Orgill, Inc. v. Distribution Centers of America (WV), LLC et al
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT. Signed by Chief Judge Gina M. Groh on 11/16/2017. (tlg)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
CIVIL ACTION NO.: 3:16-CV-158
DISTRIBUTION CENTERS OF AMERICA
MEMORANDUM OPINION AND ORDER
GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
Currently pending before the Court is the Plaintiff’s Motion for Summary Judgment
[ECF No. 154], the Defendant’s Motion for Summary Judgment [ECF No. 162], and both
parties’ responses and replies to the respective motions. ECF No. 196, 194, 231 and
230. For the reasons stated herein, the Plaintiff’s motion for summary judgment [ECF
No. 154] is GRANTED on all issues.
The Plaintiff in this case, Orgill, Inc. (“Orgill”), is a company engaged in the
wholesale distribution of hardware home improvement products. ECF No. 154-2 at 14.
In 1999, Orgill built a distribution center on real property located at 4925 Tabler Station
Road, in Inwood, West Virginia (“Inwood Facility”).
ECF No 162-5 at 1-2.
subsequently sold that property in a “sale-leaseback” transaction to a California based
entity, Sierra Crest Equities, LLC. ECF No. 154-2 at 28. Between 2004 and 2005, the
Defendant, Distribution Centers of America (“DW”), began looking for financing to
purchase the Inwood Facility. ECF No. 162-5 at 3. Ultimately, DW obtained a mortgage
loan through Eurohypo Bank (“Eurohypo Loan”), and on April 21, 2005, DW acquired the
Inwood Facility. Id. Pursuant to the sale and the lender’s requirements, DW entered
into an Amended and Restated Lease Agreement (“Amended Lease”) with Orgill. Id.
The lease is dated April 15, 2005. Id. DW became the landlord under the new lease.
The parties operated under this lease without issue until May 2015, at which time,
Orgill’s base rent declined from $195,341 to $178,898 per month, and DW began
collecting “management fees,” as “Additional Rent” under the lease agreement. ECF
No. 154-2 at 119. Orgill agreed to make the additional rent payments for the remainder
of the year, in return for an amendment to the lease specifying the nature and extent of
permissible “additional rent” charges going forward.
ECF No. 154-4 at 133-36.
However, in April 2016, DW renewed its demands for additional rent dating back to 2014
and continuing forward. Id. At that point, Orgill declined to pay and instituted the action
before the Court seeking declaratory relief.
In its answer, DW alleged several
counterclaims against Orgill for breach of contract. ECF No. 11 at 11.
II. Standard of Review
Summary judgment as to a given subject is appropriate under Federal Rule of Civil
Procedure 56 when there is no genuine issue as to any material fact and the moving party
is thus entitled to judgment in its favor as a matter of law. Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). A genuine issue of fact exists “if the evidence is such that a
reasonable jury could return a verdict for the non-moving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). Therefore, the Court must conduct “the threshold
inquiry of determining whether there is the need for a trial—whether, in other words, there
are any genuine factual issues that properly can be resolved only by a finder of fact
because they may reasonably be resolved in favor of either party.” Id. at 250.
The party opposing summary judgment “must do more than simply show that there
is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986). That is, once the movant has met its
burden to show an absence of disputed material facts, the party opposing summary
judgment must then come forward with affidavits or other evidence demonstrating there
is a genuine issue for trial. Fed. R. Civ. P. 56(c); Celotex, 477 U.S. at 323-35; Anderson,
477 U.S. at 248. “If the evidence is merely colorable, or is not significantly probative,
summary judgment may be granted.” Anderson, 477 U.S. at 249 (citations omitted).
III. Applicable Law
The Amended Lease contains a choice of law provision specifying that any
disputes arising under the lease will be governed by West Virginia law. ECF No. 162-2
at 50. Under West Virginia law, a court must determine whether a contract is ambiguous
before it attempts to interpret it. Whether a contract is ambiguous is a legal determination
well suited for summary judgment. Payne v. Weston, 466 S.E.2d 161, 166 (W. Va.
