2000 CLEMENTS BRIDGE, LLC v. OFFICEMAX NORTH AMERICA, INC.
Filing
84
OPINION. Signed by Judge Joseph E. Irenas on 8/21/2012. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
2000 CLEMENTS BRIDGE, LLC,
HONORABLE JOSEPH E. IRENAS
Plaintiff-Counterclaim
Defendant,
CIVIL ACTION NO. 11-57
(JEI/KMW)
v.
OPINION
OFFICEMAX NORTH AMERICA, INC.,
DefendantCounterclaimant.
APPEARANCES:
Patras Williams, LLC
Amy M. Williams
14 Countryside Lane, Suite #100
Ringwood, New Jersey 07456
Counsel for Plaintiff
Reilly, Janiczek & McDevitt, P.C.
Susan Valinis
2500 McClellan Blvd., Suite 240
Merchantville, New Jersey 08109
Counsel for Defendant
IRENAS, Senior District Judge:
Plaintiff 2000 Clements Bridge, LLC alleges that Defendant
OfficeMax North America, Inc. breached the terms of a lease for
commercial property. Presently before the Court are Cross Motions
for Summary Judgment. (Dkt. Nos. 52, 75)
I.
In February 2006, AIG Baker Deptford, LLC (”Former
1
Landlord”) acquired ownership of Deptford Landing Shopping Center
(the “Shopping Center”). (See Williams Cert. Ex. A at 2) On
September 13, 2007, Former Landlord leased a lot to Defendant at
the Shopping Center (“Defendant’s Lease”). (See Valinis Cert. Ex.
A at 1)
Defendant’s Lease contained a restrictive covenant (the
“Prohibited Uses Provision”), inserted for the benefit of
Defendant, which ran with the land. (See Valinis Cert. Ex. A at
23) The Prohibited Uses Provision prohibited Former Landlord and
his successors from leasing a lot to a tenant in the Shopping
Center likely to be a direct competitor of Defendant.
During the initial term of this lease or during any
renewal period hereunder, and for so long as Tenant is
operating an office supply superstore from the Demised
Premises, Landlord covenants and agrees that it shall not
enter into a lease or sale of any portion of the Shopping
Center (excluding the Demised Premises) for the
following:
(a)
For the purpose of, or which is permitted to
be, the sale of office, home office, school or
business products, computers and computer
products, office, home office, school or
business
supplies
or
equipment;
office
furniture; or electronics (including by way of
example those businesses operated by Office
Depot, Staples, Office Shop Warehouse, Mardel
Christian Office and Education Supply Store,
Mail Boxes etc., and Workplace); or for use as
a business support center, copy center or
“Kinko” type of operation (all of which are
hereinafter referred to as the “Prohibited
Uses”), except to the extent permitted by
subparagraph (b) immediately below . . . or
(b)
For any purpose which would permit more than
(i) one thousand (1,000) square feet of space
2
to be used for any Prohibited Uses . . .
(Valinis Cert. Ex. A at 23)
Defendant’s Lease also included a cotenancy provision
(“Cotenancy Provision”). If Michaels Stores, Inc., PetSmart, Inc.
or Circuit City Stores, Inc. (“Major Tenants”)1 ceased operations
at the Shopping Center (a “Cotenancy Event”) for 180 days,
Defendant’s minimum rent would abate.2 (See Valinis Cert. Ex. A
at 30) If, after eighteen months, Former Landlord had not found a
new tenant to replace the vacating Major Tenant (“Replacement
Tenant”), Defendant gained the right to terminate. (Id.) Former
Landlord could cure the Cotenancy Event within eighteen months
merely by finding a Replacement Tenant. (Id.) To cure after
eighteen months, however, Former Landlord would have to find a
Replacement Tenant and provide Defendant with notice of the cure
or Defendant’s right to terminate would not lapse. (Id.)
The parties agree that, on March 7, 2009, a Cotenancy Event
occurred when Major Tenant Circuit City ceased operations at the
Shopping Center. (See Pl.’s Facts ¶ 26)3 On July 29, 2009, Former
1
These Major Tenants entered leases before Defendant and
thus were not subject to the Prohibited Uses Provision.
