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2000 Clements Bridge, LLC v. Officemax North America

August 21, 2012

2000 CLEMENTS BRIDGE, LLC, PLAINTIFF-COUNTERCLAIM DEFENDANT,
v.
OFFICEMAX NORTH AMERICA, INC.,
DEFENDANT-COUNTERCLAIMANT.



The opinion of the court was delivered by: Honorable Joseph E. Irenas

IRENAS, Senior District Judge:

OPINION

Plaintiff 2000 Clements Bridge, LLC alleges that Defendant OfficeMax North America, Inc. breached the terms of a lease for commercial property. Presently before the Court are Cross Motions for Summary Judgment. (Dkt. Nos. 52, 75)

I.

In February 2006, AIG Baker Deptford, LLC ("Former Landlord") acquired ownership of Deptford Landing Shopping Center (the "Shopping Center"). (See Williams Cert. Ex. A at 2) On September 13, 2007, Former Landlord leased a lot to Defendant at the Shopping Center ("Defendant's Lease"). (See Valinis Cert. Ex. A at 1)

Defendant's Lease contained a restrictive covenant (the "Prohibited Uses Provision"), inserted for the benefit of Defendant, which ran with the land. (See Valinis Cert. Ex. A at 23) The Prohibited Uses Provision prohibited Former Landlord and his successors from leasing a lot to a tenant in the Shopping Center likely to be a direct competitor of Defendant.

During the initial term of this lease or during any renewal period hereunder, and for so long as Tenant is operating an office supply superstore from the Demised Premises, Landlord covenants and agrees that it shall not enter into a lease or sale of any portion of the Shopping Center (excluding the Demised Premises) for the following:

(a) For the purpose of, or which is permitted to be, the sale of office, home office, school or business products, computers and computer products, office, home office, school or business supplies or equipment; office furniture; or electronics (including by way of example those businesses operated by Office Depot, Staples, Office Shop Warehouse, Mardel Christian Office and Education Supply Store, Mail Boxes etc., and Workplace); or for use as a business support center, copy center or "Kinko" type of operation (all of which are hereinafter referred to as the "Prohibited Uses"), except to the extent permitted by subparagraph (b) immediately below . . . or

(b) For any purpose which would permit more than

(i) one thousand (1,000) square feet of space to be used for any Prohibited Uses . . . (Valinis Cert. Ex. A at 23)

Defendant's Lease also included a cotenancy provision ("Cotenancy Provision"). If Michaels Stores, Inc., PetSmart, Inc. or Circuit City Stores, Inc. ("Major Tenants")*fn1 ceased operations at the Shopping Center (a "Cotenancy Event") for 180 days, Defendant's minimum rent would abate.*fn2 (See Valinis Cert. Ex. A at 30) If, after eighteen months, Former Landlord had not found a new tenant to replace the vacating Major Tenant ("Replacement Tenant"), Defendant gained the right to terminate. (Id.) Former Landlord could cure the Cotenancy Event within eighteen months merely by finding a Replacement Tenant. (Id.) To cure after eighteen months, however, Former Landlord would have to find a Replacement Tenant and provide Defendant with notice of the cure or Defendant's right to terminate would not lapse. (Id.)

The parties agree that, on March 7, 2009, a Cotenancy Event occurred when Major Tenant Circuit City ceased operations at the Shopping Center. (See Pl.'s Facts ¶ 26)*fn3 On July 29, 2009, Former Landlord leased the lot to Replacement Tenant Gregg Appliances, Inc. ("hhgregg Lease"), an electronics retail store similar to Circuit City. (Id. at ¶ 27) On May 20, 2010, hhgregg opened for business approximately fourteen months after the Cotenancy Event.

The hhgregg Lease described the proper uses for the property ("Use Provision"):

Use. Except with respect to the Exclusive Uses and Restrictions, which are listed in Exhibit "D" attached hereto, and to the extent not prohibited by the Permitted Encumbrances listed in Exhibit "F" attached hereto, Tenant may use the Premises for any lawful retail purpose including, but not limited to the display and retail sale of electronics, appliances, audio and video equipment, computers and bedding as typically sold in stores operated by Tenant, and for ...


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