Tramlaw Remainderman Limited Partnership v.WLM Retail Trust
Filing
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ORDER & REASONS that WLM Retail Trust's 17 Motion for Judgment on the Pleadings is DENIED. Signed by Judge Eldon E. Fallon on 8/29/18. (dno)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TRAMLAW REMAINDERMAN
LIMITED PARTNERSHIP
CIVIL ACTION
VERSUS
NO. 17-12636
WLM RETAIL TRUST
SECTION “L” (2)
ORDER AND REASONS
Before the Court is Defendant WLM Retail Trust’s motion for judgment on the pleadings.
R. Doc. 17. Plaintiff Tramlaw Remainderman, LP opposes. R. Doc. 25. For the reasons that follow,
the motion is DENIED.
I.
BACKGROUND
In 1991, Public Service Resources Corporation (“PRSC”) purchased twenty-nine
properties that were subject to long-term Wal-Mart leases (the “Transaction”). The structure of the
Transaction was complex. First, PRSC formed WLM Retail Trust (“WLM”), which purchased an
“Estate for Years” in each of the properties. 1 Next, to obtain significant tax benefits, Tramlaw
Remainderman, LP (“Tramlaw”) was formed to purchase a “remainder” interest in each property,
subject to WLM’s estate for years. The parties entered into an “Option and Estate for Years
Agreement” for each of the twenty-nine properties.
On September 26, 1991, Tramlaw and WLM executed an “Option and Estate for Years
Agreement” concerning property in Covington, Louisiana (the “Agreement”), at issue in this case.
The Agreement gave WLM two options: (i) an option to ground lease the property upon the
1
An “Estate for Years” is the right to the possession of land for a specified term, known in Louisiana as
“usufruct.”
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expiration of the estate for years (“Ground Lease Option”), and (ii) an option to purchase
Tramlaw’s interest in the property upon the occurrence of certain events, including the expiration
of a long-term lease (“Wal-Mart Lease”) with Wal-Mart Stores, Inc. (“Purchase Option”). §3(B)
of the Agreement states that WLM may exercise the Purchase Option whether those events occur
“before or after” the expiration of the estate for years.
The issue in this case is whether WLM timely exercised the Purchase Option. The WalMart Lease had an initial term of May 14, 1986 – January 31, 2012 and gave Wal-Mart the option
to extend for five additional five-year terms. Wal-Mart extended the Lease through January 31,
2017, but did not extend a second time. On August 24, 2017, WLM notified Tramlaw that, since
the Wal-Mart Lease had expired, it wished to exercise the Purchase Option. Tramlaw responded,
however, that under §14 of the Agreement, the Purchase Option expired along with the estate for
years on January 31, 2012 – five years earlier. §14 states that “[t]he Options contained in this
Agreement shall terminate and be of no further force or effect upon the later of the expiration of
(i) the Estate for Years or (ii) the Additional Notice Period.”
Tramlaw filed this action seeking a declaration that WLM failed to timely exercise the
Purchase Option before the estate for years expired in 2012. WLM argues that the Agreement
expressly allows it to exercise the Purchase Option when the Wal-Mart Lease terminates, whether
that occurs “before or after” the expiration of the estate for years.
II.
PRESENT MOTION
WLM moves for judgment on the pleadings based on collateral estoppel. An Illinois state
court decided a similar disagreement between the parties over §14 and the Purchase Option in
WLM’s favor (the “Illinois Action”). The Illinois Court of Appeal affirmed, and the Illinois
Supreme Court denied Tramlaw’s request for review.
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The Illinois Action involved an agreement that was part of the same overall transaction as
the Agreement in this case (the “Oklahoma Agreement”). There, as here, WLM attempted to
exercise the Purchase Option upon termination of the Wal-Mart Lease after the estate for years
had already expired. On cross-motions for summary judgment, the court held that WLM timely
exercised the Purchase Option, §14 notwithstanding, because “[t]he clear and explicit language of
§3(B) of the Option Agreement establishes the parties’ intent was that the Purchase Option survive
the Estate [for] Years if the Wal-Mart Lease had not yet terminated.” Since §3(B) “expressly and
unequivocally provides that WLM may exercise the Purchase Option after the expiration of the
Estate for Years,” the court reasoned, the parties clearly did not intend to terminate the Purchase
Option along with the estate for years. Finally, the court rejected Tramlaw’s contrary argument,
reasoning that “[i]nterpreting § 14 as terminating the Purchase Option upon the expiration of the
Estate for Years would render the Purchase Option illusory and frustrate the stated intent of the
parties.” The Illinois Court of Appeal affirmed and concluded that §14 “must be viewed as a
mistake, an accident, or simply as a specific clause so repugnant to and subordinate to the general
intent and purpose of the Agreement that it must be rejected and disregarded.” WLM Retail Tr. v.
Tramlaw Remainderman Ltd. P’ship, 2018 IL App (1st) 170819, ¶ 27, 99 N.E.3d 116, 122, appeal
denied sub nom. WLM Retail Tr. v. Tramlaw Remainderman Ltd. P’ship, 98 N.E.3d 29 (Ill. 2018).
