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Radioshack Corp. v. Saker Enterprises

September 9, 2008


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3059-03.

Per curiam.


Argued May 14, 2008

Before Judges Lisa, Sapp-Peterson and Newman.

Plaintiff appeals from the October 13, 2005 order granting summary judgment in favor of defendant, Saker Enterprises (Saker), the landlord from whom it leased space, the January 6, 2006 order denying plaintiff's motion for reconsideration of that decision, and the March 21, 2007 order stipulating damages.*fn1 At issue, is a clause in the lease that gave plaintiff the right to lower its rental payment if the landlord leased space to another tenant whose primary enterprise is the sale of electronic equipment and components. The trial court, in granting summary judgment, concluded that the lease of space to the other tenant did not trigger the product exclusivity clause in the lease because the tenant primarily sold wireless service rather than electronic equipment and components. We now reverse.

Plaintiff is a retailer engaged in "the retail sale of consumer electronics, including personal computers . . . [,] a broad assortment of electronic parts and accessories, audio/video equipment, . . . cellular and conventional telephones as well as specialized products such as scanners, electronic toys and hard to find batteries." Plaintiff has been selling cellular phones, accessories, and service since the mid- 1990s. Additionally, plaintiff's marketing includes offering discounts to consumers who enter into bundling agreements, specifically agreements that bundle the purchase of cellular phones with a service agreement.

On April 4, 1995, plaintiff and defendant entered into a five-year lease agreement. Under the terms of the agreement, plaintiff (then known as Tandy Corporation) leased retail space in a shopping center located at 3585 Route 9 in Freehold for $30,000 per year, plus an additional amount computed as a percentage of plaintiff's gross sales at the location. On May 25, 2000, the parties executed a lease extension for three additional years, with plaintiff given the right to unilaterally renew the lease for two additional periods of three years, subject to certain changes in rent.

The lease provision at issue here provides:

26. PRODUCT EXCLUSIVITY: If, after the execution date of this Lease, Landlord leases, rents or otherwise conveys any space within the Shopping Center to any tenant whose primary use involves the sale of electronic equipment and components, excluding tenants existing as of the execution date of this Lease, Tenant shall have the option to (a) pay Landlord, three percent (3%) of Tenant's Gross Sales, monthly, in arrears, in lieu of Tenant's obligation to pay Fixed Minimum Rent, Percentage Rent and all additional charges as set forth in this Lease or (b) terminate this Lease and each party's obligations hereunder upon the giving of six (6) months' prior written notice thereof. [(emphasis added).]

On June 9, 2000, less than one month after plaintiff signed its lease extension, defendant entered into an agreement with Not Just Cellular, Inc., to lease retail space at the shopping center. Not Just Cellular is now known as Elephant Wireless. It is undisputed that Elephant Wireless' business consists solely of the activation of cellular service and the sale of cellular handsets and related accessories. Elephant Wireless is an authorized agent of Cingular Wireless,*fn2 which is currently known as "Wireless from AT&T."*fn3

On July 31, 2002, plaintiff notified defendant that because Elephant Wireless sold Cingular's electronic equipment and components, it was exercising its right under the exclusivity provision to pay three percent of its gross sales, monthly, in lieu of its rent obligation, pursuant to the lease. On May 29, 2003, defendant filed a tenancy action for possession against plaintiff in the Law Division, Special Civil Part, Landlord/Tenant Section. Defendant alleged that plaintiff was in default for failing to pay rent. On July 2, 2003, upon consent of both parties, the action was removed to the Law Division, with plaintiff posting the disputed rent and having seven days to file a new complaint.

On July 9, 2003, plaintiff filed a one-count complaint in the Law Division. Specifically, plaintiff sought declaratory relief that (1) it had properly invoked the product exclusivity clause in the lease, (2) it was entitled to pay three percent of gross sales in lieu of the rent as set forth in the agreement, and (3) it was entitled to counsel fees and costs.

Both parties subsequently moved for summary judgment. Plaintiff argued that the undisputed evidence would show that Elephant Wireless sold electronic equipment and components at the Cingular Store and, consequently, that summary judgment should be entered in it favor, "reducing the rent to [three percent] of gross sales and awarding counsel fees and expenses." Defendant argued that renting to Elephant Wireless did not violate the exclusivity clause because "a majority of its revenues [were] from the activation of cell phone accounts." Defendant further argued that even if plaintiff prevailed, damages would still have to be proven.

In an oral decision, the motion judge granted summary judgment in favor of defendant and ordered plaintiff to pay $150,994.20 in outstanding rent within forty-five days of the date of the order and to pay future rent without deductions. The court denied each party's demand for counsel fees. On January 6, 2006, the court entered an order denying plaintiff's motion for reconsideration, but vacated the amount of damages it previously awarded as being "improvidently entered[.]" Additionally, the order provided that "the issue of damages may be resolved by stipulation of the parties, as well as by way of motion upon certification and, if necessary, a hearing before [the court] on a date to be scheduled[.]" On August 30, 2006, plaintiff filed a motion to compel damages-related discovery. The parties entered into a consent order on October 13, 2006 to resolve the outstanding discovery issue. On March 31, 2007, the parties entered into a ...

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