Dillon Real Estate Co., Inc. et al v. American National Insurance Co. et al, No. 2:2008cv01508 - Document 210 (D. Ariz. 2010)
Court Description: ORDER granting Plas' Renewed Motion 197 for Permanent Injunction. All the claims of all the parties having been resolved, the clerk is now directed to enter final judgment as follows: 1. In favor of Plaintiffs Dillon Real Estate Co., and Smith 's Food & Drug Centers, Inc. (Fry's) and against Defendant American National Insurance Co. (Anico), pursuant to the jury's verdict in the amount of $172,565.00. 2. The defendant Anico is permanently enjoined from allowing Dollar T ree to sell groceries (food and non-food household supplies) in the Heatherwood Plaza shopping center. Anico cannot rely on its inconsistent lease provisions with Dollar Tree to avoid compliance. It had no power to grant inconsistent provisions. The lease was expressly subject to the declaration. Any term in the lease that is inconsistent with the declaration is void. 3. In favor of Dollar Tree and against Plaintiffs (Fry's) on Plaintiffs' complaint pursuant to our order of July 17, 2009, granting summary judgment in favor of Dollar Tree. Signed by Judge Frederick J Martone on 4/26/10.(KMG)
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Dillon Real Estate Co., Inc. et al v. American National Insurance Co. et al 1 Doc. 210 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 11 12 13 14 15 ) ) ) Plaintiffs, ) ) vs. ) ) American National Insurance Co.; Dollar) ) Tree Stores, Inc., ) ) Defendants. ) ) Dillon Real Estate Co., Inc., et al., No. CV 08-1508-PHX-FJM ORDER 16 The court has before it “Plaintiffs’ Renewed Motion for Permanent Injunction”(doc. 17 197), Anico’s Response (doc. 201), Dollar Tree’s Response (doc. 204), and Plaintiffs’ Reply 18 (doc. 206). 19 I. 20 In our Order of July 17, 2009 (doc. 125), we held that Plaintiffs (Fry’s) had no direct 21 action against Dollar Tree to enforce the restrictive covenant in its declaration with Anico. 22 In our Order of September 25, 2009 (doc. 136), we held that the declaration prohibits Anico 23 from allowing Dollar Tree to sell groceries, that the term “groceries”, as used in the 24 declaration, includes both food and non-food household supplies, and that Anico’s laches 25 defense was foreclosed. The case then went to trial before a jury on Anico’s waiver and 26 equitable estoppel defenses. The parties understood that Fry’s request for injunctive relief 27 against Anico would be tried to the court. 28 Dockets.Justia.com 1 The jury returned a verdict in favor of Fry’s and against Anico in the amount of $172, 2 565 (doc. 183). Our Order of December 14, 2009 (doc. 196) provided that we would order 3 the entry of final judgment after we resolved the request for injunctive relief. 4 We agree with the jury’s resolution of the waiver and equitable estoppel defenses. We 5 find that there was neither waiver nor estoppel. Osco had a separate right to sell certain 6 groceries under the drugstore provisions which do not apply to Dollar Tree. Moreover, 7 Dollar Tree is selling far more items that constitute groceries than Osco did. Thus, there was 8 no waiver. Nor is Fry’s estopped from asserting its rights for having used the words “food 9 restriction” in describing the groceries restriction. 10 We thus find in favor of Fry’s and against Anico. This, however, does not end the 11 inquiry. One seeking a permanent injunction, in contrast to one seeking preliminary 12 injunctive relief, must demonstrate “(1) that it has suffered an irreparable injury; (2) that 13 remedies available at law, such as monetary damages, are inadequate to compensate for that 14 injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a 15 remedy in equity is warranted; and (4) that the public interest would not be disserved by a 16 permanent injunction.” Ebay Inc. v. Mercexchange, L.L.C., 547 U.S. 388, 391, 126 S. Ct. 17 1837, 1839 (2006). Contrast Winter v. Natural Resources Defense Council, Inc. ___U.S.___, 18 129 S. Ct. 365, 374 (2008) (setting forth test for preliminary injunctive relief and substituting 19 likelihood of success on the merits for inadequacy of remedies at law). 