BENSON EVERETT LEGG, Senior District Judge.
Plaintiff, Redner's Markets, Inc. ("Redner's"), operates a chain of grocery stores, one of which is located in the Joppatowne Plaza Shopping Center. In this case, Redner's sues its landlord, Joppatowne G.P. Limited Partnership ("Joppatowne"), for breach of a restrictive covenant found in its lease. This Court has diversity jurisdiction over the dispute because Redner's and Joppatowne are citizens of different states. See 28 U.S.C. § 1332. Following discovery, the case was tried before the Court, sitting non jury. This Memorandum states the Court's findings of fact and conclusions of law as is required by Federal Rule of Civil Procedure 52. For the reasons stated herein, the Court concludes that Joppatowne has breached the Restrictive Covenant. Further proceedings are required, however, to determine the full extent of the breach and to award relief.
Redner's is a Pennsylvania corporation that operates 40 or so grocery stores in Pennsylvania, Maryland, and Delaware. Redner's stores sell the type of items that one would typically find in a grocery store or supermarket, but at lower prices made possible by the company's no-frills, food warehouse approach. Joppatowne owns and manages the Joppatowne Plaza Shopping Center ("Shopping Center"), which is located in Joppatowne, Maryland at the intersection of Maryland Route 40 and Joppa Farm Road.
Following extensive negotiations conducted by real estate experts, Redner's and Joppatowne, on November 23, 2005, executed a 61-page, 20-year lease (the "Lease") involving approximately 54,000 square feet of retail space. On November, 20, 2006, the parties executed an amendment to the Lease that authorized Redner's to build and operate a small gas station on the Shopping Center's parking
The dispute concerns three sections of the Lease: Article XIII (Restrictive Covenants), Article IV (Rent), and Article XX (Default by Tenant or Landlord). Briefly stated, Redner's contends that Joppatowne violated the Restrictive Covenant by permitting an Amish Farmer's Market (the "Market" or the "Farmer's Market") that directly competes with Redner's. Joppatowne denies that the Market is a prohibited use. Moreover, pointing to Article IV, Joppatowne contends that Redner's cannot enforce the Restrictive Covenant because it is in breach of its obligation to pay percentage rent on gasoline sales. Finally, Joppatowne maintains that Redner's has failed to satisfy the notice and opportunity to cure requirements of Article XX. Absent the required notice, no event of default recognized by the Lease can have occurred, Joppatowne asserts.
The departure of a major tenant created a substantial vacancy in the Shopping Center. The vacancy attracted the attention of Brian Miller, an entrepreneur who operates a large, successful flea and farmer's market in the North Point Plaza Shopping Center in Dundalk, Maryland. Miller was interested in opening a second flea market and farmer's market at Joppatowne.
On October 21, 2009, after negotiations, Joppatowne entered into a 10-year lease with, JTF, LLC ("JTF"), a Maryland limited liability corporation that Miller created to do business at the Shopping Center.
Joppatowne and Miller recognized that they were running the risk that the Amish Farmer's Market would violate the restrictive covenant in Redner's Lease. To address this risk, Joppatowne agreed to defend and indemnify JTF in the event of a suit. In a letter agreement dated October 15, 2009, Joppatowne agreed that "in the event of legal action based on the issue of a breach of the restrictive covenants in the Redner's Lease," it would defend and indemnify JTF. Joint Trial Ex. 18.
The Amish Farmer's Market opened on March 17, 2011. This case focuses on eight stalls that Redner's claims violate the Restrictive Covenant.
The seven stalls inside the enclosure are part of a loosely organized group headed by Menno Beiler, who owns and operates Beiler's BBQ. JTF and Beiler signed an untitled, two paragraph agreement dated December 2, 2010. This document reads in pertinent part: "We agree to pay JTF... for 11,500 sq. ft.... for duration of 5 year total period.... Each standholder must have liability insurance JTFLLC as rider." Pl.'s Trial Ex. 1. The term "standholder" refers to the proprietors of the seven stalls or stands within the enclosure. The standholders, all of whom are Amish, do not have a written contract among themselves or with Beiler. They have a handshake agreement among themselves to split the rent to JTF according to the square footages of their respective stalls. Each pays one seventh of the rent owed for the commonly shared space within the enclosure. The common space includes everything outside the perimeters of each stall, including the aisle space and the seating areas. Beiler collects the rent and pays it to JTF.
