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Berkley Trace, LLC v. Food Lion, LLC

United States District Court, Fourth Circuit

July 18, 2013

BERKLEY TRACE, LLC, et al., Plaintiffs,
v.
FOOD LION, LLC, et al., Defendants.

MEMORANDUM OPINION

Richard D. Bennett United States District Judge

Plaintiffs Berkley Trace, LLC (“BT”) and the Hampton Company, Inc. (“Hampton”) (collectively “Plaintiffs”) initially brought this breach of contract and civil conspiracy action against Food Lion, LLC (“Food Lion”), Camellia Food Stores, Inc. (“Camellia”) and Eastern Shore Markets, Inc. (“ESM”) (collectively “Defendants”) in the Circuit Court for Worcester County, Maryland. Ultimately, Defendant Food Lion removed this action to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. §§ 1332(a), 1441(a) and 1446. Following a period of discovery and certain settlement negotiations, Plaintiffs filed a Stipulation of Dismissal as to all Counts asserted against Defendant Food Lion. As a result, Plaintiffs claims against Defendant Food Lion were dismissed with prejudice. The only remaining claim at this time alleges breach of contract against Defendants Camellia and ESM. Specifically, Plaintiffs contend that Defendants Camellia and ESM breached the business operation terms of their commercial lease by closing the “Fresh Pride” grocery store they had agreed to operate on the Pines Plaza Shopping Center from February 2008 until the end of the Lease term on March 31, 2011.

Pending before this Court is Plaintiffs’ Motion for Summary Judgment (ECF No. 94). Also pending is Defendants Camellia and ESM’s Cross-Motion for Summary Judgment (ECF No. 95). The parties’ submissions have been reviewed and no hearing is necessary. See Local Rule 105.6 (D. Md. 2011). For the reasons that follow, Plaintiffs Berkeley Trace, LLC and The Hampton Company, Inc.’s Motion for Summary Judgment (ECF No. 94) is GRANTED. Defendants Camellia Food Stores, Inc. and Eastern Shore Markets, Inc.’s Cross-Motion for Summary Judgment (ECF No. 95) is DENIED.

BACKGROUND

Plaintiff Berkley Trace, LLC (“BT”) is a New Jersey limited liability company, registered to do business in the State of Maryland, with its principle place of business in Woodbury, New Jersey. Pls.’ Second Am. Compl. ¶ 1, ECF No. 75. Plaintiff The Hampton Company, Inc. (“THC”) is a Maryland corporation with its principle place of business in Baltimore, Maryland. Id. ¶ 2. Plaintiffs are, and at all times relevant to the Complaint were, “the owners and operators of certain real property and improvements located on Cathell Road in Ocean Pines, Maryland, known . . . as the ‘Pines Plaza Shopping Center’ ” (“Pines Plaza”). Id. ¶ 6.

In 1985, Plaintiffs and their predecessors-in-title entered into a lease agreement (“Lease”) with Defendant Eastern Shore Markets, Inc. (“ESM”) for the lease of space at Pines Plaza. Lease, ECF No. 94-2. Defendant ESM is a wholly owned subsidiary of Defendant Camellia Food Stores, Inc. (“Camellia”). Saunders[1] Aff. ¶ 2, ECF No. 95-6. “The original lease term was ten years with the option for four renewal periods of five years.” Lease § 2.1. On April 29, 2002, the Lease was amended to include two five year optional renewal terms, one commencing on April 1, 2006 and expiring on March 31, 2011, the other commencing on April 1, 2011 and expiring on March 31, 2016. Am. to Lease § 2, ECF No. 94-3. Article III of the Lease sets forth the use of premises terms and the liquidated damages clause. Lease §§ 3.1-3.4. Specifically, in signing the Lease, ESM agreed that:

3.1 The premises shall be occupied and used by Tenant solely for the operation of a grocery supermarket and for no other purpose whatsoever. Tenant shall conduct its business in the Premises under the trade name Meatland and no other trade name without the consent of Landlord. Tenant shall use only such minor portions of the Premises for storage and office purposes as are reasonably required therefor. The aforesaid specific use is a material covenant and consideration to Landlord to maintain an appropriate tenant mix in the Center and to achieve maximum Gross Sales for all Tenants.
3.2 Tenant shall cause its business to be conducted and operated in good faith and with adequate staff and merchandise and otherwise in such manner as will assure the transaction of the maximum volume of business in or from the Premises as a further material covenant and consideration of the Lease. Tenant shall cause the Premises to be open for business during the hours established by Landlord and otherwise in accordance with the rules and regulations established by Landlord for the Center.
3.3 Throughout the Lease Term, the decor and fixturing of the Premises, Tenant’s merchandise and the operation of Tenant’s business conducted in the Premises shall be consistent with the operation of a “first class, ” “high quality” store or business as those standards of operation may be interpreted from time to time by Landlord, in its sole discretion, in order to enhance the image of the Center as a whole and its reputation as a dignified place to shop. The foregoing description is not intended by Landlord and will not be enforced to affect the retail selling price of Tenant’s merchandise or service.
3.4 If Tenant shall fail to operate its business in the premises in accordance with Section 3.1, 3.2, 3.3, and any other provision of this Lease or the rules and regulations established by Landlord, then Landlord, in addition to any other remedy available to Landlord under this Lease, Tenant shall pay to Landlord as liquidated damages for such a breach, a sum equal to $100.00 for each day Tenant fails to so operate.

