REDNER'S MARKETS, INC. v. JOPPATOWNE G.P. LIMITED PARTNERSHIP
Filing
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MEMORANDUM OPINION. Signed by Judge Richard D Bennett on 7/11/13. (dass, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
REDNER’S MARKETS, INC.,
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Plaintiff,
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V.
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JOPPATOWNE G.P. LIMITED
PARTNERSHIP,
Civil Action No.: RDB-11-1864
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Defendant.
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MEMORANDUM OPINION
The Plaintiff Redner’s Markets, Inc. (“Plaintiff” or “Redner’s”) filed this action
against its landlord Joppatowne G.P. Limited Partnership (“Defendant” or “Joppatowne”),
alleging violations of a restrictive use covenant in a commercial lease. Redner’s initially
contended that by permitting a group of ten farmer’s market stalls to operate at the
Joppatowne Plaza Shopping Center, Joppatowne breached a covenant not to lease to any
other grocery stores within a five-mile radius of the shopping center. On January 24, 2013,
Judge Legg of this Court found that two of the challenged stalls infringed the restrictive use
covenant while three other stalls did not. See Jan. 24, 2013 Mem. Op. 30-35, ECF No. 133.
The case was thereafter reassigned to the undersigned, who has certified familiarity with the
record pursuant to Rule 63 of the Federal Rules of Civil Procedure.1
1
See May 23, 2013 Letter Order, ECF No. 155. In anticipation of Judge Legg’s retirement from the
United States District Court for the District of Maryland on February 6, 2013, this case was
transferred to the undersigned on January 24, 2013.
1
This Court then scheduled a second stage of the bench trial for July 1 and 2, 2013,
with the following issues remaining to be tried: (1) whether Joppatowne breached its
restrictive use covenant as to the five farmer’s market stalls for which Judge Legg rendered
no opinion, and (2) whether Redner’s is entitled to damages for lost profits caused by the
infringing stalls. However, on the morning of trial on July 1, 2013, Redner’s abandoned its
breach of contract claim relating to four of the five remaining stalls.2 As to the remaining
stall, specifically Beiler’s Baked Goods, Redner’s maintained its claim of liability, but
indicated that it would pursue only injunctive relief as to that stall. Accordingly, the pending
issue of lost profits damages would pertain only to the two stalls for which this Court, per its
Memorandum Opinion of January 24, 2013, already found liability.
The procedural posture in this case is as follows. Jurisdiction is based on diversity of
citizenship under 28 U.S.C. § 1332, as Redner’s is a Pennsylvania corporation and
Joppatowne is a limited partnership and citizen of Maryland. See Am. Compl. ¶¶ 1-2, ECF
No. 36. In addition, the amount in controversy exceeds $75,000. Id. Redner’s originally
filed this action in the United States District Court for the Eastern District of Pennsylvania
on May 10, 2011. The case was transferred to this Court on July 7, 2011. On September 15,
2011, Redner’s filed an Amended Complaint. See Am. Compl., ECF No. 36. The case
involved issues of liability and traditional theories of damages—to wit, lost profits and lost
sales.3
2
Those stalls are Beiler’s BBQ, King’s Cheese & Deli, and the two “Vendor Stalls.”
As Judge Legg noted in Letter Orders during earlier stages of the case, there was some suggestion
that a second stage of litigation, relating to “more esoteric damage theories (e.g., diminution of
value; constructive trust),” might come into play, depending on the outcome of the bench trial on
liability and traditional damages theories. Sept. 30, 2011 Letter Order, ECF No. 42. In light of this
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2
In late 2011, a bench trial on the issues of liability and traditional damage theories
commenced. The bench trial was conducted by Judge Legg over seven nonconsecutive days,
from December 5, 2011 to August 14, 2012. On January 24, 2013, Judge Legg issued an
opinion in which he resolved some of the issues presented at the first stage of trial and
reserved some issues for report and recommendation by a United States Magistrate Judge.
See Jan. 24, 2013 Mem. Op. 24-26; Order of Reference, ECF No. 135. After Joppatowne
objected to Judge Legg’s Order of Reference, the undersigned withdrew and vacated it. See
May 16, 2013 Letter Order, ECF No. 154. Accordingly, the issues of liability and traditional
damages that are identified as pending in the vacated Order of Reference remain outstanding
and are decided by this Court herein.
