SIGNIFICANT CASE SUMMARIES
Maryland Case Summary
Md. Indoor Play, LLC v. Snowden Invs., LLC
Maryland Supreme Court
No. 29
Decided: July 1, 2025
The Maryland Supreme Court holds that damages from a breach of a right of first refusal are general damages, not consequential damages, and the appropriate measure of those general damages is the fair market value.
Background
This case arouse out of the Plaintiff’s contractual right to invest in two separate companies, and the measure of damages for that lost opportunity. In 2018, Plaintiff loaned the Defendants $350,000.00. The loan included provisions entitling the Plaintiff to invest in future related endeavors. Specifically, the Plaintiff was given a first right of refusal to invest in future related endeavors. The Defendants subsequently opened two related businesses, but did not give written notice of the formation of the new businesses to the Plaintiff. Accordingly, no right of first refusal was provided. The Plaintiff sued Defendants seeking, among other things, compensatory damages for the breach of the loan agreement due to the failure to provide the right to invest as a minority stakeholder in the newly opened businesses. The Trial Court granted summary judgment on liability, but held a trial on damages.
Following Post-Trial Motions, the Trial Court awarded the Plaintiff, among other relief, $453,333.00 in damages for Defendants’ breach of contract. In doing so, it calculated the damages using the “fair value” method, instead of the “fair market value” method. The difference is not semantic. When using the “fair market value” method, experts usually apply discounts to measure the value. However, under the fair value formulation, no discounts are applied. As a result, using the “fair value” as the damages measure often results in higher awards. Fair value is typically used when there are consequential damages claimed for lost profits. Besides the above, the Trial Court also held that the damages would be measured from the time that the breach occurred, rather than asking whether the losses were contemplated by the parties when they signed the contract as consequential damages.
Holding
The Maryland Supreme Court resolved two questions: (1) whether the Circuit Court was required to measure damages from the time of the breach, rather than a later date; and (2) whether the fair market value, not the fair value, was the proper measure of damages sustained as a result of the breach. The Supreme Court of Maryland first held that the Plaintiff’s damages were direct damages – not consequential/lost profit damages. As such, damages should be measured from the time of breach, not a later date, because the right of investment given to Plaintiff simply afforded the right to purchase a membership interest, and the breach by Defendants prevented that purchase. These were general damages, not consequential damages.
The Court also found that measuring the damages by fair value, without discounting the market value of the shares, placed Plaintiff in a position better than it would have been in absent a breach. Thus, fair market value was the appropriate measure of damages for this general breach of contract.
Questions about this case can be directed to Nicholas Daetwyler at (443) 641-0567 or ndaetwyler@tthlaw.com.