20 21 II. 22 We first address irreparable injury. Given the potential elasticity of the term 23 “groceries”, requiring an action at law for every violation of the restrictive covenant would 24 likely cause the covenant to be unenforceable as a practical matter. Covenants have value 25 if they can be enforced, otherwise not. The long, uncertain road of litigation for each 26 violation would render the covenant almost valueless, and yet the promise was an essential 27 part of Fry’s willingness to buy the property and make its investment. 28 We next turn to the adequacy of the remedy at law. We know from the trial and the -2- 1 jury’s verdict that a damages action is inadequate. It is simply too hard to assess damages 2 in connection with the sale of millions of items. A series of damages actions would render 3 the covenant of no use to Fry’s. 4 We then turn to a balance of hardships. If we do not grant injunctive relief, Fry’s 5 covenant is without value. If we do grant injunctive relief, Anico must simply comply with 6 its promise. It unwisely failed to remember the substance of its covenant when it leased 7 space to Dollar Tree. It is the culpable party here. Thus, if someone must be harmed here, 8 Anico is the logical party. This includes any liability it may have to Dollar Tree for lease 9 terms that may be inconsistent with its covenant to Fry’s. 10 Dollar Tree had both actual knowledge and constructive knowledge of the covenant 11 when it entered into its lease with Anico. It claims it relied on Anico’s warranties, but due 12 diligence would have suggested that it read the covenants that were expressly identified in 13 the lease and that were also a matter of public record. Had it done so, it would have known 14 that Anico did not have the power to authorize the sale of groceries in its lease. Any harm 15 to Dollar Tree by an injunction against Anico is likely to be ameliorated by a claim by Dollar 16 Tree against Anico on the warranties. 17 Finally, we turn to the public interest. Although this is largely a private dispute, the 18 public has an interest in the sanctity of contract which forms the foundation for economic 19 development and the free flow of goods and services. 20 The four traditional factors favor the granting of permanent injunctive relief. We note, 21 however, that whether we grant or deny, the only rational way to end this dispute is by an 22 accord among the three parties. By granting, we expose the court to the risk of enforcement 23 proceedings which may entangle the court in the murky waters of what precisely is within 24 the scope of “food and non-food household supplies”. We also expose Anico to claims by 25 Dollar Tree. By denying, we expose Fry’s to the prospect of an endless series of civil actions 26 for damages over the term of the lease. Either way the court suffers. For this reason, we 27 urge the parties to reach a practical solution to the problem they find themselves in. 28 -3- 1 III. 2 At all events IT IS ORDERED GRANTING Plaintiffs’ Renewed Motion for 3 Permanent Injunction (doc. 197). All the claims of all the parties having been resolved, the 4 clerk is now directed to enter final judgment as follows: 5 1. In favor of Plaintiffs Dillon Real Estate Co., and Smith’s Food & Drug Centers, Inc. 6 (Fry’s) and against Defendant American National Insurance Co. (Anico), pursuant to the 7 jury’s verdict in the amount of $172,565.00. 8 2. The defendant Anico is permanently enjoined from allowing Dollar Tree to sell 9 groceries (food and non-food household supplies) in the Heatherwood Plaza shopping center. 10 Anico cannot rely on its inconsistent lease provisions with Dollar Tree to avoid compliance. 11 It had no power to grant inconsistent provisions. The lease was expressly subject to the 12 declaration. Any term in the lease that is inconsistent with the declaration is void. 13 3. In favor of Dollar Tree and against Plaintiffs (Fry’s) on Plaintiffs’ complaint 14 pursuant to our order of July 17, 2009, granting summary judgment in favor of Dollar Tree. 15 DATED this 26th day of April, 2010. 16 17 18 19 20 21 22 23 24 25 26 27 28 -4-
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