Although the Amish Farmer's Market is promoted as such, each stall is separately owned and operated. Each has its own trade name and signage. The seven stalls within the enclosure are Dutch Delights, Dutch Pantry Fudge, Kreative Kitchen, Lapp's Fresh Meat, King's Cheese & Deli, Beiler's BBQ, and Beiler's Baked Goods.
The eighth stall, All Fresh Seafood & Produce ("All Fresh"), is located outside the enclosure. The proprietors of All Fresh, John Walters and Mary Roth, are neither Amish nor part of the Beiler group. All Fresh has a separate lease with JTF.
Redner's also challenges two "Vendor Stalls" located outside the enclosure. Information as to the proprietor or proprietors of the two small Vendor Stalls, both of which are located outside the enclosure, is absent from the record.
Although the case was originally filed in the United States District Court for the Eastern District of Pennsylvania, it was transferred to this Court on July 7, 2011. Neither side prayed a jury or filed a dispositive motion. Following discovery, the case proceeded directly to a seven-day bench trial.
Redner's called eight witnesses at trial:
After the trial was over, Joppatowne filed a Motion to Dismiss, contending that Federal Rule of Civil Procedure 19 mandated the joinder of JTF and the stall owners. Once the Motion was fully briefed, the Court heard argument. For the reasons stated below, the Court will deny the Motion.
Broadly speaking, Rule 19 mandates a two-step inquiry. First, the court must determine whether the absentee is a "required party" as defined by Rule 19(a). If so, the absentee is considered "necessary" to the litigation and must be joined if feasible. When joinder is not feasible, Rule 19(b) requires the court to decide "whether in equity and good conscience, the action should proceed among the existing parties or should be dismissed." An absentee is considered "indispensable" if the action should not proceed without him. "Where joinder of necessary and indispensable persons would destroy complete diversity, and diversity is the only basis for subject matter jurisdiction, the action must be dismissed." Dickson v. Morrison, No.
Turning to the text of Rule 19(a)(1) (Required Party), a person who is subject to service of process and whose joinder will not deprive the court of subject matter must be joined if:
For purposes of federal diversity jurisdiction, Redner's is a citizen of Pennsylvania and Joppatowne is a citizen of Maryland. Because the matter in controversy exceeds $75,000, the requirements of 28 U.S.C § 1332 are satisfied. The joinder of JTF would not defeat diversity because it is a citizen of Maryland. Most of the stall owners are citizens of Pennsylvania, however. Joining them would destroy diversity and deprive this Court of jurisdiction over all claims excepting a minor rent dispute that is of interest only to Joppatowne and Redner's.
When a required party cannot be joined, Rule 19(b)(When Joinder Is Not Feasible) provides that "the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." The factors for the court to consider include:
Even though JTF and the stall owners have an interest in the outcome of the case, they are neither necessary nor indispensable parties. This case is a breach of contract action involving the two parties to the Lease. The absent parties are strangers to the Lease, being neither signatories nor third party beneficiaries. Were JTF and the stall owners parties, there would be no claims that they could assert against Redner's. Redner's has a theoretical claim against them for intentional interference with Redner's rights under the Lease. Redner's, however, has brought no such claim and its counsel definitively stated on the record that Redner's will bring no such claim.
Despite their lack of standing, JTF and the stall owners do have an interest relating to the subject matter of the instant suit. A verdict in Redner's favor would set in motion a series of events that would eventually involve them. If Redner's establishes a breach of the Restrictive Covenant, Joppatowne would be contractually obligated to stop the violations. Joppatowne, as JTF's landlord, would demand that JTF end the violations. JTF, as the stall owners' landlord, would demand that they cease any violative use.
Even though the falling contractual dominoes may impact JTF and the stall owners, this does not mean that they are necessary or indispensable parties. Under Rule 19, "a person does not become a necessary party to an action simply because the determination of the action will affect that person's rights under a separate or subsequent contract." Washington Nat. Ins. Co. v. Philadelphia Auth. for Indus. Dev., No. 91-5826, 1992 WL 33934, at *1 (E.D.Pa. Feb. 19, 1992); see also Helzberg's Diamond Shops, Inc. v. Valley West Des Moines Shopping Ctr., Inc., 564 F.2d 816, 820 (8th Cir.1977); Video Towne, Inc. v. RB-3 Assocs., 125 F.R.D. 457, 459 (S.D.Ohio 1988) ("[A] person does not become an indispensable party to an action to determine rights under a contract simply because determination of the action will affect that person's rights under a separate or subsequent contract — including the rights of a third party lessee to property at issue in the original action."). Courts have often recognized that Rule 19 "does not contemplate joinder of any party who might possibly be affected by a judgment in any way." Shelton v. Exxon Corp., 843 F.2d 212, 218 (5th Cir.1988).