After Judge Legg issued his Memorandum Opinion in which he found liability as to
two stalls and found no liability as to three other stalls, Redner’s filed a Motion for
Permanent Injunction (ECF No. 141), seeking an order permanently enjoining Joppatowne
from continuing to violate the restrictive use covenant. Specifically, Redner’s asked that
Joppatowne be required to cause the two infringing farmer’s market stalls—All Fresh
Quality Seafood & Produce (“All Fresh”) and Lapp’s Fresh Meats—to be removed from the
Joppatowne Plaza Shopping Center. Applying Maryland law, this Court decided that a
permanent injunction was warranted as to All Fresh and Lapp’s Fresh Meats, because
Joppatowne was found to have violated the restrictive use covenant and the equities favored
Redner’s. See June 13, 2013 Mem. Op. 10-12, ECF No. 158. Joppatowne moved to stay the
Court’s conclusion that Redner’s has made no proof of monetary damages for lost profits caused by
Joppatowne, as well as this Court’s Order of Permanent Injunction (ECF No. 159) as to the two
stalls found to infringe the restrictive use covenant, the issues of esoteric damage theories no longer
have any bearing in this action. Accordingly, no trial will be held on those matters.
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enforcement of the Permanent Injunction Order, and that motion was denied. See June 20,
2013 Letter Order, ECF No. 168; see also Fourth Circuit Order, ECF No. 169 (denying
Joppatowne’s motion for a stay of permanent injunction pending appeal).
A two-day bench trial on the remaining issues of liability as to Beiler’s Baked Goods
and traditional damages as to the infringing stalls, Lapp’s Fresh Meats and All Fresh Quality
Seafood & Produce, commenced on July 1 and 2, 2013. Redner’s called two witnesses—
Gary O’Brien, Vice President of Perishable Retail Operations for Redner’s, who testified
regarding lost profits allegedly caused by the infringing stalls; and architectural expert
Jonathan McGowan, who testified to the gross floor area and in-store sales areas of the
remaining challenged stall. Joppatowne called its expert architect Shellie Curry, as well as
Robert E. Fowler, Esq., Joppatowne’s corporate representative. Based on the exhibits
introduced into evidence, the testimony of the four witnesses, the written submissions of the
parties, and the oral arguments of counsel, this Court sets forth its findings of fact and
conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
The accompanying Order enters Judgment in favor of Defendant Joppatowne G.P.
Limited Partnership and against Plaintiff Redner’s Markets, Inc. as to the remaining breach
of restrictive use covenant claims. In addition, this Court finds that Redner’s has failed to
prove lost profits with reasonable certainty as to the two infringing stalls, Lapp’s Fresh
Meats and All Fresh Quality Seafood & Produce, and therefore awards no monetary
damages. Accordingly, the Order and Judgment shall indicate the entry of Judgment in favor
of the Plaintiff Redner’s Markets, Inc. for injunctive relief as to Lapp’s Fresh Meats and All
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Fresh, with no monetary damages, and entry of Judgment in favor of the Defendant
Joppatowne G.P. Limited Partnership as to all other challenged stalls.
I.
THIS COURT’S PREVIOUS FINDINGS OF FACT AND CONCLUSIONS
OF LAW
The findings of fact and conclusions of law found by Judge Legg in his January 24,
2013 Memorandum Opinion are summarized herein, as they continue to govern this case.
A.
Previous Findings of Fact
Redner’s Markets, Inc. (“Redner’s” or “Plaintiff”) operates a chain of grocery stores
in Pennsylvania, Maryland, and Delaware. Jan. 24, 2013 Mem. Op. 1. On November 23,
2005, Redner’s executed a twenty-year lease agreement (“the Redner’s Lease”) with
Joppatowne G.P. Limited Partnership (“Joppatowne” or “Defendant”), the owner and
manager of the Joppatowne Plaza Shopping Center, which is located in Joppatowne,
Maryland at the intersection of Maryland Route 40 and Joppa Farm Road. Id. at 2. Article
XIII of the Redner’s Lease contains a restrictive use covenant, by which Joppatowne agreed
not to lease any space at the Joppatowne Plaza Shopping Center or within a five mile radius
thereof to be used as a food supermarket, butcher shop, seafood shop, or grocery store. See
Redner’s Lease § 13.01(a), Joint Trial Ex. 12.
This dispute arose when Joppatowne permitted an Amish farmer’s market and other
food stalls to lease space at the Joppatowne Plaza Shopping Center. Jan. 24, 2013 Mem. Op.
4. The Amish farmer’s market, which opened on March 17, 2011, contains seven stalls
inside an enclosure, which are loosely organized and headed by Menno Beiler (“Beiler”). Id.
The seven stalls, which are separately owned and operated, are Dutch Delights; Dutch
Pantry Fudge; Kreative Kitchen; Lapp’s Fresh Meats; King’s Cheese & Deli; Beiler’s BBQ;
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and Beiler’s Baked Goods. Id. at 5. An eighth stall, All Fresh Quality Seafood & Produce
(“All Fresh”), which is not associated with the Beiler group, is located outside the enclosure.
