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Atlantic City Electric Co. v. Wal-Mart Stores East, Inc.

United States District Court, Third Circuit

October 30, 2013

ATLANTIC CITY ELECTRIC COMPANY, Plaintiff,
v.
WAL-MART STORES EAST, INC., WAL-MART STORES EAST, LP, WAL-MART STORES EAST I, LP, and WAL-MART REAL ESTATE BUSINESS TRUST, Defendants.

FREDRIC LEIGH SHENKMAN, LLOYD DAVID LEVENSON COOPER, LEVENSON, APRIL, NIEDELMAN & WAGENHEIM, PA, ATLANTIC CITY, NJ, On behalf of plaintiff.

N. ARI WEISBROT, LAUREN JILL TALAN, FOX ROTHSCHILD, LLP, ROSELAND, NJ, On behalf of defendants.

OPINION

NOEL L. HILLMAN, District Judge.

This matter concerns an agreement for the sale of property owned by plaintiff, the Atlantic City Electric Company ("ACE"), to defendants, Wal-Mart Stores East, Inc., Wal-Mart Stores East LP a/k/a Wal-Mart Stores East I, LP and Wal-Mart Real Estate Business Trust (collectively referred to as "Wal-Mart"). ACE claims that Wal-Mart's delay in obtaining the proper approvals from the State of New Jersey breached the parties' agreement. Wal-Mart has moved to dismiss ACE's complaint, while ACE has moved for partial summary judgment seeking to compel Wal-Mart to fulfill its obligations to close on the property. For the reasons explained below, both motions will be denied.

BACKGROUND

On July 9, 1999, over fourteen years ago, ACE entered into a purchase agreement with Wal-Mart to sell Wal-Mart a 35.2 acre tract of land located in Egg Harbor Township, New Jersey (the "Agreement"). Pursuant to the terms of the Agreement, Wal-Mart agreed to pay ACE $11, 500, 000.00 for the purchase of the property. In order to construct a Wal-Mart store on the property, Wal-Mart was required to obtain certain governmental permits and approvals and the agreement to sell was contingent upon Wal-Mart obtaining the requisite approvals. Specifically, paragraph 15(a) of the agreement provides:

15. Approvals.
(a) Wal-Mart intends to apply for governmental permits and approvals in order to construct improvements to utilize the land for the construction of a Wal-Mart store and related retail facilities (the "Project"). Wal-Mart's obligation to close under this Agreement is contingent on Wal-Mart obtaining, at Wal-Mart's sole cost and expense, the final, unappealable, valid and irrevocable grant, on terms and conditions satisfactory to Wal-Mart, in Wal-Mart's sole and absolute discretion of those permits, licenses, variances, rights of way, and approvals that are necessary and/or required to permit Wal-Mart to obtain building permits for and to construct the Project in a size and design satisfactory to Wal-Mart (collectively, the "Approvals"). The Approvals shall include without limitation site plan and/or zoning approval from the Township of Egg Harbor Township and County of Atlantic, approval of the requisite agencies of the State of New Jersey, including NJDEP ("CAFRA") and NJDOT ("Highway Access"), approvals from the federal government if necessary, and any other permits or approvals relating to zoning, building, grading, occupancy, curb cuts, driveways, environmental controls, and other permits, licenses, variances, agreements, rights of way, approvals, contracts with utility providers as Buyer determines are necessary or appropriate.

(Amended Compl., Ex. 1.)

The original agreement was amended six times, with the last amendment entered into on May 25, 2005. During that time, Wal-Mart was obligated to pay ACE certain funds in consideration of all the delays. Some of the money went directly to ACE as fees for extensions of time and some of the money was applied to the purchase price and placed in escrow. The final amendment provided, in relevant part, that "Closing shall be held within twenty (20) days following Buyer's receipt of New Jersey Department of Transportation Approvals and provided that Buyer has delivered to Seller a current Report of Title a minimum of ninety-days prior to closing." (Amended Compl., Ex. 7.[1]) Closing has still not occurred because the NJDOT has not issued its final approval of Wal-Mart's traffic plans.

In its complaint, ACE claims that "Wal-Mart received a municipal decision and resolution[2] approving a revised site plan which incorporated the NJDOT's [2009] conceptual approval for the Property on June 20, 2011, " but that Wal-Mart did not timely file for the final approval from the NJDOT, and "if Wal-Mart had timely filed for final approval from the NJDOT, same would have already been received." (Amended Compl. ΒΆΒΆ 37, 39.) ACE claims that Wal-Mart's alleged failure to timely file for NJDOT final approval constitutes a breach of the purchase agreement and the agreement's inherent covenant of good faith and fair dealing. ( Id., First and Second Counts.) ACE also claims that Wal-Mart's dilatoriness has caused needless delay, damaging ACE and causing the property to waste.[3] ( Id., Third Count.)

Wal-Mart has moved to dismiss ACE's complaint in its entirety, arguing that ACE's claims have no merit because Wal-Mart has not received final approval from the NJDOT, and without that approval, pursuant to the paragraph 15(a) of the Agreement and paragraph 1 of the sixth amendment, it has not breached any obligation to close on the property. Relatedly, Wal-Mart argues that because the municipal approvals are currently being litigated, those approvals are not "final" and, accordingly, are not a satisfied requirement of the parties' sale agreement. Because the final approvals are out of the hands of Wal-Mart, ACE's claim that Wal-Mart has breached the agreement, and also breached the inherent covenants of good faith and fair dealing, are not actionable.

ACE contests Wal-Mart's position. ACE argues that it has properly alleged that Wal-Mart's bad faith in delaying its application for final approval from the NJDOT caused Wal-Mart to breach the contract and its good faith covenants. But-for Wal-Mart's delay in seeking and obtaining the required approvals and its refusal to close, ownership of the property would have been transferred to Wal-Mart, and ACE would not be subject to its property wasting and the burden of the property's carrying costs.

In addition to opposing Wal-Mart's motion to dismiss, ACE has filed a pre-answer, pre-discovery motion for partial summary judgment. ACE argues that it is entitled to judgment as a matter of law that Wal-Mart has breached the Agreement. ACE further argues that Wal-Mart should be compelled to close on the property immediately. Wal-Mart opposes the motion, arguing, first, that ACE's complaint has no merit, and, second, if ACE's complaint ...


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