2
If a Cotenancy Event occurred, Defendant had to pay only
3% of gross sales (“Percentage Rent”) for the months that the
Cotenancy Event remained uncured. (Valinis Cert. Ex. A at 30)
3
Citations to “Facts” refer to the parties’ obligation to
submit statements of undisputed facts with motions for summary
judgment. See L.Civ.R. 56.1(a).
3
Landlord leased the lot to Replacement Tenant Gregg Appliances,
Inc. (“hhgregg Lease”), an electronics retail store similar to
Circuit City. (Id. at ¶ 27) On May 20, 2010, hhgregg opened for
business approximately fourteen months after the Cotenancy Event.
The hhgregg Lease described the proper uses for the property
(“Use Provision”):
Use. Except with respect to the Exclusive Uses and
Restrictions, which are listed in Exhibit “D” attached
hereto, and to the extent not prohibited by the Permitted
Encumbrances listed in Exhibit “F” attached hereto,
Tenant may use the Premises for any lawful retail purpose
including, but not limited to the display and retail sale
of electronics, appliances, audio and video equipment,
computers and bedding as typically sold in stores
operated by Tenant, and for the storage of merchandise or
service related purposes ancillary to the sale of its
goods.
(Valinis Cert. Ex. B at 4-5)
Attached verbatim to the hhgregg Lease as Exhibit D was the
Prohibited Uses Provision from Defendant’s Lease. (Valinis Cert.
Ex. B at Ex. D) The principal issue in this case is the
interpretation of these competing provisions: the Prohibited Uses
Provision purportedly prohibited the sale of computers and
electronics while the Use Provision expressly permitted such
retail activity.
On July 16, 2010, Plaintiff became the owner of the Shopping
Center and succeeded Former Landlord’s interests under all of the
Shopping Center leases. (See Williams Cert. Ex. A at 1) On July
27, 2010, Defendant sent notice to Plaintiff that not only did
4
the Cotenancy Event remain uncured, but that the hhgregg Lease
also violated Defendant’s Prohibited Uses Provision.4 (See Pl.’s
Facts ¶ 39)
Plaintiff disputed Defendant’s reading of the Prohibited
Uses Provision and sent Defendant notice that, under its
interpretation, hhgregg was not in violation. (See Valinis Cert.
Ex. C, Letter from Williams, Aug. 10, 2010) While still disputing
that a violation had occurred, Plaintiff sent hhgregg a notice of
default and demanded a cure. (Id.) [H]hgregg, however, did not
cure the violation and Plaintiff notified hhgregg that the
behavior had “ripened into an Event of Default.” (Valinis Cert.
Ex. C, Letter from Williams, Sept. 16, 2010) Despite the warning,
Plaintiff pursued no further rights or remedies against hhgregg.
(See Def.’s Facts ¶ 25)
Following this correspondence, Defendant continued to pay
Percentage Rent until October 7, 2010. (See Def.’s Br. 11) At
Plaintiff’s insistence, Defendant then paid full rent for the
remainder of October and November under protest. (See Pl.’s Facts
¶ 50, 52) After November, it is unclear what amount of rent, if
4
Ironically, OfficeMax negotiated for Circuit City to remain
in the Shopping Center via the Cotenancy Provision. OfficeMax
evidently found Circuit City to benefit its business. When
Landlord replaced Circuit City with hhgregg, a substantially
similar store, OfficeMax claimed a violation of the Prohibited
Uses Provision. OfficeMax’s seemingly anomalous position,
however, is not dispositive to these Motions.
5
any, Defendant paid.5
On November 23, 2010, Plaintiff filed the Complaint in New
Jersey State Court. (See Pl.’s Br. 12) On December 7, 2010,
Defendant sent Plaintiff written notice that it was terminating
the lease. (See Pl.’s Facts ¶ 54) On January 6, 2011, Defendant
removed this action on the basis of diversity jurisdiction. (Dkt.
No. 1) On January 20, 2011, Defendant filed the Answer and
counterclaimed. (Dkt. No. 4) On January 22, 2011, Defendant
ceased operations. On February 28, 2011, Plaintiff retook
possession of Defendant’s property. (See Def.’s Facts ¶ 12)
II.
