Filed: Nov. 16, 2004
Latest Update: Feb. 12, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 02-2324 RCSH OPERATIONS, L.L.C., a Louisiana Limited Liability Company, Plaintiff - Appellant, versus THIRD CRYSTAL PARK ASSOCIATES LIMITED PARTNERSHIP, a Virginia Limited Partnership; CHARLES E. SMITH MANAGEMENT, INCORPORATED, a District of Columbia Corporation; CESC PARK THREE LAND, LLC, a Virginia Limited Liability Company; CESC PARK THREE MANAGER, LLC, a Virginia Limited Liability Company, Defendants - Appellees. Appeal fr
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 02-2324 RCSH OPERATIONS, L.L.C., a Louisiana Limited Liability Company, Plaintiff - Appellant, versus THIRD CRYSTAL PARK ASSOCIATES LIMITED PARTNERSHIP, a Virginia Limited Partnership; CHARLES E. SMITH MANAGEMENT, INCORPORATED, a District of Columbia Corporation; CESC PARK THREE LAND, LLC, a Virginia Limited Liability Company; CESC PARK THREE MANAGER, LLC, a Virginia Limited Liability Company, Defendants - Appellees. Appeal fro..
More
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 02-2324
RCSH OPERATIONS, L.L.C., a Louisiana Limited
Liability Company,
Plaintiff - Appellant,
versus
THIRD CRYSTAL PARK ASSOCIATES LIMITED
PARTNERSHIP, a Virginia Limited Partnership;
CHARLES E. SMITH MANAGEMENT, INCORPORATED, a
District of Columbia Corporation; CESC PARK
THREE LAND, LLC, a Virginia Limited Liability
Company; CESC PARK THREE MANAGER, LLC, a
Virginia Limited Liability Company,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge; T. S. Ellis, III, District Judge. (CA-02-173-A)
Argued: October 30, 2003 Decided: November 16, 2004
Before WILKINSON and TRAXLER, Circuit Judges, and Robert E. PAYNE,
United States District Judge for the Eastern District of Virginia,
sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Vernon Webster Johnson, III, JACKSON & CAMPBELL, P.C.,
Washington, D.C., for Appellant. John Henry Carstens, JORDAN,
COYNE & SAVITS, L.L.P., Fairfax, Virginia, for Appellees. ON
BRIEF: Russell S. Drazin, JACKSON & CAMPBELL, P.C., Washington,
D.C., for Appellant. Melissa A. Zeller, JORDAN, COYNE & SAVITS,
L.L.P., Fairfax, Virginia, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
RCSH Operations, L.L.C. (“RCSH”) appeals from an award of
summary judgment dismissing its breach of contract and negligence
claims against the defendants, Third Crystal Park Associates
Limited Partnership (“TCP”), Charles E. Smith Management, Inc.,
CESC Park Three Land, LLC, and CESC Park Three Manager, LLC, and
from a judgment, following a bench trial, in favor of TCP on its
counterclaim against RCSH for breach of contract. For the reasons
set forth below, we affirm both the entry of summary judgment in
TCP’s favor on RCSH’s claims and the entry of judgment in favor of
TCP on its counterclaim.
I.
In 1993, TCP and Prime L.L.C. (“Prime”) entered into a
commercial lease agreement (the “Lease”) by which Prime leased
space on the eleventh floor of a building owned by TCP. From then
until August 1998, Prime operated a franchised Ruth’s Chris Steak
House restaurant in the leased premises.1 In August 1998, the
franchise restaurant was purchased from Prime by Ruth’s Chris Steak
House #28, Inc. (“RC #28"), a corporate subsidiary of Ruth U.
Fertel, Inc., then the parent corporation of the Ruth’s Chris Steak
House organization. Also, in August 1998, RC #28 assumed the Lease
1
Before Prime leased the premises for use as a Ruth’s Chris
restaurant, the premises had previously been leased to another
entity for use as a restaurant.
3
from Prime and thereafter operated the Ruth’s Chris restaurant
under the Lease until March 2001 when RC #28 was merged into RCSH,
which assumed the Lease. Pursuant to the merger agreement, RC #28
ceased to exist.
This action arises out of plumbing problems at the restaurant
in 1999 while RC #28 was the tenant. The principal drain line for
the restaurant is a five inch drain (the “5" line”) that runs
vertically and horizontally in a zig-zag pattern as it wends its
way down and across the building from the eleventh floor to the
sewer connection that is located in the basement. The 5" line and
other drains in the restaurant that lead to the 5" line, became
clogged, resulting in flooding on the eleventh floor and four
lower floors in the building. The restaurant was damaged and so
too were an adjacent tenancy on the eleventh floor, as well as
other tenancies on the first, second, third and fifth floors.