1995). A contract is ambiguous if it is “reasonably susceptible to two different meanings”
or if “reasonable minds might be uncertain or disagree as to its meaning.” Id. (citing syl.
Pt. 1, in part, Shamblin v. Nationwide Mut. Ins. Co., 332 S.E.2d 639 (W. Va. 1985)).
Contract language may also be considered ambiguous if “the agreement’s terms are
inconsistent on their face or where the phraseology can support reasonable differences
of opinion as to the meanings of words employed and obligations undertaken.” In re
Joseph G., 589 S.E.2d 507, 512 (W. Va. 2003).
Looking at all parts of the document together, if the court finds that the contract
terms are clear and unambiguous, the contract is “not subject to judicial construction or
interpretation,” and “the Court will apply, not interpret, the plain and ordinary meaning.”
Payne, 466 S.E.2d at 166 (W. Va. 1995). However, if the court determines that the
contract “cannot be given a certain and definite legal meaning” and “is therefore
ambiguous,” a question of fact may be submitted to the jury as to the meaning of the
contract. Id. Specifically, a jury may be called upon to determine the intent of the
parties through extrinsic evidence.
However, if the extrinsic evidence is not in
dispute, “the duty remains with the court to construe the writing.” Stewart v. Blackwood
Electric Steel Corporation, 130 S.E. 447, 449 (W. Va. 1925); see also Lee Enterprises,
Inc. v. Twentieth Century-Fox Film Corp., 303 S.E.2d 702 (W. Va. 1983).
Assuming the extrinsic evidence is not in dispute, the court may interpret the
contract using extrinsic evidence to show “the situation of the parties, the surrounding
circumstances when the writing was made, and the practical construction given to the
contract by the parties themselves either contemporaneously or subsequently.”
Enterprises, Inc., 303 S.E.2d at 705 (internal citations omitted). The court may also use
proof of usage or custom to interpret any ambiguity in the contract. Cotiga Development
Co. v. United Fuel Gas Co., 128 S.E.2d 626, 635 (W. Va. 1962) (internal citations
omitted). Ultimately, the resolution will typically turn on the parties’ intent at the time of
contracting. Fraternal Order of Police, Lodge No. 69 v. City of Fairmont, 468 S.E.2d 712,
716 n.7 (W. Va. 1996).
There are four claims raised in the parties’ summary judgment motions. ECF No.
154 and 162. These include whether Orgill is liable to DW, under the terms of the lease,
for: (1) additional rent in the form of direct and indirect property management fees
(“Additional Rent”); (2) litigation expenses related to a lawsuit filed in California
(“Novakovic Litigation”); (3) necessary repairs to the leased property (“Maintenance and
Repairs”); and (4) failure to give notice of alterations to the leased property (“Alterations
and Improvements”). Each claim will be discussed in turn.
A. Additional Rent
1. Background Information
First, the parties dispute whether Orgill is liable to DW for direct and indirect
management fees arising under the “Additional Rent,” provision of the Amended Lease.
Specifically, DW seeks to pass on to Orgill certain management fees that it incurs
pursuant to its obligations under its loan. Under the Eurohypo Loan, DW was required
to enter into a management agreement with respect to the Inwood Facility. ECF No.
160-3 at 39.
In accordance with that obligation, DW entered into a management
agreement with DCA Management Company, LLC (“DCA”). In 2006, DCA changed its
name to Center Investors Group (“CIG”). ECF No. 154-2 at 102. DW paid DCA and CIG
a management fee of 0.5% of “Gross Monthly Receipts derived from the operation of the
Property,” and additional fees if certain metrics were met. ECF No. 162-4 at 1. DW did
not pass these fees through to Orgill, stating in this litigation that, “it just wasn’t worth it.”
ECF No. 154-2 at 119-20.
In 2014, DW refinanced its loan with UBS Real Estate Securities, Inc. (“UBS
ECF No. 162-8.
Pursuant to the UBS loan, DW engaged a separate
management company, Center Real Estate Management, LLC (“CR”). ECF No. 162-9
at 5. Under that agreement, DW pays CR a fee equal to 3% of the gross revenue of the
Inwood Facility to directly manage the Inwood Facility (“direct management fees”). Id.