The logic of these cases is sound as the following example illustrates. Assume that a fast food company issues a license to a franchisee to operate a restaurant. License in hand, the franchisee enters into contracts, inter alia, with employees, food and beverage suppliers, a trash hauling company, an accounting firm, and the gas and electric company. Moreover, once the franchise has opened for business, the franchisee pays taxes to the state and local government. If the fast food company sues to revoke the license, many will be affected by the outcome of the case. This does not mean, however, that all are necessary or indispensable parties to the breach of contract suit between the fast food company and the franchisee. An economic interest in the outcome of a breach of contract suit does not confer standing on a person who is a stranger to the contract.
A number of other factors bearing upon the Rule 19 calculus merit consideration. JTF and the stall owners were fully aware of the suit and its potential to disrupt their businesses, but they did not seek to intervene.
Joppatowne points out that it, JTF, and the stall owners have potential claims against one another that might lead to conflicting obligations if another court were to disagree with this Court's interpretation of the Lease. An understanding of this issue requires a discussion of the claims that might be asserted in further litigation.
Because of the indemnity agreement discussed supra, the legal interests of JTF and Joppatowne largely overlap. Both Joppatowne and Brian Miller recognized the risk that Redner's would sue to oust a farmer's market. Joppatowne, decided that the risk of suit was outweighed by the benefit of filling a large vacant area in the shopping center. Before Miller of JTF agreed to lease the space, he obtained an indemnity agreement from Joppatowne. Joint Trial Ex. 18. The JTF/Joppatowne letter agreement of October 15, 2009 provides in pertinent part:
Joppatowne correctly points out that its interests and JTF's interests are not fully congruent. In the event of an adverse court decision, JTF is responsible for ending any violative use, including bringing suit against stall owners if necessary. JTF would be liable to Joppatowne for damages if it is unsuccessful in putting an end to the violation and "Tenant continues such use contrary to that court decision." Additionally, in the event JTF sues a stall owner, the owner would have an opportunity to assert any claims it might have against either JTF or Joppatowne.
In the event of subsequent litigation, therefore, the possibility of rulings that conflict with this opinion exists.
For these reasons, the Court concludes that neither JTF nor the stall owners are necessary or indispensable parties under Rule 19.
Joppatowne contends that no "Event of Default By Landlord" has occurred because Redner's failed to provide written notice of the alleged violation of the Restrictive Covenant as required by the Lease. Section 20.05 of the Lease provides:
This section must be read together with section 20.06, which reads: "Upon the occurrence and continuation of any Event of Default By Landlord, Tenant, with prior written notice to Landlord after any applicable cure period, shall have the right to seek remedies available at law or in equity."
Joppatowne's argument warrants little discussion as it clearly fails. Putting aside the fact that Redner's suit has been pending for over a year, during which time Joppatowne has steadfastly refused to enforce the Restrictive Covenant, Redner's provided the required notice prior to filing suit. In a letter of March 16, 2011, Jason Hopp, Vice President and General Counsel of Render's, described the default and demanded that the Landlord enforce the terms of the Lease. Joint Trial Ex. 23. Joppatowne faults Hopp for failing to describe the factual basis of the default in sufficient detail.
The text of the letter makes short work of this argument. Inter alia, Hopp's letter states: "Redner's is providing notice that it believes in good faith that landlord is in violation of section 13.01 of the Lease by permitting your tenant in the former C-Mart space of the Shopping Center to have greater than 6,000 square feet of Gross Floor Area as a food super market or grocery store." Id. Hopp also states that his letter, which includes the phrase "Lease Default Notice" in the subject line,
Joppatowne's argument focuses on the fact that Hopp's letter invokes section 13.01(a)(ii)(4), whereas Redner's suit relies on other subsections of section 13.01. This argument is untenable. Redner's gave explicit notice that it believed the Farmer's Market to be in violation of the Restrictive Covenant. The Lease requires notice and not a legal brief. Moreover, in a follow-up letter sent by its attorney on April 5, 2011, Redner's provided a variety of alternative grounds under which the Farmer's Market violates section 13.01. Joint Trial Ex. 24.
