Best Buy Stores, L.P. v. Manteca Lifestyle Center, LLC, No. 2:2010cv00389 - Document 17 (E.D. Cal. 2010)
Court Description: MEMORANDUM AND ORDER denying 8 dft's Motion to Dismiss, signed by Judge William B. Shubb on 5/12/10. (Kastilahn, A)
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Best Buy Stores, L.P. v. Manteca Lifestyle Center, LLC Doc. 17 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---11 12 BEST BUY STORES, L.P., NO. CIV. 2:10-389 WBS KJN 13 Plaintiff, 14 MEMORANDUM AND ORDER RE: MOTION TO DISMISS v. 15 MANTECA LIFESTYLE CENTER, LLC, 16 17 Defendant. _____________________________/ 18 19 ----oo0oo---- 20 Plaintiff Best Buy Stores, L.P. brought this action 21 against defendant Manteca Lifestyle Center, LLC alleging various 22 claims arising out of plaintiff’s lease with defendant. 23 Presently before the court is defendant’s motion to dismiss the 24 Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). 25 I. 26 Factual and Procedural Background On July 10, 2007, defendant entered into a written 27 lease whereby it agreed to lease plaintiff 30,038 square feet of 28 space at a retail development known as the Promenade Shops at 1 Dockets.Justia.com 1 Orchard Valley (“Promenade”) in Manteca, California. 2 1, 8.) 3 provision, which was subsequently modified by amendment of the 4 parties on January 19, 2009. 5 version of the provision states: 6 7 8 9 (Compl. ¶¶ Article 8 of the lease agreement contains a Co-Tenancy (Id. ¶¶ 8, 10.) The amended As used herein, the “Opening Co-Tenancy Condition” shall mean that, as of the Commencement Date, Tenant shall not be required to open for business unless sixty percent (60%) (not including Best Buy) of the gross leasable area of the Shopping Center are open and operating at the Shopping Center, or are to open concurrently with Tenant, including at least two (2) or more of the following tenants: (i) J.C. Penney; (ii) Bass Pro; (iii) a cinema. 10 11 12 13 14 15 16 17 Should the Opening Co-Tenancy Condition not be satisfied, Tenant may either (i) delay opening for business until the Opening Co-Tenancy Condition is satisfied . . . or (ii) open for business and, if the Opening Co-Tenancy Condition remains unsatisfied on the Rent Commencement Date, then beginning on the Rent Commencement Date, pay fifty percent (50%) of the monthly Rent (and any additional other costs without reduction) payable pursuant to the terms of this Lease until such time as the Opening Co-Tenancy Condition has been satisfied. (Id. ¶ 10.) A proposed site plan (“Site Plan”) for the Promenade was 18 attached to the lease as Exhibit B. 19 Site Plan shows plaintiff’s location in relation to other proposed 20 buildings in the Promenade, details the square footage of each 21 building, and the space allocated for parking. 22 The Site Plan also includes a table that summarizes the amount of 23 space allocated for different uses of buildings in the Promenade, 24 such as the amount of space for small shops, a health club, a 25 cinema, large shops, and restaurants. 26 “total gross leasable area” as 743,908 square feet. (Id. ¶ 13(c).) 27 28 (Id. ¶¶ 8, 13(c), Ex. B.) (Id.) The (Id. ¶ 9, Ex. B.) This table lists the Plaintiff opted to open its store at the Promenade concurrently with J.C. Penny, Bass Pro, and the cinema. 2 At the 1 time plaintiff opened its store, 320,000 square feet of the 2 Promenade was allegedly open and operating. 3 Plaintiff began making monthly rent payments to defendant for 4 fifty percent of the amount of agreed upon rent, contending that 5 defendant had failed to meet the Co-Tenancy Condition in the 6 lease because less than sixty percent of the gross leasable area 7 was open and operating. 8 evict plaintiff and demanded plaintiff pay one-hundred percent of 9 the monthly rent. (Id. ¶ 15.) (Id. ¶ 16.) (Id. ¶ 13(e).) Defendant threatened to Defendant argued that the Co- 10 Tenancy Condition was satisfied because buildings not fully 11 constructed are not included in the “Shopping Center” for 12 purposes of the condition, and that more than sixty percent of 13 buildings that had been fully constructed were open and operating 14 at the time plaintiff opened for business. 15 Plaintiff subsequently paid the amount of rent demanded by 16 defendant under protest. 