DW has attempted to pass on these “direct management fees” from CR since May of
DW has also engaged the services of The Center Companies, LLC (“CE”) to
provide services for DW including bookkeeping, financial reports, cash flow management,
and monitoring of insurance claims and requirements. ECF No. 162-5 at 4. Because
CE performs services for other DW affiliates, CE’s direct and overhead costs are shared
between all DW affiliates. 162-12 at 23. Since DW generates approximately 92.5% of
all revenue generated among the affiliates, CE allocates 92.5% of its overhead costs to
DW (“indirect management fees”).
DW seeks to pass through these “indirect
management fees” to Orgill.
Orgill argues that the Additional Rent provision does not permit DW to charge
these management fees. Specifically, Orgill argues that the Additional Rent provision is
ambiguous, but that extrinsic evidence shows management fees are not contemplated
under the provision. DW argues that the provision is “clear and unambiguous” and
accordingly, the Court should give full effect to the plain meaning intended. However, if
the Court finds that the “Additional Rent” provision is ambiguous, DW argues in the
alternative that management fees are still recoverable.
Pursuant to the well-established principles of contract law, the Court must first
determine whether the contract provision at issue is ambiguous. While DW urges the
Court to find that the contract is not ambiguous, looking at the document as a whole, it is
unclear whether the parties intended that “Additional Rent” include management fees.
In the recitals section of the Amended Lease, “Additional Rent” is defined as “all
sums required to be paid by [Orgill] to [DW] hereunder other than Basic Rent.” ECF No.
162-2 at 5.
This is unhelpful in determining whether additional rent includes
management fees, because it does not explain “all sums required to be paid.”
Section 2.2 of the Amended Lease states that additional rent consists of “all
impositions, taxes, payments or fees in lieu of taxes, insurance premiums, operating
charges, costs and expenses which arise or may be contemplated under any provisions
of this Lease.” Id. at 15. Again, this provision is not instructive because it does not
explicitly reference management fees, and it is unclear that management fees would fall
into one of the plainly stated categories. Moreover, the same section provides examples
of additional rent including “insurance premiums,” “expenses of occupying, operating,
altering, maintaining and repairing the Leased Premises,” and “all taxes, assessments,
fees in lieu of taxes and other governmental charges.” Id. These examples do not
suggest that management fees were contemplated as a form of additional rent.
Section 2.4. states that the lease is a “‘net-net-net lease,’ it being understood that
the Landlord shall receive the Basic Rent, Additional Rent and all other sum payable to it
pursuant to the terms of this Lease, free and clear of any and all impositions, taxes, liens,
charges or expenses of any nature whatsoever in connection with the Landlord’s
ownership and leasing of the Leased Premises.” Id. at 17. The same section states,
“Unless caused by the actions of the Landlord, all costs, expenses, and obligations of
every kind and nature whatsoever relating to the Leased Premises and the
appurtenances thereto . . . shall be paid by the Tenant.” Id.
DW uses these provisions to argue that Orgill is responsible for all costs related to
the Inwood Facility and that it would not receive its rent “free and clear” unless Orgill pays
the management fees.
Orgill argues that the term “net-net-net lease,” is itself
While not clearly defined under West Virginia law, at least one case
suggests that a triple net lease “places the responsibility of taxes, liability insurance, and
maintenance on the lessee in exchange for lower rent.” Camastro v. Diesk, 484 S.E.2d
188 (W. Va. 1997). Notably, this definition leaves out any reference to management
Orgill emphasizes that the qualifier “unless caused by the Landlord” applies to the
management fees at issue, because DW alone made the decision to refinance its existing
loan and enter into the management agreement at issue.
In opposition, DW argues that
the qualifier only applies to the physical property, and not DW’s “ownership and leasing”
of the property.
By such argument, the management fees would not be excluded.
