Via Port New York LLC v. Sears, Roebuck and Co.
Filing
15
DECISION AND ORDER granting # 6 Defendant's Motion to Dismiss; and Plaintiff's complaint is dismissed. Signed by Chief Judge Glenn T. Suddaby on 9/4/18. (lmw)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
VIA PORT NEW YORK LLC,
Plaintiff,
v.
1:17-CV-1222
(GTS/CFH)
SEARS, ROEBUCK AND CO.,
Defendant.
____________________________________________
APPEARANCES:
OF COUNSEL:
RYAN LAW PARTNERS LLP
Counsel for Plaintiff
3811 Turtle Creek Blvd.
Dallas, Texas 75219
DAVID M. RUBINSTEIN, ESQ.
DICKIE McCAMEY & CHILCOTE LAW FIRM
Counsel for Defendant
2 PPG Place, Suite 400
Pittsburgh, Pennsylvania 15222
ADAM J. VENTURA, ESQ.
SCOTT D. CLEMENTS, ESQ.
GLENN T. SUDDABY, Chief United States District Judge
DECISION and ORDER
Currently before the Court, in this breach-of-contract action filed by Via Port New York
LLC ("Plaintiff"), against Sears, Roebuck and Co. ("Defendant"), is Defendant’s motion to
dismiss Plaintiff’s Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).
(Dkt. No. 6.) For the reasons set forth below, Defendant’s motion is granted.
I.
RELEVANT BACKGROUND
A.
Plaintiff’s Claims
Generally, liberally construed, Plaintiff's Complaint alleges as follows. On or about
September 22, 1986, Rotterdam Square, L.P., entered into a contract, which provided for
Defendant to lease a department store space (the “Lease”) at a shopping center in Rotterdam,
New York (the “Mall”). (Dkt. No. 1, ¶ 8.) Plaintiff is the successor in interest to Rotterdam
Square, L.P. (Id. at ¶ 1.)
The Mall opened on or about September 1, 1988, offering three stores: Hess, Kmart, and
Sears. (Id. at ¶ 12.) On or about June 5, 1995, the May Department Store Company (“May”)
purchased Hess to operate a Filene’s store. (Id. at ¶¶ 16, 19.) Also, on or about June 5, 1995,
Plaintiff and Defendant entered into the First Lease Amendment Agreement (“First
Amendment”). (Id. at ¶ 17.) In pertinent part, the First Amendment altered Section 5 of Part I of
the Lease (the “Occupancy Provision”), which provided as follows:
After October 1, 1995, Tenant may terminate this Lease, if at any time, for
a continuous period of more than twelve (12) months, there (i) are not
occupants occupying at least sixty percent (60%) of the leaseable floor
space of the Shopping Center (not including the leaseable floor space of
Department Stores) . . . ; or (ii) if Filene’s (or a retail store operating under
the same name under which a majority of the stores formerly [prior to any
name change] operated under the name Filene’s in the state of New York
are then being operated) is not open and operating and either (a) J.C.
Penney ( . . . ) or (b) Kmart ( . . . ) or (c) a retail store (which generally
operates other stores of approximately 60,000 square feet or more)
occupying at least 60,000 square feet of floor area in the space shown on
Exhibit B as “Kmart” and/or “Kmart Permissible Expansion Area” is not
open and operating.
(Id. at ¶ 23.)
The First Amendment also contained an expansion clause, pursuant to which Defendant
could expand its square footage and trigger the First Amendment rent provision. (Id. at ¶ 37.)
The rent provision provided that, if Defendant expands its store to 103,296 square feet in the
Mall, the fixed rent payable by Defendant to Plaintiff shall be $361,536.00 per year, plus
additional rent based on sales. (See generally Dkt. No. 1.)
2
In 2005, May sold Filene’s to Federated Department Stores, and Filene’s name changed
to Macy’s. (Id. at ¶¶ 44-45.)
On or about September 11, 2012, Defendant entered into a Third Lease Amendment
Agreement (“Third Amendment”), which extended the Lease until August 31, 2018, with options
for four additional five-year periods. (Id. at ¶ 50.)