Extensive cleaning and repair of the restaurant was required and,
while that was underway, the restaurant was closed. According to
the complaint, RC #28 incurred approximately $355,000 in direct
repair costs, and it suffered approximately $1.15 million in lost
profits while the restaurant was closed from January 3, 2000 to
April 3, 2000.
TCP also incurred expenses in its emergency response to the
flooding in the restaurant, in the adjacent tenancy on the eleventh
floor, and in the tenancies on the four lower floors. TCP also
4
incurred expenses to repair flood damage to the restaurant and
other tenant spaces. According to TCP, it paid $110,372.14 to
various contractors and its property manager in order to respond to
the emergency and to remedy the damage caused by the flooding.
Although RC #28 was the tenant at the time of the flooding in
the summer of 1999, it ceased to exist after its merger into RCSH
in 2001 and thus RCSH instituted this action, as RC #28's successor
in interest. The complaint asserted claims for breach of contract
(Count I), negligence (Count II), and conspiracy to injure
another’s trade reputation and business (Count III). TCP filed a
counterclaim against RCSH, seeking to recover the expense that it
had incurred in responding to the emergency and in repairing damage
to the other tenancies and the drain lines.
Count III was dismissed early in the proceedings, and it is
not at issue in this appeal. Following the close of discovery, the
district court granted summary judgment in favor of all defendants
against RCSH on its breach of contract and negligence claims.
Thereafter, a pretrial conference was held and the case was set for
jury trial. Approximately a week later, TCP moved to strike RCSH’s
request for a jury trial on the ground that the parties had waived
their right to jury trial under Section 47 of the Lease. The
district court granted that motion, and TCP’s counterclaim was
5
tried to the court sitting without a jury, after which a judgment
was entered in TCP’s favor in the amount of $110,372.14.2
II.
We review de novo the district court’s grant of summary
judgment, Inova Alexandria Hosp. V. Shalala, 244 F.3d 342, 349 (4th
Cir. 2001). That includes a de novo assessment of the legal issue
whether the Lease was ambiguous. Moore Bros. Co. V. Brown & Root,
Inc.,
207 F.3d 717, 722 (4th Cir. 2000).
Section 7 of the Lease, “REPAIRS AND MAINTENANCE,” provides,
in pertinent part, that the “[t]enant shall at its own expense make
all repairs to the interior of the Demised Premises. . . .” (JA
67). Section 49, entitled “TENANT REPAIRS AND MAINTENANCE” amends
Section 7, by inserting immediately after the foregoing quoted
text, the provision that: “[t]enant shall also maintain and repair
all drain lines, grease traps, conduits, ducts and other facilities
in the Building which are dedicated to serving the equipment in the
Demised Premises.”3 (JA 85).
2
United States District Judge Gerald Bruce Lee decided the
summary judgment motions and the motion to strike RCSH’s demand for
jury trial. United States District Judge T.S. Ellis, III tried the
counterclaim and entered judgment on it.
3
Section 49 adds several other provisions for insertion into
Section 7 at this point, but none of them are pertinent to
resolution of the issues presented in this appeal.
6
In 1999, the 5" line and other drain lines that connected to
it became clogged. Those lines were dedicated solely to service
the restaurant. The 5" line received kitchen waste and sewage from
the bathrooms in the restaurant and then carried the combined
waste through the building to the county’s sewer line with which
the 5" line connected at the garage level of the TCP building.
The record also reflects that, in 1995, when Prime was
operating a franchised Ruth’s Chris Steak House restaurant in the
leased premises, the restaurant experienced two flooding problems
in the 5" line and that, consequently, an outside plumbing company
was called upon to unclog the drain lines. The plumbing company
used electrical “snaking” equipment and completely cleared the
line. Also, in 1995, the plumbing company installed special
“clean-outs” so that future maintenance of the line would be
easier, and advised that the 5" line should be “snaked” regularly.
Roger Pastore, an experienced restaurant manager, became
general manager of the restaurant in January 1997, and he was aware
of the need to maintain the drain lines that served the restaurant.
In fact, in 1997, TCP’s property management company reminded
Pastore that maintenance of the 5" line was the restaurant’s
responsibility under the Lease, (JA 517; 266), and Pastore passed
this along to corporate headquarters. The plumber, who had
“snaked” the line in 1995, returned to clean the line in the summer
of 1997. He observed that the condition of the 5" line was worse
7
than it had been in 1995 and concluded that the line did not appear
to have been cleaned since 1995. Nonetheless, and notwithstanding
that the line was completely clogged, the plumber, using the same
procedure followed in 1995, was able to clear out the entire line
once again. From the record, it appears that no “snaking” or other
cleaning was performed between the summer of 1997 and the summer of
1999 when the flooding that gave rise to this action occurred.
The district court held that the applicable provisions of the
Lease (Sections 7 and 49) unambiguously placed responsibility for
maintaining and repairing the drain pipes on the tenant. Finding
no dispute respecting whether the 5" line and the connected lines
served only the restaurant, and rejecting the contention of RCSH
that the language at issue was ambiguous, the district court held
that, “because the only reasonable construction and the plain and
unambiguous meaning of Paragraph 49 allocates the maintenance and
repair responsibilities of the drain lines at issue to the
Plaintiff-Tenant, Defendants had no obligation to maintain the
drain lines and therefore did not breach the [Lease].” (JA 335).
As it did in the district court, RCSH argues here that Section
49 is ambiguous because it does not define the term “equipment.”
From that point of departure, RCSH argues that the toilet
facilities which drain into the 5" line were, under property law,
generally regarded as “improvements,” not “equipment,” and that,
8
therefore, the 5" line at issue was not “dedicated to serving the
equipment in the Demised Premises.”
Mindful that the undisputed record was that the sewage from
the toilets in the restaurant and the waste from the kitchen both
are carried away from the restaurant by the 5" line and that the 5"
line and the connected lines served only the restaurant, the
district court rejected RCSH’s argument because:
The five inch drain line at issue served only
the Plaintiff-Tenant’s restaurant. Reading
the Lease as a whole, the only logical
construction of Paragraph 49 is that the
tenant is responsible for maintenance of the
drains and drain lines that serve the
restaurant’s equipment but do not serve the
equipment of other tenants. Plaintiff’s
construction of Paragraph 49 would read the
‘drain line . . . dedicated to serving the
equipment in the Demised Premises’ language
right out of the [Lease].
We agree with the district court that the Lease does not make a
property law-based distinction between “equipment” and
“improvements.” Instead, given its plain meaning, the text of
Section 49 simply obligates the tenant to maintain and repair those
drain lines that serve its facilities, as opposed to the facilities
of other tenants. We also agree that RCSH’s interpretation of the
Lease is so cramped as to render Section 49, an important part of
the Lease, a nullity.
In this diversity case, the district court was obligated to
apply the law of Virginia, the forum state. The Supreme Court of
Virginia has spoken to the issues here presented in TM Delmarva
9
Power, L.L.C. v. NCP of Va., L.L.C., 557 S.E.2d 199, 200 (Va. 2002)
wherein the court held that:
A contract is not ambiguous merely because the
parties disagree as to the meaning of the
terms used. Furthermore, contracts must be
considered as a whole ‘without giving emphasis
to isolated terms.’ Finally, no word or
clause in a contract will be treated as
meaningless if a reasonable meaning can be
given to it, and the parties are presumed not
to have included needless words in the
contract.
Id. at 200 (citations omitted). The attempt of RCSH to create
ambiguity in the Lease runs afoul of these basic precepts because
it wrenches the words “dedicated” and “equipment” out of their
context and, in so doing, treats what is a highly relevant contract
amendment as devoid of purpose.
For the foregoing reasons, we affirm the decision of the
district court to grant summary judgment on Count I, RCSH’s breach
of contract claim.4
4
RCSH alleged that there was an oral agreement in 1997,
pursuant to which RCSH agreed to increase the frequency of its
maintenance of the 5" line to twice annual cleanings and the
defendant, TCP, agreed to pay for property damage associated with
the flooding of the 5" line. This alleged oral modification of the
Lease is barred by the provision of the Lease in Section 24 which
prohibits modification of the Lease except “in writing, signed by
the parties hereto.” The district court properly applied Section
24 to bar any oral modification of the Lease.
10
III.
The district court also granted summary judgment on RCSH’s
negligence claim which was predicated on the theory that the
defendants owed a number of common law duties not governed “solely
by virtue of the contractual relationships between the parties,”
which the defendants negligently failed to fulfill. (JA 19) In the
view of RCSH, “[t]he leakage, flooding and related damage to the
Restaurant would not have occurred but for the Defendants’
negligent failure to ‘fulfill’ the duties.” The district court
rejected that contention, holding that:
Plaintiff’s negligence claim fails for one
simple reason. Though Plaintiff argues at
great length that Virginia and other
jurisdictions recognize common law duties in
some cases where a commercial lease exists, it
fails to set forth any evidence showing a
specific common law duty that the Defendants
breached in this case.
(JA 337)
It is true that, in the complaint, RCSH cataloged ten duties
which the defendants supposedly had breached. However, by the time
of summary judgment, none of those duties was tethered to any
factual base other than the maintenance of the 5" line and the
lines connected to it which, as outlined in Section II above, was
a duty that, by contract, the parties had allocated to the tenant.
Thus, after discovery, and at the time of summary judgment, the
negligence claim was nothing more than a recasting of the breach of
contract claim in negligence terms. And, the only duty that
11
allegedly was breached by the defendants was the putative duty to
maintain the 5" line and the connected lines.
Although, under Virginia law, a negligence claim conceivably
can exist in tandem with a breach of contract claim, that is so
only if the negligence claim is based on the breach of some duty
that is independent of the contract. A&E Supply Co. v. Nationwide
Mutual Fire Ins. Co., 798 F.2d 669, 671-72 (4th Cir. 1986) (citing
Kamlar Corp. V. Haley,
229 S.E.2d 514, 517 (Va. 1983)). It is the
responsibility of the nonmoving party to identify the existence of
a specific, independent duty that was breached. As the district
court correctly held, RCSH failed to discharge that fundamental
responsibility demanded of it by now well-settled summary judgment
jurisprudence.
Instead, RCSH relied principally on a string of premises
liability cases which, as the district court correctly held, had no
applicability in this case in which the issue is: upon which party
did the Lease place the obligation to maintain the 5" line and the
connected drain lines that served the restaurant. Also, RCSH
cited: (1) a number of inapplicable cases addressed to the
obligation of landlords to protect business invitees from personal
injury, a circumstance not here at issue; (2) a case decided under
the 1974 Virginia Residential Landlord Tenant Act, a statute that
does not apply to commercial leases (Va. Code Ann. §§ 55-248.2 to
28.40); and (3) decisions involving the Uniform Statewide Building
12
Code (Va. Code §§ 36-97 to 36-119.1) which, absent contractual
provisions to the contrary, places repair and maintenance of a
building upon the owner, a fact pattern that did not exist here.
On the facts presented by this record, the district court correctly
concluded that these decisions and statutes had no applicability in
this case.
Finally, RCSH argued that the tenant did not have access to,
or control over, the entire length of the 5" line and that,
therefore, notwithstanding the language of the Lease that
specifically allocated maintenance of that line to the tenant, the
responsibility really remained with TCP. There are two flaws in
that theory. First, the record is replete with evidence that, at
least in 1995 and 1997, TCP afforded the tenant’s plumbing
contractor access to all areas necessary to clear the clogged 5"
line from the restaurant all the way to the point where the line
connected with the sewer (e.g. across and down the entire
building). Second, perhaps as a function of the foregoing, and, as
held by the district court, “[P]laintiff does not come forward with
any evidence that Defendants denied access to Plaintiff or
Plaintiff’s contractor to maintain the drain line pursuant to the
Lease.” (JA 338). We agree that, in opposing the entry of summary
judgment, RCSH offered no factual support for its assertion that
the tenant was denied the access necessary to discharge the
13
maintenance obligation imposed on it by Sections 7 and 49 of the
Lease.5
For the foregoing reasons, we affirm the grant of summary
judgment on Count II, RCSH’s negligence claim.6
IV.
TCP filed a counterclaim against RCSH alleging that the
failure of the tenant to perform inspections, repairs and
maintenance necessary to keep the drain lines that were dedicated
to serving the restaurant in good working order was a breach of the
Lease and that, as a direct and proximate cause of the breach, the
pipes burst, causing flooding in the building, the consequence of
which was the damage sustained by TCP. The counterclaim was tried
to the district court sitting without a jury.
To recover on its counterclaim, TCP was obligated to prove, by
a preponderance of the evidence, that a material breach of the
Lease on the part of the tenant was the proximate cause of the
damage of which TCP complains. The district court held that TCP
5
RCSH also seems to argue that RC #28, the tenant, was
unaware of the existence of some of the connected lines. That, of
course, is no excuse because the Lease requires the tenant to
maintain and repair all drains dedicated to serving the leased
premises.
6
Given this resolution, it is unnecessary to address TCP’s
argument that the negligence claim fails under Virginia’s economic
loss rule.
14
had met its burden and entered judgment on the counterclaim. RCSH
appeals from that judgment.
We begin by noting that, as explained above in Section II, the
Lease imposes upon the tenant the obligation to “maintain and
repair all drain lines, grease traps, conduits, ducts and other
facilities in the building which are dedicated to serving the
equipment in the Demised Premises.” The district court found, as
facts, that the drain lines at issue were dedicated to serving the
kitchen and bathroom facilities in the restaurant; that the drain
lines had not been maintained by the tenant; and that the failure
to maintain the drain lines proximately caused the drain lines to
rupture and to release waste and sewage into the restaurant and
other tenant spaces. The district court also held, as a fact, that
TCP consequently had incurred reasonable necessary expenses in the
amount of $110,372.14 to address the emergency flooding and to
remediate the damage caused by the tenant’s breach of the Lease.
RCSH presents four reasons why the district court’s entry of
judgment in favor of TCP on the counterclaim was error. We
consider each in turn.
A. The Assumption and Assignment Agreement
The district court held that RCSH was the successor in
interest to RC #28 and thus was liable by virtue of Sections 19 and
34.2 of the Lease for the acts and omissions of RC #28 while it was
the tenant. RCSH does not dispute that it is the successor in
15
interest under the Lease to RC #28.7 Nor does RCSH dispute that
Section 19 of the Lease devolves the liabilities of RC #28 upon
RCSH when it provides that “[a]ll rights, remedies and liabilities
herein given to or imposed upon either of the parties hereto, shall
extend to their respective heirs, executors, administrators,
successors, and assigns.” And, RCSH agrees that Section 34.2 of
the Lease permits the tenant to assign its rights to:
Ruth U. Fertel, Inc. or any entity or
individual designed by Ruth U. Fertel, Inc.,
so long as (1) such assignee expressly assumes
in writing all the obligations of Tenant under
this Lease . . . and (2) Ruth U. Fertel, Inc.
unconditionally guarantees the obligations of
such assignee for the balance of the term of
this Lease (and any extensions) . . .
(JA 76)
It also is undisputed that, in March 2001, by virtue of an
Assignment and Assumption of Lease Agreement (“Assignment
Agreement”), RC #28 assigned its rights under the Lease to RCSH, a
subsidiary of, and an entity that was approved by, Ruth U. Fertel,
7
Nor could RCSH dispute that finding, given that, in its
complaint, RCSH affirmatively asserted that it was “successor in
interest to [RC #28]” and that, as such, it was the proper party to
sue on the Lease. Complaint, ¶1, (JA 13-14). Moreover, RCSH’s
complaint also describes RC #28 as RCSH’s predecessor in interest
which incurred the very damages (repair expense and lost profits)
that RCSH sought to recover in its complaint.
16
Inc.8 Under paragraph 2 of the Assignment Agreement, RCSH, as
assignee of RC #28:
agrees to pay, perform and fully discharge, in
accordance with their respective terms, the
payment and performance, liabilities and
obligations of Assignor [RC #28] arising out
of the Lease after the date hereof. Assignee
does not assume or agree to pay any
liabilities or obligations under the Lease
arising prior to the date hereof.
(JA 105). Acting through its property manager, TCP consented to
the assignment. (JA 108)
According to RCSH, TCP waived the rights it had under Sections
19 and 34.2 of the Lease to recover from RCSH, as successor in
interest to RC #28, for any breach of the Lease by RC #28 because
TCP consented to the Assignment Agreement which provided that RCSH
did “not assume or agree to pay any liabilities obligations under
the Lease arising prior to the date hereof.” The district court
rejected RCSH’s waiver argument for a number of reasons, (JA 1267-
74) the first of which was that RCSH did not plead the affirmative
defense of waiver in its answer to the counterclaim. (JA 1270)
Under Fed. R. Civ. P. 8(c), “a party shall set forth
affirmatively . . . waiver, and any other matter constituting an
avoidance or affirmative defense.” It is settled that a failure to
raise an affirmative defense in the appropriate pleading results in
8
By the time of the Assignment Agreement, Ruth U. Fertel,
Inc. had become Ruth’s Chris Steak House, Inc., and RCSH was a
wholly owned subsidiary of that entity. (JA 105-111).
17
the loss of that defense. Brinkley v. Harbor Recreation Club, 180
F.3d 598, 612 (4th Cir. 1999); Peterson v. Air Line Pilots Assoc.
Intl,
795 F.2d 1161, 1164 (4th Cir. 1985). It is beyond question
that RCSH did not plead in its answer to the counterclaim, waiver,
by virtue of paragraph 2 of the Assignment Agreement or otherwise.9
However, even if a party fails to plead an affirmative defense, the
opposing party still must show “prejudice or unfair surprise”
before the waiver will be enforced. Brinkley v. Harbor Recreation
Club, 180 F.3d at 612; Peterson v. Air Line Pilots Assoc.
Intl, 759
F.2d at 1164. The district court held that TCP was prejudiced
because the failure of RCSH to plead the waiver defense disabled
TCP from discovering, or presenting evidence about, the topic of
waiver.
The record does not show exactly when the issue of waiver
first surfaced, but it clearly was not pleaded as an affirmative
defense to the counterclaim. The first mention of the topic in the
record was in the proposed findings of fact and conclusions of law
that both parties filed on Friday, August 23, 2002, two days before
the trial began on Monday, August 26, 2002. (JA 340-357). On the
morning of trial, TCP took the position that waiver had not been
9
Because the assignment provision contradicts the Lease and
was not accompanied by consideration that would be necessary to
effect a modification of the Lease, the consent to the Assignment
Agreement, including paragraph 2, is properly categorized as a
waiver of Sections 19 and 34.2 of the Lease. RCSH does not contest
that characterization.
18
pleaded as an affirmative defense. (JA 673-74). RCSH did not
contend otherwise, and, although, in opening statement, RCSH
pointed to paragraph 2 of the Assignment Agreement, it did so in
context of discussing the topic of successor liability, not the
topic of a waiver of the provisions of Sections 19 and 34.2 of the
Lease (JA 687-89). And, even then RCSH’s counsel stated that the
successor liability issue had “just come up.” (JA 689).
Nonetheless, in its post-trial brief in support of a motion for a
judgment as a matter of law, RCSH argued that paragraph 2 of the
Assignment Agreement was a contractual waiver that foreclosed
imposition of liability on RCSH as a successor in interest under
the Lease provisions. (JA 1093-94). And, in its post-trial
brief, TCP continued to press the point that RCSH had not pleaded
waiver as an affirmative defense. (JA 1110-12; 1133-37).
The district court held that the waiver defense had not been
pleaded and that TCP had been prejudiced by the failure to plead
it. In so doing, the district court held: (1) that “TCP did not
have . . . fair warning that it was going to have to confront a
waiver, a timely waiver defense. . . . (JA 1271); and (2) that, if
it had received notice of the waiver defense, TCP would have
presented two exhibits that “strike, I think, a fatal blow to a
waiver claim, both on prejudice grounds and on other grounds.” (JA
1271).
19
That reference was to a letter that attended TCP’s consent to
the Assignment Agreement. Both documents refuted paragraph 2 of
the Assignment Agreement. The letter, which was addressed to TCP,
stated that:
The purpose of this letter is to advise
that Ruth U. Fertel, Inc. The parent company
and sole shareholder of Ruth’s Chris Steak
House #28, Inc. (“Tenant”), has changed its
name to ‘Ruth’s Chris Steak House, Inc.’ The
name change of Ruth U. Fertel, Inc. to Ruth’s
Chris Steak House, Inc. is nominal and
cosmetic only, and the ownership of Ruth U.
Fertel, Inc. and the Tenant is not changing in
any way whatsoever.
In addition, all of the wholly owned
subsidiaries of Ruth’s Chris Steak House, Inc.
(formerly Ruth U. Fertel, Inc.) are being
restructured and merged for internal
operational purposes only. As a result of
this restructuring, the Tenant, Ruth’s Chris
Steak House #28, Inc., will be merged with
several other wholly owned subsidiaries of the
parent into the newly created Louisiana
limited liability company known as ‘RCSH
Operations, LLC.’ The sole owner, member and
manager of RCSH Operations, LLC is Ruth’s
Chris Steak House, Inc. (formerly Ruth U.
Fertel, Inc).
As an accommodation to Tenant and Ruth’s
Chris Steak House, Inc. (formerly Ruth U.
Fertel, Inc.) and in light of our good working
relationship, we ask that you, as
‘Landlor/Intervenor,’ execute the attached
Assignment and Assumption of Lease Agreement
acknowledging the restructuring and renaming
of Tenant to RCSH Operations, LLC; and the
Assignment of Tenant’s interests and
obligations in the Lease to RCSH Operations,
LLC.
20
(JA 1141) emphasis added. The merger agreement explicitly
provided, in paragraph 2.05, that RCSH “shall be responsible for
all of the liabilities and obligations of” RC #28. (JA 1147).
The district court held that, if waiver by virtue of paragraph
2 of the Assignment Agreement had been pleaded, TCP could have
introduced evidence respecting the letter from RCSH to TCP
explaining that the change in corporate structure was a cosmetic
one, that ownership of the restaurant would remain the same, and
that the tenant would be not changing in any way. Also, TCP could
have shown that RC #28 would be merged into the newly created RCSH
and that this merger was occurring “for internal purposes only.”
Further, TCP could have offered evidence that the merger agreement
provided that RC #28 would cease to exist and that the surviving
company, RCSH, would “be responsible for all of the liabilities and
obligations of corporation A [RC #28].”
That kind of evidence would have been highly probative of the
effect, if any, of TCP’s consent to the Assignment Agreement and
the effect, if any, of paragraph 2 of the Assignment Agreement on
the provisions of Sections 19 and 34.2 of the Lease. Undoubtedly,
the failure to plead waiver as an affirmative defense prejudiced
TCP because TCP did not pursue in discovery, and thus did not offer
at trial, proof that the consent to the Assignment Agreement did
21
not have the effect of waiving Sections 19 and 34.2 of the Lease.10
And, of course, significant evidence of that sort was available, so
that the waiver issue, had it been pleaded, could have been
explored in discovery and at trial.
It is no answer to say, as does RCSH, that TCP had possession
of these two documents before the litigation began and thus could
have anticipated the defense of waiver. Rule 8(c) imposed on RCSH
the obligation to plead the waiver defense so that it could be
addressed in discovery and at trial. It is precisely the sort of
procedural gamesmanship raised by the circumstances presented here
that Rule 8(c) is intended to foreclose. Thus, we find no error in
the district court’s rejection of RCSH’s waiver defense.11
10
The district court also held that the two documents (which
were not permitted in evidence), along with other testimony would
call into play the rule, well-settled under Virginia law, that RCSH
was a mere continuation of RC #28 and thus would be liable as a
successor under any circumstances. It is unnecessary to address
this issue given the fact that RCSH did not plead the affirmative
defense of waiver as required by Rule 8(c) and because the district
court was clearly correct in finding that TCP was prejudiced by the
belated raising of that defense.
11
On appeal, as it did below, RCSH makes a pass at casting the
waiver defense as a question of successor liability. However,
given its own pleadings, RCSH cannot be heard to assert that it is
not RCSH’s successor in interest. Thus, it must stand or fall on
the waiver defense.
The district court, alternatively, held: (1) that if the
letter and the merger agreement had been admitted, they would
defeat the waiver defense on its merits; and (2) that RCSH did not
prove waiver by clear and convincing evidence. We need not address
either alternative holding.
22
B. TCP’s Rule 26(a)(1) Disclosure Respecting Damages
In the initial disclosure of its damages made under Rule
26(a)(1), TCP disclosed damages in the amount of $78,346.87. The
proof at trial showed damages of $110,372.14 which, of course, was
the amount of the judgment. RCSH argued that TCP should be
foreclosed from proving the greater sum because it varied from the
amount of damages set out in TCP’s initial pretrial disclosure.
The district court rejected that argument, holding that:
There is no showing on this record of any
prejudice that results from the difference . .
. . In fact, as I see the discovery, these
documents were made available, and it was gone
through in some detail.
(JA 1279). We review that decision for abuse of discretion.
Although RCSH continues on appeal to assert that there was a
difference between the initial disclosure and the sum proved at
trial, it does not contend that the district court erred in finding
that the greater sum was disclosed in discovery and “gone through
in some detail.”12 The mere fact that the damage claim was
increased after the initial disclosure does not operate to
foreclose proof of the greater amount where, as the district court
held, the greater amount was the subject of discovery. Indeed,
Rule 26(a)(1) contemplates that the initial disclosure will be
12
The higher sum also appeared in TCP’s proposed findings of
fact and conclusions of law filed on the Friday before trial.
That, however, was not a basis for the district court’s finding
respecting supplemental disclosure on TCP’s damages.
23
based on information available at the time of disclosure. And,
Rule 26(e) requires that initial disclosures be supplemented.
Considering this record, the district court’s findings respecting
supplemental disclosure, and the provisions of Rule 26(a)(1) and
Rule 26(e), we find no abuse of discretion in the district court’s
decision to allow proof of the larger damage sum.
C. Sufficiency of Proof: Causation
RCSH contends that there was insufficient proof that the
breach of the Lease was the proximate cause of the damages claimed
by TCP. Findings of proximate cause, usually described as mixed
questions of law and fact, are to be reviewed for clear error
pursuant to Fed. R. Civ. P. 52(a). Exxon Co., U.S.A. v. Sofec,
Inc., 830, 840-41 (1996); Cohen v. Boxberger, 544 F.2d 701, 704
(4th Cir. 1976).13
The district court’s findings on causation were articulated in
great detail (JA 1255-58; 1263-66). Measuring those findings
13
Most of our sister circuits adhere to this rule. Childress
& Davis, Federal Standards of Review, § 2.28 (3d ed. 1999); Wright
& Miller, Federal Practices and Procedure Civil, § 2589 (1995).
One treatise points out that some of our decisions between 1966 and
1983 appear to have departed from it (and employed a freely
reviewable standard), Wright & Miller, Federal Practice and
Procedure Civil, § 2589 (1995), but that we returned to it in 1983.
Id.; Bonds v. Mortensen, 717 F.2d 123, 125 (4th Cir. 1983).
Whatever may be said of this history, the Supreme Court, in 1996,
seems to have settled the matter in favor of application of the
clearly erroneous standard to the review of findings of proximate
cause. Exxon Co., U.S.A. v. Sofec, Inc.,
517 U.S. 830, 840-41
(1996) (“issues of proximate causation and superseding cause
involve application of law to fact, which is left to the factfinder
subject to limited review.”).
24
against the record as a whole, we find no error in the district
court’s finding that the breach of the Lease obligation to maintain
and repair the drain lines proximately caused the loss for which
TCP sought redress in its counterclaim.
D. Sufficiency of Proof: Damages
There was fulsome proof that the damages were incurred in the
amounts claimed and that they were of the sort that were
compensable for the breach of the Lease. The challenge to the
sufficiency of the proof made by RCSH is that the witnesses who
were offered to prove TCP’s damages were not from TCP, but from its
property manager. Thus, says RCSH, there was no proof that TCP
actually paid the bills that were admitted to support its damage
claim. The sufficiency of proof of damages is a fact issue which
we review for clear error.14 Having done that and considering the
record as a whole, we are satisfied that the district court did not
err in finding that the proof was sufficient to support the award
of damages in the amount claimed.
V.
RCSH argues that the district court erred in striking its
demand for jury trial. This issue comes to us as a request to
direct a jury trial on remand. Because of the disposition of the
14
Scott v. Vandiver, 476 F.2d 238 (4th Cir. 1976); Childress
& Davis, Federal Standards of Review, § 2.22 (3d ed. 1999).
25
foregoing issues, there will be no remand. And, it is unclear from
RCSH’s brief whether it even asserts error in the decision to
strike the jury demand as to TCP’s counterclaim.15 Assuming,
however, that RCSH is pressing that issue, we will address it.
In its complaint, RCSH asked for trial by jury. Neither the
answer nor the counterclaim contained any such request nor did the
reply to the counterclaim. At the pretrial conference,
approximately five weeks before the commencement of trial, the case
for set for a jury trial. On July 25, 2002, seven days after the
pretrial conference, TCP moved to strike RCSH’s jury demand,
asserting as the ground therefor, the terms of Section 47 of the
Lease which provides that:
landlord and Tenant hereby expressly waive
trial by jury in any action, proceeding or
counterclaim brought by either of them against
the other, on any matter whatsoever arising
out or in any way connected this Lease, their
relationship as landlord and Tenant, Tenant’s
use and occupancy of the Demised Premises
and/or any claim of any injury or damage.
The district court held that the waiver of jury trial meant
precisely what it said and enforced it. We see no error in that
decision.
15
In its opening brief, RCSH states: “[t]hus, on remand, this
Court should direct that in at least the further proceedings as to
[naming all defendants other than TCP], RCSH is entitled to a jury
trial.” The issue is not addressed in RCSH’s reply brief.
26
VI.
For the foregoing reasons, the judgment of the district court
granting summary judgment on the claims of RCSH is affirmed, and
the judgment of the district court awarding damages to TCP in the
amount of $110,372.14 is affirmed.
AFFIRMED
27