However, a separate provision under Section 3.3, “Maintenance and Repair,” provides
for the physical property and states that “Landlord shall be responsible for all damages
(and repairs necessitated thereby) caused by the Landlord.” Id. at 21. Accordingly, the
phrases would be duplicative if Section 2.4 was construed to apply only to the leased
In either event, the qualifier “unless caused by the actions of the Landlord,” makes
it clear that at least some costs cannot be passed on to Orgill. Whether the management
fees are one of these costs is unclear from the plain language. Moreover, DW’s inability
to pass through some costs is inconsistent with the provision that DW receives rent free
and clear of any charges or expenses of any nature.
Accordingly, it is not apparent by a plain reading of the Amended Lease whether
“Additional Rent” includes any management fees. Thus, the Court must evaluate the
extrinsic evidence to interpret the contract.
If the extrinsic evidence is disputed,
interpretation becomes a question of fact for the jury. In this case, the material extrinsic
evidence is not in dispute. Therefore, interpretation remains a question of law for the
To determine the parties’ intent at the time of contracting, the Court evaluated the
situation of the parties, the surrounding circumstances when the writing was made, the
practical construction given to the contract by the parties themselves either
contemporaneously or subsequently, and any evidence of custom or usage that was in
the contemplation of the parties at the time of contracting. In this case, the Court finds
that the parties did not contemplate that the “Additional Rent” provision would include
First, the Amended Lease was drafted through a series of negotiations and draft
exchanges between Orgill and DW.
ECF No. 154-1 at 3.
discussing Orgill’s obligations under the contract, the lease does not directly address
management fees. Even where the lease provides examples of additional rent, it does
not identify management fees, or even suggest that management fees would be included.
Additionally, counsel for Orgill specifically requested that the lease include the
provision “unless caused by the actions of the Landlord” because “[h]e wanted to make
sure that it was unambiguous . . . that the landlord could not go out and just spend money
on certain activities that they thought were appropriate and just bill them to [Orgill].” ECF
No. 204-1 at 3. This deliberate addition suggests that, at the very least, Orgill did not
intend to be charged these sorts of management fees.
While DW argues that the
qualifier does not apply to management fees, the qualifier is very broad. The provision
states, “[u]nless caused by the actions of the Landlord, all costs, expenses and
obligations of every kind and nature whatsoever relating to the Leased Premises . . . shall
be paid by the tenant.” ECF No. 162-2 at 17 (emphasis added). The statement “unless
caused by the actions of the landlord” qualifies “costs, expenses and obligations of every
kind and nature whatsoever relating to the Leased Premises.” Accordingly, the Court
finds that the parties intended that any cost or expense caused by the Landlord should
be paid by the Landlord. Moreover, Orgill’s counsel included similar limiting language in
lease agreements in Utah, Missouri, and Texas, and no landlord at those facilities has
collected management fees as additional rent. ECF No. 204-3 at 12-13.
Moreover, in an appraisal report of the Inwood Facility commissioned by one of
DW’s lenders, the appraiser remarked that the “[l]ease terms are triple net” and that “the
tenant is responsible for paying real estate taxes, insurance, utilities, and all maintenance
related expenses.” ECF No. 204-10 at 4. The same appraiser said, “[t]he tenant pays
all expenses directly,” and, importantly, “[m]anagement fees may be incurred by the
landlord and are not passed-through.” Id. Defining a “net lease,” the report states, “In
a triple net lease, all operating expenses are the responsibility of the tenant . . . [h]owever,
management fees . . . are often the responsibility of the lessor.” Accordingly, it appears
contrary to trade custom to pass through management fees in these types of leases.
Considering the practical construction given to the contract, from 2005 to 2015,
DW did not attempt to collect management fees from Orgill, despite paying management
fees equivalent to 0.5% of “Gross Monthly Receipts derived from the operation of the
Property.” ECF No 162 at 2-3. It was only when the management fee increased by
2.5% that DW sought to collect it. While the Court recognizes that the Amended Lease
has a “no waiver” provision, the fact that DW paid these fees for ten years without
attempting to collect them is some evidence that management fees were not
contemplated as part of additional rent.
