Mall v. Shoe Show Inc.

• Decision Date: 08 August 2011
• Docket Number: No. 10–20587.,10–20587.
• Citation: 649 F.3d 389
• Parties: ALMEDA MALL, L.P., Plaintiff–Appellee,v.SHOE SHOW, INC., doing business as The Shoe Department, Inc.; The Shoe Show of Rocky Mount, Inc., doing business as Shoe Department, Defendants–Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

649 F.3d 389

ALMEDA MALL, L.P., Plaintiff–Appellee,

v.SHOE SHOW, INC., doing business as The Shoe Department, Inc.; The Shoe Show of Rocky Mount, Inc., doing business as Shoe Department, Defendants–Appellants.

No. 10–20587.

United States Court of Appeals, Fifth Circuit.

Aug. 8, 2011.

Julian Fertitta, III (argued), Grimes & Fertitta, P.C., Houston, TX, for Plaintiff–Appellee.David Michael Walsh, IV, William H. Chamblee, Chamblee & Ryan, P.C., Dallas, TX, Hope I. Hamilton, Bingham B. Leverich (argued), Covington & Burling, L.L.P., Washington, DC, for Defendants–Appellants.Appeal from the United States District Court for the Southern District of Texas.Before WIENER, BENAVIDES, and STEWART, Circuit Judges.WIENER, Circuit Judge:

Defendant–Appellant Shoe Show, Inc. (“Shoe Show”) entered into a lease (the “Lease”) as lessee (“Lessee”) of a store space (the “Leased Premises”) in a shopping mall in Houston, Texas. The Lessor was San Mall, the predecessor in interest of Plaintiff–Appellee Almeda Mall, L.P. (“Almeda”). In the Lease, Shoe Show agreed to operate a retail shoe store in the Leased Premises under the trade name “The SHOE DEPT.”¹ The Lease expressly prohibited Shoe Show from operating another business under the name “The SHOE DEPT.” or any “substantially similar trade-name,” within two miles of the Leased Premises. Shoe Show subsequently opened a retail footwear store under the name “SHOE SHOW” in a commercial center located less than a quarter mile from the mall in which the Leased Premises is located. Neither San Mall nor Almeda objected until, some time later, Shoe Show exercised its option to terminate the Lease early, which option was conditioned on Shoe Show's not being in default under the Lease. Only then did Almeda, as the current owner of the mall in which the Leased Premises is located, sue Shoe Show. Almeda contended that its operation of that second store violated the terms of the Lease because the name of the second store was “substantially similar” to the name of the store in the Leased Premises, thereby making Shoe Show ineligible to terminate the Lease early. Holding that the two trade names were indeed substantially similar, the district court granted Almeda's motion for summary judgment. As we conclude that, under the uncontested facts of this case and the discrete provisions of the Lease, the trade name SHOE SHOW is not substantially similar to The SHOE DEPT., we reverse that court's summary judgment and remand for further proceedings consistent herewith.

I. FACTS & PROCEEDINGS

A. Facts

Shoe Show entered into the Lease with San Mall for the stated purpose of operating a retail shoe store in the Almeda mall which was then owned and operated by San Mall. The Lease was for a term of ten years, but gave Shoe Show the option of terminating the Lease after five years if the Lessee's annual sales in the Leased Premises did not exceed one million dollars by the end of the fifth year of the lease term. This option was conditioned, however, on Shoe Show's not being in default under the Lease when it mailed the termination notice.

Section 4.01(c) of the Lease states that Shoe Show “shall operate its business ... under the following trade-name only and under no other trade-name: The SHOE DEPT.” Section 4.08 of the Lease (“the trade name provision”) states:

Tenant agrees that so long as this Lease shall remain in effect, Tenant ... shall not, either directly or indirectly, own, operate or be financially interested in ... a business operating under the same or substantially similar trade-name, as permitted by Section 4.01(c) of this Lease, within a radius of two (2) miles of the perimeter of the [mall].

Section 4.08 of the Lease also provides that if Shoe Show should violate the trade name provision, the Lessor could include all gross sales from the other proximate business when calculating Shoe Show's rent for the Leased Premises.