Id. There are two other food stalls (the “Vendor Stalls”) located outside the enclosure,
which were also challenged by Redner’s. Id.
B.
Previous Conclusions of Law
Judge Legg found that Joppatowne had breached the restrictive use covenant by
leasing space to All Fresh and Lapp’s Fresh Meats. See id. at 30-32. Under the Redner’s
Lease, All Fresh constituted a seafood shop and Lapp’s Fresh Meats was a butcher shop. Id.
However, three other stalls were found not to violate the restrictive use covenant. First,
Dutch Pantry Fudge, which Judge Legg found to be divisible into three sub-stalls, did not
violate the restrictive use covenant. Id. at 32-34. Likewise, Kreative Kitchen and Dutch
Delights did not fall within the prohibited uses of the restrictive use covenant. Id. at 34-35.
As to five remaining stalls—Beiler’s BBQ, Beiler’s Baked Goods, King’s Cheese &
Deli, and the two Vendor Stalls—Judge Legg set forth a three-step analysis that should be
applied to determine whether each stall breached the restrictive use covenant. Id. at 24.
Section 13.01(a)(ii)(2) defines a retail operator, for purposes of the restrictive use covenant,
as one whose “Gross Floor Area is 15,000 square feet or less” and whose “in-store sales
areas” offering specifically enumerated goods4 exceed twenty-five percent of the Gross Floor
Area. See Redner’s Lease § 13.01(a)(ii)(2). Judge Legg found that section 13.01(a)(ii)(2)
applied in this case. See Jan. 24, 2013 Mem. Op. 23. To conclude whether each stall
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Those goods are canned foods, fresh-baked bakery items, baking ingredients, fresh or frozen meats
and deli items, fresh uncooked fruits and vegetables, ice cream, frozen vegetables and frozen
prepared foods, milk and milk products, butter, eggs, cheese, and pet foods. Redner’s Lease
§ 13.01(a)(ii)(2).
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constituted an impermissible retail operator, Judge Legg explained, one would first have to
determine the subject stall’s “Gross Floor Area.” Id. at 24. The next step would involve
calculating the in-store sales areas devoted to the sale of the specifically enumerated goods
listed in section 13.01(a)(ii)(2). Id. Finally, one would apply simple arithmetic to find
whether the in-store sales areas devoted to the sale of those goods exceed, in the aggregate,
twenty-five percent of the Gross Floor Area. Id.
Judge Legg also made findings as to the terms “Gross Floor Area” and “in-store sales
areas.” Id. at 25. Typically, a store has “perimeter walls that encompass its gross floor area.”
Id. Because the food stalls at the Joppatowne Plaza Shopping Center were not bound by
perimeter walls on all sides, Judge Legg determined that the “Gross Floor Area” should
consist of the area of the vendor’s individual stall, excluding any common areas, such as a
lobby or parking lot, which benefit all retailers. Id. Next, Judge Legg found “in-store sales
areas” to include display cases, shelves, and racks. Id. at 25-26. Judge Legg rejected a more
“expansive view” of “in-store sales areas,” which might have encompassed “counter space
used for cash registers,” for example, or the “floor area on opposite sides of a display case
where customers and employees stand while discussing merchandise.” Id. at 25. A more
restrictive definition of “in-store sales areas” was warranted, Judge Legg found, because the
Redner’s Lease used the term in reference to the areas in the stalls that actually “present”
merchandise to customers. Id. at 26. Because the Redner’s Lease offered no guidance on
which space other than display cases, shelves, and racks should be counted, Judge Legg
limited the definition of “in-store sales areas” to avoid any speculation regarding other areas,
such as “sinks, prep tables, [and] employee work space.” Id.
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Applying Judge Legg’s definitions and three-step analysis, this Court sets out the
following findings of fact and conclusions of law.
II.
FINDINGS OF FACT
When the second stage of the bench trial began on July 1, 2013, the following issues
were pending: (1) whether, applying Judge Legg’s three-step analysis, Joppatowne breached
its restrictive use covenant as to Beiler’s BBQ, Beiler’s Baked Goods, King’s Cheese & Deli,
and the two Vendor Stalls, and (2) whether Redner’s is entitled to damages for lost profits
caused by the infringing stalls. At the outset of trial, however, Redner’s decided not to
pursue certain claims, limiting the facts that this Court must find. First, Redner’s indicated
that it was only pursuing a claim of liability as to Beiler’s Baked Goods, and not to Beiler’s
BBQ, King’s Cheese & Deli, or the two Vendor Stalls. Second, assuming this Court finds
that Beiler’s Baked Goods infringes the restrictive use covenant, then Redner’s seeks only
injunctive relief as to Beiler’s Baked Goods and not lost profits damages. Accordingly, any
lost profits damages sought by Redner’s would have to be attributable to the operation of
Lapp’s Fresh Meats and All Fresh Quality Seafood & Produce (“All Fresh”), which have
already been found by this Court to violate the Redner’s Lease.