Based on the aforementioned extrinsic evidence, the Court finds that the parties
did not intend for management fees to be passed through to Orgill under the “Additional
Rent” provision. Moreover, there is certainly an argument that the management fees are
“caused by the Landlord,” in as much as DW alone entered into a loan agreement which
obligated it to obtain management services. DW alone chose to refinance in 2014, and
DW alone agreed to the terms in the refinance—which included a management fee
equivalent to 3% of the gross revenue of the Inwood Facility. Orgill was not included in
that agreement and did not negotiate the terms thereof. This premise is supported by at
least one court which held that, in a lease that does not explicitly address responsibility
for management fees, management fees cannot be passed on to the tenant because
“hiring a management company . . . [is] for [the Landlord’s] own benefit and convenience.”
Viking Bank v. Firgrove Commons 3, LLC, 334 P.3d 116, 120-22 (Wash. Ct. App. 2014).
Accordingly, the Court FINDS that the Defendant is not entitled to pass through
direct or indirect management fees to the Plaintiff under the “Additional Rent” provision of
the Amended Lease. Thus, the Court hereby ORDERS that summary judgment for the
Plaintiff is GRANTED in so far as it pertains to direct and indirect management fees.
B. Novakovic Litigation Expenses
1. Background Information
Next, the parties dispute whether Orgill is liable to DW for litigation expenses
incurred in a civil suit originating in California.
ECF No. 154 at 1. DW seeks
reimbursement for defense costs and a settlement payment made in connection with
litigation for an automobile accident which occurred in 2011.
ECF No. 160 at 18.
Specifically, on October 12, 2011, Marcus Silva was involved in an automobile accident
in Orange County, California. ECF No. 154-4 at 15. The vehicle Mr. Silva was driving
was co-titled in the name of Mr. Silva and Mr. Myer, the general manager for DW. ECF
No. 154-1 at 17. Ultimately, the injured party filed suit against Mr. Silva, Mr. Myer and
others in October 2012. Id. In October 2013, DW was named as a Defendant in the
The Court ultimately dismissed DW, but only after DW incurred
$116,034.34 in attorney fees and expenses, and paid $25,000 to settle and obtain a
release as to potential cross-claims. ECF No. 162-17 at 9-11.
DW argues that, had Orgill provided insurance as required under the terms of the
Amended Lease, DW would have been covered for those expenses. ECF No. 162 at 8.
Specifically, DW argues that, under the terms of the Amended Lease, Orgill should have
provided named insured automobile liability insurance coverage to DW. Orgill contends
that it was not obligated to provide named insured coverage and, as such, the claim for
litigation related expenses should be denied.
The pertinent provision of the Amended Lease states, “Tenant shall maintain at its
sole cost and expense the following insurance on the Leased Premises: . . . (d) Any other
insurance coverage . . . that may from time to time be reasonably required by Landlord
or by Lender in order to protect their respective interests.” ECF No. 162-2 at 23-24. It
is undisputed that the Eurohypo Loan required named automobile liability insurance for
DW. The loan states, “[DW] shall obtain and maintain, or cause to be maintained,
insurance for [DW] and the Property providing at least the following coverages: . . . motor
vehicle liability coverage for all owned and non-owned vehicles, including rented and
leased vehicles containing minimum limits per occurrence of One Million and No/100
Dollars ($1,000,000.00). ECF No. 162-3 at 29-31. The Eurohypo Loan further states
that “[a]ll policies of insurance . . . shall name Borrower as the insured and Lender and its
successors and/or assigns as additional insured.” ECF No. 162-3 at 32.
Accordingly, the issue ultimately turns on whether the Amended Lease requires
Orgill to provide named insured automobile liability insurance coverage to DW pursuant
to the Eurohypo Loan.
As with other contract disputes, the Court’s first inquiry is whether the lease terms
are ambiguous. If the terms are unambiguous, the Court does not interpret the contract,
but rather applies its plain meaning.