Joppatowne argues that Redner's cannot enforce the Restrictive Covenant because it is default under its obligation to pay rent on gasoline sales. This contention involves a gas station that Redner's built in the Shopping Center's parking lot circa 2006. In 2006, Joppatowne experienced cost-overruns while building out the Redner's space. Joppatowne and Redner's made a bargain under which Redner's agreed to pay additional construction costs of $206,706 in exchange for Joppatowne's permission to build the gas station. This agreement was formalized in both a letter of March 10, 2006 and in Amendment No. 1 to Lease, which incorporates the letter. Joint Trial Exs. 13 and 14, respectively.
Article IV of the Lease obligates Redner's to pay three types of rent: Annual Minimum Rent, Percentage Rent, and Additional Rent. Joppatowne contends that Redner's is required to pay percentage rent on gasoline sales and sales of other miscellaneous items such as snacks and candy that are available at a small booth adjacent to the pumps. There is no need to work through the complicated rental provisions in the Lease as amended. The March 10, 2006 letter from Redner's to Joppatowne, which was incorporated into the Lease, resolves the issue. In the letter, Richard Redner, the President and CEO of Redner's, thanked Joppatowne for its "willingness to allow Redner's to construct gas pumps at no additional rental costs to Redner's." Joint Trial Ex. 13.
Joppatowne argues that this letter correctly states the parties' understanding as to Additional Rent, but that Redner's is, nevertheless, obligated to pay Percentage Rent on sales at the gas station. The Court disagrees; "no additional rental costs" applies to all three types of rent, including percentage rent. Richard Redner used the word "additional" in its ordinary sense and not as a defined term in the Lease. Moreover, the letter uses the broad phrase "rental costs," connoting that the gasoline operation would not increase Redner's rent obligations in any way. For this reason, the Court finds that the letter applies to the gas station operation, including the sale of gasoline and incidental items. Accordingly, Redner's is not in default under the Lease, and there is no impairment of its rights under section 13.01.
The dispute between Redner's and Joppatowne centers on the meaning of Article XIII of the Lease, headed "Restrictive Covenants."
The Lease is a contract. The Court must apply the rules of contract construction when interpreting the Lease and its provisions. Reading the Lease as a whole, the Court first asks whether Article XIII is clear and unambiguous. If so, the Court will interpret the language "as a matter of law." If, however, the contract language is ambiguous, meaning susceptible of two or more reasonable interpretations, then the Court will admit parole evidence bearing on the intent of the parties when they entered into the contract.
When interpreting a contract, the Court is not at liberty to re-write it. A document should always be construed in the light of common sense and commercial reasonableness. Nevertheless, a court lacks the prerogative to improve the contract by framing a better or more reasonable bargain.
Despite the complexity of Article XIII, the Court concludes that its meaning is clear. As an initial matter, Article XIII is in effect. Section 13.01 stipulates that the Restrictive Covenant applies "[d]uring the initial Term and any Renewal Term, if any, and so long as Tenant is operating the Demised Premises as a full service supermarket...." The Lease is in its original Term and Redner's is operating a full service supermarket at Joppatowne. Hence, Article XIII applies.
Article XIII applies even though Joppatowne, as Landlord, does not itself operate any of the retail stores or stalls that Redner's claims violate the Restrictive Covenant. Section 13.01 provides that Landlord "shall not lease to, use, or permit to be used or otherwise allow any portion of the Shopping Center ... to be used [in a prohibited manner]." JTF is a tenant of Joppatowne, and the stores and stalls are operated by JTF's subtenants. Article XIII obligates Joppatowne to take measures, including the filing of suit, to terminate any prohibited use. Joppatowne has taken no measures to enforce Article XIII against either JTF or the subtenants.
Section 13.01(a)(i) prohibits four competing uses: "a food supermarket, butcher
We now turn to the other two terms. In common parlance, "grocery store" and "food supermarket" have different connotations. In Great Britain, the noun "greengrocer" connotes a small shop selling fruits and vegetables. In the United States, the noun "grocery" retains to a degree the old association with smallness and produce; the produce section in a supermarket is sometimes referred to as the "grocery section."
