Acme Markets v. Wharton Hardware & Supply Corp.

• Decision Date: 28 March 1995
• Docket Number: Civ. A. No. 94-2969 (JBS),94-4133 (JBS).
• Citation: 890 F. Supp. 1230
• Parties: ACME MARKETS, INC., Plaintiff, v. WHARTON HARDWARE AND SUPPLY CORPORATION, Defendant. WHARTON HARDWARE AND SUPPLY CORPORATION, Giant Food, Inc., Giant Construction Company, Inc., and Giant of Maryland, Inc., Plaintiffs, v. ACME MARKETS, INC., and Jarnap Company, Inc., Defendants.
• Court: U.S. District Court — District of New Jersey

890 F. Supp. 1230

ACME MARKETS, INC., Plaintiff, v.WHARTON HARDWARE AND SUPPLY CORPORATION, Defendant.

WHARTON HARDWARE AND SUPPLY CORPORATION, Giant Food, Inc., Giant Construction Company, Inc., and Giant of Maryland, Inc., Plaintiffs, v.ACME MARKETS, INC., and Jarnap Company, Inc., Defendants.

Civ. A. Nos. 94-2969 (JBS), 94-4133 (JBS).

United States District Court, D. New Jersey.

March 22, 1995.

On Motion For Reconsideration March 28, 1995.

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Edward S. Wardell, Voorhees, NJ, and Scott D. Patterson, Saul, Ewing, Remick & Saul, Malvern, PA, for Acme Markets, Inc.

Allison E. Accurso, Fox, Rothschild, O'Brien & Frankel, Lawrenceville, NJ, for Jarnap Co., Inc.

Carl C. Hittenger, Philadelphia, PA, and Martin C. Bryce, Jr., Ballard Spahr Andrews & Ingersoll, Camden, NJ, for Wharton Hardware and Supply Corp., Giant Food, Inc., Giant Const. Co., and Giant of Maryland, Inc.

OPINION

SIMANDLE, District Judge:

The parties come before the court to dispute the validity of a restrictive covenant which purports to prevent the owners and lessees of land situated in Medford, New Jersey from operating a supermarket.Each party brought an action to protect its rights and the two actions have been consolidated.Presently, the court must address a motion for summary judgment pursuant to Rule 56, Fed.R.Civ.P., brought jointly by Acme Markets, Inc. and Jarnap Corporation.

I.BACKGROUND

Formerly, the properties at issue were part of a 111-acre farm owned by Donald M. Singer and his wife ("the Singers").The farm straddled Route 70 in Medford, New Jersey.When the Singers sold approximately 12 acres of their farm ("the dominant estate") to American Stores Company("ASC") on June 25, 1957, they included the following covenant in the deed:

The grantor, for himself, his heirs and assigns, during the time the property herein conveyed is occupied and operated as a Super food store, hereby agrees not to use, let or sublet, or to permit the use, letting, or subletting of grantor's remaining lands, of which the above described parcel was a part, for the sale or storage of food, except that the foregoing shall not apply to the sale or storage, or to the offering for sale of food above restricted, in connection with the operation of a luncheon counter, soda fountain, restaurant, or of an eating place where said restricted items are consumed on the premises of such business.This restriction shall run with the land and be binding upon grantor, his heirs, personal representatives, grantees, successors and assigns.

Whether consideration was paid for the covenant is disputed.On July 30, 1958, ASC conveyed the dominant estate to Jarnap Company, Inc.("Jarnap") who then leased the land back to ASC.

Jarnap then built a 16,800 square foot supermarket which opened on June 24, 1959.In 1979, Jarnap constructed the Medford Shopping Center on the dominant estate to replace the old supermarket.The newly constructed facility contained a 32,200 square foot supermarket leased by ASC, and other stores.Currently, Jarnap owns the Medford Shopping Center and leases the supermarket to ASC who operates the store through its subsidiary Acme Markets, Inc.("Acme").

Throughout the 1950's and 1960's, the Singers sold portions of their remaining 100 acres.On February 17, 1969, the Singers sold 24 acres bordering on Route 70 ("the servient estate") to Angelo D. Rinaldi and Eugene Rinaldi subject to the restrictive covenant contained in the deed from the Singers to ASC.After several conveyances, Sharp's Run Associates("SRA") purchased the servient estate.SRA developed a shopping center on the land, known as Sharp's Run Shopping Center ("Sharp's Run").After experiencing financial troubles, SRA sold the servient estate, subject to all covenants of record, to Wharton Hardware and Supply Corporation("Wharton"), the current owner.

In early 1994, the anchor tenant in Sharp's Run, a Jamesway department store, liquidated its inventory and closed its doors.Wharton then searched for a replacement anchor tenant.Wharton alleges that Acme negotiated with Wharton for a lease covering the former Jamesway site.After a tentative agreement was reached, the negotiations fell through.In June 1994, Wharton entered into a lease with Giant Food, Inc.("Giant") for the former Jamesway site.Because Giant and Wharton assume the covenant to be invalid, Giant intends to construct a sixty-thousand-square-foot supermarket on the leased premises.

