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LLC v. Kobe Kansas, LLC

United States District Court, D. Maryland

June 20, 2017

KANSAS CITY LIVE BLOCK 124 RETAIL, LLC, Plaintiff and Counter-Defendant,
v.
KOBE KANSAS, LLC, et al, Defendants and Counter-Plaintiffs.

          MEMORANDUM OPINION

          George L. Russell, III United States District Judge

         THIS MATTER is before the Court on Defendant/Counter-Plaintiffs Kobe Kansas, LLC, Young W. Bae, and Chan H. Bae's (the “Baes”) Motion for Partial Summary Judgment (ECF No. 67). The Motion is ripe for disposition. No hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons that follow, the Court will deny the Motion.

         I. BACKGROUND

         As discussed in previous Opinions, this action arises principally out of a dispute concerning a commercial lease (the “Lease”) between the Baes and Plaintiff/Counter-Defendant Kansas City Live Block 124 Retail, LLC (“KC Live”). The Lease became effective on September 15, 2008 for a ten-year term. (Compl. Ex. 2 [“Lease”] §§ 101, 201(b), ECF No. 1-3). In September 2009, the Baes executed a personal guaranty (the “Guaranty”) of their obligations under the Lease. (Second Am. Compl. ¶ 18, ECF No. 34).

         Under the Lease, the Baes rented approximately 7, 500 square feet of commercial space (the “Premises”) in the Kansas City Power and Light District (the “District”). (Lease § 201(a)). The Baes agreed to operate a “high end” KOBE Japanese Steakhouse restaurant in the Premises. (Id. § 201(c)). The Lease requires the Baes to pay both Minimum Rent and Additional Rent (collectively “Rent”) for the Premises. (Id. §§ 201(d), 301). Additional Rent includes taxes, as well as charges for common area maintenance, promotional activities, and trash receptacles. (Id. §§ 8, 10, 11, 17). The Lease also requires the Baes to operate their restaurant during Minimum Store Hours, which the Lease defines as 11 a.m. to 10 p.m. on Sunday through Thursday, and 11 a.m. to 11 p.m on Friday and Saturday. (Id. § 201(q)).

         Section 26 of the Lease governs default. Lease § 2602(vii) (“Section 2602(vii)”) provides that if the Baes fail to operate their restaurant during Minimum Store Hours for more than three consecutive days, then KC Live shall be entitled to treble damages:

If [the Baes] fail[] to conduct [their] business operations at the Premises during the Minimum Store hours for more than three (3) consecutive business days, it is agreed and understood that [KC Live] shall have been deprived of an important right under this Lease and, as a result thereof, shall suffer damages in an amount which is not readily ascertainable; therefore, in addition to, and not in lieu of, any other remedies which [KC Live] has under this Lease, at law or in equity, [KC Live] shall have the right to collect as liquidated damages (and not as a penalty) three (3) times the Rent due for each month, or portion thereof, that such discontinuance shall persist.

Lease § 2605 (“Section 2605”) provides that if the Baes fail to pay Rent in accordance with the terms of the Lease, then KC Live shall be entitled to late charges:

If [the Baes] fail[] to pay any Rent in accordance with the provisions of this Lease when such Rent becomes due and payable as specified in [this Lease], [the Baes] shall pay to [KC Live] a late charge equal to the greater of five percent (5%) of the amount due or Two Hundred Fifty Dollars ($250.00) for each month that such Rent remains unpaid and, in addition, such unpaid Rent shall bear interest at the Lease Interest Rate. Such late charge and interest shall constitute Additional Rent hereunder immediately due and payable.

         Additionally, Lease § 402 (“Section 402”) obligates the Baes to pay Rent plus additional damages if the Baes do not open their restaurant on the Rent Commencement Date.[1] The additional damages are $1, 833 per day until the Baes open their restaurant. (Lease § 402). The Rent Commencement Date was February 6, 2009. (See WDQ-11-2171, Compl. ¶ 7, ECF No. 1). The Baes did not open their restaurant until October 17, 2009 -- eight months after the Rent Commencement Date. (Fowler Aff. ¶ 10, ECF No. 72-1).

