ATLANTIC CITY ELECTRIC COMPANY v. WAL-MART STORES EAST, INC. et al

Filing 19

OPINION. Signed by Judge Noel L. Hillman on 10/29/2013. (tf, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

ATLANTIC CITY ELECTRIC
COMPANY,

Civil Action No.
13-3272(NLH/AMD)

Plaintiff,
v.

OPINION

WAL-MART STORES EAST, INC.,
WAL-MART STORES EAST, LP, WALMART STORES EAST I, LP, and
WAL-MART REAL ESTATE BUSINESS
TRUST,
Defendants.

FREDRIC LEIGH SHENKMAN
LLOYD DAVID LEVENSON
COOPER, LEVENSON, APRIL, NIEDELMAN & WAGENHEIM, PA
1125 ATLANTIC AVENUE
3RD FLOOR
ATLANTIC CITY, NJ 08401-1125
On behalf of plaintiff
N. ARI WEISBROT
LAUREN JILL TALAN
FOX ROTHSCHILD, LLP
75 EISENHOWER PARKWAY
ROSELAND, NJ 07068
On behalf of defendants
HILLMAN, District Judge
This matter concerns an agreement for the sale of property
owned by plaintiff, the Atlantic City Electric Company (“ACE”),
to defendants, Wal-Mart Stores East, Inc., Wal-Mart Stores East
LP a/k/a Wal-Mart Stores East I, LP and Wal-Mart Real Estate
Business Trust (collectively referred to as “Wal-Mart”).

ACE

claims that Wal-Mart’s delay in obtaining the proper approvals
from the State of New Jersey breached the parties’ agreement.
Wal-Mart has moved to dismiss ACE’s complaint, while ACE has
moved for partial summary judgment seeking to compel Wal-Mart to
fulfill its obligations to close on the property.

For the

reasons explained below, both motions will be denied.
BACKGROUND
On July 9, 1999, over fourteen years ago, ACE entered into a
purchase agreement with Wal-Mart to sell Wal-Mart a 35.2 acre
tract of land located in Egg Harbor Township, New Jersey (the
“Agreement”).

Pursuant to the terms of the Agreement, Wal-Mart

agreed to pay ACE $11,500,000.00 for the purchase of the
property.

In order to construct a Wal-Mart store on the

property, Wal-Mart was required to obtain certain governmental
permits and approvals and the agreement to sell was contingent
upon Wal-Mart obtaining the requisite approvals.

Specifically,

paragraph 15(a) of the agreement provides:
15. Approvals.
(a) Wal-Mart intends to apply for governmental permits
and approvals in order to construct improvements to
utilize the land for the construction of a Wal-Mart
store and related retail facilities (the "Project").
Wal-Mart's obligation to close under this Agreement is
contingent on Wal-Mart obtaining, at Wal-Mart's sole
cost and expense, the final, unappealable, valid and
irrevocable grant, on terms and conditions satisfactory
to Wal-Mart, in Wal-Mart's sole and absolute discretion
of those permits, licenses, variances, rights of way,
and approvals that are necessary and/or required to
permit Wal-Mart to obtain building permits for and to
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construct the Project in a size and design satisfactory
to Wal-Mart (collectively, the "Approvals"). The
Approvals shall include without limitation site plan
and/or zoning approval from the Township of Egg Harbor
Township and County of Atlantic, approval of the
requisite agencies of the State of New Jersey,
including NJDEP ("CAFRA") and NJDOT ("Highway Access"),
approvals from the federal government if necessary, and
any other permits or approvals relating to zoning,
building, grading, occupancy, curb cuts, driveways,
environmental controls, and other permits, licenses,
variances, agreements, rights of way, approvals,
contracts with utility providers as Buyer determines
are necessary or appropriate.
(Amended Compl., Ex. 1.)
The original agreement was amended six times, with the last
amendment entered into on May 25, 2005.

During that time, Wal-

Mart was obligated to pay ACE certain funds in consideration of
all the delays.

