3500 Sepulveda, LLC v. Macy's W. Stores, Inc.

• Decision Date: 20 November 2020
• Docket Number: No. 18-56620, No. 19-55273, No. 18-56637, No. 19-55227,18-56620
• Citation: 980 F.3d 1317
• Parties: 3500 SEPULVEDA, LLC, a Delaware limited liability company; 13TH & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellants, v. MACY'S WEST STORES, INC., Defendant-Appellee, Rreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellee, v. 6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant. 3500 Sepulveda, LLC, a Delaware limited liability company; 13th & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellees, v. Macy's West Stores, Inc., Defendant, and Rreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellant, v. 6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant-Appellee. 3500 Sepulveda, LLC, a Delaware limited liability company; 13th & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellees, v. Macy's West Stores, Inc., Defendant, and Rreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellant, 6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant-Appellee. 3500 Sepulveda, LLC, a Delaware limited liability company; 13th & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellants, v. Macy's West Stores, Inc., Defendant, and Rreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellee, 6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

980 F.3d 1317

3500 SEPULVEDA, LLC, a Delaware limited liability company; 13TH & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellants,

v.MACY'S WEST STORES, INC., Defendant-Appellee,Rreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellee,

v.6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant.

3500 Sepulveda, LLC, a Delaware limited liability company; 13th & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellees,

v.Macy's West Stores, Inc., Defendant,andRreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellant,

v.6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant-Appellee.

3500 Sepulveda, LLC, a Delaware limited liability company; 13th & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellees,

v.Macy's West Stores, Inc., Defendant,andRreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellant,6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant-Appellee.

3500 Sepulveda, LLC, a Delaware limited liability company; 13th & Crest Associates, LLC, a California limited liability company, Plaintiffs-Counter-Defendants-Appellants,

v.Macy's West Stores, Inc., Defendant,andRreef America Reit II Corporation BBB, a Maryland corporation, Defendant-Counter-Claimant-Appellee,6220 Spring Associates, LLC, a California limited liability company, Counter-Defendant-Appellant.

No. 18-56620

No. 18-56637

No. 19-55227

No. 19-55273

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 2, 2020 Pasadena, California

Filed November 20, 2020

Geoffrey B. Kehlmann (argued) and Robin Meadow, Greines Martin Stein & Richland LLP, Los Angeles, California, for Plaintiffs-Counter-Defendants-Appellants/ Cross-Appellees.

Michael G. Romey (argued), R. Peter Durning Jr., Jamie L. Sprague, and Sarah F. Mitchell, Latham & Watkins LLP, Los Angeles, California, for Defendant-Counter-Claimant-Appellee/Cross-Appellant.

Before: Sandra S. Ikuta and Mark J. Bennett, Circuit Judges, and Douglas P. Woodlock,^* District Judge.

BENNETT, Circuit Judge:

Before the court are cross-appeals from the district court's orders granting summary judgment (i) to Defendants on Plaintiffs' claims, and (ii) to Counterdefendants on the counterclaims. We have jurisdiction under 28 U.S.C. § 1291, and we review the district court's grant of summary judgment de novo, viewing the facts in the light most favorable to the non-movant. See Flores v. City of San Gabriel , 824 F.3d 890, 897 (9th Cir. 2016). The parties agree that California law applies. We affirm in part, reverse in part, and remand.

I. Background

Plaintiffs are 3500 Sepulveda, LLC, and 13th & Crest Associates, LLC. They brought claims against Defendants RREEF America REIT II Corporation BBB ("RREEF"), and Macy's West Stores, Inc. ("Macy's"). Defendant RREEF then brought counterclaims against Plaintiffs and an additional Counterdefendant, 6220 Spring Associates, LLC (together, Counterdefendants are known as the "Hacienda Parties" or "Hacienda").

The parties' dispute concerns a construction project to expand Manhattan Village Shopping Center (the "Shopping Center") in Manhattan Beach, California. The forty-four-acre Shopping Center includes multiple parcels of land. The Hacienda Parties own a 0.7-acre parcel located at 3500 Sepulveda Boulevard. The Hacienda Building is a commercial building located on the 3500 Sepulveda property. Hacienda rents its space to commercial tenants, including restaurants, retail stores, and offices. Macy's owns another single parcel of land, and RREEF owns the remaining parcels in the Shopping Center.

The parties' predecessors executed the Construction, Operation and Reciprocal Easement Agreement (the "COREA") in 1980. The COREA defines a "Common Area" within the Shopping Center as including the "Automobile Parking Area, access roads, driveways, Perimeter Sidewalks ..., and similar areas." Under the COREA, the parties and their permittees have "nonexclusive easements over the Common Area of [the parties'] respective Tract[s], for the passage and accommodation of pedestrians and vehicles." The easements run with the land. Hacienda's tenants and customers drive through and park in the Common Area. The parking lot known as "Lot F" is particularly important to Hacienda, as Lot F is located "across the drive aisle from the Hacienda Building."

