>I'm redating this for those who are filing.  Sorry.
>
>Daily Development for Tuesday, March 4, 2003
>by: Patrick A. Randolph, Jr.
>Elmer F. Pierson Professor of Law
>UMKC School of Law
>Of Counsel: Blackwell Sanders Peper Martin
>Kansas City, Missouri
>dirt@umkc.edu
>
>LANDLORD/TENANT; LANDLORD'S DUTIES; EXCLUSIVE
>USE PROTECTION:   Absent the protection of a specific exclusive use
>clause, shopping center tenant has no right to require landlord to refrain
>from leasing to competing businesses.
>
>34 Partners, LLC v. Danabe Corporation, A-0052-01T2 (N.J. Super.
>App. Div. 2002) (unreported case)
>
>Shopping center video store owner leased space in a center.
>Subsequently, the landlord leased other space in the same center to a
>national chain video store.  The landlord gave the second tenant
>"exclusive use" rights and agreed in the lease with the second tgenant to
>"use good faith efforts to cause the [existing video store] to cease
>operating" before the chain store opened.
>
>"Perhaps, but not necessarily because of the competition," the original
>video store went out of business.  Its lease required it to pay rent until the
>landlord found a replacement tenant for the space.  When the landlord
>sued for the unpaid rent, the lower court denied relief to the landlord
>because it concluded that to award rent would "reward [the landlord] for
>obtaining 'exactly the result [the landlord', in contracting with [the chain
>store], sought . . . , 'that is [the small stores's] vacation of the premises.'"
>That left the landlord with a small award, and it obtained only about a
>third of the attorneys' fees it had expended on the matter.  Landlord
>appealed.
>
>On appeal, Held: reversed.
>
>The appeals court commented: [w]e do not fault the trial court for its
>appropriate sensitivity to the centrality of our jurisprudential universe of
>'fairness and of the need to be vigilant against overreaching, which is
>represented by such doctrines as the covenant of good faith and fair
>dealing."  On the other hand, the Court would not allow such sensitivity
>about these principles  "obscure their inapplicability to the facts of this
>case as a matter of law."
>
>IN the view of the appeals court, this was a straightforward lease
>arrangement where the tenant would be liable for ordinary damages.
>There was no suggestion that the landlord had failed to deliver what the
>lease required.  "Significantly, [the original video store] had no
>expectation of protection against competition because . . . they never
>secured an exclusive right to operate a video store at this mall."
>Consequently, the original video store was subject to the forces of
>competition at the time that it vacated the premises just as it had been
>when it originally signed the lease.  As to the landlord's right to lease to
>a second video store, the court said, "[i]n our constellation of cherished
>legal principles and policies, competition is not a mere dim star."
>
>Comment 1: Although the editor confesses that even the most elaborate
>lease will still contain some implied responsibilities on the part of each
>side, it is not appropriate to infer the existence of clauses that in the
>marketplace are commonly the subject of bargaining and included
>expressly if agreed upon.  In light of the fact that exclusive use rights are
>commonly a part of the bargain in shopping center leases, it is
>appropriate to conclude that if such a clause does not exist, it is because
>the parties did not intend to include it.  So long as there is no express
>prohibition against renting to competition, landlords generally are not
>regarded as having such a duty.  See Friedman on Leases Section 23.2,
>and  cases cited in n. 2.
>
>Comment 2: It is also true that the parties generally have a right to expect
>that contract rights should be enforced in a reasonable fashion, but
>"reasonableness" is in the eye of the beholder.  If there is no express
>clause, the landlord's "good faith and fair dealing" responsibilities are
>simply to pursue its economic best interests.
>
>Some might question whether the existence of a motive on the part of the
>landlord to "squeeze out" the first tenant might color a court's view of
>the landlord's conduct in some particulars.  Here, of course, there is no
>claim that that happened.  In any event, as a general rule, a party's duty
>of fair dealing ought to be measured by whether the that party's conduct
>is objectively reasonable, as that is all the other side has a right to expect.
>See, e.g. Storeck & Storeck v. Citicorp Real Estate, Inc., 112 Cal. Rptr.
>2d 267 (Cal.  App. 2002) (The DIRT DD for 8/22/02) (lender's evil
>motive in negotiating and enforcing rights in construction mortgage of no
>relevance if the lender's actions were "objectively reasonable" and
>authorized by documents.)
>
>Comment 3:   There is some scant authority finding that a tenant has a
>right to some protection from competition from the landlord, although
>the editor feels that the cases are wrongly decided.  See, e.g. Eastern
>Shores Market, Inc. v.  J.D. Associates, Ltd.,  No. 99-1554,  Fed. Ct.
>App. 4th Cir. May 22, 2000. (Unreported decision) (tenant does not have
>an implied "exclusive use" right per se, but landlord, under
>circumstances of the case, had a duty not to lease to others that would
>create "ruinous competition.") (This case later was remanded for
>clarification to the state court system in Maryland, and later settled.
>Thus, as an unreported decision, it is very weak authority.)     Tabet v.
>Sprouse-Reitz Co. , 409 P. 2d 497 )N.M. 1966) (presence of use
>limitation and prohibition on competition with other tenants justified
>implication of a corresponding duty on part of landlord not to lease to
>competing tenant.)
>
>Readers are encouraged to respond to or criticize this posting.
>
>Items reported on DIRT and in the ABA publications related to it  are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters.  The same is true of all commentary provided by contributors to the DIRT list.  Accuracy of data provided and opinions expressed  by the DIRT editor the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

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