AAC HP Realty, LLC v. Bubba Gump Shrimp Co. Rests., Inc.

• Decision Date: 31 October 2019
• Docket Number: No. 1076, Sept. Term, 2018,1076, Sept. Term, 2018
• Citation: 243 Md.App. 62,219 A.3d 99
• Parties: AAC HP REALTY, LLC, v. BUBBA GUMP SHRIMP CO. RESTAURANTS, INC.
• Court: Court of Special Appeals of Maryland

243 Md.App. 62

219 A.3d 99

AAC HP REALTY, LLC,

v.BUBBA GUMP SHRIMP CO. RESTAURANTS, INC.

No. 1076, Sept. Term, 2018

Court of Special Appeals of Maryland.

October 31, 2019

Argued by: Benjamin Rosenberg (Jamar R. Brown, Rosenberg, Martin, Greenberg, LLP, on the brief), Baltimore, MD, for Appellant.

Argued by: William F. Ryan, Jr. (Ilana Subar, Whiteford, Taylor & Preston, LLP, on the brief), Baltimore, MD, for Appellee.

Panel: Arthur, Leahy, Kenney, James A., III Senior Judge, Specially Assigned, JJ.

Arthur, J. Bubba Gump Shrimp Co. Restaurants, Inc. ("Bubba Gump"), filed suit against AAC HP Realty, LLC ("AAC"), alleging that AAC breached its obligation to maintain the common areas under a comprehensive written lease between the parties. After a bench trial, the Circuit Court for Baltimore City found that AAC breached the lease and awarded Bubba Gump damages for certain out-of-pocket costs and attorney's fees, as provided in the lease.

The circuit court, however, denied Bubba Gump's demand for lost profits, because Bubba Gump had failed to prove those damages with reasonable certainty. Nonetheless, the circuit court went on to award Bubba Gump an "equitable rent reduction" on a quasi-contractual claim for unjust enrichment.

AAC appealed the award of damages on the claim for unjust enrichment. We shall reverse that aspect of the judgment.

FACTUAL AND PROCEDURAL HISTORY

We recount the pertinent facts in the light most favorable to Bubba Gump, the party that prevailed at trial. Green v. McClintock , 218 Md. App. 336, 341, 97 A.3d 198 (2014) (citing L.W. Wolfe Enters., Inc. v. Maryland Nat'l Golf, L.P ., 165 Md. App. 339, 343, 885 A.2d 826 (2005) ).

In the spring of 2011, Bubba Gump, a seafood restaurant owned by Landry's, Inc.,¹ entered into a lease at Harborplace in Baltimore City with AAC's predecessor. AAC acquired its interest in the lease in November 2012, about six months after Bubba Gump began operating at Harborplace.

The lease is over fifty pages in length, with several exhibits. It includes many provisions specifically defining the various rights and obligations of the landlord and tenant.

Article 4 of the lease sets forth Bubba Gump's obligation to pay a "Minimum Annual Rental," in twelve, equal monthly installments, for its use and occupancy of the leased premises. The Minimum Annual Rental exceeds $1 million, or $83,000 a month. The rent is to be paid "without deduction or set-off."

The Minimum Annual Rental includes the "Joint Use and Operating Expenses" that Bubba Gump is required to pay under Article 17 of the lease. According to the executive who negotiated the lease on Bubba Gump's behalf, Bubba Gump contracted to include these expenses in the fixed monthly rent, as opposed to paying a lower monthly rent and separate common-area maintenance charge.² Bubba Gump describes those payments as advance payments in exchange for the landlord's commitment to maintain the common areas, which are termed the "Joint Use Areas" under the lease.

Article 17 of the lease requires AAC to keep the Joint Use Areas in "good order and repair." Under Article 17, AAC, "in its sole and absolute discretion," may appropriate any portion of the monthly rent toward the expenses of maintaining the Joint Use Areas. Those expenses, which are termed "Operating Expenses," "consist of all expenditures relating to operating, managing, equipping, policing, protecting, lighting, repairing, cleaning, replacing and maintaining the Joint Use Areas in the same or improved condition as when originally installed."

Shortly after it began its operations at Harborplace in 2012, Bubba Gump observed that the landlord was not maintaining the property in good order and repair. At trial, the restaurant presented ample evidence of poor conditions in the common areas, including water leaks, hanging wires, dirty bathrooms, broken concrete, chipping and peeling paint, escalators that did not work, planters containing trash and debris, rusted metal stairs, and rodent infestation.

At first, Bubba Gump continued to pay its rent, but it implored AAC to fulfill its obligation to maintain the property in good order and repair. When Harborplace remained in a substandard state, and when the restaurant's revenue fell below expectations, Bubba Gump asked AAC to reduce its monthly rent. The parties eventually agreed to a temporary, three-month reduction of the monthly rent, which they memorialized in an amendment to the lease in March 2015.