In March 2015, Macy’s closed its store at the Mall. (Id. at ¶ 52.) At that time, Defendant
did not seek to renegotiate the Lease, but continued to operate at the Mall and pay rent. (Id. at ¶¶
53-54.) Defendant then closed its store at the Mall in August 2016. (Id. at ¶ 55.) Kmart was still
open and operating in August 2016. (Id. at ¶ 56.) J.C. Penney has never been open or operating
at the Mall. (Id. at ¶ 32.)
Based upon the foregoing allegations, the Complaint asserts the following two claims: (1)
a claim that Defendant breached its contract with Plaintiff by (a) failure to continuously operate
Sears at the Mall, and (b) failure to pay rent due under the contract; and (2) a claim that
Defendant’s breach entitles Plaintiff to declaratory judgment declaring that the Lease is an
executory contract pursuant to 11 U.S.C. § 365 of the Bankruptcy Code. (See generally Dkt. No.
1 [Pl.’s Compl.].) Familiarity with the factual allegations supporting these claims in Plaintiff’s
Complaint is assumed in this Decision and Order, which is intended primarily for the review of
the parties. (Id.)
B.
Parties’ Briefing on Defendant’s Motion to Dismiss
Generally, in support of its motion to dismiss, Defendant asserts the following two
arguments: (1) Defendant properly terminated the Lease pursuant to Section 5, Part 1 of the First
Amendment; and (2) Plaintiff’s declaratory judgment action is improper because this is not an
3
executory contract pursuant to 11 U.S.C. § 365. (See generally Dkt. No. 6, Attach. 1 [Def.’s
Mem. of Law].)
Generally, in Plaintiff's opposition to Defendant’s motion, Plaintiff asserts the following
two arguments: (1) pursuant to the parties’ contract, Defendant was not permitted to terminate
the Lease while Kmart was open and operating because (i) logic dictates that the termination
provision precludes Defendant from terminating the Lease unless all of the other department
stores cease to be open and operating, (ii) Defendant’s interpretation of the termination provision
is unreasonable and contrary to the parties’ intent expressed in the Lease, and (iii) even if
Defendant’s interpretation of the contract is plausible, the termination provision is ambiguous
such that the motion to dismiss should be denied; and (2) Plaintiff’s request for declaratory
judgment is ripe. (See generally Dkt. No. 7 [Pl.’s Opp’n Mem. of Law].)
Generally in its reply, Defendant asserts the following two arguments: (1) the Lease
unambiguously provides Defendant with the right to terminate if Filenes and either J.C. Penney
or Kmart (or another department store) is not open and operating for a continuous period of
twelve months; and (2) extrinsic evidence may not be considered where the agreement is
unambiguous. (See generally Dkt. No. 10 [Def.’s Reply Mem. of Law].)
II.
RELEVANT LEGAL STANDARDS
A.
Legal Standard Governing Motions to Dismiss for Failure to State Claim
It has long been understood that a dismissal for failure to state a claim upon which relief
can be granted, pursuant to Fed. R. Civ. P. 12(b)(6), can be based on one or both of two grounds:
(1) a challenge to the “sufficiency of the pleading” under Fed. R. Civ. P. 8(a)(2); or (2) a
challenge to the legal cognizability of the claim. Jackson v. Onondaga Cnty., 549 F. Supp. 2d
4
204, 211, nn. 15-16 (N.D.N.Y. 2008) (McAvoy, J., adopting Report-Recommendation on de
novo review).
Because such dismissals are often based on the first ground, a few words regarding that
ground are appropriate. Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a
pleading contain “a short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2) [emphasis added]. In the Court’s view, this tension between
permitting a “short and plain statement” and requiring that the statement “show[]” an entitlement
to relief is often at the heart of misunderstandings that occur regarding the pleading standard
established by Fed. R. Civ. P. 8(a)(2).
On the one hand, the Supreme Court has long characterized the “short and plain”
pleading standard under Fed. R. Civ. P. 8(a)(2) as “simplified” and “liberal.” Jackson, 549 F.