In this case, the Court finds that the terms of the lease are unambiguous. The
Amended Lease requires Orgill to provide insurance “that may from time to time be
reasonably required by the Landlord or the Lender.” However, this statement is qualified
by the introductory phrase which states, “Tenant shall maintain . . . the following insurance
on the Leased Premises.” ECF No. 162-2 at 23 (emphasis added). Accordingly, Orgill
is only required to provide insurance “reasonably required by the Lender” if that insurance
pertains to “the Leased Premises.”
Thus, Orgill had no duty to provide automobile
coverage to DW.
Moreover, even if the lease is interpreted to mean that Orgill must provide any
insurance required by the Landlord or Lender, the Eurohypo Loan does not explicitly
require that Orgill provide named automobile insurance to DW. Rather, it states that DW
“shall obtain and maintain, or cause to be maintained,” named automobile insurance.
ECF No. 162-3 at 29. By these terms, DW is required to provide its own automobile
insurance, or it could require Orgill to insure it. Thus, it cannot be said that the Lender
required Orgill to provide named automobile insurance coverage for DW. While DW
could have required such coverage, without some separate contractual agreement
between DW and Orgill, the Eurohypo loan by itself does not obligate Orgill to provide the
insurance on DW’s behalf.
Accordingly, the Court FINDS that the Plaintiff is not required to provide named
automobile insurance for the Defendant, and so, the Plaintiff is not liable to the Defendant
for Novakovic-related litigation expenses.
Thus, the Court hereby ORDERS that
summary judgment for the Plaintiff is GRANTED in so far as it pertains to Novakovicrelated litigation expenses.
C. Maintenance and Repairs
1. Background Information
Next, the parties dispute whether Orgill is liable to DW for failure to make
necessary repairs under the Amended Lease. DW states that Orgill failed to repair and
maintain its water tank, the lower parking lot, metal halide lights, and fire sprinklers. ECF
No. 160 at 10-16. Orgill denies that it has not upheld its obligations under the lease.
ECF No. 155 at 18. Orgill further argues that, assuming Orgill failed to maintain the
property, DW did not provide the requisite notice.
Id. at 22-23. DW argues that it
provided notice by filing cross claims approximately a year ago and that it was prevented
from providing earlier notice by Orgill’s conduct. ECF No. 196 at 24.
First, DW argues that Orgill failed to make necessary repairs and properly maintain
the Inwood Facility. The applicable provision of the Amended Lease states that, “Tenant
shall at all times . . . keep and maintain the Leased Premises . . . in good repair and
appearance, and shall promptly make all repairs and replacements . . . of every kind and
nature, whether foreseen or unforeseen, which may be required to . . . keep and maintain
the Leased Premises in as good repair and appearance as they were as of the
Commencement Date, except for ordinary wear and tear.” ECF No. 162-2 at 20. There
is conflicting evidence as to whether Orgill upheld its obligations under this provision.
Accordingly, the Court will not decide whether Orgill breached its obligations to maintain
and repair the facility.
However, Orgill argues that even if it failed to properly maintain the facility, DW
failed to provide the requisite notice and opportunity to cure.
ECF No. 155 at 23.
Accordingly, Orgill states that it has not breached the lease because it was not given the
opportunity to cure any defects. DW argues that it provided notice of the defects through
this litigation and its cross claims filed approximately one year ago. ECF No. 196 at 24.
The applicable lease provision governing this dispute states that, “[i]f Tenant shall be in
default under any of the [Maintenance and Repair] provisions, Landlord or Lender may,
after thirty (30) days’ notice to Tenant and failure of Tenant to commence to cure during
said period or to diligently prosecute such cure to completion once begun . . . do whatever
is necessary to cure such default as may be reasonable under the circumstances for the
account of and at the expense of Tenant.” ECF No. 162-2 at 21.
Applying the plain meaning of the contract, DW is required to notify Orgill of any
defect under the Maintenance and Repair provision, and then allow thirty days for Orgill
to begin curing that defect, before Orgill is considered to have breached the Amended
Lease. In this case, DW argues that it provided notice when it brought its cross claims
approximately one year ago. However, this does not provide Orgill with an opportunity
to cure the defect. In fact, DW acknowledges that, “[t]he fact remains unchanged that
Orgill failed to properly maintain the water tank until its Lease violations were uncovered
in this litigation, meaning DW incurred legal fees and costs to enforce the provisions of
the Lease . . . entitling it to recover attorney fees.” ECF No. 230 at 14. However, DW
may not have incurred attorney fees if it had given Orgill an opportunity to cure any defects
outside of this litigation.
