because we have determined that the size of the relevant geographic market is in dispute.
Furthermore, the parties dispute the existence of alternative sites for new supermarket development. The plaintiffs state that no alternative sites currently exist in the relevant geographic market upon which a modern superstore could be built and operated. The defendants contend that several other sites are available for supermarket development. We find that a factual dispute exists as to whether alternative sites are available within the relevant geographic market and whether a barrier to the entry of new competition exists. Thus, we must deny the defendants' motion for summary judgment on plaintiffs' Section 1 claim
, and Giant's claims under Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 and under the New Jersey Antitrust Act, 15 N.J.S.A. § 56:9-3, may go to trial.
D. Sherman Antitrust Act § 2
The defendants also seek summary judgment against plaintiffs' claims under Section 2 of the Sherman Antitrust Act. To establish an attempt to monopolize under Section 2, plaintiffs must demonstrate: (1) the defendant has engaged in predatory or anti-competitive conduct with (2) a specific attempt to monopolize and (3) sufficient market power to create a dangerous probability of achieving monopoly power within the relevant geographic and product markets. Spectrum Sports, Inc. v. McQuillan, 122 L. Ed. 2d 247, 113 S. Ct. 884, 890-91 (1993); Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508, 512 (3d Cir. 1994).
Courts primarily look to the size of a defendant's market power to determine whether a defendant presents a dangerous probability of gaining monopoly power. Pennsylvania Dental Ass'n v. Medical Serv. Ass'n of Pa., 745 F.2d 248, 260 (3d Cir. 1984), cert. denied, 471 U.S. 1016, 85 L. Ed. 2d 303, 105 S. Ct. 2021 (1985). Nevertheless, other factors considered include the strength of competition, projections on industry development, barriers to entry, the nature of the anti-competitive conduct, and the elasticity of consumer demand. Barr Labs., Inc. v. Abbott Labs., 978 F.2d 98, 112 (3d Cir. 1992).
The leading antitrust commentators have stated that "the basic thrust of the classic rule is the presumption that attempt does not occur in the absence of a rather significant market share." 3 Phillip Areeda & Donald F. Turner, Antitrust Law P 820 (1978). What constitutes a market share significant enough to demonstrate a dangerous probability of attaining monopoly power has not been clearly defined in case law. Id. P 835c. Areeda and Turner have suggested a rule of thumb for determining whether a particular market share may be indicative of a dangerous probability of achieving monopoly power. See id. For defendants who control 30% or less of the relevant market, claims of attempted monopolization should be "presumptively" rejected. Where a defendant has a market share in the range of 30-50%, attempt claims should be rejected unless the defendant's conduct strongly suggests an ability to garner monopoly power. When the defendant controls 50% or more of the market, anti-competitive conduct is conclusively presumed by Areeda and Turner to constitute attempted monopolization. Id.
Although they are not rigid rules of law, the views of these oft-cited commentators, when applied in conjunction with prevailing case law, create a useful framework for analyzing Section 2 claims of attempted monopolization. Applying this framework to the present case, we conclude as a matter of law that Acme does not present a dangerous probability of obtaining monopoly power based upon the undisputed facts, and giving the plaintiffs the benefit of favorable inferences.
Our previous conclusion that genuine issues of material fact exist on the question of Acme's market share does not preclude a finding as to plaintiffs' Section 2 claim. Even if we view the evidence in a light most favorable to the plaintiffs and accept plaintiffs conclusion that Acme has a 40% share of the relevant geographic market, we find that no reasonable fact finder could conclude that Acme has a dangerous probability of achieving monopoly power.
When Acme's market share is considered in conjunction with the nature of the alleged anti-competitive conduct, Acme does not present a dangerous probability of gaining monopoly power as a matter of law. That is, by seeking enforcement of the restrictive covenant, Acme can only prevent the entrance of one competitor at one location. Acme cannot increase its market share by this conduct, it can only protect the market share it currently enjoys. As a matter of law, the plaintiffs cannot demonstrate a dangerous probability that Acme will achieve monopoly power because Acme's conduct cannot increase its market share. Without the potential to increase market share from its current non-monopoly level, the plaintiffs cannot prove their claims under Section 2 of the Sherman Antitrust Act. Cf. Pennsylvania Dental, 574 F. Supp. at 472 (holding that without evidence of acts which tend to result in a monopoly, a 40% market share did not create a dangerous probability of success in monopolizing a market). Thus, we will grant defendants' motion for summary judgment on plaintiffs' claims under Section 2 of the Sherman Antitrust Act.