Some of the money went directly to ACE as fees

for extensions of time and some of the money was applied to the
purchase price and placed in escrow.

The final amendment

provided, in relevant part, that “Closing shall be held within
twenty (20) days following Buyer’s receipt of New Jersey
Department of Transportation Approvals and provided that Buyer
has delivered to Seller a current Report of Title a minimum of
ninety-days prior to closing.”

(Amended Compl., Ex. 7.1)

Closing has still not occurred because the NJDOT has not issued

1

The copy of the amended complaint accompanying the notice
of removal is missing the first page of Exhibit 7, which is the
sixth amendment. (See Docket No. 1-3 at 55-56.) A full copy of
the sixth amendment is attached as Exhibit 7 to the Certification
of Fredric L. Shenkman in support of ACE’s motion for summary
judgment. (See Docket No. 11-3 at 47-49.)
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its final approval of Wal-Mart’s traffic plans.
In its complaint, ACE claims that “Wal-Mart received a
municipal decision and resolution2 approving a revised site plan
which incorporated the NJDOT’s [2009] conceptual approval for the
Property on June 20, 2011,” but that Wal-Mart did not timely file
for the final approval from the NJDOT, and “if Wal-Mart had
timely filed for final approval from the NJDOT, same would have
already been received.”

(Amended Compl. ¶¶ 37, 39.)

ACE claims

that Wal-Mart’s alleged failure to timely file for NJDOT final
approval constitutes a breach of the purchase agreement and the
agreement’s inherent covenant of good faith and fair dealing.
(Id., First and Second Counts.)

ACE also claims that Wal-Mart’s

dilatoriness has caused needless delay, damaging ACE and causing
the property to waste.3

(Id., Third Count.)

Wal-Mart has moved to dismiss ACE’s complaint in its
entirety, arguing that ACE’s claims have no merit because WalMart has not received final approval from the NJDOT, and without

2

ACE’s complaint states that Egg Harbor Township’s approval
for the proposed use of the property has been challenged in New
Jersey state court. The briefing reveals that the suits
challenging the municipality’s approvals were dismissed by the
Law Division in June 2013, but those decisions have been appealed
to the Appellate Division. The lack of finality to these
lawsuits is another basis for Wal-Mart’s claimed inability to
close on the property.
3

As discussed below, in its motion for summary judgment and
opposition to Wal-Mart’s motion to dismiss, ACE asserts that WalMart has, in essence, enjoyed purchase money financing on the
property at no interest.
4

that approval, pursuant to the paragraph 15(a) of the Agreement
and paragraph 1 of the sixth amendment, it has not breached any
obligation to close on the property.

Relatedly, Wal-Mart argues

that because the municipal approvals are currently being
litigated, those approvals are not “final” and, accordingly, are
not a satisfied requirement of the parties’ sale agreement.
Because the final approvals are out of the hands of Wal-Mart,
ACE’s claim that Wal-Mart has breached the agreement, and also
breached the inherent covenants of good faith and fair dealing,
are not actionable.
ACE contests Wal-Mart’s position.

ACE argues that it has

properly alleged that Wal-Mart’s bad faith in delaying its
application for final approval from the NJDOT caused Wal-Mart to
breach the contract and its good faith covenants.

But-for Wal-

Mart’s delay in seeking and obtaining the required approvals and
its refusal to close, ownership of the property would have been
transferred to Wal-Mart, and ACE would not be subject to its
property wasting and the burden of the property’s carrying costs.
In addition to opposing Wal-Mart’s motion to dismiss, ACE
has filed a pre-answer, pre-discovery motion for partial summary
judgment.

ACE argues that it is entitled to judgment as a matter

of law that Wal-Mart has breached the Agreement.

ACE further

argues that Wal-Mart should be compelled to close on the property
immediately.

