Martin Doyle alertly pointed out that my "squib" summary of the case is
misleading at best and flat wrong at worst. In fact, when I wrote it, I had a
different view of the case, which I later corrected in the text discussion, but
not in the squib. So I have to repost this with a different squib. Sorry. That's
what I get for rushing to print. I also revised the body of the text a bit,
while I was at it.
Daily Development for Friday, October 15, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law UMKC School of Law Of Counsel: Blackwell
Sanders Peper Martin Kansas City, Missouri
LANDLORD/TENANT; COMMERCIAL; EXCLUSIVE USE: "Exclusive use" rights granted to
tenant for pharmacy operation is read to protect tenant from prior tenants
expanding under broad "use privileges" so as to interfere with exclusive
pharmacy use protection. If prior tenants do so, landlord will be liable for
damages.
Eckerd Corp. v. Glen Eagle Retail L.P., 853 A.2d 385 (Pa. Super. 2004)
Eckerd leased and operated a drug store in Glen Eagle's shopping center. The
lease agreement between Eckerd and Glen Eagle granted Eckerd the exclusive right
to operate at the shopping center a drug store or drug department in which a
registered pharmacist is in attendance. The lease also provided that Glen Eagle
would not enter into any lease for the shopping center that would permit the
tenant or subtenant under such lease to use or occupy the space in the shopping
center for the operation of a drug store or drug department. Finally the lease
guaranteed that there were no inconsistent rights already present in the center:
"It is the intention of Landlord to hereby grant to Tenant the exclusive right
to operate and conduct within the Entire Premises the aforesaid type of retail
business so long as this lease remains in effect. Landlord covenants and agrees
that rights similar to the rights herein granted by Landlord to Tenant are not
held by any other tenant or occupant!
of sp
ace within the Entire Premises."
More than ten years after the commencement of Eckerd's lease with Glen Eagle,
Genuardi's supermarket (operating in the same shopping center for a period of
time longer in duration than Eckerd's drug store operation) opened a pharmacy
department. Genuardi's lease with Glen Eagle predated Eckerd's exclusivity
provision and provided that the tenant "shall use the premises for a full
service supermarket, including any retail use now or hereafter customarily found
in full service supermarkets around the country, and for no other purpose."
Eckerd sued to enjoin the grocery store's operation of the pharmacy department,
and lost. Later, Eckerd sued the landlord for damages for breach of the lease.
The trial judge granted summary judgment in favor of Glen Eagle on the basis
that Eckerd's lease merely prevented Glen Eagle from entering into a later lease
with another pharmacy or drug store, which Glen Eagle had not done, and that
Genuardi's lease predated Eckerd's exclusivity provision, and therefore did not
violate it.
The Superior Court reversed the trial judge's decision because the Court
interpreted the terms of Eckerd's lease as unambiguously indicating that the
parties intended to preclude the sale of prescription medications by
supermarkets such as Genuardi's. The Court distinguished the exclusivity
provision contained in Eckerd's lease from similar exclusivity provisions that
merely prevent another tenant in a shopping center from primarily conducting the
business of a Drug Store. The Court indicated that such leases might provide a
tenant supermarket with an exception to a drug store's exclusivity provision.
But here the lease unambiguously prevented any pharmacy "department," which
clearly spelled out that stores not primarily in the pharmacy business were also
restricted.
The language quoted above, warranting that there were not any inconsistent
rights already present in the center, certainly demonstrated the intent of the
parties to cover any competing uses by existing tenants.
Comment 1: Clearly the landlord should have thought more carefully before it
provided a warranty that there were no other competing activities that it had
already permitted. Grocery store pharmacy departments are hardly a new idea at
this point in time.
Comment 2: But there's another lesson here as well. The general permission to
the grocery store to operate whatever activities that grocery stores commonly
operate elsewhere basically eliminated any ability on the part of the landlord
to give any new tenant an exclusive on anything, since grocery stores are
constantly opening new departments, from banking to greeting cards, to
stationery. If the grocery store's rights were limited only by the general
behavior of grocery stores, no use is really safe.
Comment 3: The grocery store use clause didn't expressly permit certain uses.
Instead it stated that the tenant could conduct the identified uses (including
any that might in the future be carried out by other grocery stores) "and no
other uses." It is nevertheless apparent that this was a purposeful attempt by
the parties to identify which uses the tenant could undertake, and not simply a
statement of the tenant's probable intent. This conclusion apparently had been
reached in the injunction proceeding which proceeded this damages action, where
the trial court had permitted the grocery store to expand its operations. The
appeals court appears to accept this conclusion without discussing it.
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