         In August 2011, KC Live sued the Baes in this Court, alleging several breaches of the Lease and Guaranty (the “2011 Suit”). (Second Am. Compl. ¶ 22). Three months later, the parties entered into an Amendment to Lease (the “2011 Amendment”) as a means of settling the 2011 Suit. (Id. ¶ 23). In the 2011 Amendment, the parties stipulated that as of July 31, 2011, the Baes owed KC Live $2, 122, 430.88 under the Lease (the “Stipulated Amount Owed”). (Id. ¶ 24). The Stipulated Amount Owed comprises the following:

Description

Amount

Rent Owed from February 16, 2009 through October 17, 2009 when the Baes were not Open for Business

$ 224, 313.57

Interest on Rent Owed from February 16, 2009 through October 17, 2009

$ 7, 885.20

Late Charges under Lease Section 2605 on Rent Owed from February 16, 2009 through October 17, 2009

$ 57, 721.15

Liquidated Damages under Lease Section 402 for the Baes' failure to open restaurant until October 17, 2009

$ 463, 749.00

Late Charges under Lease Section 2605 on Liquidated Damages for Late Opening

$ 605, 531.55

Interest on Liquidated Damages for Late Opening[2]

$ 97, 078.19

Rent Owed after October 17, 2009

$ 288, 732.96

Interest on Rent Owed after October 17, 2009

$ 59, 457.68

Late Charges under Lease Section 2605 on Rent Owed after October 17, 2009

$ 317, 961.59

Total

$ 2, 122, 430.89

         (Id.). The parties also agreed that if the Baes paid $ 350, 446.93 of the Stipulated Amount Owed (the “2011 Settlement Amount”) and complied strictly with the Lease and the 2011 Amendment through their terms, KC Live would waive the balance of the Stipulated Amount Owed.

         (Id. ¶¶ 27, 28). The parties further agreed that in return for strict compliance with the Lease and 2011 Amendment, KC Live would abate the Common Area Maintenance Costs for which the Baes would be responsible for paying for the period of November 1, 2011 through October 31, 2013.[3] (Id. ¶ 29).

         The Baes paid the 2011 Settlement Amount. (Fowler Aff. ¶ 37). Nonetheless, KC Live initiated the instant action in October 2014, alleging breach of the Lease, Guaranty, and 2011 Amendment. (Compl., ECF No. 1). In its Second Amended Complaint, KC Live asserts that between November 1, 2011 and October 31, 2013, the Baes failed to pay Rent on a timely basis. (Second Am. Compl. ¶ 36). According to KC Live, after November 2013, the Baes ceased paying rent altogether. (Fowler Aff. ¶ 36). KC Live also alleges that the Baes “repeatedly and continuously failed to operate [their restaurant] during the Minimum Store Hours required by the Lease.” (Id. ¶ 38). For example, on Sundays, the Baes closed their restaurant, and on Saturdays, the Baes only opened their restaurant from 4:30 p.m. to 10:30 p.m. (Id.). What is more, the Baes purportedly further violated the Minimum Store Hours requirement, as well as other Lease provisions, when they totally abandoned the Premises in or before May 2016 -- long before the expiration of the Lease term. (Fowler Aff. ¶ 36).

         KC Live seeks $3, 210, 941.51, asserting that this figure represents the total amount due and owing as of February 22, 2016[4]under the Lease, Guaranty, and 2011 Amendment, exclusive of attorneys' fees and liquidated damages for failure to operate during Minimum Store Hours. (Id. ¶ 48). The $3.2 million figure comprises the unpaid balance of the Stipulated Amount Owed: $1, 771, 983.95. (Id. ¶ 45). The remainder includes unpaid Rent, late charges, and interest charges, as well as the Common Area Maintenance Costs that KC Live abated conditionally in the 2011 Amendment. (Id. ¶¶ 46, 47). KC Live also seeks liquidated damages under Section 2602 (vii) “in a specific amount to be determined at trial, ” for each month, or potion thereof, in which the Baes did not operate during Minimum Store Hours. (Id. ¶ 49).

         The Court has already resolved multiple motions in this case. (See ECF No. 26) (denying KC Live's Motion to Dismiss Counterclaim); (ECF No. 57) (granting KC Live's Motion for Leave to File Second Amended Complaint, granting the Baes' Motion for Leave to File Amended Counterclaim, and denying without prejudice KC Live's Motion for Summary Judgment). On October 18, 2016, the Baes filed the present Motion for Partial Summary Judgment. (ECF No. 67). KC Live filed its opposition on December 22, 2016. (ECF No. 72). To date, the Court has no record that the Baes replied.

         II. ...


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