Supp. 2d at 212, n.20 (citing Supreme Court case). On the other hand, the Supreme Court has
held that, by requiring the above-described “showing,” the pleading standard under Fed. R. Civ.
P. 8(a)(2) requires that the pleading contain a statement that “give[s] the defendant fair notice of
what the plaintiff’s claim is and the grounds upon which it rests.” Jackson, 549 F. Supp. 2d at
212, n.17 (citing Supreme Court cases) (emphasis added).1
The Supreme Court has explained that such fair notice has the important purpose of
“enabl[ing] the adverse party to answer and prepare for trial” and “facilitat[ing] a proper decision
on the merits” by the court. Jackson, 549 F. Supp. 2d at 212, n.18 (citing Supreme Court cases);
1
Accord, Flores v. Graphtex, 189 F.R.D. 54, 54 (N.D.N.Y. 1999) (Munson, J.);
Hudson v. Artuz, 95-CV-4768, 1998 WL 832708, at *1 (S.D.N.Y. Nov. 30, 1998); Powell v.
Marine Midland Bank, 162 F.R.D. 15, 16 (N.D.N.Y.1995) (McAvoy, C.J.).
5
Rusyniak v. Gensini, 629 F. Supp. 2d 203, 213 & n.32 (N.D.N.Y. 2009) (Suddaby, J.) (citing
Second Circuit cases). For this reason, as one commentator has correctly observed, the “liberal”
notice pleading standard “has its limits.” 2 Moore’s Federal Practice § 12.34[1][b] at 12-61 (3d
ed. 2003). For example, numerous Supreme Court and Second Circuit decisions exist holding
that a pleading has failed to meet the “liberal” notice pleading standard. Rusyniak, 629 F. Supp.
2d at 213, n.22 (citing Supreme Court and Second Circuit cases); see also Ashcroft v. Iqbal, 129
S. Ct. 1937, 1949-52 (2009).
Most notably, in Bell Atlantic Corp. v. Twombly, the Supreme Court reversed an
appellate decision holding that a complaint had stated an actionable antitrust claim under 15
U.S.C. § 1. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007). In doing so, the Court
“retire[d]” the famous statement by the Court in Conley v. Gibson, 355 U.S. 41, 45-46 (1957),
that “a complaint should not be dismissed for failure to state a claim unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him
to relief.” Twombly, 127 S. Ct. at 1968-69. Rather than turn on the conceivability of an
actionable claim, the Court clarified, the “fair notice” standard turns on the plausibility of an
actionable claim. Id. at 1965-74. The Court explained that, while this does not mean that a
pleading need “set out in detail the facts upon which [the claim is based],” it does mean that the
pleading must contain at least “some factual allegation[s].” Id. at 1965. More specifically, the
“[f]actual allegations must be enough to raise a right to relief above the speculative level [to a
plausible level],” assuming (of course) that all the allegations in the complaint are true. Id.
As for the nature of what is “plausible,” the Supreme Court explained that “[a] claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the
6
reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
129 S. Ct. 1937, 1949 (2009). “[D]etermining whether a complaint states a plausible claim for
relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense. . . . [W]here the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged–but it has not
show[n]–that the pleader is entitled to relief.” Iqbal, 129 S. Ct. at 1950 [internal quotation marks
and citations omitted]. However, while the plausibility standard “asks for more than a sheer
possibility that a defendant has acted unlawfully,” id., it “does not impose a probability
requirement.” Twombly, 550 U.S. at 556.
Because of this requirement of factual allegations plausibly suggesting an entitlement to
relief, “the tenet that a court must accept as true all of the allegations contained in the complaint
is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action,
supported by merely conclusory statements, do not suffice.” Iqbal, 129 S. Ct. at 1949.
Similarly, a pleading that only “tenders naked assertions devoid of further factual enhancement”
will not suffice. Iqbal, 129 S. Ct. at 1949 (internal citations and alterations omitted). Rule 8
“demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id.
(citations omitted).