A.
Beiler’s Baked Goods
Jonathan McGowan (“McGowan”), the Plaintiff’s expert architect, and Shellie Curry
(“Curry”), the Defendant’s expert architect, testified at trial regarding the “Gross Floor
Area” and “in-store sales areas” of Beiler’s Baked Goods. McGowan testified that the instore sales areas devoted to the sale of fresh-baked bakery items exceed, in the aggregate,
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twenty-five percent of the Gross Floor Area. Using Plaintiff’s Trial Exhibit 51,5 McGowan
calculated the Gross Floor Area to be 952 square feet. That calculation excluded the space
between the main portion of Beiler’s Baked Goods and a large, “C”-shaped display area to
its left. See Pl.’s Trial Ex. 51. The excluded space is used by customers to walk into the
display area and to access the coffee bar, which extends off of the main portion of the
Beiler’s Baked Goods stall. See id.; Pl.’s Trial Ex. 52, RED 467, 434. Amish employees also
use the space to restock the display shelves and coffee bar. See Pl.’s Trial Ex. 52, RED 465.
McGowan next calculated the in-store sales areas to be 301.75 square feet. See Pl.’s
Trial Ex. 51. In performing this calculation, McGowan counted the square footage of the
various display areas that are part of Beiler’s Baked Goods, as well as several areas devoted
to employee work space. See id. Using these calculations, McGowan concluded that Beiler’s
Baked Goods is an impermissible retail operator under section 13.01(a)(ii)(2) of the Redner’s
Lease, because its in-store sales areas represent 31.7 percent of the stall’s Gross Floor Area.
On the other hand, the Defendant’s expert Curry testified that Beiler’s Baked Goods’
in-store sales areas do not exceed twenty-five percent of the Gross Floor Area. Using
Defendant’s Trial Exhibit 65,6 Curry calculated the Gross Floor Area to be 1,116.75 square
5
Plaintiff’s Trial Exhibit 51 is a graphic, two-dimensional diagram of the Beiler’s Baked Goods stall.
The diagram was originally prepared by Shellie Curry, the Defendant’s expert architect, using
measurements that Curry took by hand when he visited the Amish farmer’s market at the
Joppatowne Plaza Shopping Center in 2010. Those measurements were entered into a computer
program called AutoCAD to produce the diagram. The diagram predates Judge Legg’s findings of
fact and conclusions of law on January 24, 2013, including the relevant definitions of “Gross Floor
Area” and “in-store sales areas.”
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Defendant’s Trial Exhibit 65 is an updated version of the diagram marked as Plaintiff’s Trial
Exhibit 61. This version reflects Curry’s understanding of the definitions of “Gross Floor Area”
and “in-store sales areas” as set forth in this Court’s January 24, 2013 Memorandum Opinion.
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feet. In contrast with McGowan, Curry included the space that exists between the main
portion of the Beiler’s Baked Goods stall and the “C”-shaped display shelves and coffee bar.
Next, Curry calculated the in-store sales areas devoted to the sale of fresh-baked
bakery items to be 236.5 square feet. He explained that his calculation differed from
McGowan’s calculation for two reasons. First, one portion of the stall, which McGowan
calculated as 17.75 square feet, was only 13.5 square feet. See Def.’s Trial Ex. 64 (showing
the square footage of one subset of Beiler’s Baked Goods to measure 3’3” by 4’2”); Def.’s
Trial Ex. 66 (comparing the calculations by McGowan and Curry).
Second, Curry
disregarded the areas devoted to employee work space—a total of sixty-one square feet—in
his calculation of in-store sales areas, because Judge Legg defined the term to include only
display areas, racks, and shelves. Judge Legg, Curry stated, specifically did not include work
areas not used to offer merchandise to the customer. Considering a total Gross Floor Area
of 1,116.75 square feet and in-store sales areas of 236.5 square feet, Curry found that 21.18
percent of the Gross Floor Area of Beiler’s Baked Goods was in-store sales areas devoted to
the sale of fresh-baked bakery items.