E. Validity of the Restrictive Covenant Under New Jersey Law
The defendants Acme and Jarnap seek summary judgment declaring that the restrictive covenant creates a valid and enforceable burden upon the Wharton Parcel according to New Jersey law. The controlling case on this issue is Davidson Bros., Inc. v. D. Katz & Sons, Inc., 121 N.J. 196, 579 A.2d 288 (1990). In Davidson, the New Jersey Supreme Court joined the majority of courts who use a reasonableness test to evaluate the validity of restrictive covenants. The plaintiff in Davidson owned two supermarkets in New Brunswick. The two stores competed with one another and as a result, neither was profitable. The plaintiff then closed one store and sold the land on which the closed store was situated to the defendant subject to a restrictive covenant not to operate a supermarket on the land for a period of forty years. When a subsequent lessee of the burdened land sought to operate a supermarket, the plaintiff brought suit to enforce the covenant.
The court held that the reasonableness of the covenant should determine whether or not it was valid:
Courts today recognize that it is not unreasonable for parties in commercial-property transactions to protect themselves from competition by executing noncompetition covenants. Businesspersons, either as lessees or purchasers may be hesitant to invest substantial sums if they have no minimal protection from a competitor starting a business in the near vicinity. Hence, rather than limiting trade, in some instances, restrictive covenants may increase business activity.
Id. at 210, 579 A.2d at 295. Pursuant to Davidson, courts should consider whether: 1) the parties had a lawful intent when the covenant was drafted; 2) the covenant was part of the consideration for the sale of the property; 3) the restriction was clearly and expressly stated; 4) the covenant was written and recorded, so that the subsequent grantee had actual notice of the covenant; 5) the covenant is reasonable concerning the time, area, or duration; 6) the covenant imposes an unreasonable restraint on trade or secure a monopoly for the beneficiary of the restriction; 7) the covenant interferes with the public interest; and 8) circumstances have changed so that enforcement would be unreasonable. Id. at 211-12, 579 A.2d at 295. In applying these factors to the present case, we must not "turn a blind eye to whether [this] covenant has become unreasonable over time." Id. at 212, 579 A.2d at 296.
The intent of the parties is uncontested. At the time of the sale in 1957, the Singers intended to restrict the land they retained for the benefit of the land they sold to ASC for as long as a super food store was operated on the dominant estate. Therefore, we find that no substantial controversy exists as to the intent behind the restrictive covenant and at trial the intent shall be deemed established
See Fed. R. Civ. P. 56 (d).
Wharton argues that ASC did not pay for the covenant when it purchased the property from the Singers. Wharton contends that ASC paid about the same price per acre as other purchasers of property from the Singers paid for their respective parcels. Acme argues that the covenant was a fundamental part of the deal. Acme contends that ASC would not have purchased the property if it did not receive the benefit of the restriction because the property was a risky new investment in rural land set apart from the existing commercial center of Medford.
Whether consideration was in fact paid for the covenant remains a genuine issue of material fact for trial. On this issue Acme presents the deposition testimony of William Drebelbis, the real estate representative for ASC who negotiated the purchase of the property. Drebelbis contends that ASC agreed to what was considered a high price for the land at that time on the condition that the Singers agree to the restrictive covenant. Ephraim Tomlinson, II, the Singer's attorney for the transaction, confirms in his deposition that ASC would not do the deal without the restrictive covenant. As evidence that Acme did not value the restriction highly, Wharton cites the leaseback transaction between Jarnap and Acme which recited a one dollar consideration for a mirror image restrictive covenant in Acme's lease. In addition, Wharton cites to the price per acre paid by the Singer's subsequent grantees who did not receive the benefit of the covenant as roughly equivalent to the price paid by Acme. Thus, Wharton contends that Acme did not provide separate consideration for the covenant. Viewing the facts in the light most favorable to the plaintiffs as non-movants, we conclude that the evidence is such that a reasonable fact finder could find that Acme did not pay consideration for the covenant. Therefore, a genuine issue of material fact remains for trial which precludes summary judgment on the reasonableness of the covenant under New Jersey law.
The covenant clearly expresses the parties' intent. The covenant prevents the owner or lessee of the servient estate from operating a store which sells food for off premises consumption as long as the owner or lessee of the dominant estate operates a super food store.
