Circle K Stores, Inc. v. Zillman, No. 6:2010cv06389 - Document 29 (D. Or. 2010)
Court Description: Opinion and Order: Circle K's request for preliminary injunction is granted and defendant's Motion to Dissolve 11 is denied. In lieu of a bond, Circle K shall continue to deposit rental monies in a trust or escrow account or as otherwise agreed by the parties. Signed on 12/3/10 by Chief Judge Ann L. Aiken. (lae)
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Circle K Stores, Inc. v. Zillman Doc. 29 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON CIRCLE K STORES INC., a Texas corporation, Civ. No. lO-6389-AA OPINION AND ORDER Plaintiff, v. RICHARD L. ZILLMAN, trustee of the RICHARD L. ZILLMAN FAMILY TRUST, Defendant. AIKEN, Chief Judge: Plaintiff Circle K Stores Inc. (Circle K) filed suit seeking declaratory and injunctive relief and specific performance, or in the alternative, damages for breach of contract and breach of the duty of good faith and fair dealing. temporary restraining order (TRO) Circle K also moved for a and preliminary injunction enjoining defendant from interfering with Circle K's possession and use of properties leased by Circle K and owned by defendant. 1 The - OPINION AND ORDER Dockets.Justia.com court granted Circle K' s motion for injunctive relief against defendant. TRO and entered temporary Defendant subsequently filed a motion to dissolve the TRO. On December 1, K's motion for 2010 the court heard oral argument on Circle preliminary inj unction. Circle K's motion is granted and defendant's motion to dissolve is denied. BACKGROUND Circle K is in the business of operating convenience stores and fuel stations throughou t the United States. On November 27, 1970, Circle K and defendant's predecessors in interest entered into separate but identical lease agreements for two separate properties (the Leases) Under the Leases, Circle K became a tenant and operated stores located at 4781 Liberty Road SE, Salem, Oregon and 2904 12th Street SE, Salem Oregon (the Leased Premises) . The original term under the Leases was twenty years, ending on November 26, 1990. The Leases granted Circle K renewal options at the end of their terms, in that Circle K had a "right of first refusal" with respect to future negotiations of rental Wilson Decl., Ex. A, pp. 1, 6. "exclusive first terms. The Leases also granted Circle K an option to purchase or lease" should defendant desire to accept a bona fide offer from a potential third-party lessee. Wilson Decl., Ex. A, p. 2. Subsequently, 2 Circle K and defendant entered into extension - OPINION AND ORDER agreements, with the Leases (as modified) ten years through November 26, 2000. Circle periods. K with options to renew extended an additional The extensions also provided the Leases for two five-year Circle K ultimately exercised the renewal options and the parties extended the lease terms through November 26, 2010. On February 3, requested a 2010, Circle K sent defendant a five-year extension of the Leases, letter and with options to renew for two additional five-year periods after the expiration of the new extension. Defendant apparently never responded to Circle K's letter. On July 2 0, ° 2 10, letter to Defendant. Circle K again sent its February 3, Around the same time, 2010 defendant allegedly retained a broker to market the Leased Premises to third parties. In late August 2010, Circle K stated its intent to exercise its "right of first refusal" on the Leased Properties. Decl., Ex. N, p. 1. Circle K maintains that defendant refused to Wilson engage in any meaningful negotiations to further extend the Leases or to execute a new lease agreement. Defendant disputes Circle K's characterization of the parties' communications. In response to a demand from defendant's broker, in October 2010, Circle K provided independent broker price opinions for the Leased Premises. On November 10, 2010, defendant's broker rejected Circle K's request for lease extensions and stated: 3 - OPINION AND ORDER [Defendant] has received recent offers that are significantly higher than that made by Circle K and at this time, [defendant] feel[s] a counter-proposal would be unproductive. As such they have decided to go another direction with these two locations. Wilson Decl., Ex. P, p. 3. Later on November 10, 2010, defendant's broker sent an e-mail to Circle K, stating: [Defendant is] not interested in discussing any continuation of your occupancy at either location, and [we] expect that you will be vacating the spaces on November 26th, 2010 per the terms of your existing lease. There is a new Lessee who may be interested in discussing acquisition of the FF&E wit h in the stores to save you the expense and hassle of removing those items prior to you vacating. Wilson Decl., Ex. P, p. 2. In response to defendant's disclosure that it had received other offers and potentially entered into lease agreements with a new tenant, Circle K requested that defendant produce the third- party leases pursuant to the terms of the Leases: "As per the terms of our lease, we have a first right of refusal. [third-party offer] is presented to either elect to exercise or vacate." On intent, lessee. November 16, 2010, defendant each dated November 8, However, us for Once this evaluation we Wilson Decl, Ex. P, p. 1. disclosed two letters of 2010 and signed by a third-party defendant denied that Circle K had a right of first refusal: These documents are being sent as an accommodation. Lessor does not acknowledge that Circle K has a valid First Right of Refusal. Any First Right that existed, expired 6 months prior to the expiration of the original lease term, in 1990. 