Wal-Mart opposes the motion, arguing, first, that

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ACE’s complaint has no merit, and, second, if ACE’s complaint may
proceed, Wal-Mart’s alleged dilatory and bad faith actions
represent disputed facts precluding summary judgment.
DISCUSSION
A.

Subject matter jurisdiction

Defendants removed this action to this Court from New Jersey
state court.

This Court exercises subject matter jurisdiction

pursuant to 28 U.S.C. § 1332 because there is complete diversity
of citizenship between the parties and the amount in controversy
exceeds $75,000.

The citizenship of the parties as stated in

defendants’ amended notice of removal is as follows: Plaintiff
Atlantic City Electric Company is a New Jersey corporation with
its principal place of business in New Jersey;

Defendant Wal-

Mart Real Estate Business Trust is a trust organized under the
laws of Delaware, and the sole trustee and beneficiary is Pamela
Kohn, a citizen of Arkansas; Defendant Wal-Mart Stores East, Inc.
was converted to Wal-Mart Stores, LLC on January 25, 2011; WalMart Stores, LLC is organized under the laws of the state of
Arkansas, and its sole member is Wal-Mart Stores, Inc., which is
a Delaware corporation with its principal place of business in
Arkansas; Defendant Wal-Mart Stores East, LP is a Delaware
partnership with its principal place of business in Arkansas, and
its partners are WSE Investment, LLC and WSE Management, LLC,
which are both organized under the laws of Delaware; the sole

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member of WSE Investment, LLC and WSE Management, LLC is Wal-Mart
Stores East, LLC.4
B.

Motion to dismiss and summary judgment standards
1.

Motion to dismiss

When considering a motion to dismiss a complaint for failure
to state a claim upon which relief can be granted pursuant to
Federal Rule of Civil Procedure 12(b)(6), a court must accept all
well-pleaded allegations in the complaint as true and view them
in the light most favorable to the plaintiff.
Fisher, 423 F.3d 347, 351 (3d Cir. 2005).

Evancho v.

It is well settled

that a pleading is sufficient if it contains “a short and plain
statement of the claim showing that the pleader is entitled to
relief.”

Fed. R. Civ. P. 8(a)(2).

Under the liberal federal

pleading rules, it is not necessary to plead evidence, and it is
not necessary to plead all the facts that serve as a basis for
the claim.

Bogosian v. Gulf Oil Corp., 562 F.2d 434, 446 (3d

Cir. 1977).

However, “[a]lthough the Federal Rules of Civil

Procedure do not require a claimant to set forth an intricately
detailed description of the asserted basis for relief, they do
require that the pleadings give defendant fair notice of what the

4

As noted previously, the sole member of Wal-Mart Stores,
LLC is Wal-Mart Stores, Inc., a Delaware corporation with its
principal place of business in Arkansas. Plaintiff names WalMart Stores East I, LP as a defendant. No entity exists by that
name, and it is instead an assumed named used by Wal-Mart Stores
East, LP.
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plaintiff’s claim is and the grounds upon which it rests.”
Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S. 147, 149-50 n.3
(1984) (quotation and citation omitted).
A district court, in weighing a motion to dismiss, asks
“‘not whether a plaintiff will ultimately prevail but whether the
claimant is entitled to offer evidence to support the claim.’”
Bell Atlantic v. Twombly, 550 U.S. 544, 563 n.8 (2007) (quoting
Scheuer v. Rhoades, 416 U.S. 232, 236 (1974)); see also Ashcroft
v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in Twombly
expounded the pleading standard for ‘all civil actions’ . . .
.”); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009)
(“Iqbal . . . provides the final nail-in-the-coffin for the ‘no
set of facts’ standard that applied to federal complaints before
Twombly.”).
2.

Motion for summary judgment

Summary judgment is appropriate where the Court is satisfied
that the materials in the record, including depositions,
documents, electronically stored information, affidavits or
declarations, stipulations, admissions, or interrogatory answers,
demonstrate 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, 330

(1986); Fed. R. Civ. P. 56(a).

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C.