In the alternative, Curry performed the same three-step analysis using the “Gross
Floor Area” of 952 square feet that McGowan calculated. See Def.’s Trial Ex. 67. In other
words, Curry excluded from the Gross Floor Area the space between the main portion of
Beiler’s Baked Goods and the “C”-shaped display shelves and coffee bar. See id. Using the
adjusted Gross Floor Area, Curry concluded that the in-store sales areas devoted to the sale
of fresh-baked bakery items totaled to 24.84 percent of the Gross Floor Area of Beiler’s
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Baked Goods. Id. In either scenario, Curry testified that Beiler’s Baked Goods did not meet
the definition of a retail operator under section 13.01(a)(ii)(2) of the Redner’s Lease.
This Court finds that McGowan’s calculation understates the “Gross Floor Area” and
overstates the “in-store sales areas,” whereas Curry properly calculates both figures. First,
the Gross Floor Area of Beiler’s Baked Goods should include the space between the main
portion of the stall and the “C”-shaped display shelves and coffee bar. Judge Legg defined
“Gross Floor Area” as the square footage of the “individual stalls,” excluding the “common
areas” of the marketplace—for example, the main aisles, seating areas, lobby, and parking
lot. Jan. 24, 2013 Mem. Op. 25 & n.36. The space that McGowan excluded is part of the
individual stall and not a common area. Customers use the space to access the “C”-shaped
display shelves and coffee bar. See Pl.’s Trial Ex. 51; Pl.’s Trial Ex. 52, RED 467, 434. In
addition, Amish employees enter the space to restock the display shelves and coffee bar. See
Pl.’s Trial Ex. 52, RED 465.
Redner’s argued at trial that this space is akin to a main aisle, such that customers use
it to circumvent Beiler’s Baked Goods and reach other stalls. While it is not impossible that
a customer might use the space as a shortcut to surrounding stalls, the photographic exhibits
submitted by the Plaintiff do not suggest that use. See Pl.’s Trial Ex. 52, RED 467, 434, 465.
Nor would such a use cause the space to qualify as a common area. In keeping with Judge
Legg’s definition, it is clear that the space at issue is not a main aisle; rather, its purpose is to
provide areas adjacent to the coffee bar and large display shelves in which customers can
approach and examine the merchandise that Beiler’s Baked Goods offers. The space is
integral to the individual stall and should be calculated as part of the Gross Floor Area.
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Second, in his tally of the “in-store sales areas,” McGowan miscalculated a specific
portion of the Beiler’s Baked Goods stall as 17.75 square feet. See Pl.’s Trial Ex. 51. That
portion is actually 13.5 square feet, as Curry testified. Compare id., with Def.’s Trial Ex. 65.
Curry performed the measurements of Beiler’s Baked Goods by hand in 2010. Based on
Curry’s measurements, the portion of the stall at issue is 3’3” by 4’2”, or 13.5 square feet. See
Def.’s Trial Ex. 64; Def.’s Trial Ex. 66. Therefore, McGowan improperly added 4.25 square
feet to the stall’s “in-store sales areas.”
Finally, McGowan’s calculation of the “in-store sales areas” of Beiler’s Baked Goods
should not have included the stall’s employee work space. Judge Legg defined “in-store sales
areas” restrictively to avoid “speculation as to what in addition to display areas the term
might include.” Jan. 24, 2013 Mem. Op. 26. Judge Legg explained that although the term
clearly encompasses display areas, “the Lease offers no guidance for including or excluding
other areas,” such as “sinks, prep tables, employee work space, and a host of other areas
visible to customers.” Id. For this reason, Judge Legg narrowly defined the term to mean
display areas, shelves, and racks. Id.
Applying Judge Legg’s definition, employee work space is not part of a stall’s “instore sales areas.” Redner’s argued at trial that these spaces have windows through which
the customers may view the Amish employees making the baked goods. See Pl.’s Trial Ex.
52, RED 464, 462. Yet this fact does not render the space part of the “in-store sales areas.”
As Judge Legg emphasized in defining the term, the “in-store sales areas” are where
merchandise is presented for sale. Jan. 24, 2013 Mem. Op. 26. Aside from the obvious
purpose of providing an area in which the Amish employees roll dough, set out baking
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sheets, and move items in and out of the ovens, the space also displays to customers the
method by which the Amish prepare their baked goods. See Pl.’s Trial Ex. 52, RED 464,
462. However, at the windows of the work space, a customer is not presented with the
merchandise ready for purchase. By contrast, the baked goods in the display cases, shelves,
and racks are on view such that a customer could select an item, either by picking it out with
his own hands or with the assistance of an employee, and accept it for purchase.
Accordingly, the sixty-one square feet of work space that McGowan designated as in-store
sales areas should not have been so designated.