4 will - OPINION AND ORDER Wilson Decl., Ex. Q, p. 1. On November 17, 2010, Circle K attempted to exercise its claimed right of first refusal by accepting the terms offered by the third-party lessee in the November 8, 2010 letters of intent. Wilson Decl., Ex. R. On November 18, 2010, Circle K filed this action and moved for temporary and preliminary inj uncti ve relief. The court granted temporary injunctive relief enjoining defendant from forcing Circle K to vacate the leased premises by November 26, the property to a third party. 2010 and leasing The court also ordered defendant to show cause why a preliminary injunction should not issue. After the court issued temporary injunctive relief, defendant disclosed to Circle K two leases for the Leased Premises executed with a third party on November 9, 2010. DISCUSSION Circle K moves for a preliminary injunction enjoining defendant from interfering with Circle K's rights in the Leased Premises, including but not limited possession of the Leased Premises, business on the Leased to terminating Circle K's interfering with Circle K's and executing any lease or sale of the Leased Premises inconsistent with Circle K's rights. "A preliminary injunction is an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief. 5 u Winter v. Natural Res. Def. Council, Inc., 129 S. - OPINION AND ORDER A plaintiff seeking a preliminary injunction must Ct. 365 (2008) establish: 1) the likelihood of irreparable relief; 3) that likelihood of success the harm balance in of preliminary injunction; and 4) Legacy v. Rey, 577 absence equities F.3d 2) the of preliminary in t ips when relevant, injunction is in the public interest. Forest the on the merits; favor of a that a preliminary Id. at 374; see also Sierra 1015, 1021 (9th Cir. 2009). "[S]erious questions going to the merits and a hardship balance that tips sharply towards the plaintiff can support issuance of an inju nc tion, so long as the plaintiff also shows a likelihood of irreparable injury interest." Alliance for the Wild Rockies v. and that 1045, 1053 (9th Cir. 2010) Here, I find that the injun c tion is in t he Cottrell, public 622 F. 3d (quotation marks omitted). Circle K establishes the likelihood of success on the merits and of irreparable harm, and that the balance of hardships tips in its favor. l A. Likelihood of Success on the Merits The crux of the parties' paragraphs contained accompanying Addendum. in the dispute is original the meaning of three 1970 Circle K maintains that Leases and an 17 of the Leases lIn this case involving contractual rights between private parties, the public interest is negligible, aside from the public interest involved in the enforcement of contracts generally and the interests of third parties suc h as Circle K employees and the third-party lessees. I find that an injunction serves such interests. 6 - OPINION AND ORDER unequi vocally grants Circle K the exclusive right to lease the properties on the same terms as those contained in a bona fide offer that defendant wishes to accept. the Leases, In en Based on the language of I agree. 17, the Leases specifically grant Circle K the "exclusive" right to accept the terms of lease or purchase offers received by defendant: 17. OPTIONS TO PURCHASE OR LEASE: If the Lessor, at any time during the term of this Lease or any renewal or extension thereof receives a bona fide offer to ... lease (for a term to begin subsequent to the present term or any extension or renewal thereof) the demised premises and/or equipment and Lessor desires to accept said offer, Lessor agrees to give Lessee immediate notice in writing of such offer, setting forth name and address of the proposed purchaser or Lessee who has made the offer with a full disclosure of all terms and options thereof. Lessee shall have the exclusive first option to purchase or lease the demised premises and/or equipment within fifteen (15) days after receipt of said notice on the same terms of any such proposal. No sale, lease or transfer of title to said premises and/or equipment shall be binding on Lessee unless and until these requirements are fully complied with by Lessor. Wilson Decl., Ex. A, p. 2 (emphasis added) Notwithstanding the express language of en 17, defendant argues that an Addendum to the 1970 Leases modified and essential l y replaced en 17, and thus any right of first refusal held by Circle K expired six months before the end of the first lease term in 1990. However, defendant's argument is belied by the plain language of the. Leases and the Addendum and by the extensions of the Leases. 7 - OPINION AND ORDER parties' subsequent The reference Addendum into <j[ relied 3 of on the by defendant Leases, a is incorporated paragraph that by discusses renewal options at the end of the original lease terms: Lessee shall have and 3. TERM AND RENEWAL OPTION: . is hereby granted a total of See Addendum successive options to extend the term of this lease for any period of time not exceeding five (5) years for each such option upon the same covenants and condi tions as are herein provided. Rather than identify the number of successive renewal or extension options available to Circle K, the Addendum granted Circle K a "right of first refusal" to negotiate the renewal or extension of lease terms: 3. RENEWAL OPTIONS: Lessee shall have the right of first refusal in any future negotiating on the renting of the lease premises at the end of the original term of this lease, said right of first refusa l to expire six months prior to the end of the lease term. Wilson Decl., Ex. A, p. 4. Notably, <j[ the Addendum. 