Analysis

The Court finds that ACE has properly pled its claims
against Wal-Mart for breach of contract and breach of the implied
covenant of good faith and fair dealing, and ACE’s claims may
proceed.

However, the Court also finds that ACE’s motion for

partial summary judgment seeking to compel Wal-Mart to close on
the property must be denied because of numerous disputed issues
of fact.
In order to establish a breach of contract claim, ACE has
the burden to show that the parties entered into a valid
contract, that Wal-Mart failed to perform its obligations under
the contract, and that ACE sustained damages as a result.

Red

Roof Franchising, LLC v. Patel, 877 F. Supp. 2d 140, 149 (D.N.J.
2012) (citing Murphy v. Implicito, 920 A.2d 678, 689 (N.J. Super.
Ct. App. Div. 2007)).

Every New Jersey contract contains an

implied covenant of good faith and fair dealing, and in order to
show that Wal-Mart breached that implied covenant, ACE must
demonstrate that Wal-Mart’s actions have had the effect of
“destroying or injuring the right” of ACE to receive the fruits
of the contract.

Id. at 156 (quoting Wood v. New Jersey Mfrs.

Ins. Co., 21 A.3d 1131, 1140 (N.J. 2011)).
ACE’s complaint properly states claims against Wal-Mart for
both breach of contract and breach of the implied covenant of
good faith and fair dealing.

According to ACE’s complaint, ACE
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and Wal-Mart entered into a valid contract for the sale of ACE’s
property (Amend. Compl. ¶¶ 41), Wal-Mart breached the terms of
the contract when it did not fulfill its obligation to obtain the
final approval from the NJDOT (id. ¶¶ 42, 43), and ACE has
suffered damages (id. ¶ 44), including carrying costs and the
wasting of the property.

ACE also claims that Wal-Mart’s delay

in filing for NJDOT approval, motivated in part by its corporate
policy of not settling on real estate until all appeals have been
exhausted regardless of contractual provisions to the contrary,
has frustrated the reasonable expectations of ACE and the
intentions and purposes of the property sale Agreement.
46, 49, 51.)

(Id. ¶¶

These claims set forth very straightforward breach

of contract and breach of the implied covenant of good faith and
fair dealing allegations and, although factually lean, satisfy
the Iqbal/Twombly plausibility standard.
Wal-Mart argues, however, that ACE cannot claim any breach
of the agreement because closing is to take place within 20 days
of the receipt of NJDOT plan approval, and since the NJDOT has
not issued its approval, Wal-Mart has not breached its obligation
to close on the property.

Further, Wal-Mart argues that it does

not control when the NJDOT issues its approvals, and any delay
cannot be attributed to Wal-Mart.

Wal-Mart also argues that

paragraph 15 of the original agreement was not modified by the
sixth amendment, and the agreement therefore is still contingent
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“on Wal-Mart obtaining, at Wal-Mart's sole cost and expense, the
final, unappealable, valid and irrevocable grant, on terms and
conditions satisfactory to Wal-Mart, in Wal-Mart’s sole and
absolute discretion of those permits, licenses, variances, rights
of way, and approvals that are necessary and/or required to
permit Wal-Mart to obtain building permits for and to construct
the Project in a size and design satisfactory to Wal-Mart.”
Thus, because both the NJDOT and Township approvals are still
outstanding by no fault of its own,5 Wal-Mart argues that it has
not breached the terms of the property sale agreement or acted