To summarize, this Court finds that the calculations offered by the Defendant’s
expert Curry are correct. The Gross Floor Area of Beiler’s Baked Goods is 1,116.75 square
feet. The stall’s in-store sales areas devoted to the sale of fresh-baked bakery items equal
236.5 square feet. Thus, the in-store sales areas represent 21.18 percent of the Gross Floor
Area of Beiler’s Baked Goods and is therefore not violative of section 13.01(a)(ii)(2) of the
Redner’s Lease.
B.
Lost Profits Damages
Gary O’Brien (“O’Brien”), the Vice President of Perishable Retail Operations for
Redner’s, testified regarding alleged lost profits suffered by Redner’s. According to O’Brien,
these damages arose out of the operation of Lapp’s Fresh Meats and All Fresh Quality
Seafood and Produce (“All Fresh”), both of which have been found to infringe the
restrictive use covenant. Joppatowne offered the testimony of Joppatowne’s corporate
representative Robert E. Fowler, Esq. (“Fowler”) regarding the damages calculations to
which O’Brien testified and specific factors which O’Brien did not take into account.
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During O’Brien’s testimony, he referred to Plaintiff’s Trial Exhibit 50, a document
containing week-by-week sales and profits figures for the meat and seafood departments at
Redner’s. See Pl.’s Trial Ex. 50. Using these figures, O’Brien calculated weekly sales averages
for the two departments. See Pl.’s Trial Ex. 54 (Redner’s meat department); Pl.’s Trial Ex. 55
(Redner’s seafood department). O’Brien then calculated the average weekly sales for the
year prior to the opening of the Amish farmer’s market as a baseline for comparison and
offered conclusions of the weekly losses allegedly caused by Joppatowne.
As for the Redner’s meat department, O’Brien found the weekly sales average in the
year prior to the opening of the Amish farmer’s market to be $12,886.64. See Pl.’s Trial Ex.
54. Using that figure as a baseline, O’Brien calculated the weekly sales average for the first
year after the market’s opening (March 20, 2011 to March 17, 2012), to be $12,296.92, with
an average weekly loss of $589.73. Id. In the second year after the market’s opening (March
18, 2012 to March 16, 2013), the Redner’s meat department had average weekly sales of
$11,600.86, resulting in an alleged weekly loss of $1,285.78. Id. During the remaining period
in which Lapp’s Fresh Meats was open and sales figures of Redner’s were available (March
17, 2013 to June 8, 2013), O’Brien calculated a weekly sales average for the Redner’s meat
department of $10,347.71 and an average weekly loss of $2,538.94. Id.
In total, O’Brien testified that the Redner’s meat department suffered lost profits
from the operation of Lapp’s Fresh Meats in the amount of $127,993.50. See id. On cross
examination, O’Brien admitted that the products offered by Lapp’s Fresh Meats did not
mirror the Redner’s meat department offerings. While Redner’s offers meats of all kinds,
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Lapp’s Fresh Meats sold only red meat, pork, and certain “processed” meats, such as
marinated steaks. Unlike Redner’s, Lapp’s Fresh Meats did not sell any poultry.
O’Brien performed the same calculations for the seafood department at Redner’s and
offered his conclusions regarding lost profits arising out of the operation of All Fresh
Quality Seafood & Produce (“All Fresh”). See Pl.’s Trial Ex. 55. During his testimony,
however, O’Brien adjusted his figures to account for the fact that All Fresh opened in late
May 2011 and closed on August 31, 2012. See Pl.’s Trial Ex. 57. The baseline that O’Brien
used to compare the weekly sales after All Fresh opened was $1,548.50, the weekly sales
average of the Redner’s seafood department from March 20, 2010 to March 19, 2011. See
Pl.’s Trial Ex. 55. Applying that baseline, O’Brien calculated an average weekly loss of
$22.59 for the first year after All Fresh opened and an average weekly loss of $242.36 in the
second year after All Fresh opened.
Id.
In total, O’Brien testified that the seafood
department at Redner’s suffered lost profits in the amount of $6,083.75 from the operation
of All Fresh. See Pl.’s Trial Ex. 57.
Joppatowne’s corporate representative Robert Fowler also testified regarding the
claim for lost profits damages. Fowler is a manager of shopping centers for The Cordish
Company, of which Joppatowne is a division. He testified regarding various factors that
could have affected the weekly losses that Redner’s claims to have suffered. Fowler offered
testimony primarily regarding a Save-a-Lot grocery store located approximately 3.3 miles
away from Redner’s on Route 40. Save-a-Lot is a low-cost store that competes with
Redner’s and whose landlord is The Cordish Company.
Fowler testified that before
Joppatowne signed the Redner’s Lease, Joppatowne asked Redner’s to reduce the restrictive
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use covenant’s five-mile reach to three miles, to allow the Save-a-Lot store to operate.