Moreover, DW acknowledges in its reply that the issues
identified in DW’s motion for summary judgment have been cured, or are in the process
of being cured. ECF No. 230 at 13-14. Thus, even assuming this litigation provided
sufficient notice, Orgill has cured any defects identified. Accordingly, Orgill cannot be
liable for damages under the lease provision.
However, DW further argues that it was prevented from giving notice of default by
Orgill’s conduct. ECF No. 196 at 24. Specifically, DW argues that Orgill refused to
provide repair information upon request and failed to keep track of repairs.
However, there is no lease provision which requires the tenant to provide repair
information or to keep track of repairs for the landlord’s benefit.
There is a lease
provision which states, “Landlord may enter upon and examine any of the Leased
Premises at reasonable times after reasonable notice and during business hours without
notice and exercise any rights and privileges granted to Landlord under the provisions of
this Lease.” ECF No. 162-2 at 19. Accordingly, pursuant to this provision, DW was
entitled to enter and inspect the Inwood Facility to determine if there were any
maintenance or repair issues. It chose not to do so. Accordingly, this argument must
Therefore, the Court FINDS that Orgill has not breached the “Maintenance and
Repair” provision of the Amended Lease.
Thus, the Court hereby ORDERS that
summary judgment for the Plaintiff is GRANTED in so far as it pertains to “Maintenance
D. Failure to Provide Notice of Alterations
1. Background Information
Finally, the parties dispute whether Orgill failed to provide notice of alterations as
required by Section 3.4 of the Amended Lease. The applicable provisions state:
Prior to making any Alterations, improvements or expansion to the Leased
Premises which: (A) do not affect the outside or façade of the building or do not
involve removal of any part of any floor, load-bearing wall, column, girder, or other
support, or do not affect roof load and (B) involve a cost which Tenant reasonably
and in good faith estimates to be less than One Hundred Thousand Dollars
($100,000), Tenant shall furnish to Landlord information (including sketches and
drawings which may be prepared by officers or employees of Tenant) as to the
proposed changes in walls and partitions or relocations thereof and Plans and
Specifications, if available, covering any proposed work, but Tenant may proceed
forthwith to make such specified alterations;
Prior to making any Alterations, improvements or expansion to the Leased
Premises which: (A) affect the outside or façade of the building or involve removal
of any part of any floor, load-bearing wall, column, girder, or other support, or affect
roof load or (B) involve a cost which Tenant reasonably and in good faith estimates
to be One Hundred Thousand Dollars ($100,000) or more, Tenant shall furnish to
Landlord Plans and Specifications or other detailed information covering the
proposed work, and Tenant shall not commence such work unless within thirty (30)
business days thereafter, Landlord shall either approve or shall not advise Tenant
of Landlord’s disapproval of such Plans and Specifications, which approval
Landlord will not unreasonably withhold.
ECF No. 162-2 at 22.
DW argues that Orgill: (1) replaced halide lights; (2) rebuilt a wire yard with
concrete replacing asphalt; (3) installed high speed doors; (4) repaired sink holes; and (5)
installed fans in violation of the aforementioned lease provisions. ECF No. 162 at 6-7.
DW states that the wire yard and lights exceeded the $100,000 limit, requiring “plans and
specifications” and approval by DW. Id. DW further avers that Orgill installed high
speed doors, repaired sink holes, and installed fans—for less than $100,000—without
notifying DW as required by the Amended Lease. Id. Orgill argues that the alterations
costing less than $100,000 did not affect the walls or partitions, and accordingly, required
no notice. ECF No. 204 at 25. Orgill further argues that only the wire yard exceeded
$100,000, and that DW had notice of that project and did not object. Id.