Finally, a few words are appropriate regarding what documents are considered when a
dismissal for failure to state a claim is contemplated. Generally, when contemplating a dismissal
pursuant to Fed. R. Civ. P. 12(b)(6) or Fed. R. Civ. P. 12(c), the following matters outside the
four corners of the complaint may be considered without triggering the standard governing a
motion for summary judgment: (1) documents attached as an exhibit to the complaint or answer,
7
(2) documents incorporated by reference in the complaint (and provided by the parties), (3)
documents that, although not incorporated by reference, are “integral” to the complaint, or (4)
any matter of which the court can take judicial notice for the factual background of the case.2
B.
Legal Standards Governing Plaintiff’s Claims
Because the parties to this action have demonstrated, in their memoranda of law, an
accurate understanding of the relevant points of law contained in the legal standards governing
Plaintiff’s claims in this action, the Court will not recite, in their entirety, those legal standards in
this Decision and Order, which (again) is intended primarily for the review of the parties. (See
2
See Fed. R. Civ. P. 10(c) (“A copy of any written instrument which is an exhibit
to a pleading is a part thereof for all purposes.”); L-7 Designs, Inc. v. Old Navy, LLC, No. 10573, 2011 WL 2135734, at *1 (2d Cir. June 1, 2011) (explaining that conversion from a motion
to dismiss for failure to state a claim to a motion for summary judgment is not necessary under
Fed. R. Civ. P. 12[d] if the “matters outside the pleadings” in consist of [1] documents attached
to the complaint or answer, [2] documents incorporated by reference in the complaint (and
provided by the parties), [3] documents that, although not incorporated by reference, are
“integral” to the complaint, or [4] any matter of which the court can take judicial notice for the
factual background of the case); DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir.
2010) (explaining that a district court considering a dismissal pursuant to Fed. R. Civ. 12(b)(6)
“may consider the facts alleged in the complaint, documents attached to the complaint as
exhibits, and documents incorporated by reference in the complaint. . . . Where a document is
not incorporated by reference, the court may neverless consider it where the complaint relies
heavily upon its terms and effect, thereby rendering the document ‘integral’ to the complaint. . . .
However, even if a document is ‘integral’ to the complaint, it must be clear on the record that no
dispute exists regarding the authenticity or accuracy of the document. It must also be clear that
there exist no material disputed issues of fact regarding the relevance of the document.”)
[internal quotation marks and citations omitted]; Chambers v. Time Warner, Inc., 282 F.3d 147,
152 (2d Cir. 2009) (“The complaint is deemed to include any written instrument attached to it as
an exhibit or any statements or documents incorporated in it by reference.”) (internal quotation
marks and citations omitted); Int’l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72
(2d Cir.1995) (per curiam) (“[W]hen a plaintiff chooses not to attach to the complaint or
incorporate by reference a [document] upon which it solely relies and which is integral to the
complaint,” the court may nevertheless take the document into consideration in deciding [a]
defendant’s motion to dismiss, without converting the proceeding to one for summary
judgment.”) (internal quotation marks and citation omitted).
8
generally Dkt. No. 6, Attach. 1 [Def.’s Mem. of Law]; Dkt. No. 7 [Pl.’s Opp’n Mem. of Law];
Dkt. No. 10 [Def.’s Reply Mem. of Law].)
III.
ANALYSIS
A.
Whether Plaintiff’s Claim for Breach of Contract Should Be Dismissed
Because Defendant Properly Terminated the Lease Pursuant to Section 5,
Part I.
After carefully considering the matter, the Court answers this question in the affirmative
for the reasons stated in Defendant’s memoranda of law. (Dkt. No. 6, Attach. 1 [Def.’s Mem. of
Law]; Dkt. No. 10 [Def.’s Reply Mem. of Law].) To those reasons, the Court would only add
two points.