Instead, Redner’s permitted an exclusion of the Save-a-Lot from the Redner’s Lease while
keeping the five-mile radius in the restrictive use covenant. See Ex. D to the Redner’s Lease,
p. 000496, Joint Trial Ex. 12.
The Save-a-Lot on Route 40 opened in January 2011, just two months before the
Amish farmer’s market opened.
It features a seafood department, which sells frozen
seafood items, and a meat department, offering fresh meats of all kinds. The Save-a-Lot
does not feature an in-store bakery, so none of the baked goods it sells are fresh-baked in the
store.
Fowler testified that this Save-a-Lot offers merchandise comparable to that of
Redner’s and that the two stores’ designs and display cases are similar. While Redner’s
operates in a space of about 54,000 square feet, Save-a-Lot is much smaller, with about
18,000 square feet of space. The Save-a-Lot operates every day from approximately 8:00
a.m. to 10:00 p.m. Redner’s, by comparison, is open every day, twenty-four hours per day.
On the other hand, the Amish farmer’s market at the Joppatowne Plaza Shopping
Center is open only three days each week—Thursday, Friday, and Saturday—from
approximately 10:00 a.m. to 5:00 p.m. All Fresh, which is not affiliated with the market, is
open on those same three days as well as Sunday and has similar hours of operation.
According to Fowler, All Fresh sold mostly frozen seafood. Lapp’s Fresh Meats, as testified
to by O’Brien, offered red meat and pork, but no poultry.
As a manager of shopping centers leased by The Cordish Company, Fowler was
aware of a dramatic drop in Save-a-Lot’s sales in 2012, as compared to 2011. See Def.’s Trial
Ex. 46. Fowler also knew that Redner’s suffered a similar loss in sales in 2012. Based on
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Fowler’s knowledge, it appears that there was an overall drop in sales for grocery stores in
the Joppatowne area in 2012.
Finally, Fowler testified to other grocery stores that are nearby to Redner’s. Between
Redner’s and Save-a-Lot on Route 40, there are also Mars and Aldi grocery stores. See Pl.’s
Trial Ex. 56. Beyond Save-a-Lot on Route 40, in the opposite direction of Redner’s, is a
Food Lion. Id.
III.
CONCLUSIONS OF LAW
The issues pending before this Court are (1) whether Joppatowne breached the
restrictive use covenant as to Beiler’s Baked Goods, and (2) whether Redner’s is entitled to
lost profits damages arising out of the operation of the infringing stalls, Lapp’s Fresh Meats
and All Fresh Quality Seafood & Produce (“All Fresh”). As explained in Section II supra,
Redner’s abandoned its breach of contract claims as to Beiler’s BBQ, King’s Cheese & Deli,
and the two Vendor Stalls, as well as its damages claim relating to any lost profits allegedly
caused by Beiler’s Baked Goods. For the reasons that follow, this Court enters Judgment in
favor of Joppatowne and against Redner’s on the remaining claim of liability and finds that
Redner’s has failed to prove lost profits damages.
A.
Alleged Breach of the Restrictive Use Covenant as to Beiler’s Baked Goods
In its Findings of Fact, this Court found the calculations offered by the Defendant’s
expert architect Shellie Curry to be correct. The “Gross Floor Area” of Beiler’s Baked
Goods is therefore 1,116.75 square feet and includes the space between the main portion of
the stall and the “C”-shaped display shelves and coffee bar. The “in-store sales areas”
devoted to the sale of fresh-baked bakery items is 236.5 square feet and excludes employee
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work space. Thus, the in-store sales areas of Beiler’s Baked Goods represent only 21.18
percent of the Gross Floor Area, and the stall is not an infringing retail operator under
section 13.01(a)(ii)(2) of the Redner’s Lease.
It is worth noting that even if the “Gross Floor Area” excluded the space that
Redner’s considers a common area, the “in-store sales areas” of Beiler’s Baked Goods would
not exceed twenty-five percent of the Gross Floor Area. Curry performed the same threestep analysis using McGowan’s Gross Floor Area figure of 952 square feet. See Def.’s Trial
Ex. 67. In this alternate scenario, Curry found that the in-store sales areas devoted to the
sale of fresh-baked bakery items totaled to 24.84 percent of the Gross Floor Area. Id.
Under either scenario, then, Beiler’s Baked Goods is a permissible use. For these reasons,
Joppatowne does not violate the restrictive use covenant of the Redner’s Lease by permitting
Beiler’s Baked Goods to operate, and Judgment is entered in favor of Joppatowne and
against Redner’s as to this final breach of contract claim.
B.