“[S]ummary judgment is proper ‘if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.’” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R.Civ.P. 56(c)).
In deciding a motion for summary judgment, the Court must
5
The parties do not address post-November 2010 rent
payments in their Local Rule 56.1 Statements of Uncontested Facts
whatsoever. However, in the Complaint, Plaintiff alleged that
Defendant did not pay any rent following the protested payment
for November. (Compl. ¶ 80) Defendant denied this allegation and
maintained that all rent had been paid in full. (Def.’s Answer ¶
80) Neither of these facts may be considered, though, because
they were not included in the parties’ 56.1 statements.
6
construe the facts and inferences in a light most favorable to
the non-moving party. Pollock v. Am. Tel. & Tel. Long Lines, 794
F.2d 860, 864 (3d Cir. 1986).
“‘With respect to an issue on which the non-moving party
bears the burden of proof, the burden on the moving party may be
discharged by ‘showing’ – that is, pointing out to the district
court – that there is an absence of evidence to support the
nonmoving party’s case.’” Conoshenti v. Public Serv. Elec. & Gas,
364 F.3d 135, 145-46 (3d Cir. 2004) (quoting Celotex, 477 U.S. at
323). The role of the Court is not “to weigh the evidence and
determine the truth of the matter, but to determine whether there
is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249 (1986). “Only disputes over facts that might
affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment.” Id. at 249.
III.
The claims of both Plaintiff and Defendant revolve around
the propriety of Defendant’s termination of the Lease under
either (1) the Prohibited Uses Provision or (2) the Cotenancy
Provision.6 Both parties move for summary judgment on all claims.
6
Plaintiff’s Complaint technically alleges four claims: (1)
anticipatory breach of contract; (2) unjust enrichment; (3)
breach of the covenant of good faith and fair dealing; and (4)
tortious interference with contractual relations. Plaintiff
additionally seeks a declaratory judgment finding Defendant
7
A.
First, Defendant could rightfully terminate if Plaintiff
leased a portion of the Shopping Center that violated the
Prohibited Uses Provision, and such violation continued for sixty
days after Defendant gave Plaintiff written notice. (See Valinis
Cert. Ex. A at 23-25)
Normally, under New Jersey law, the construction of a
written contract is a matter of law. See Fastenberg v. Prudential
Ins. Co. of Am., 309 N.J. Super. 415, 420 (App. Div. 1998); see
also Verhagen v. Platt, 1 N.J. 85, 88 (1948) (stating that the
common intent of the parties controls). When construing a
contract “it should not be interpreted to render one of its terms
meaningless. ‘Literalism must give way to context.’” Cumberland
Cnty. Improvement Authority v. GSP Recycling Co., Inc., 358 N.J.
Super. 484, 497 (App. Div. 2003) (quoting Borough of Princeton v.
Bd. of Chosen Freeholders of Cnty. of Mercer, 333 N.J. Super.
310, 325 (App. Div. 2000), aff’d, 169 N.J. 135 (2001). “[W]here
there is uncertainty, ambiguity or the need for parol evidence to
aid in the interpretation, then the doubtful provision should be
wrongfully terminated its lease.
Defendant’s Answer technically alleges three counterclaims:
(1) breach of contract; (2) unjust enrichment; and (3) breach of
the covenant of good faith and fair dealing. Defendant also seeks
a declaratory judgment finding that Defendant properly terminated
its lease.
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left to the jury.” Great Atl. & Pac. Tea Co. v. Checchio, 335
N.J. Super. 495, 502 (App. Div. 2000) (citing Michaels v.
Brookchester, Inc., 26 N.J. 379, 387 (1958)).
To determine whether a violation occurred, the Court must
determine what was actually prohibited. The Prohibited Uses
Provision contains two lists. One list prohibits certain
products: “office, home office, school or business products,
computers and computer products, office, home office, school or
business supplies or equipment; office furniture; or
electronics.” (Valinis Cert. Ex. A at 23) The second list
identifies examples of prohibited entities: “Office Depot,
Staples, Office Shop Warehouse, Mardel Christian Office and
Education Supply Store, Mail Boxes etc., and Workplace.” (Id.)