Plaintiffs argue that the use of the term "Super food store" makes the covenant ambiguous. Although the term is imprecise, the use of this term does not render the entire covenant void for ambiguity. Courts interpreting contractual language in older documents must inevitably confront terms which have fallen out of common usage. Frequently, terms which may have been clear to the drafters, confound future readers. In interpreting such terms, "the court's function is to assess what was written in the context of the circumstances under which it was written, and accord to language a rational meaning in keeping with the express general purpose." Regan v. Regan, 246 N.J. Super. 473, 478, 587 A.2d 1330 (Ch. Div. 1990). Acme provided case citation in its brief in opposition to Wharton's preliminary injunction motion, which indicates that the term "super food store" was, at the time the restrictive covenant was drafted, the functional equivalent of the now common tern, supermarket. See, e.g., Elida, Inc. v. Harmor Realty Corp., 177 Conn. 218, 413 A.2d 1226, 1227 (Conn. 1979) (construing a lease dated 1970 which contained reference to "super food markets"); Murphy v. J.L. Saunders, Inc., 202 Va. 913, 121 S.E.2d 375 (Va. 1961) (analyzing claim of customer injured in a "super food market"); Schaub's, Inc. v. Department of Alcoholic Beverage Control, 153 Cal. App. 2d 858, 315 P.2d 459, 461 (Cal. 1957) (involving transfer of liquor license to a "super food market"). Nothing submitted by the plaintiffs brings this fact into dispute. Thus, for the purposes of our inquiry into the clarity of the covenant, we hold that the term "super food store" is the functional equivalent of the common term supermarket.
Furthermore, New Jersey's rule of strict construction for interpreting real covenants is relaxed where strict construction would defeat the obvious purpose of the restriction. Murphy v. Trapani, 255 N.J. Super. 65, 72, 604 A.2d 635 (App. Div.), certif. denied, 130 N.J. 17, 611 A.2d 655 (1992); Bruno v. Hanna, 63 N.J. Super. 282, 287, 164 A.2d 647 (App. Div. 1960). "The precise form of the covenant is of little consequence if the intent is reasonably clear, and its apparent purpose should not be defeated by a technical construction of the language used." Murphy, 255 N.J. Super. at 72. We decline to find ambiguity in the use of the term "super food store" which would in any way render the covenant at issue unclear. Therefore, we hold that the circumstances surrounding its creation and the language of the covenant demonstrate with sufficiently reasonable clarity the intent, purpose and effect of the restriction.
The covenant was expressly set forth in a recorded deed. When the Singers sold the servient estate they specifically referred to the restrictive covenant. Wharton purchased the servient estate subject to all covenants of record. Wharton admits that it had actual notice of the restriction when it purchased the servient estate. Furthermore, there is no reason to believe that the price paid by Wharton for its land did not reflect the burden of the restrictive covenant. Therefore, we find that no genuine issue of material fact remains for trial on the issue of notice.
5. Reasonableness of scope
The covenant at issue burdens 100 acres. However, Wharton's parcel, arguably the only relevant burdened estate, comprises 24 acres of land directly across the street from the dominant estate. "In commercial settings such as seller and purchaser, as distinguished from employer-employee contracts containing territorial restrictions against post-employment competition, restrictions in excess of five miles have been upheld." Alexander's Dep't Stores of New Jersey, Inc. v. Arnold Constable Corp., 105 N.J. Super. 14, 27, 250 A.2d 792, 798-99 (Ch. Div. 1969). The restriction did not purport to burden all lands that the grantor owned or thereafter acquired, but rather sought to burden only those lands which were part of the Grantor's farm at the time of the sale. Most importantly, the lands burdened by the covenant were only those lands which could be considered "neighboring parcels". We hold that the geographic scope of the covenant was reasonable because it restricted the operation of a food store only on those neighboring lands which were part of the Singer Farm at the time the covenant was drafted in 1957.
Covenants that extend for perpetuity may often be unreasonable. However, within the realm of employer's non-competition covenants, where the geographic scope of the covenant is reasonable there need be no limitation as to time. See Heuer v. Rubin, 1 N.J. 251, 256-57, 62 A.2d 812, 814 (1949)
Furthermore, non-competition covenants in leases which are co-extensive with the lease term have been upheld without an inquiry into the reasonableness of the duration of the lease term. See, e.g., Alexander's, 105 N.J. Super. at 27, 250 A.2d 798-99 (citing cases). Because the covenant at issue was designed to last as long as the dominant estate operates a food market, we hold that the covenant was reasonable as to duration at the time the covenant was drafted.
6. Restraint on Trade
We next consider whether the covenant imposes an unreasonable restraint on trade or secures a monopoly for the covenantor. "This may be the case in areas where there is limited space available to conduct certain business activities and a covenant not to compete burdens all or most available locales to prevent them from competing in such an activity." Davidson, 274 N.J. Super. at 162, 643 A.2d at 644.