WLM argues that the Illinois Action is entitled to preclusive effect. Tramlaw asserts that this action
represents a new case or controversy between the parties, which Tramlaw is entitled to litigate in
this Court.
Alternatively, WLM contends that Tramlaw fails to state a claim because the plain
language of the Agreement gives WLM the right to exercise the Purchase Option “before or after”
the expiration of the estate for years.
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III.
LAW & ANALYSIS
Under Federal Rule of Civil Procedure 12(c), “[a]fter the pleadings are closed—but early
enough not to delay trial—a party may move for judgment on the pleadings.” Rule 12(c) “is
designed to dispose of cases where the material facts are not in dispute and a judgment on the
merits can be rendered by looking to the substance of the pleadings and any judicially noticed
facts.” Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir.
2002) (citing Hebert Abstract Co. v. Touchstone Props., Ltd., 914 F.2d 74, 76 (5th Cir. 1990)).
A Rule 12(c) motion is governed by the same standard as a Rule 12(b)(6) motion. In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). Accordingly, a court must
accept all well-pleaded facts as true and view them in the light most favorable to the non-moving
party. A complaint must “contain sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation
marks omitted). A claim is facially plausible “when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Id. at 678. However, “[a] pleading that offers labels and conclusions or a formulaic recitation of
the elements of a cause of action will not do.” Id.
In determining whether a state court judgment bars a later-filed federal action, a federal
court must apply the “principles of the law of the state whose decision is set up as a bar to further
litigation” – here, Illinois. Production Supply Co. v. Fry Steel Inc., 74 F.3d 76, 78 (5th Cir. 1996)
(quoting E.D. Systems Corp. v. Southwestern Bell Tel. Co., 674 F.2d 453, 457 (5th Cir. 1982)).
Under Illinois law, the party claiming collateral estoppel must establish that (i) there was a final
judgment on the merits in the prior adjudication; (ii) the party against whom estoppel is asserted
was a party or in privity with a party in the prior adjudication; and (iii) the issue decided in the
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prior adjudication is identical to the issue presented in the present suit. Gumma v. White, 216 Ill.
2d 23, 38 (2005).
The Court finds that the differences between the Agreement at issue here and the agreement
involved in the Illinois Action are fatal to WLM’s collateral estoppel argument. Although §14 and
§3 of the agreements are identical, the Illinois courts found additional proof of the parties’ intent
in several sections of that agreement that are either different or absent from the Agreement at issue
here.
For example, §3(D) of the Oklahoma Agreement provided that “the Purchase Option shall
not be exercisable after January 31, 2059” – a date long after the expiration of the estate for years.
The Agreement here does not contain a §3(D) or analogous sunset provision. Additionally, both
agreements state that, in the event of the expiration or termination of the Wal-Mart Lease, the
purchase price was to be the greater of (i) the fair market value at the time, or (ii) a price listed in
Schedule II of the agreement. Schedule II provides monthly values for the remainder interest,
beginning when the agreement was executed and increasing by date. Schedule II of the Oklahoma
Agreement listed dates far beyond the expiration of the estate for years. Schedule II of the
Louisiana Agreement, though, ends in January 2012 – it does not provide values beyond the
expiration of the estate for years. Finally, one of the events triggering the Purchase Option in the
Oklahoma Agreement, §3(A)(a), could only be triggered after the “twentieth anniversary of the
date” of the agreement. That anniversary fell after the estate for years expired. The Louisiana
Agreement includes the same §3(A)(a) but, unlike the Oklahoma Agreement, the twentieth
anniversary fell before the estate for years expired. In light of these differences, the Court finds
that the issue presented here – whether WLM timely exercised the Purchase Option under the
Louisiana Agreement – is not identical to the issue litigated in the Illinois Action.
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The Court also finds that the petition in the present case states a claim for relief. WLM
contends that the Agreement establishes that the Purchase Option did not automatically terminate
with the estate for years, and that WLM timely exercised the option in 2017 when the Wal-Mart
Lease expired. But “when considering a Rule 12(c) motion, a district court must accept the factual
allegations of the complaint as true and resolve all ambiguities or doubts regarding the sufficiency
of the claim in favor of the plaintiff.” Higbee Co. v. Greater Lakeside Corp., 2007 WL 196901, at
*1 (E.D. La. Jan. 22, 2017). Because §14 states that the “options” terminate upon expiration of the
estate for years, Tramlaw has sufficiently alleged that WLM failed to timely exercise the Purchase
Option when the estate for years expired in 2012.
IV.
CONCLUSION
For the foregoing reasons, IT IS ORDERED that Defendant WLM’s Motion for Judgment on the
Pleadings, R. Doc. 17, is hereby DENIED.
New Orleans, Louisiana, this 29th day of August, 2018.
______________________________
ELDON E. FALLON
United States District Judge
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