Pursuant to the Lease, Shoe Show opened a retail shoe store in the Leased Premises under the name The SHOE DEPT. Approximately four years later, Shoe Show opened another retail shoe store, using the trade name SHOE SHOW, in a commercial center located approximately 400 feet from the perimeter of the shopping mall in which the Leased Premises is located. A few months after that, San Mall sold that shopping mall to Almeda and assigned all of the leases of space therein to Almeda. Neither San Mall nor Almeda registered any concern or took any action against Shoe Show for using SHOE SHOW as the name of its new store in the nearby center, however, until the spring of the year following Almeda's acquisition of the mall—and then only after Shoe Show had notified Almeda that it intended to exercise its early-termination option. In that notice, Shoe Show advised Almeda that annual sales at The SHOE DEPT. had failed to reach the million-dollar level by the end of the fifth lease year of the Lease.

Almeda rejected Shoe Show's early termination of the Lease, contending for the first time that Shoe Show's operation of SHOE SHOW in such close proximity to the Leased Premises violated the trade name provision of the Lease, thereby constituting a default and making Shoe Show ineligible to exercise its early-termination option. Shoe Show disagreed, vacated the Leased Premises, and ceased paying rent under the Lease. Two months later, Almeda sued Shoe Show for breach of the Lease.

B. Proceedings

The parties filed opposing motions for summary judgment. Almeda took the position that Shoe Show's operation of a retail store under the name SHOE SHOW in the nearby commercial center violated the trade name provision of the Lease, putting Shoe Show in default and rendering it ineligible to exercise its right to terminate the Lease early. Almeda sought past due rent, future damages, and attorneys fees. Shoe Show countered that it had not violated the trade name provision of the Lease because the name SHOE SHOW is neither expressly prohibited in the Lease nor substantially similar to The SHOE DEPT. as a matter of law.

The district court agreed with Almeda that the two stores had substantially similar trade names and granted Almeda's motion for summary judgment, awarding it damages and attorneys fees. Shoe Show timely filed a notice of appeal.

II. STANDARD OF REVIEW

We review a district court's summary judgment de novo.² Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”³ When reviewing a summary judgment, we construe all the evidence and reasonable inferences in the light most favorable to the nonmoving party.⁴

III. ANALYSIS

The parties agree that, pursuant to the choice-of-law provision of the Lease, Ohio law governs the interpretation of that contract. We conduct our review of the instant summary judgment in two steps. We first determine the meaning of the phrase “substantially similar trade-name” as it is used in the Lease. We then determine whether, in that context, the trade names SHOE SHOW and The SHOE DEPT. are substantially similar.

We agree with the district court that, as used in the Lease, the phrase “substantially similar trade-name” is not ambiguous. A term is not ambiguous when it can be given a definite legal meaning.⁵ The district court drew on the Ohio Labor and Industry Code⁶ as well as Black's Law Dictionary⁷ in determining that a trade name is “the name that identifies a business.” The court then credited Random House Webster's College Dictionary's⁸ definition of “substantially similar” as having “essential elements in common.” The district court surmised (and we agree) that the subject phrase, as used in the trade name provision of the Lease, prohibits Shoe Show from opening and operating any business within two miles of the Leased Premises under a name that “identifies a business” and has essential elements in common with “The SHOE DEPT.” For purposes of such identification, “business” refers to the party conducting the operation, not to the nature of the operation that it conducts.

Of equal importance to our inquiry as what the trade name provision of the Lease specifies is what it does not specify.⁹ As reflected in the record and confirmed by counsel at oral argument, the parties who negotiated the Lease were sophisticated individuals with considerable experience operating and leasing shopping malls and commercial centers on the one hand, and renting and operating retail footwear stores in such locations on the other hand. More to the point, the party who negotiated the lease for the Lessor was aware that Shoe Store is a national footwear retailer with some 1,100 outlets, almost all of which are operated under one of but three trade names: SHOE SHOW, The SHOE DEPT., or BURLINGTON SHOES. Within that framework we note:

• The trade name provision of the Lease does not expressly prohibit Shoe Store from operating a retail shoe store within a two-mile radius of the Leased Premises.

• Neither does the trade name provision expressly prohibit Shoe Show from using the word “shoe” in the trade-name of any operation that it might conduct within a two-mile radius of the Leased Premises.

• Although the trade name provision expressly prohibits Shoe Store from using the name The SHOE DEPT. for any store that it might operate within two miles of the Leased Premises, that provision never mentions, much less expressly prohibits, Shoe Show's use of either of its other two widely used trade names, SHOE SHOW or BURLINGTON SHOES.

• Instead of forthrightly prohibiting Shoe Show from using those other two widely used trade names, the trade name provision employs only the non-specific, elastic term “substantially similar” in reference to The SHOE DEPT. to identify the set of other trade names that Shoe Show may not use within two miles of the Leased Premises.

• Although the trade name provision prohibits Shoe Show from using a trade name that is “substantially similar” to The SHOE...