17 (Id. ¶ 17.) (Id. ¶ 18.) On February 12, 2010, plaintiff filed this action 18 against defendant, containing causes of action for breach of 19 contract and breach of the implied covenant of good faith and 20 fair dealing, and requesting a declaration of its rights and 21 obligations under the lease. 22 defendant filed a Rule 12(b)(6) motion to dismiss the Complaint 23 for failure to state a claim on which relief can be granted. 24 II. 25 (Docket No. 1.) On March 12, 2010, Discussion On a motion to dismiss, the court must accept the 26 allegations in the complaint as true and draw all reasonable 27 inferences in favor of the plaintiff. 28 U.S. 232, 236 (1974), overruled on other grounds by Davis v. 3 Scheuer v. Rhodes, 416 1 Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 2 (1972). 3 plead “only enough facts to state a claim to relief that is 4 plausible on its face.” 5 544, 570 (2007). 6 for more than a sheer possibility that a defendant has acted 7 unlawfully,” and where a complaint pleads facts that are “merely 8 consistent with” a defendant’s liability, it “stops short of the 9 line between possibility and plausibility.” To survive a motion to dismiss, a plaintiff needs to Bell Atl. Corp. v. Twombly, 550 U.S. This “plausibility standard,” however, “asks Ashcroft v. Iqbal, 10 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556- 11 57). 12 In general a court may not consider items outside the 13 pleadings upon deciding a motion to dismiss, but may consider 14 items of which it can take judicial notice. 15 F.3d 1370, 1377 (9th Cir. 1994). 16 notice of facts “not subject to reasonable dispute” because they 17 are either “(1) generally known within the territorial 18 jurisdiction of the trial court or (2) capable of accurate and 19 ready determination by resort to sources whose accuracy cannot 20 reasonably be questioned.” 21 Barron v. Reich, 13 A court may take judicial Fed. R. Evid. 201. Defendant filed a request for judicial notice that 22 requests the court take notice of four documents: (1) a copy of 23 the lease between plaintiff and defendant; (2) a definition of 24 “gross leasable area” from the International Council of Shopping 25 Centers’s (“ICSC”) Dictionary of Shopping Center Terms; (3) a 26 computer printout of the “About ICSC” page from the ICSC website; 27 and (4) a computer printout from the ICSC website showing that 28 plaintiff is a member. (Docket No. 9.) 4 The court will take 1 notice of the lease because “documents whose contents are alleged 2 in a complaint and whose authenticity no party questions, but 3 which are not physically attached to the pleading, may be 4 considered in ruling on a Rule 12(b)(6) motion to dismiss.” 5 Fecht v. The Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995); 6 see In re Stac Elec. Sec. Litig., 89 F.3d 1399, 1405 n.4. 7 court declines to take notice of defendants’ remaining three 8 exhibits because they do not satisfy Federal Rule of Evidence 9 201(b).1 10 A. The Declaratory Relief and Breach of Contract Claims The parties’ dispute on plaintiff’s first four causes 11 12 of action for declaratory relief, money paid, money had and 13 received, and breach of contract focuses on their differing 14 interpretations of the phrase “gross leaseable area of the 15 Shopping Center” in the lease’s Co-Tenancy Condition. 16 Tenancy Condition in Article 8 of the lease is satisfied and 17 plaintiff must pay monthly full rent if, “as of the Commencement 18 Date . . . sixty percent (60%) (not including Best Buy) of the 19 gross leasable area of the Shopping Center are open and operating 20 at the Shopping Center . . . .” 21 A. at 12.) 22 interpretation of the terms “gross leasable area” and “Shopping 23 Center. The Co- (Def.’s Req. Judicial Notice Ex. Interpretation of the lease therefore turns on 24 25 26 27 28 1 Plaintiff filed a “Conditional Request for Judicial Notice” which requested that the court take notice of additional documents from the ICSC in the event it granted defendants’ request for judicial notice of the ICSC documents. (Docket No. 11.) Since the court will not take notice of defendant’s ICSC documents, it will also not take judicial notice of the documents submitted by plaintiff. 5 1 1. “Gross Leasable Area” 2 Under plaintiff’s interpretation, the “gross leasable 3 area” of the Shopping Center could be interpreted to refer to the 4 amount of leasable area included in the Site Plan. 5 in Exhibit B contains a table entitled “Area Summary” that lists 6 the “total gross leasable area” of the Promenade as 743,908 7 square feet. 8 incorporated into the lease. 