In 2006, RREEF applied to the City of Manhattan Beach (the "City") for approval to renovate and expand the Shopping Center. Around the same time, Hacienda was attempting to convert parts of its building from office space to restaurants. RREEF and Hacienda vigorously opposed each other's plans for renovation, and various legal disputes arose.

The parties resolved those disputes in a Settlement Agreement (the "Agreement") in 2008.¹ Under the terms of the Settlement Agreement, RREEF agreed not to oppose Hacienda's plan to convert office space into restaurants, and Hacienda agreed not to oppose RREEF's expansion project (the "Project")—subject to certain limitations in the Agreement. The current dispute is over RREEF's Project, and Hacienda's restaurant-conversion plan is irrelevant for our purposes.

The Settlement Agreement includes a "Site Plan"—a series of drawings that set forth RREEF's proposed Project to expand Macy's and other retail space, and to construct new parking structures. The Site Plan and an additional "Parking Plan" lay out, among other things, the available retail and parking spaces during and upon completion of stages of construction. The Settlement Agreement provides that RREEF will submit the Site Plan to the City for approval: "RREEF is preparing to amend the RREEF Application [to the City] to reflect a revised expansion plan for the Shopping Center as generally depicted in the [attached] Site Plan." The Settlement Agreement also gives RREEF "discretion" to revise the Site Plan, and it allows Hacienda to object to certain material revisions during the City's approval process. Section 6 of the Settlement Agreement states that "nothing in this Agreement shall constitute an amendment to the ... COREA."

The City's approval process includes circulating the proposed plan and environmental impact report for public comment and holding public hearings. During this process, RREEF submitted multiple revised versions of the Site Plan. Hacienda took issue with the new versions, which Hacienda believed were materially different from the agreed-upon Site Plan in the 2008 Settlement Agreement and would harm Hacienda's interests. In particular, Hacienda was concerned that the new plans reduced the amount of available parking for Hacienda and its tenants—both during and after the completion of construction. Hacienda and its agents opposed the revised Site Plans in multiple public hearings, wrote letters to the City raising similar concerns, and were allegedly involved in certain lawsuits challenging the Project.

The City approved RREEF's Project—based on a revised Site Plan—in 2017, and construction began soon after. Hacienda's tenants started complaining about the construction almost immediately, raising concerns about the loss of parking spaces, road closures, and other inconveniences. Tenants demanded compensation for lost business. They also demanded rent reductions, threatened to not renew their leases, and threatened legal action.

In October 2017, Plaintiffs sued Defendants in California Superior Court, alleging breach of contract, anticipatory breach of contract, breach of the covenant of good faith and fair dealing, interference with easement rights, nuisance, and intentional and negligent interference with business and contractual relations. Plaintiffs' underlying theory is that the current Site Plan is substantially different from the agreed-upon Site Plan in the Settlement Agreement, and that RREEF's expansion and construction Project violates Plaintiffs' rights. Defendants removed the case to federal court, and RREEF filed counterclaims against the Hacienda Parties, alleging breach of contract and breach of the covenant of good faith and fair dealing.

RREEF's theory is that Hacienda violated the Settlement Agreement by opposing the Project.

The parties filed cross-motions for summary judgment, and the district court granted both motions and dismissed all the claims and counterclaims. The parties then each filed a motion for attorneys' fees, which the district court denied on the ground that no party prevailed. This appeal and cross-appeal followed. Plaintiffs argue that the district court erred in granting summary judgment on their claims, and RREEF argues that the district court erred in granting summary judgment on its counterclaims.

II. Plaintiffs' Claims

We affirm the district court's grant of summary judgment on the nuisance claim and reverse the district court as to the remaining claims.

1. Breach of Contract

Plaintiffs allege that Defendants violated the COREA, under which the parties agreed to perform construction work "so as not to unreasonably interfere with the use, occupancy or enjoyment of the remainder of the Shopping Center or any part thereof by any other Party, and any other Occupant of the Shopping Center, and the Permittees of any other Party and such other Occupants." The district court granted summary judgment to Defendants on this claim. According to the district court, Plaintiffs agreed to the Project under the Settlement Agreement, and further agreed that RREEF would have discretion to revise the Site Plan and execute the Project; therefore, Plaintiffs cannot now complain of conduct to which they consented.

Plaintiffs point out that section 6 of the Settlement Agreement provides that "nothing in this Agreement shall constitute an amendment to the ... COREA,"...