Turning to the four definitions of "food supermarket or grocery store," the Court will consider each in its turn. Section 13.01(a)(ii)(1) defines the term to include a Super Wal-Mart, a Super Target, or "other big box combo" that includes, as part of its operation, either a "food supermarket or `grocery store.'" This definition reflects the fact that large stores, in an effort to be all things to all people, now sell a variety of items that in earlier times would have been found in a specialty store. Big box stores have pharmacies, flower shops, no-appointment medical clinics, and a food section that would dwarf many neighborhood supermarkets. Large pharmacies are apothecaries no longer; they sell toys, cosmetics, DVDs, video games, and even auto parts.
The Court next turns to section 13.01(a)(ii)(2). The first order of business is to address the term "retail operator," which appears in subsections (2), (3), and (4). Each of the three subsections begins, "any retail operator in the Shopping Center whose Gross Floor Area is...." Subsection (2) applies to a retail operator whose Gross Floor Area is 15,000 square feet or less. Subsection (3) applies to a retail operator whose Gross Floor Area is more than 15,000 but less than 30,000 square feet. Subsection (4) applies to a retail operator whose Gross Floor Area is more than 30,000 square feet.
There are only two candidates for the appellation "retail operator:" JTF and JTF's subtenants in the Amish Farmer's Market. When applying the Restrictive Covenant, there is logic in viewing the Amish Farmer's Market as a single retail operation. Physically, the Amish Farmer's Market is an enclosed area that is fenced off from the Flea Market. Most of the stalls in the Market are run by members of the Amish community, and the Market seeks to convey an overall Amish theme. Viewed as a whole, the Amish Farmer's Market has the appearance of a grocery store. A number of the stalls resemble typical grocery store departments.
If the Amish Farmer's Market were viewed as a single retail operation, subsection (4) would apply because the enclosed Market area comprises more than 30,000 square feet. The Court cannot take such an approach, however, because the Restrictive Covenant bases the definitions of "food supermarket or grocery store" on the term "retail operator." As will be discussed, JTF cannot be considered a "retail operator;" only the individual stall owners meet that definition.
According to Merriam-Webster, "retail" means "to sell in small quantities directly to the ultimate consumer" or "to sell at retail." An operator is "one that operates, as: one that operates a business." Hence, a retail operator runs a business that sells in small quantities directly to the ultimate consumer. JTF cannot be shoehorned into this definition. JTF is an LLC that has one employee, Miller. JTF leased space from Joppatowne. JTF "subleases" the Market area to the entities (all of which appear to be LLCs) that do, in fact, operate the retail stalls and stores.
The term "retail operator" can only apply to the individual stall proprietors. The Amish Farmer's Market is not a legal entity. Each stall is separately managed by a separate proprietor that operates under a separate business license from the State of
Because "retail operator" refers to the tenants of the Amish Farmer's Market, only section 13.01(a)(ii)(2) applies.
The Lease fails to define either "Gross Floor Area" or "in-store sales areas." These definitions matter because applying this subsection requires three distinct steps for each of the stalls. First, one must determine the stall's "Gross Floor Area." Second, for each stall, one must calculate the "in-store sales areas" devoted to the enumerated merchandise. Third, for each stall, one must calculate whether its "instore sales areas" exceed, in the aggregate, 25% of the "Gross Floor Area."
The Court cannot accomplish these three steps based on the record as it now exists. Each side hired an architect, but the architects' calculations, which were based on conflicting interpretations of the pertinent terms, disagree.
To guide the Magistrate Judge in this task, the Court makes the following findings as to the terms "Gross Floor Area" and "in-store sales areas." Although there are no dictionary definitions of these terms, their meaning can be reasonably determined by applying the facts of this case to the language of the Lease. First, the Court will address "Gross Floor Area." As commonly conceived, a store has perimeter walls that encompass its gross floor area. The vendors in the Amish Farmer's Market operate from stalls that are not bounded by perimeter walls on all four sides. The vendors pay rent based on the square footage of their individual stalls. Except for All Fresh Seafood & Produce, the vendors share rent for the common areas of the Market, such as the main aisles and seating areas. When applying "Gross Floor Area," the Magistrate Judge should use the area of the vendor's individual stall. A stall operator's Gross Floor Area does not include any of the common areas on which he pays rent.
The Court next turns to "in-store sales areas." The parties agree that display cases and shelving should be counted. Taking a more expansive view of the term, Redner's would include additional areas such as counter space used for cash registers and the floor area on opposite sides of a display case where customers and employees stand while discussing merchandise. There is logic in Redner's reading. Nevertheless, the Court agrees with Joppatowne's more restrictive interpretation that holds the line at spaces within a stall that display merchandise.