The parties take the same positions here as they take with respect to the antitrust claims discussed above. As we have determined that the validity of the covenant under the federal and New Jersey antitrust laws remains in dispute, those issues necessarily involving several material factual disputes, we cannot determine for the purposes of New Jersey's reasonableness test whether the covenant unreasonably restrains trade. Furthermore, there exists a genuine dispute as to whether the Wharton parcel is the only viable location for a new supermarket in Medford.
7. Public Interest
This case involves the public interest in the integrity of real estate contracts and the interest in unrestrained competition. In Davidson, the New Jersey Supreme Court cautioned that the fact sensitive nature of resolving the reasonableness of public interest arguments makes summary judgment inappropriate. Davidson, 121 N.J. at 215, 579 A.2d at 297. Although we do not believe that the court has laid down a blanket prohibition of summary judgments in these cases, we conclude that genuine issues of material fact exist with regard to the reasonableness of this covenant in light of the competing public interests in this case.
As we noted above, a genuine issue of material fact remains concerning the consideration exchanged for the covenant. Viewing the facts favorably to the plaintiffs, we conclude that a reasonable fact finder could find that the covenant adversely affects the public interest in the free transferability of land and the sale of goods to consumers in a competitive market, and does not undermine the public interest in the validity of land restrictions.
In 1957, it is alleged that Medford would not have had the benefit of a new supermarket without the covenant here at issue. The covenant provided ASC with a measure of security which mitigated the risk of locating out on rural Route 70. However, the Medford Acme has been in existence for over thirty-five years during which time Medford's population has increased six-fold since 1958. Although in 1957 rural Medford may have offered unlimited development potential, Medford's landscape has dramatically changed so that the covenant may now limit opportunity for increased grocery store competition. Thus, the extent to which the public interest in unrestrained competition is adversely affected by the burden on this one parcel remains an issue of fact for trial.
8. Changed Circumstances
The inquiry into changed circumstances must be superimposed over the inquiry under the previous seven factors. The New Jersey Supreme Court succinctly described this process as follows:
The trial court must first determine whether the covenant was reasonable at the time it was enacted. If it was reasonable then, but now adversely affects commercial development and the public welfare . . ., the trial court may consider whether allowing damages for the breach of the covenant is an appropriate remedy.
Davidson, 121 N.J. at 215, 579 A.2d at 297. The court in Davidson cautioned that the fact-sensitive nature of changed circumstances inquiry makes summary judgment generally inappropriate. Id. at 214, 579 A.2d at 297.
Acme contends that changed circumstances are limited to circumstances where the benefit to the dominant estate has ceased to exist.
Wharton argues that the changed circumstances are the increased burden of the covenant which results from external factors. Both arguments have merit and can be reconciled in a simple analysis: Does the retained benefit of the covenant exceed the increased burden of the restriction? As a factor in this analysis we must decide whether Acme has already received the benefit of its bargain. Next we must determine the extent to which circumstances have changed which increase the burden on Wharton.
Again, genuine issues of material fact preclude a finding as a matter of law with respect to changed circumstances. As we noted above, an issue of fact remains as to whether alternative sites exist. This issue is genuine and material to our inquiry into the increased burden on Wharton. Thus, because a reasonable fact finder could find in favor of Wharton on the facts presented, we must deny summary judgment.
In sum, we find that genuine issues of material fact remain on several of the Davidson factors. Material facts remain, which are actually and in good faith controverted, with regard to whether consideration was paid for the covenant, whether the covenant imposed or imposes an unreasonable restraint on trade, whether the public interest is adversely affected by the covenant and whether circumstances have changed such that enforcement is no longer reasonable. However, no substantial dispute remains as to the issues of intent, clarity, notice, and reasonableness of geographic scope or duration at the time the covenant was drafted and, for the purposes of trial, these issues shall be deemed resolved as outlined above.
For the reasons stated above, the defendants motion for summary judgment will be granted in part and denied in part. All claims by Wharton arising under the state and federal antitrust laws are dismissed for lack of standing. We will grant the defendants' motion for summary judgment with respect Giant's claims arising under Section 2 of the Sherman Antitrust Act. The defendants' motion for summary judgment is denied with respect to Giant's claims arising under Section 1 of the Sherman Antitrust Act and the New Jersey Antitrust Act, 15 N.J.S.A. § 56:9-3, and with respect to Wharton and Giant's claims under New Jersey common law.
JEROME B. SIMANDLE
UNITED STATES DISTRICT JUDGE