Id. Moreover, the Lease provides that the Tenant will be in default where Tenant “vacat[es] or abandon[s] . . . the Premises . . . or fail[s] . . . to be open for business (except in the vent of damage or destruction to the Premises which prevents Tenant from conducting any business thereon) for more than five (5) days.” Id. § 18.1(a). Where the Tenant abandons the Premises, “Landlord shall be entitled to enforce all Landlord’s rights and remedies under this Lease, including the right to receive the rent and any other charges as may become due hereunder.” Id. §18.2(b). In accordance with the Lease and its Amendments, Defendant ESM operated a grocery store at Pines Plaza under the name “Fresh Pride” from 1985 until 2008. Defs.’ Answer to Second Am. Compl. ¶ 10, ECF No. 81.

In or about 2007, Food Lion, LLC (“Food Lion”) opened a store location in Ocean Pines, Maryland, at a shopping center known as Pennington Commons, located within a short distance of Pines Plaza. Id. at ¶ 11. The Food Lion store was in direct competition with the Fresh Pride store. Id. According to Defendants, the Food Lion store’s opening caused Fresh Pride’s contribution to go from positive $892, 562.00 in 2006 to negative $164, 750.00 during fiscal year 2007 and negative $189, 508.00 for the first six months of fiscal year 2008. Proposed Pre-Trial Order at 3, ECF No. 98. As a result, “in January 2008, Camellia and ESM entered into a written agreement with Food Lion under which Food Lion agreed to pay a substantial sum of money to Camellia and ESM, in exchange for [their] promise to close” the Ocean Pines Fresh Pride. Defs.’ Answer to Second Am. Compl. ¶ 17. Food Lion would have given Camellia and ESM additional funds “if the Landlord had been willing to enter into the lease termination agreement.” Id. As such, as of February 4, 2008, the Fresh Pride store at Pines Plaza was closed. Id. ¶ 18. From February 4, 2008 to the termination of the Lease on March 31, 2011, ESM continued to pay rent and reimbursable charges to Plaintiffs. Saunders Aff. ¶ 3. “The total rent and reimbursable charges [for that period] . . . equaled $642, 759.00.” Id. Additionally, the parties agree that 1, 151 days elapsed from the closing of the Fresh Pride store on February 4, 2008 until the termination of the Lease on March 31, 2011. Defs.’ Resp. to Pls.’ Statement of Undisputed Facts ¶ 13, ECF No. 95-3.

Plaintiffs initially filed this action on November 12, 2010 in the Circuit Court for Worcester County. Pls.’ Compl., ECF No. 2. The Complaint alleged claims for breach of contract and breach of fiduciary duty against ESM and Camellia, Tortious Interference with Contractual Relations against Food Lion, and Civil Conspiracy, Tortious Interference with Contractual and Business Relations as well as violation of the Maryland Antitrust Act against all Defendants. Id.. In their First Amended Complaint, Plaintiffs included an additional claim for Disgorgement of Ill-Gotten Gains against ESM and Camellia. Pls.’ First Am. Compl., ECF No. 13. Three days short of a year later, Defendant Food Lion removed this action to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. §§ 1332(a), 1441 and 1446. Notice of Removal, ECF No. 1. Plaintiffs later filed a Second Amended Complaint alleging breach of contract against ESM and Camellia (Count I), Civil Conspiracy against all Defendants (Count II) and Tortious Interference with Contractual Relations against Food Lion (Count IV).[2] Pls.’ Second Am. Compl., ECF No. 75. Following a period of discovery, Food Lion and Plaintiffs settled and Plaintiffs filed a stipulation of dismissal as to Defendant Food Lion as well as Counts II and IV. Stipulation, ECF No. 85. The only remaining claim pending before this Court is Plaintiffs’ Breach of Contract claim set forth in Count I against Defendants ESM and Camellia. Plaintiffs seek to recover $115, 100.00 in light of Defendants’ alleged violation of the liquidated damages provision included in the Lease as well as reasonable attorneys’ fees. Pls.’ Statement of Undisputed Facts ¶¶ 13-14, ECF No. 94-1.

STANDARD OF REVIEW

Rule 56 of the Federal Rules of Civil Procedure provides that a court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). A material fact is one that “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue over a material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. In considering a motion for summary judgment, a judge’s function is ...


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