Several factors support a narrow reading of the term. First, section 13.01(a)(ii)(2) does not use the term in the abstract, but refers specifically to "in-store sales areas offering" certain enumerated items. The verb "offer" means "to present for acceptance or rejection." The only areas in the stalls that actually "present" merchandise to the customers are the display cases, shelves, and racks where the merchandise is on view.
Determining whether a stall is prohibited under section 13.01(a) does not end the inquiry. A stall that fits the definition of "food supermarket or grocery store" is permitted if it falls within one of the "safe harbors" in section 13.01(b)(ii), "Exceptions to Use Covenant." The exceptions trump the restrictions. If a use falls under subsection (b)(ii), it is categorically permitted even if it would otherwise be
Next, we turn to the enumerated permitted uses, which are:
Section 13.01 includes a third subsection, subsection (c), "Clarification of Exceptions to Use Covenant." Subsection (c) provides that the exceptions described in subsection (b) cannot be construed to permit a tenant to sell "frozen foods or dairy products from an unlimited quantity of coolers, freezers, or cases...." The operative language reads as follows:
Section 13.01(b) raises a number of issues. The first involves subsection (c). What is the outcome if a stall that is not prohibited under section 13.01(a)(ii)(2) has
The Court finds that subsection (c) does not create a separate, overriding restrictive covenant. Its title, "Clarification of Exceptions to Use Covenant" limits its application to the exceptions. Its text straightforwardly links its application to the exceptions: "in furtherance of [subsection (b)], the Landlord covenants that...." Anyone reading Article XIII would expect to find all of the use covenants in section 13.01(a), "Use Covenant."
The second issue involves the definition of "specialty food stores." This issue has two parts. First, Joppatowne contends that butcher shops and seafood shops, although expressly forbidden in subsection (a)(i), fall within the safe harbor of subsection (b)(ii) because they are "specialty food stores." This argument fails. It would be illogical to read the Lease as permitting in subsection (b) two uses that are expressly disallowed in subsection (a). Moreover, in contract construction, specific terms such as butcher shop and seafood shop are presumed to take precedence over more general terms, such as "specialty store." See, e.g., Heist v. Eastern Sav. Bank, FSB, 165 Md.App. 144, 884 A.2d 1224, 1228 (Md.Ct.Spec.App.2005).
Finally, although "specialty store" is not defined in the lease, it has connotations that simply do not apply to a typical butcher or seafood shop.
The third issue involves the term "ethnic food stores." According to Merriam-Webster, "ethnic" means "of or relating to large groups of people classed according to common racial, national, tribal, religious, linguistic, or cultural origin or background." The Amish qualify under this definition because of their distinctive shared religion and culture.
Having addressed Article XIII, the Court will next turn to the stalls and stores that Redner's accuses of violating the restrictive use covenant.
As mentioned, All Fresh, which is owned and managed by John Walters and Mary Roth, is located outside the Amish Farmer's Market enclosure. The stall, which is laid out in a cannot encompass All Fresh and Lapp's Fresh Meats. These stalls make no pretentions towards uniqueness, sophistication, or special expertise. Without intending to demean these businesses, the Court concludes that they are typical seafood and butcher purveyors of the type found in a typical large supermarket. rectangle, comprises approximately 1,000 square feet.
All Fresh sells fresh and frozen seafood as well as fresh fruits and vegetables. A large sign on the back wall states, "`All Fresh' Quality Seafood & Produce." Below it, another large sign states, "Seafood." The photographs admitted into evidence show smaller signs stating, "Lobster Tails," "Scallops," "Crab Pretzels," and "Sno Crabs." Pl.'s Trial Ex. 17 (Photo Nos. 2412 and 2413). The Court finds that All Fresh is a "seafood shop" within the intendment of section 13.01(a)(i). A seafood shop is no less a seafood shop merely because it also sells fresh produce. Hence, All Fresh violates the Restrictive Covenant in Redner's Lease.
