we are dealing here with a mere twenty-month span
between the date of the last expert report as to value and the
date when the railcars would have been sold. In any event, the
district court may, to the extent necessary, properly account
for this issue on remand when considering the amount of damages
(if any) that Allfirst should be awarded.

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vacate the judgment of the district court as to this damage

issue and remand for further consideration.

                                     IV.

      We hold that the district court did not clearly err in

finding that Railcar and Allfirst created a valid oral contract

at the February 10 meeting.          We hold further that the district

court   abused    its      discretion     in   assessing    the    merits   of

Allfirst’s claims for additional damages.                We therefore affirm

in   part,   vacate   in   part,   and    remand   for   further   proceedings

consistent with this opinion.

                                                           AFFIRMED IN PART,
                                                            VACATED IN PART,
                                                                AND REMANDED

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