On June 23, 1994, Acme filed a verified complaint against Wharton to validate the covenant and to enjoin the construction and operation of the proposed supermarket.In its complaint Acme requests declaratory relief under New Jersey law, preliminary and permanent injunctive relief, and in the alternative, damages for the alleged breach of the restrictive covenant.

On August 11, 1994, Jarnap filed a complaint in the Superior Court of New Jersey, Burlington County, seeking declaratory and injunctive relief against Wharton under New Jersey law.Jarnap agreed to stay its state court action pending a determination by this court.

On August 25, 1994, Wharton filed a complaint in this court against both Acme and Jarnap.Wharton does not request injunctive relief in its complaint, but instead requests declarations that the restrictive covenant is invalid and unenforceable under federal and New Jersey antitrust law and New Jersey common law, and it requests attorney's fees.

The two cases were consolidated on November 3, 1994.Pursuant to Wharton's motion, on January 19, 1995, the court issued an order to show cause why a preliminary injunction should not issue.On January 20, 1995, Magistrate Judge Rosen entered a scheduling order mandating that the parties complete all pretrial discovery by February 10, 1995.The preliminary injunction motion was consolidated with trial on the merits pursuant to Rule 65(a)(2), Fed.R.Civ.P., on February 2, 1995, upon application by Acme and Jarnap.Following consolidation of the cases and of the preliminary injunction hearing with trial on the merits, Wharton and Giant have been designated as the plaintiffs and Acme and Jarnap as the defendants.The claims by Jarnap to uphold the restrictive covenant are designated as counterclaims.

The trial is presently scheduled for March 28, 1995, and the present summary judgment motions are before the court upon shortened notice.Oral argument on the summary judgment motions was held on March 10, 1995, at which time the court reserved decision.

At the oral argument, the court granted Wharton's application for leave to file an amended complaint¹, naming Giant Food, Inc. and related entities Giant Construction Co., Inc. and Giant of Maryland, Inc.(hereinafter collectively referred to as "Giant") as its co-plaintiffs.The amended complaint was filed on March 13, 1995 and contains six counts.In counts one and four, Wharton and Giant respectively seek a declaration that the restrictive covenant at issue is invalid and unenforceable because the covenant violates Sections 1 & 2 of the Sherman Antitrust Act.In counts two and five, Wharton and Giant respectively seek a declaration that the covenant is unreasonable and unenforceable under New Jersey common law.Finally, Wharton and Giant seek, in counts three and six respectively, a declaration that the restrictive covenant is invalid and unenforceable because it violates the New Jersey Antitrust Act, N.J.S.A. §§ 56:9-3 & 56:9-4.

II.DISCUSSION

A.Antitrust Standing

As a preliminary matter, the defendants argue that Wharton lacks antitrust standing to challenge the restrictive covenant.Although Wharton alleges that this court has jurisdiction under Section 4 of the Clayton Act,15 U.S.C. § 15(a)², Wharton does not base its claims for relief on the Clayton Act.That is, Wharton requests neither treble damages under Section 4 nor injunctive relief under Section 16,15 U.S.C. § 26³ Instead, Wharton requests a declaration that the restrictive covenant violates Section 1andSection 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 & 2.

The fact that Wharton seeks a declaratory judgment and not damages or injunctive relief does not automatically preclude Wharton's claims.Where the court would have jurisdiction to entertain Wharton's antitrust claims if an injunction or money damages were sought, the court has jurisdiction to entertain a declaratory judgment action alleging violation of the same statutes.SeeSchilling v. Rogers,363 U.S. 666, 677, 80 S.Ct. 1288, 1295-96, 4 L.Ed.2d 1478(1960);Jersey Central Power & Light Co. v. Local Unions,508 F.2d 687, 699 n. 31(3d Cir.), cert. denied,425 U.S. 998, 96 S.Ct. 2215, 48 L.Ed.2d 823(1975);La Maina v. Brannon,804 F.Supp. 607, 611(D.N.J.1992).Therefore, Wharton may seek a declaratory judgment that the covenant violates the Sherman Antitrust Act if Wharton would be able to bring an action for either damages or for injunctive relief.

The Third Circuit has summarized the prevailing test the Supreme Court used to determine antitrust standing in Associated General Contractors v. California State Council of Carpenters,459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723(1983), as follows:

(1) the causal connection between the antitrust violation and the harm to the plaintiff and the intent by the defendant to cause the harm, with neither factor alone conferring standing; (2) whether the plaintiff's alleged injury is of the type for which the antitrust laws were intended to provide redress; (3) the directness of the injury, which addresses concerns that liberal application of standing principles might produce speculative claims; (4) the existence of more direct victims of the alleged antitrust violations; and (5) the potential for duplicative recovery or complex apportionment of damages.

In re Lower Lake Erie Iron Ore Antitrust Litigation,998 F.2d 1144, 1165-66(3d Cir.1993), cert. denied sub...