First, the Court will evaluate whether Orgill’s failure to give notice of the projects
costing less than $100,000 violated the terms of the Amended Lease. As agreed upon
by both parties, these projects include: (1) installing high speed doors; (2) repairing sink
holes; and (3) installing fans. Applying the plain, unambiguous language, Orgill was
required to provide “information (including sketches and drawings which may be prepared
by officers or employees of Tenant) as to the proposed changes in walls and partitions or
relocations thereof and Plans and Specifications, if available.” ECF No. 162-2 at 22. In
this case, none of the projects changed or relocated any walls or partitions. Accordingly,
this provision does not apply to the installation of high speed doors, repairs to sink holes,
or installment of fans because there were no plans or specifications regarding changes
to walls or partitions to provide. Thus, Orgill did not breach the terms of the Amended
Lease by failing to provide notice.
Next, DW argues that Orgill failed to provide notice of two projects which exceeded
$100,000, including replacing halide lights and rebuilding the wire yard with concrete
instead of asphalt. ECF No. 162 at 6-7. Orgill disputes that replacing the halide lights
falls within the scope of the contract provision and states that it did provide notice of the
wire yard. As to the replacement of the lights, the Court notes that the replacements
occurred over a period of seven years. ECF No. 162-14 at 7. While the total cost adds
up to approximately $110,000, no single charge cost more than $19,000, and most
replacements averaged between $2,000 and $10,000. Id. It cannot be said that this
was a single project, as light bulbs will necessarily need to be replaced throughout an
extended lease term. Therefore, the claim that Orgill breached the lease by failing to
give notice of the replacement of the lights is without merit.
As to the wire yard, Orgill states that it provided notice of the project and that DW
did not object. While Orgill states that it provided notice and that DW did not object, there
is no evidence before the Court that Orgill did so. There is, however, evidence that at
least one Orgill employee responsible for maintenance did not inform DW of the project.
ECF No. 204-18 at 4. That one employee did not inform DW of the project is not
conclusive. Accordingly, it appears that there is a factual dispute as to whether Orgill
informed DW and obtained approval for the wire yard. Therefore, the Court will not
decide whether Orgill breached its obligation under the Amended Lease, in so far as it
failed to notify DW and obtain approval before completing the wire yard.
However, assuming arguendo that Orgill breached its obligation, DW fails to allege
any damages resulting from the failure to give notice. DW has not indicated that it would
have withheld approval, or that it could have withheld approval had it chose to do so.
Notably, approval may only be “reasonably” withheld. Accordingly, there is no evidence
that DW suffered any damages.
Furthermore, while DW seeks declaratory relief to
“prevent reasonably certain future conduct,” [ECF No. 196 at 25], DW is not entitled to
declaratory relief because it has only shown a single instance over a twelve year lease
where Orgill may have failed to provide requisite notice. Therefore, future violations of
the notice provision are not “reasonably certain,” and declaratory relief is denied.
Therefore, the Court FINDS that Orgill did not breach the “Alterations and
Improvements,” provision of the Amended Lease in so far as it: (1) replaced halide lights;
(2) installed high speed doors; (3) repaired sink holes; and (4) installed fans. The Court
further FINDS that there is a factual dispute regarding whether Orgill failed to provide
notice of the wire yard replacement. Nevertheless, DW is not entitled to damages or
declaratory relief. Thus, the Court hereby ORDERS that summary judgment for the
Plaintiff is GRANTED in so far as it pertains to “Alterations and Improvements.”
Based upon the aforementioned reasons, the Plaintiff’s Motion for Summary
Judgment [ECF No. 154] is hereby GRANTED. The Defendant’s Motion for Summary
Judgment [ECF No. 162] is DENIED. In so far as this concludes the litigation in this
matter, the remainder of the pending motions are TERMINATED AS MOOT.
This case is ORDERED stricken from the Court’s active docket. The Clerk of Court
is DIRECTED to enter judgment in favor of the Plaintiff. The Clerk is further ORDERED
to transmit copies of this Order to all counsel of record herein.
DATED: November 16, 2017
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