5

Wal-Mart’s opposition to ACE’s motion for partial summary
judgment contends that the sixth amendment only refers to NJDOT
approvals because at the time the parties agreed to the sixth
amendment, there were no challenges to the Township approvals.
Wal-Mart’s papers also contend that after the sixth amendment was
entered, the “entire process was upended by the NJDOT’s refusal
to approve the original plans and by NJDOT’s requirement that a
new internal road be included in the plans, necessitating a road
intersection with Egg Harbor Road (a county road - thereby
requiring new county approvals), which required the entire site
to be reconfigured, new municipal land use approvals to be
obtained and any appeals of such approvals to be dealt with....
Everyone - including Plaintiff - knew that Wal-Mart was not
buying property for $11 million that it could not use. Moreover,
everyone - including Plaintiff - knew that Wal-Mart was and
remains extremely eager to move this process along as quickly as
possible; they have already paid over $7 million of the $11
million purchase price, and are legally obligated to pay
Plaintiff $60,000 per month for each month until closing occurs.”
(Wal-Mart Opp., Decl. of Barbara A. Casey, Docket No. 12-3, ¶ 4.)
The Court, however, cannot consider these contentions when
analyzing the sufficiency of ACE’s complaint, and may only
consider them in opposition to ACE’s partial summary judgment
motion. If Defendant believes these facts are uncontested and
defeat ACE’s claims as a matter of law, then they may bring their
own motion for summary judgment. The Court expresses no opinion
on the merits of such a motion.
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unfairly or in bad faith to delay the closing.
Accepting as true that Wal-Mart had a duty to timely file
for NJDOT approval, and that Wal-Mart failed to do so, Wal-Mart’s
arguments do not show that ACE has not pled plausible claims for
relief.

ACE claims that Wal-Mart affirmatively failed to perform

its obligations under the contract, and fulfill those obligations
in good faith.

Instead of arguing that it did not have an

affirmative duty under the contract to timely and in good faith
file for NJDOT approval, Wal-Mart interprets the contract to make
itself a passive participant in the NJDOT approval process.

Wal-

Mart argues that without NJDOT approval, there can be no closing.
Although that interpretation may be true to a certain extent, it
does not preclude a claim at the pleading stage by ACE that WalMart is culpable for the absence of NJDOT approval.
Although insufficient to justify dismissal of ACE’s
complaint, Wal-Mart’s arguments demonstrate that it may have
substantive defenses to ACE’s claims and that there are disputed
facts which preclude the entry of judgment as a matter of law
that Wal-Mart breached the agreement.

The overriding disputed

issue that cannot be resolved at this time on this record relates
to Wal-Mart’s actions, or inactions, regarding the required NJDOT
approval.

The sixth amendment to the property sale agreement is

clear that closing is to take place within 20 days of the receipt
of the NJDOT plan approval.

Although the 20-day clock cannot
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start ticking without the NJDOT approval, ACE has provided
evidence, disputed by Wal-Mart for various reasons, that Wal-Mart
unilaterally, intentionally, and without justification, delayed
seeking final NJDOT approval because of the ongoing lawsuits by a
third party regarding the Township’s municipal approvals of WalMart’s proposed use of the property.6

This sparse, disputed

record regarding the NJDOT approval process and who might be
responsible for the failure to obtain final approval or even
whether final approval could be obtained preclude a finding by
the Court as a matter of law that Wal-Mart has breached its
contractual obligations and has acted in bad faith.
By not “timely filing” for NJDOT approval and waiting out
the third-party litigation over the Township’s approval of the
Wal-Mart development plan, Wal-Mart may be fulfilling its
obligations under the Agreement and acting in good faith, or it
may not.

The record has simply not yet been adequately developed

for the Court to make such a determination.

Accordingly, the

Court cannot and will not grant judgment in ACE’s favor at this
time.

6

ACE disputes Wal-Mart’s position that the Township
approvals must be final in order for it to apply for NJDOT final
approval. ACE also points out that during the briefing of these
motions, Wal-Mart finally applied for NJDOT approval. (ACE’s
Reply, Docket No. 13 at 15-16.) It does not appear that either
party has filed documentation showing proof of Wal-Mart’s NJDOT
application, or the issuance of the NJDOT’s final approval.
13

CONCLUSION
For the reasons expressed above, Wal-Mart’s motion to
dismiss ACE’s complaint and ACE’s motion for partial summary
judgment must both be denied.

An appropriate Order will be

entered.

Date: October 29, 2013
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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