Still unsatisfied with Harborplace's condition, Bubba Gump began to withhold its rent payments in the fall of 2015. Although Bubba Gump eventually paid all of the back rent in September 2016, it sent a letter to AAC claiming that the landlord had breached the lease because of its failure to maintain the property.

On November 7, 2016, Bubba Gump commenced this litigation. In a five-count amended complaint, Bubba Gump asserted claims for breach of contract, breach of the covenant of quiet enjoyment, and unjust enrichment, a request for declaratory relief, and a claim for specific performance.

During a six-day bench trial, the trial court heard testimony from several witnesses regarding the conditions of Harborplace during the lease term. Photographs documenting the deterioration of the shopping center were admitted into evidence as well. Bubba Gump's expert witness testified about the poor state of the property and its effect on foot traffic and sales. Bubba Gump principally claimed to have suffered lost profits of approximately $2.5 million as a result of AAC's breach of the obligation to keep the common areas in "good order and repair."

On June 14, 2018, the circuit court announced its decision. The court agreed that AAC had breached its obligations to keep the common areas in good order and repair and to police and protect Harborplace. The court awarded Bubba Gump $32,300 for out-of-pocket security costs because of AAC's breach and $5,000 in attorney's fees as the prevailing party, pursuant to Article 28 of the lease. The court, however, declined to award lost profits, because "too many uncertain changing conditions and a multitude of factors" prevented Bubba Gump from proving the damages with reasonable certainty.

Although Bubba Gump could not satisfactorily prove the profits that it had lost because of the breach of contract, the circuit court went on to award Bubba Gump $1,096,270.51 as an "equitable rent reduction" under the unjust enrichment claim in the amended complaint. The circuit court arrived at this award by calculating 20.45 percent of Bubba Gump's gross rent for the period from 2013 through 2017. The 20.45 percent figure represented the portion of the rent payment that Bubba Gump attributed to its obligation to pay the Operating Expenses for the maintenance of the Joint Use Areas. See supra n. 2. The court explained that it had rendered that award as an "alternative" to the claim for lost profits.

In awarding the "equitable rent reduction," the court acknowledged the general rule that unjust enrichment is unavailable when the parties have an enforceable contract, but it cited County Commissioners of Caroline County v. J. Roland Dashiell & Sons, Inc. , 358 Md. 83, 747 A.2d 600 (2000), for the proposition that a claim for unjust enrichment may lie when there is evidence of fraud or bad faith, or when an express contract does not fully address the subject matter. The court reasoned that AAC had acted in bad faith in failing to maintain Harborplace in good order and repair and that the lease does not fully address the remedy for breach of AAC's obligation to maintain the property.³

AAC noted its timely appeal thereafter. Bubba Gump did not note a cross-appeal.

QUESTIONS PRESENTED

AAC presents three questions for review, which we consolidate into one: Did the trial court err in awarding Bubba Gump an "equitable rent reduction" on its unjust enrichment claim, despite the presence of a lease between AAC and Bubba Gump?⁴

For the reasons stated herein, we shall reverse.

STANDARD OF REVIEW

When a case is tried without a jury, the standard of review in this Court is governed by Maryland Rule 8-131(c) :

When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.

This Court defers to factual findings by the trial court unless they are clearly erroneous. Ryan v. Thurston , 276 Md. 390, 392, 347 A.2d 834 (1975). We review the trial court's legal conclusions de novo . Goff v. State , 387 Md. 327, 337-38, 875 A.2d 132 (2005). The circuit court's determinations that Bubba Gump could prevail on the unjust enrichment claim because of bad faith or because the lease did not fully address the subject matter are legal conclusions, which we review de novo. See Janusz v. Gilliam , 404 Md. 524, 537, 947 A.2d 560 (2008) (citing Griffin v. Bierman , 403 Md. 186, 195, 941 A.2d 475 (2008) ). De novo review requires this Court to determine whether the trial court's conclusion was "legally correct." Walter v. Gunter , 367 Md. 386, 392, 788 A.2d 609 (2002).

DISCUSSION

" ‘[U]njust enrichment is notoriously difficult to define.’ " Hill v. Cross Country Settlements, LLC , 402 Md. 281, 295, 936 A.2d 343 (2007) (quoting Daniel Friedmann, Restitution of Benefits Obtained Through the Appropriation of Property or the Commission of a Wrong , 80 Colum. L. Rev. 504, 504 (1980) ). For our purposes, it is sufficient to observe that Bubba Gump's claim for unjust enrichment is, by all accounts, a quasi-contract claim.

According to the Court of Appeals, a "quasi-contract" is a " ‘[l]egal fiction invented by common law courts to permit recovery by contractual remedy in cases where, in fact, there is no contract, but where circumstances are such that justice warrants a recovery as though there had been a promise.’ ...