From a stall that comprises approximately 1,000 square feet, Lapp's Fresh Meats ("Lapp's") sells fresh and frozen meats. Lapp's sells pre-packaged meats and meats that are cut to order. The stall is laid out as a rectangle, with a single long refrigerated display case across its face. Laid out in the display case are cuts of meat and meat items such as sausages. Behind the display case is a work area that includes a meat grinder, a sausage stuffer, a band saw, and two slicers. Lapp's employees use this equipment to cut 20 to 25-pound sections of beef and pork into retail-sized portions. Upon request, Lapp's will also slice a cut of meat to order. A large sign on the wall behind the counter reads, "Lapp's Fresh Meats, LLC." Other messages on the sign include: "Steaks Hamburger Pork Chops," "Frozen Packages!" and "Fresh Cut!" Def.'s Trial Ex. 36 (Photo No. 60).
Based on these facts, the Court finds that Lapp's Fresh Meats is clearly a "butcher shop" within the intendment of
Owned and operated by Steve Stoltzfus, Dutch Pantry Fudge ("Dutch Pantry") has three small stalls in the Amish Farmer's Market. Two of the stalls (referred to as Dutch Pantry A and Dutch Pantry B) are located side-by-side in one corner of the enclosure. A large sign that demarks both A and B reads, "Dutch Pantry Fudge: Bulk Foods and Candy." Def.'s Trial Ex. 36 (Photo No. 42). The third stall (Dutch Pantry C) is located across an aisle from the other two. The photos introduced into evidence do not show a separate sign for C except for a small wall sign instructing customers to "Please pay for Candies at Fudge Counter." Def.'s Trial Ex. 36 (Photo No. 44). Because each stall sells different items, the Court will consider each separately.
Dutch Pantry A sells homemade fudge (about 20 different types), chocolate, candy apples, caramel apples, fudge apples, chocolate covered pretzels, fudge pretzels, and chocolate covered bacon and fruit. Dutch Pantry A does not violate the Restrictive Covenant. First, none of the items it sells are enumerated in subsection 13.01(a)(ii)(2). Hence, the store does not meet the definition of "food supermarket or grocery store." Even if it did, Dutch Pantry A would fall within the safe harbor of section 13.01(b)(ii) as both a "candy store" and a "specialty food store."
The same analysis applies to Dutch Pantry C, which sells only candy. Dutch Pantry B presents a more difficult question, however. Dutch Pantry B, which comprises roughly 500 square feet, is rectangular in configuration. According to Joppatowne's diagram, one side of the rectangle is open, allowing customers to walk inside. The interior of the stall includes perimeter and free standing shelving. According to Menno Beiler, the shelves offer candy, snack foods, drinks, and dry bulk foods.
The photos of Dutch Pantry B provide a more detailed (although not exact) picture of the merchandise on offer. Def.'s Trial Ex. 36 (Photo Nos. 42, 55 and 56). Most of the merchandise consists of candy, chips, cheese puffs, snacks, and other "junk food" items that one finds in a typical convenience store. A substantial portion
The Court finds that Dutch Pantry B does not run afoul of the Restrictive Covenant. The trial record cannot support a finding that Dutch Pantry B is a "food supermarket or grocery store." Few, if any, of the items it sells are among the items enumerated in section 13.01(a)(ii)(2). Redner's seems to be offended most by Dutch Pantry B's substantial offering of nuts, trail mix, and other "bulk" items often found in a grocery store like Whole Foods. None of these items, however, are listed in subsection (a)(ii)(2). The Court must apply the Restrictive Covenant as it is written.
Operated by Jacob and Kay Stoltzfus, Kreative Kitchen sells homemade potpies, soups, salads, sandwiches, wraps, and made-to-order subs. The Kreative Kitchen stall (roughly 780 square feet) is demarked by a sign announcing "Kreative Kitchen: Homemade Pot Pie Soups Salads Subs Deserts." Pl.'s Trial Ex. 27 (Photo No. 458). A large menu board hanging behind the counter lists 17 items on the bill of fare. Def.'s Trial Ex. 36 (Photo Nos. 49 and 52). Menno Beiler testified that about half of the food sold at Kreative Kitchen is carried out and half is eaten in the Market's seating area. Kreative Kitchen does not violate the Restrictive Covenant. Even if it were prohibited under subsection (a)(ii)(2), which it is not, Kreative Kitchen would fall within the safe harbor applicable to "restaurants of any kind."
Owned and operated by Mervin Stoltzfus, Dutch Delights sells funnel cakes, handrolled pretzels, and various types of homemade "logs," which are made from pretzel dough stuffed with various types of meats, including hot dogs, cheesesteaks, chicken, bacon, ham, and ribs. Joint Trial Ex. 26 (Photo No. 2391). Dutch Delights also offers ice cream cones scooped from containers in two small refrigerated cases located near the end of its counter. According to Menno Beiler, most of the food prepared by Dutch Delights is consumed at the Amish Farmer's Market. Joppatowne and Redner's agree that Dutch Delights is a "food court style operation." As such, it does not violate the Restrictive Covenant.