Alleged Lost Profits Damages
For Joppatowne’s violation of the restrictive use covenant as to Lapp’s Fresh Meats
and All Fresh, Redner’s seeks damages in the form of lost profits. Through the testimony of
Gary O’Brien (“O’Brien”), the Vice President of Perishable Retail Operations for Redner’s,
Redner’s sought to prove lost profits in the meat department of $127,993.50 and in the
seafood department of $6,083.75. See Pl.’s Trial Exs. 54-55, 57. A plaintiff can recover lost
profits where (1) the plaintiff shows that the defendant’s breach caused the loss; (2) the
defendant could have reasonably foreseen that a loss of profits would be a probable result of
breach at the time the defendant executed the contract; and (3) the lost profits can be proved
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with reasonable certainty. Impala Platinum Ltd. v. Impala Sales (U.S.A.), Inc., 389 A.2d 887, 907
(Md. 1978). Damages may not be awarded if the computation is based on “speculation or
guesswork.” Atkinson Warehousing & Distrib. Inc. v. Ecolab, Inc., 99 F. Supp. 2d 665, 669 (D.
Md. 2000) (citing Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264 (1946)).
For two reasons, damages for lost profits will not be awarded in this case. First,
Redner’s failed to prove, as it must, that its lost profits were caused by Joppatowne’s breach.
See Impala, 389 A.2d at 907. As Fowler testified, just two months before the Amish farmer’s
market opened at the Joppatowne Plaza Shopping Center, a Save-a-Lot opened 3.3 miles
away on Route 40. Save-a-Lot is a low price competitor of Redner’s, has similar hours of
operation, and offers like merchandise. O’Brien’s lost profits analysis did not account for
the possibility that some of Redner’s lost profits may have been attributable to Save-a-Lot.
As for Lapp’s Fresh Meats and All Fresh, Redner’s offered no evidence of their sales
volume. To award damages in Redner’s favor, Redner’s asks this Court to assume that its
lost profits are attributable to those infringing stalls, even though the Court has no
knowledge of how successful either stall was in selling its merchandise. In addition, the stalls
had much shorter hours of operation and, in the case of Lapp’s Fresh Meats, offered a more
limited variety of products. Considering all of these factors that distinguish the farmer’s
market stalls from Redner’s and its direct competitor Save-a-Lot, this Court doubts that
Joppatowne was the sole cause of the entire lost profits of the meat and seafood
departments at Redner’s to which O’Brien testified.
Second, O’Brien’s damages calculation was based on impermissible speculation and
guesswork. See Bigelow, 327 U.S. at 264. As explained in more detail in Section II.B of this
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Memorandum Opinion, O’Brien’s analysis relied on a baseline comparison of the year prior
to the opening of the Amish farmer’s market at the Joppatowne Plaza Shopping Center. Yet
O’Brien did not explain why such a baseline was appropriate or reliable. It could be that the
sales of meat and seafood at Redner’s during the year prior to the opening of the market
were influenced by external factors that render those figures an imperfect baseline from
which to compare subsequent years of sales. Redner’s offered no explanation for O’Brien’s
method. Moreover, Fowler testified that there was a decline in profits for both Redner’s and
Save-a-Lot in 2012. This fact suggests that the lost profits to which O’Brien testified may
not accurately reflect the overall market impact on sales at Redner’s. O’Brien did not speak
to this issue in testimony and Redner’s offered no reason to discount it. Finally, because
Redner’s failed to show the sales volume of Lapp’s Fresh Meats and All Fresh, this Court
cannot test the lost profits calculations by O’Brien by comparing them to the sales generated
by the stalls.
At bottom, O’Brien’s method for calculating damages failed to account for other
factors that may have impacted the sales of meat and seafood at Redner’s. For this reason,
Redner’s has not proved its lost profits attributable to Joppatowne with “reasonable
certainty.”
Impala, 389 A.2d at 907.
Rather, Redner’s has relied on guesswork and
speculation that this Court may not accept. See Bigelow, 327 U.S. at 264. Accordingly, its
claim for lost profit damages fails.
IV.
CONCLUSION
For the reasons stated above, Judgment is hereby entered in favor of the Defendant
Joppatowne G.P. Limited Partnership and against the Plaintiff Redner’s Markets, Inc., to the
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extent that Beiler’s Baked Goods was found by this Court not to violate the restrictive use
covenant of the Redner’s Lease. Moreover, while Redner’s has been granted injunctive relief
as to the infringing stalls Lapp’s Fresh Meats and All Fresh Quality Seafood & Produce in
this Court’s previous Order of Permanent Injunction (ECF No. 159), Redner’s is not
entitled to lost profits, as it failed to prove those damages with reasonable certainty at trial.
A separate Order and Judgment follows.
Dated: July 11, 2013
______/s/______________________
Richard D. Bennett
United States District Judge
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