The Prohibited Uses Provision, therefore, must be
interpreted to prohibit the sale of the listed products, but only
when sold through a prohibited office superstore. See Borough of
Princeton, 333 N.J. Super. at 325 (noting that a document “must
be read as a whole, without artificial emphasis on one section
with a consequent disregard for others.”). This interpretation
harmonizes both the hhgregg Lease and Defendant’s Lease. It also
comports with commonsense.
To place undue emphasis on the list of prohibited products,
as Defendant suggests, would cause several problems. First, the
list of office superstores would be rendered meaningless. Second,
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hhgregg’s Use Provision would directly contradict Defendant’s
Prohibited Uses Provision attached as Exhibit D to the hhgregg
Lease. The Court cannot fathom that an electronics retail store
would intend to enter a contract that prohibited the sale of
electronics. Accordingly, the Court finds that the Prohibited
Uses Provision is unambiguous, parol evidence is not required,
and Plaintiff did not violate its terms. Defendant, therefore,
was not entitled to terminate the Lease under the Prohibited Uses
Provision.
B.
Second, under the Cotenancy Provision, Defendant’s only
argument is that hhgregg cannot be a Replacement Tenant because
hhgregg was violating the Prohibited Uses Provision. As noted
above, hhgregg was not violating the Prohibited Uses Provision.
Even if it were, however, nothing in the Cotenancy Provision
requires the Replacement Tenant to abide by the Prohibited Uses
Provision. The two provisions create two separate obligations
with different remedies. Defendant’s attempt to conflate the two
provisions, therefore, is without merit.
Moreover, it is undisputed that hhgregg opened for business
well within eighteen months. Although Plaintiff erroneously
conceded that the Cotenancy Event was not properly cured because
Plaintiff did not send Defendant notice of a cure (see Pl.’s Br.
at 27-28 & n.4), no reasonable interpretation of the Cotenancy
10
Provision required Plaintiff to give such notice. Before the
expiration of eighteen months, a Cotenancy Event continued “until
such time as Landlord has caused the Vacant Space to be open and
operated by a single-user, retail tenant, if the Vacant Space was
previously occupied by any Major Tenant.” (Valinis Cert. Ex. A at
30) It is undisputed that hhgregg is a single-user, retail
tenant.
The Court declines to send this case to a jury based solely
on Plaintiff’s erroneous concession where no reasonable jury
could find in Defendant’s favor. Accordingly, Defendant did not
have the right to terminate under the Cotenancy Provision.
C.
For the reasons above, Defendant was not entitled to
terminate the contract under either the Prohibited Uses Provision
or the Cotenancy Provision. Accordingly, Plaintiff’s Motion will
be granted with respect to the claim for a breach of contract.
Plaintiff’s other claims, however, are without merit.
First, unjust enrichment is an equitable doctrine. See Goady
v. Philadelphia Elec. Co., 639 F.2d 117, 122 (3d Cir. 1981)
(“[I]f an adequate remedy at law exists, equitable relief will
not be granted.”)
Second, a breach of the covenant of good faith and fair
dealing does not apply to express contract terms. See Cargill
Global Trading v. Applied Development Co., 706 F.Supp.2d 563, 580
11
(D.N.J. 2010) (quoting Fields v. Thompson Printing Co., 363 F.3d
259, 271-72 (3d Cir. 2004) (“[W]here the terms of the parties’
contract are clear, the implied covenant of good faith and fair
dealing will not override the contract’s express language.”).
Third, with respect to the tortious interference claim, “an
entity cannot interfere with its own contract ...” In re Inter’l
Ben. Grp., Inc., 2007 WL 1875926, *4 (D.N.J. 2007).
Finally, a declaratory judgment is moot in light of
Plaintiff’s success on the breach of contract claim.
Defendant’s counterclaims, on the other hand, have no merit.
Because this Court finds that Defendant improperly terminated
Defendant’s Lease, Defendant’s Motion will be denied in full.
IV.
For the foregoing reasons, Plaintiff’s Motion will be denied
on the claims for unjust enrichment, breach of the covenant of
good faith and fair dealing, tortious interference, and a
declaratory judgment. In all other respects, Plaintiff’s Motion
will be granted. Defendant’s Cross Motion will be denied in full.
Dated: 8/21/12
/s/ Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J.
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