Serfecz v. Jewel Food Stores, 67 F.3d 591 (7th Cir. 1995). Tenant moved across the street to a competing shopping center but continued to pay rent and exercised renewal options on the vacated space. Shopping center owner alleged breach of lease which provides that"lessee shall use the leased premises only for operation of a grocery supermarket."
Held: Such a provision in the lease is merely a typical use-restriction provision delineating permissible uses but does not restrict lessee from leaving the store vacant.
Comment: There is no indication of a percentage lease arrangement here. That usually is the "trigger" that lead courts either to imply a continuous operation duty or to refashion the use clause into such a duty. The court's interpretation of the use clause is by far the most common interpretation made in other cases.
There is more to this case, as the real gist of the lawsuit was that the grocery store unlawfully restrained competition by retaining the lease in its old store when the landlord was willing to release it. Those issues are discussed under the heading: "Landlord/Tenant; Commercial; Restraint of Competition."
LANDLORD/TENANT; COMMERCIAL; RESTRAINT OF COMPETITION: Landlord has no standing to sue for antitrust violations when tenant, for purposes of preventing competition, retains lease on old site in landlord's shopping center after it moves to new center, thereby depriving landlord of an "anchor." Serfecz v. Jewel Food Stores, 67 F.3d 591 (7th Cir. 1995).
Tenant, a grocery store operator, after moving across the street, attempted to sublet the premises to a skating rink. The landlord refused because such sublease would have increased its insurance premiums - a lawful basis for refusal under the tenant's lease. In addition, however, the landlord pointed out that a skating rink was not adequate as an anchor for a retail shopping center. It offerred to cancel the lease, but the tenant refused, continuing to pay rent on its lease which, with extension options, lasted almost ten more years. With no anchor tenant, the landlord's shopping center failed. Landlord brought suit for antitrust - alleging monoplization of the retail grocery market and a conspiracy to restrain trade in the retail shopping center market.
Held: Summary judgment for tenant upheld. Landlord lacks standing on the monopolization claim, and there is no evidence that tenant conspired with its new landlord.
The court here holds that there was sufficient evidence for a jury to find that the tenant continued to hold on to the old space for the purpose of restraining trade, and that the landlord was injured by the tenant's action. But, although the conduct might have been unlawful, the court holds that the landlord's injuries alone do not confer standing. The landlord must show that it sufferred an "antitrust injury." In the context of monopolization of the retail shopping center industry, appropriate plaintiffs would be competing grocery stores and customers suffering higher prices. The trial court expressed regret that it had to follow precedent to make this finding, since it doubted that either of the appropriate plaintiff classes were actually likely to sue. A dissenter on the Seventh Circuit panel views the fact that there are no other good antitrust plaintiffs and the fact that the defendant was an anchor tenant as sufficient grounds to view the landlord as having standing.
On the conspiracy claim, the landlord showed no actual plotting on the part of the tenant and its new landlord, but demonstrated a pattern of the tenant moving into new centers established by the landlord and deserting old locations, which then failed. Mere coincidence, says the court. The tenant had a sound economic basis for making the move to the new center (it was able to couple its grocery operation with a retail drugstore - something it could not do in the old center because of anti-compete clause protecting another drugstore tenant.) Under the circumstances, one cannot infer conspiracy, and there is not enough to permit the jury to even try.
Note: The trial court reserved one additional issue that may eventually turn the tides on the landlord. The landlord alleged that the tenant's activities violated the "unlawful use" prohibition of the lease. Note that the court here was prepared to send to the jury the question of whether the actions of the tenant were unlawful, but it was not willing to let the landlord have standing. But clearly the landlord does have standing if the tenant's actions are deemed to be an "unlawful use." Stay tuned.
Comment: One wonders why the landlord didn't argue breach of the implied covenant of good faith and fair dealing. For a case in which conduct not nearly so egregious resulted in liability on that theory, see Olympus Hills Shopping Center, Ltd. v. Smith's Food & Drug Centers, Inc., 889 P.2d 445 (Utah App. 1994).
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