First, the Court agrees with Defendant’s interpretation of the relevant provisions of the
contract. A contract is unambiguous when the terms have “a definite and precise meaning, as to
which there is no reasonable basis for a difference of opinion.” White v. Cont’l Cas. Co., 9
N.Y.3d 264 (N.Y. 2007). Here, the Court reads the relevant provision to mean as follows:
Defendant may terminate the lease, if at any time, for a continuous period of more than twelve
months, (1) Filene’s is not open and operating, and (2) if any of the following conditions occur
(a) J.C. Penney is not open and operating, or (b) Kmart is not open and operating, or (c) a retail
store (which generally operates other stores of approximately 60,000 square feet or more) is not
open and operating. To transform the word “or” into an “and” would “render the contract
provisions meaningless or superfluous.” Manley v. AmBase Corp., 337 F.3d 237, 250 (2d Cir.
2003).
The parties agree that Filene’s (called “Macy’s” after it changed its name in 2005) had
not been open and operating at the Mall for a continuous period of more than twelve months
9
prior to Defendant’s termination of the lease. (Dkt. No. 1, at ¶¶ 52, 55.) Further, the parties
agree that J.C. Penney has never opened or operated at the Mall. (Dkt. No. 1, at ¶¶ 31-32; Dkt.
No. 6, Attach. 1, at 8.) Therefore, pursuant to the unambiguous terms of the Lease, Defendant
was permitted to terminate the Lease.
Second, for Plaintiff’s interpretation of the relevant provision to be accurate, the language
should have read as follows:
After October 1, 1995, Tenant may terminate this Lease, if at any time, for
a continuous period of more than twelve (12) months, there (i) are not
occupants occupying at least sixty percent (60%) of the leaseable floor
space of the Shopping Center (not including the leaseable floor space of
Department Stores) . . . ; or (ii) if Filene’s (or a retail store operating under
the same name under which a majority of the stores formerly [prior to any
name change] operated under the name Filene’s in the state of New York
are then being operated) is not open and operating and neither (a) J.C.
Penney . . . nor (b) Kmart . . . nor (c) a retail store (which generally
operates other stores of approximately 60,000 square feet or more)
occupying at least 60,000 square feet of floor area in the space shown on
Exhibit B as “Kmart” and/or “Kmart Permissible Expansion Area” are . . .
open and operating.
(emphasis added). The word “either” is defined by Black’s Law Dictionary as “[e]ach of
two; one or the other; one or the other of two alternatives; one of two. Often used,
however, with reference to more than two, in which case it may mean ‘each’ or ‘any.’”
Black’s Law Dictionary at 463 (5th ed. 1979). The Lease’s use of the terms “either,”
“or,” and the singular “is” makes clear that the parties’ intent was for Defendant to be
permitted to terminate the lease under the circumstances presented here.
For all of these reasons, the Court finds that Defendant did not breach the contract
when it terminated the Lease and Plaintiff’s claim for breach of contract is dismissed.
10
B.
Whether Plaintiff’s Claim for Declaratory Judgment Should be
Dismissed Because the Action Is Improper
The Second Circuit has explained that “[t]he [Bankruptcy] Code does not define
the term ‘executory contract.’ In Eastern Air Lines, Inc. v. Ins. Co. of Pa. (In re
Ionosphere Clubs, Inc.), 85 F.3d 992 (2d Cir. 1996), we characterized an executory
contract as one ‘on which performance remains due to some extent on both sides.’” In re
Penn Traffic Co., 524 F.3d 373, 379 (2d Cir. 2008) (citing Eastern Air Lines, Inc., 85
F.3d at 998-99).
As set forth above in Part III.A. of this Decision and Order, the Court has decided
that Defendant was permitted to terminate the Lease. Therefore, there is no basis for
maintaining Plaintiff’s request for declaratory judgment declaring the contract in question
an executory contract under 11 U.S.C. § 365 because there is no performance remaining
due by Defendants.
For these reasons, the Plaintiff’s claim for declaratory judgment is dismissed.
ACCORDINGLY, it is
ORDERED that Defendant’s motion to dismiss (Dkt. No. 6, Attach. 1) is
GRANTED; and it is further
ORDERED that Plaintiff’s Complaint (Dkt. No.1) is DISMISSED.
Dated:
September 4, 2018
Syracuse, NY
________________________________
Hon. Glenn T. Suddaby
Chief U.S. District Judge
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?