17 of the Leases does not reference or incorporate Further, the Addendum is numbered "3" and labeled "RENEWAL OPTIONS," thus corresponding with OPTION." <j[ 3, "TERM AND RENEWAL Further, while the Addendum uses the language "right of first refusal" when referencing future renewal negotiations, <j[ 17 describes an "exclusive first option to purchase or lease" when and if defendant receives a bona fide offer from a third party. under the language of the Leases and the Addendum, first refusal" Thus, the "right of identified in the Addendum refers to Circle K's right to first negotiate and/or refuse a renewal or extension of 8 - OPINION AND ORDER the Leases, not the "first option" to purchase or lease should defendant receive an offer from a third party. Thus, Addendum regardless to of negotiate Circle and/or K's rights refuse defendant marketed the properties, under extension 3 <j[ and terms the before the language of the Addendum does not extinguish Circle K's rights and defendant's obligations under <j[ 17. Defendant's competing Addendum modified and superseded <j[ interpretation that the 17 - would require Circle K to exercise its "exclusive first option to lease or purchase" even if defendant had not received a bona fide offer from a third party. Such an interpretation is contrary to the language of would render the entirety of <j[ 17 meaningless. Co. v. Hamilton, 332 Or. 20, 22 P.3d 739 (2001) be viewed by provisions clause four "must be is modified, Denton v. (1974)) its corners and See N. Pac. a whole" if and how limited or controlled by others") Int'l Health & Life, 270 Or. 444, Ins. (a contract "must considered as construed to determine 17 and <j[ 449-50, far and one (quoting 528 P.2d 546 .2 Furthermore, the provisions of the Leases, including <j[ 17, were extended when the parties' subsequently modified and extended the lease terms. The first extension agreements explicitly provided that "all other conditions and covenants of said primary 2Defendant also argues that <j[ 17 applies to only purchase offers; however, this argument is contradicted by the plain language of <j[ 17. 9 - OPINION AND ORDER Lease dated July 27, 1970, shall remain in full force and effect and are hereby ratified and confirmed." The parties also executed and Wilson Declo, Ex. C, p. 2. recorded a Memorandum of Lease Extension in connection with the first extension agreements that stated: "The purpose of this Memorandum of Lease Extension is to give record notice-of the Lease Extension and of the rights created thereby, all of which are hereby confirmed." p. 1. Wilson Decl., Ex. E, Similarly, the second modification agreements provided that "[eJxcept as specifically amended hereby by, all other conditions and covenants of the Lease shall remain in full force and effect and are hereby ratified and confirmed." Thus, Circle K's rights under Wilson Decl., Ex. K, p. 2. 17 did not expire at the end of the original lease term. 3 Accordingly, when defendant received a bona fide lease offer from a third-party lessee on November 8 or 9 and was inclined to accept it, defendant was required to notify Circle K of the offer and allow Circle K fifteen days to decide whether to lease the properties on the same terms or vacate the premises. Based on the record before the court, Circle K has established a likelihood of success on the merits or - at minimum - has raised 3Further, the Memorandum of Lease Extension also specifically acknowledged that Circle K retained a "right of first refusal option." Wilson Declo, Ex. E, p. 1. Thus, even if Circle K's rights under 17 were modified by the Addendum, those rights were extended and Circle K exercised such rights by stating its intent to enter into renewal negotiations in February 2010. 10 - OPINION AND ORDER serious questions regarding its rights under B. 17 of the Leases. Irreparable Injury and Balance of Hardships Circle K must also show the likelihood of irreparable injury and that the balance of hardships tips in its favor. I find that Circle K has made these showings. If the preliminary in j unction is not granted, Circle K will be forced to vacate two properties it has leased for forty years and will suffer the accompanying and potentially permanent business and customers. third-party lessee injunction. Further, matter it once of If the injunction is granted, Circle K has confirmed that it will pay defendant the the l oss for the rental amounts offered by duration of the preliminary the court will expedite resolution of this receives notice regarding Circle K's accept the terms offered by the third-party lessee. balance of hardships tips in Circle K's favor, intent Thus, to the and Circle K has made the requisite showing for preliminary injunctive relief. CONCLUSION For these reasons and those articulated at the hearing, Circle K's request for preliminary injunction is GRANTED and defendant's Motion to Dissolve (doc. 11) is DENIED. In lieu of a bond, Circle K shall continue to deposit rental monies in a trust or escrow account or as otherwise agreed by the parties for the duration of preliminary injunction or this action. On or before December 13, 2010, 11 - OPINION AND ORDER the parties shall submit a joint status report indicating whether Circle K accepts the terms of the November 9, 2010 lease agreements, or whether the parties dispute the terms of Circle K's acceptance. IT IS SO ORDERED. Dated this of December, 2010. Ann Aiken United States District Judge 12 - OPINION AND ORDER
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