9 plausable that the gross leasable area of the Shopping Center was (Id. at Ex. B.) The Site Plan The Site Plan was explicitly (Id. at 3.) It is therefore 10 meant to be defined as a static number based on the amount of 11 leasable area available in the proposed buildings in the Site 12 Plan. 13 Tenancy Condition in Article 8 that uses the term “gross leasable 14 area.” In fact, Exhibit B is the only location outside of the Co- 15 Under the interpretation urged by defendant, however, 16 “gross leasable area” could refer to a number that can only be 17 calculated after a building is constructed. 18 lease supports that “leasable area” refers only to constructed 19 space. 20 21 22 23 24 Article 7 of the Article 7 provides that: For the purpose of this lease, the leasable area of the Premises shall be measured from the center of all common walls and the outside of all exterior walls of the Premises . . . If the actual number of leasable area in the Premises varies from the number of square feet set forth in Article 1 . . . the parties will execute an Amendment to this Lease: (i) to state the actual number of leasable area in the Premises . . . and (ii) to decrease the Rent . . . to reflect the actual number of leasable square feet in the Premises. 25 (Compl. ¶ 8.) Article 7 could therefore demonstrate that the 26 measurement of leasable area can only occur after a building is 27 constructed. However, the explanation of how to measure leasable 28 6 1 area in Article 7 does not definitively prove that defendant’s 2 interpretation is correct. 3 Premises”--plaintiff’s individual space in the Shopping Center-- 4 and provides that plaintiff’s rent shall be lowered if the 5 “actual leasable area” of the premises is different from the 6 leasable area enumerated in Article 1 of the lease. 7 likely only be a need for such an adjustment if the lease were 8 based on planned square footage in Article 1, rather than to-be- 9 determined post construction square footage, as defendant argues. Article 7 only refers to “the There would 10 The court cannot say at this stage of the proceeding that 11 plaintiff’s interpretation of the phrase “gross leasable area,” 12 as opposed to defendant’s, is entirely implausible. 13 2. 14 Both parties look to Article 1 of the lease to define 15 16 17 18 19 20 21 22 23 “Shopping Center” the term “Shopping Center.” Article 1 states: The premises and improvements and appurtenances constructed and to be constructed thereto (the “Premises”) located at the SE corner of State Highway Route #120 and South Union, in Manteca, California (the “Shopping Center”). The legal description of the Shopping Center is attached hereto as Exhibit A and made a part hereof, and the Shopping Center is outlined in red on the site plan attached hereto as Exhibit B and made a part hereof . . . Nothing contained in this Lease will prohibit Landlord from constructing the Shopping Center at various times, and in various phases or sections . . . The buildings located within phases or sections constructed after the date of execution of this Lease will be deemed to be included within the defined Shopping Center for all purposes of this Lease as of the date that the buildings are fully constructed . . . . 24 25 26 (Id. at 3.) The definition of “Shopping Center” is open to two 27 reasonable interpretations because of the inconsistent use of 28 “Shopping Center” in Article 1. On one hand, as argued by 7 1 plaintiff, the Shopping Center may be defined as those buildings 2 outlined in the Site Plan. 3 “Shopping Center” in reference to “the SE corner of State Highway 4 Route # 120 and South Union, in Manteca, California (the 5 ‘Shopping Center’).” 6 Shopping Center is outlined in red on the site plan attached 7 hereto as Exhibit B.” 8 the Shopping Center solely according to the proposed Site Plan. Article 1 first uses the term (Id.) (Id.) Article 1 further notes that “the This phrase could be read to define On the other hand, as defendant contends, “Shopping 9 10 Center” might only refer to those buildings already constructed 11 for purposes of the Co-Tenancy Condition. 12 interpretation, Exhibit B could be read to simply provide the 13 “legal description” of the real property of the Promenade, not a 14 definition of Shopping Center for purposes of the lease. 15 1 states that “[t]he legal description of the Shopping Center is 16 attached hereto as Exhibit A . . . and the Shopping Center is 17 outlined in red on the site plan attached hereto as Exhibit B . . 18 . in the event of any conflict between Exhibit A and Exhibit B, 19 Exhibit B shall control.” 20 provide that if Exhibit B, which also identifies the physical 21 location of the land bounded by four roads, conflicts with the 22 metes and bounds description in Exhibit A, Exhibit B controls for 23 purposes of establishing the legal definition of the Shopping 24 Center. 25 “for purposes of [the] Lease” would be “[t]he buildings . . . 26 constructed after the execution of [the] Lease . . . as of the 27 date that the buildings are fully constructed.” 28 cannot say at this stage of the proceeding that the (Id.) Under this Article This language could be read to In that case, the only definition of Shopping Center 8 Again, the court 1 interpretation of the term “Shopping Center” urged by plaintiff, 2 as opposed to that urged by defendant, is entirely implausible. 3 Under California law, the court must consider relevant 4 extrinsic evidence that can prove a meaning to which the contract 5 is reasonably susceptible to determine the intent of the parties. 6 U.S. v. King Features Entm’t, Inc., 7 1988); A. Kemp Fisheries, Inc. v. Castle & Cooke, Inc., Bumble 8 Bee Seafoods Div., 852 F.2d 493, 497 n.2 (9th Cir. 1988); see 9 also Brinderson-Newberg Joint Venture v. Pac. Erectors, Inc., 971 843 F.2d 394, 398 (9th Cir. 10 F.2d 272, 277 (9th Cir. 1992); Trident Ctr. v. Conn. Gen. Life 11 Ins. Co., 847 F.2d 564, 568-69 (9th Cir. 1988); Pac. Gas & Elec. 12 Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33, 37 13 (1968). 14 interpretation of the contract and plead that defendants breached 15 its terms, the court cannot grant defendant’s motion to dismiss 16 when no evidence evincing the intent of the parties is before it. 17 B. Because plaintiff has alleged a reasonable Breach of the Implied Covenant of Good Faith and Fair 18 Dealing 19 “Every contract imposes upon each party a duty of good 20 faith and fair dealing in its performance and its enforcement.” 21 Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999) 22 (quoting Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 23 Cal. 4th 342, 371 (1992)). 24 imposed by the implied covenant of good faith and fair dealing is 25 ‘that neither party will do anything which will injure the right 26 of the other to receive the benefits of the agreement.’” 27 v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (2005) 28 (quoting Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 573 (1973)). “A typical formulation of the burden 9 Andrews 1 Plaintiff alleges that defendant breached the covenant of good 2 faith and fair dealing by “failing or refusing to construct, or 3 to fully construct, the buildings that it represented would be 4 constructed, upon the timeline stated for their construction.” 5 (Compl. ¶ 35.) 6 Although the lease does provide defendant with the 7 discretion to construct the Shopping Center “at various times, 8 and in various phases or sections,” this does not preclude 9 plaintiff from pleading a claim for breach of the implied 10 covenant of good faith and fair dealing. In fact, “[t]he 11 covenant of good faith finds particular application where one 12 party is invested with a discretionary power affecting the rights 13 of another. 14 Developers, 2 Cal. 4th at 372. 15 defendant acted in bad faith by refusing to construct various 16 buildings in the Promenade and slowing the pace of construction 17 despite its promises to the contrary. 18 plaintiff’s ability to realize the economic benefits from leasing 19 space in the Promenade if defendant dragged its feet in 20 constructing the buildings in bad faith. 21 allegations as true, the Complaint states a claim for breach of 22 the implied covenant of good faith and fair dealing. Such power must be exercised in good faith.” Carma Plaintiff has alleged that This may have frustrated Taking plaintiff’s IT IS THEREFORE ORDERED that defendant’s motion to 23 24 dismiss be, and the same hereby is, DENIED. 25 DATED: May 12, 2010 26 27 28 10
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