Operated by Menno Beiler, Beiler's BBQ sells various cuts of fresh, raw chicken, and prepared food, including baked beans, string beans, bread, mushrooms, rotisserie potatoes, and barbequed chicken and ribs. Although the photo of Beiler's sign is partially obscured, it apparently reads, "Beiler's Bar-B-Que i Pork i Beef i Chicken." Def.'s Trial Ex. 36 (Photo No. 28). Beiler's rectangularly shaped stall comprises roughly 1,050 square feet. The stall is situated between Dutch Delights and Dutch Pantry Fudge, and its counter is flush with theirs. The BBQ's counter is divided into three sections. The middle section includes three cash registers. Def.'s Trial Ex. 36 (Photo No. 32). The end sections consist of display cases. One case is heated and offers prepared food such as barbequed chicken. Def.'s Trial Ex. 36 (Photo No. 31). The other is refrigerated and offers fresh, uncooked chicken. Joint Trial Ex. 26 (Photo No. 2411).
Beiler's Baked Goods makes and sells homemade pies, cakes, whoopee pies, sticky buns, and pastries.
With respect to section 13.01(a), the analysis of Beiler's Baked Goods tracks that of Beiler's BBQ. A bakery is not a prohibited use. "Fresh-baked bakery items," are one of the enumerated items in subsection (a)(ii)(2). Accordingly, the United States Magistrate Judge will determine whether the in-store sales area dedicated to these items is 25% of the stall's gross floor area. Like Beiler's BBQ, Beiler's Baked Goods is not protected by a subsection (b)(ii) safe harbor. Even though Beiler's Baked Goods sells coffee, and customers may eat their pastries at the Market, the primary character of the stall is a bakery not a "restaurant of any kind." The "ethnic or specialty food store" exception also does not fit. The baked goods do not claim to be characteristic foods of the Amish. Nor are the bakery's wares the high quality, unique, specialized items of a specialty store.
Operated by Reuben King, King's Cheese & Deli ("King's") sells milk and dairy drinks, a variety of cheeses and cheese spreads, pickles, homemade popped rice, eggs, milk and other drinks, cold cuts, deli meats, smoked meats, beef sticks, various canned items and jams. King's Cheese abuts the back wall of Beiler's Baked Goods. Display cases and shelves
The analysis used for Beiler's Baked Goods and Beiler's BBQ applies to King's as well. The Magistrate Judge will add up the square footage of the in-store sales area dedicated to "milk and milk products, butter, eggs, and cheese," "fresh or frozen meats or deli items," and "canned foods." For purposes of applying the 25% test under subsection (a)(ii)(2), "canned foods" means food that is sealed and preserved in either a metal can or a glass jar. "Fresh or frozen meats" is self-explanatory, but would not include jerky, beef sticks, or other cured meats. "Deli items" include cold cuts, sliced cheese, and sliced deli meats.
Like Beiler's Baked Goods and Beiler's BBQ, King's does not fit within any of the safe harbors recognized in subsection (b)(ii). Given the wide variety of items it sells, King's is not an "ethnic or specialty food store." Nor is King's a "table service delicatessen," because it does not "provid[e] at least one-half (1/2) of its leasable floor space, exclusive of office and stock room for tables and chairs." From the photographs, some of the glass jars in King's canned goods section appear to be home-preserved. Arguably, these jars may create an association with rural life in general and with the Amish in particular. When interpreting the Restrictive Covenant, the Court must view the store as a whole. Moreover, the "ethnic food store" exception applies to the store as a whole and not to individual items within the store. When applying subsection (a)(ii)(2), therefore, the Court cannot exempt individual canned foods that may have an ethnic association.
Although this opinion decides almost all of the claims and issues, several remain unresolved because further fact finding is required. In a separate Order, the Court is referring the unresolved matters to a United States Magistrate Judge for a report and recommendation pursuant to 28 U.S.C. § 636 and Local Rules 301 and 302.
13.01 Landlord's Restrictive Use Covenant.
In conformity with the findings of fact and conclusions of law in this Court's Memorandum Opinion of even date, it is ORDERED this 24th day of January, 2013:
