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LLC v. Gator Swansea Property, LLC

United States District Court, D. Massachusetts

June 2, 2016




         Plaintiff and tenant 58 Swansea Mall Drive, LLC (58 Swansea), leases space at the Swansea Mall in Swansea, Massachusetts, from landlord-defendant Gator Swansea Property, LLC (Gator). 58 Swansea sublets the leasehold to two retailers, Dollar Tree Stores and PriceRite. 58 Swansea alleges that Gator has attempted to coerce it into adopting a Chik-Fil-A restaurant as a subtenant by making unreasonable demands for repairs and threats to hold 58 Swansea in default. 58 Swansea alleges that Gator’s tactics cost it a favorable third-party loan that could have been used to make repairs to the Mall.


         On May 20, 1984, Gator’s predecessor, Equity Properties and Development Company, entered a Ground Lease (lease) with 58 Swansea’s predecessor, Service Merchandise Company, Inc., for 58 Swansea Mall Drive. The lease permitted 58 Swansea to mortgage its interest without Gator’s prior consent on two conditions: (1) that 58 Swansea not be in default "beyond the applicable grace period[]"; and (2) that either 58 Swansea or the mortgagee provide the landlord (Gator) with a copy of the mortgage. Dkt. # 56-1 at 8.[2]

         After purchasing 58 Swansea Mall Drive in 2013, Gator insisted that 58 Swansea undertake substantial repairs of the property. In June of 2015, 58 Swansea (reluctantly) agreed. To pay for the repairs, 58 Swansea negotiated a loan with United Bank, secured by the leasehold. As a condition precedent to the loan, United Bank required that Gator provide 58 Swansea with an Estoppel Certificate. After some initial squabbling, Gator provided the Estoppel Certificate on July 30, 2015. It warranted in relevant part:

[58 Swansea] is not in default under the Lease beyond the applicable grace, notice and/or cure periods and, except for the repairs and maintenance as evidenced by the construction documents attached hereto . . . Landlord does not know of any other defaults . . . provided, however, that [Gator] reserves the right to declare a default by [58 Swansea] under the Lease in the event [58 Swansea] does not complete the repair and maintenance work identified on the construction documents . . . within ninety (90) days after the date of this Estoppel Certificate.

Dkt. # 56-7 at 2-3. Gator gave 58 Swansea until October 28, 2015, to complete the three specified improvements.[3]

         As a second condition precedent, United Bank required that Gator execute a so-called 3(n) Agreement, stipulating that the Bank was an intended beneficiary of the terms of Article 6, Section 3 of the lease.[4] Over the next two months, Gator renewed its demand that 58 Swansea accept Chik-Fil-A as a tenant. It declined, however, to execute the 3(n) Agreement. On September 8, 2015, United Bank and 58 Swansea agreed on the terms of a $2, 000, 000 loan, conditioned on the tender of an executed 3(n) Agreement no later than October 15, 2015. After Gator ignored repeated requests for the Agreement, on October 2, 2015, 58 Swansea instituted this action and sought injunctive relief in the Norfolk Superior Court. Three days later, Gator served a Notice of Default and Termination on 58 Swansea.[5]

         On October 9, 2015, Gator removed the case to this court on diversity grounds. After a requested emergency hearing on October 15, 2015, the court denied 58 Swansea’s motion for a preliminary injunction. At some unspecified later date, Gator signed and forwarded the 3(n) Agreement to 58 Swansea. The delivery came too late to salvage the loan agreement. United Bank terminated the loan on October 28, 2015.

         On April 14, 2016, 58 Swansea filed this Second Amended Complaint, alleging breach of contract (Count I), breach of the implied covenant of good faith and fair dealing (Count II), and violations of the Massachusetts Unfair Id. at 11 (emphasis added). Business Practices statute, Mass. Gen. Laws ch. 93A (Counts IV and V). 58 Swansea also requests specific performance of the lease (Count III), and a declaratory judgment as to whether (a) 58 Swansea is in default, (b) whether Gator improperly revoked of the Estoppel Certificate and issued the Notice of Termination, and (c) whether 58 Swansea is obligated to reimburse Gator for the Property Condition Report (Count VI). On April 21, 2016, Gator moved to dismiss the Complaint pursuant to Fed.R.Civ.P. 12(b)(6).


         To survive a motion to dismiss pursuant to Rule 12, the pleading must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This standard requires more than "labels and conclusions" or "naked assertions devoid of further factual enhancement." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and quotation marks omitted).

         Gator offers a number of alternative theories in support of its motion to dismiss the breach of contract claim (Count I).[6] Gator stresses that Article 40 of the lease (an exculpation clause of a type commonly appearing in ground leases) disclaims liability on the part of Gator to "personally to perform any covenant . . . herein contained." Dkt. # 56-1 at 29. Exculpatory clauses are strictly construed in favor of the tenant. Cormier v. Cent. Massachusetts Chapter of the Nat’l Safety Council, 416 Mass. 286, 288 (1993) ("[A]ny doubts about the interpretation of the release must be resolved in the [tenant’s] favor."); Marsman v. Nasca, 30 Mass.App.Ct. 789, 799 (1991) ("[E]xculpatory clauses are not looked upon with favor and are strictly construed."). The purpose of an exculpation clause is not to shield the landlord from any liability for breach of contract, but to protect the Gator next argues that 58 Swansea was in default of the lease and that Gator therefore was under no obligation to execute the 3(n) Agreement. This argument also misses the mark. 58 Swansea vehemently disputes that it was at any time in default; on a motion to dismiss, a plaintiff’s plausible factual allegations must be taken as true. While Gator relies upon the Estoppel Certificate executed by both parties as evidence that 58 Swansea acknowledged its own state of default, the Certificate identified only three specific repairs and granted 58 Swansea a ninety-day period to cure them, which 58 Swansea insists that it did.

         Third, Gator argues that 58 Swansea could have, consistent with Article 13 of the lease, signed the 3(n) Agreement itself on Gator’s behalf, and offered the completed agreement to United Bank. Characterizing Article 13 as a "condition precedent" and "pre-suit requirement, " Gator contends that 58 Swansea’s failure to do so bars recovery. Article 13 merely states that a non-defaulting party may, on ten days’ notice, perform the obligations of a defaulting party - not that it must. Dkt. # 56-1 at 17-18. landlord’s assets over and above the landlord’s interest in the property itself.[7]Gator’s further ...

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