Afco Cargo Pit LLC v. Dhl Express (usa) Inc
| Decision Date | 09 December 2010 |
| Docket Number | Civil Action No. 10-1080 |
| Parties | AFCO CARGO PIT LLC, Plaintiff, v. DHL EXPRESS (USA), INC., Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
1
Plaintiff landlord AFCO Cargo PIT LLC asserts that Defendant tenant DHL Express (USA), Inc. breached a Lease agreement when it vacated the leased premises prior to the expiration of the renewal term of the Lease. Pending before the Court is Defendant's Motion for Judgment on the Pleadings (Doc. 23), in which Defendant asserts that Plaintiff has failed to state a claim for breach of contract because Defendant could not have renewed the Lease. Defendant asserts that, after the original term of the Lease expired, it was a holdover tenant occupying the premises on a month-to-month basis. For the reasons stated herein, the Court will deny Defendant's motion.
While the pertinent facts in this case appear to be largely undisputed, see Am. Answer (Doc. 26), the facts below are presented as alleged in the Amended Complaint (Doc. 17). See Allah v. Al-Hafeez, 226 F.3d 247, 249-50 (3d Cir. 2000) ().
On February 1, 2002, Plaintiff AFCO Cargo PIT LLC entered into a Lease with ABX Air, Inc., by which Plaintiff subleased to ABX Air certain property at the Pittsburgh International Airport. Am. Compl. ¶ 10 (Doc. 1). The Lease had an initial term of five years. Id. at ¶ 11.
Rider No. 1 to the Lease granted ABX Air the right to renew the Lease for a five year renewal term. Id. at ¶ 11; Rider No. 1 (Doc. 17-1 at 54). Rider No. 1 states that "[t]he renewal option provided for in this Rider No. 1 shall be personal to Tenant and shall not be applicable to any assignee, subtenant or successor of Tenant." Rider No. 1 at ¶ 5 (Doc. 17-1 at 54).
Through a series of assignments, Defendant DHL Express (USA), Inc. was assigned ABX Air's rights under the Lease in 2003. Am. Compl. ¶¶ 12-13.
On May 15, 2007, Defendant e-mailed Plaintiff, stating: "I can confirm that we are planning to renew our lease at the current PIT location for 5 years." Doc. 17-2; see also Am. Compl. ¶ 14. On May 16, 2007, Plaintiff responded via e-mail, explaining: Doc. 17-3; see also Am. Compl. ¶ 16. Defendant e-mailed Plaintiff on May 22, 2007, stating: "Per our phone con, I received confirmation today from DHL Strategic Planning to exercise the PIT 5 year lease renewal." Doc. 17-4; see also Compl. ¶ 18.2
Sometime following this e-mail exchange, Defendant paid Plaintiff rent retroactive to February 1, 2007. Am. Compl. ¶ 19. Defendant paid Plaintiff rent through approximately June 2009, in accordance with the Renewal Term rent formula set forth in Paragraph 4 of Rider No. 1 of the Lease. Id at ¶ 20.
On June 18, 2009, Defendant sent Plaintiff a letter notifying Plaintiff that: Doc. 17-5; see also Am. Compl. ¶ 23.
On July 17, 2009, Plaintiff informed Defendant by letter that Plaintiff believed Defendant had no right to terminate the Lease because Defendant exercised its five-year renewal option pursuant to Rider No. 1, making the expiration date of the Lease January 31, 2012. See Doc. 176; Am. Compl. ¶ 24. In that letter, Plaintiff also informed Defendant that Plaintiff believed Defendant was in default of the lease for vacating the leased premises. See Doc. 17-6; Am. Compl. ¶ 24.
On February 4, 2010, and July 23, 2010, Plaintiff's counsel sent Defendant letters demanding payment for amounts allegedly due and owing under the Lease. Am. Compl. ¶¶ 26, 28. Defendant did not pay the amounts demanded by Plaintiff, leading to this action. Compl. ¶¶ 27, 29.
After Defendant filed a Motion for Judgment on the Pleadings (Doc. 15) pursuant to Federal Rule of Civil Procedure 12(c), Plaintiff filed an Amended Complaint (Doc. 17). In light of the Amended Complaint, this Court denied Defendant's Motion for Judgment on the Pleadings as moot. Text Order dated Nov. 2, 2010. Defendant then filed the currently pending Motion for Judgment on the Pleadings (Doc. 23), and an Amended Answer to the Amended Complaint (Doc. 26).
Defendant asserts that it is entitled to judgment on the pleadings because Rider No. 1 unambiguously provides that the renewal option under the Lease "shall be personal to Tenant and shall not be applicable to any assignee, subtenant or successor of Tenant." Because Defendant is an assignee of the Lease, Defendant asserts that it had no right to renew the Lease and therefore could not have breached the Lease provisions regarding the alleged renewal term. Defendant also asserts that it did not renew the Lease because it did not provide written, "executed" notice of renewal and failed to exercise the renewal option at least six months prior to the expiration of the original Lease term, as required by the terms of Rider No. 1.
Judgment on the pleadings under Rule 12(c) "will not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law." Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008) (quoting Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290-91 (3d Cir. 1988)). All inferences from the facts presented in the pleadings must be drawn in the light most favorable to the nonmoving party. Id.
Material issues of fact remain to be resolved as to whether the parties modified the Lease such that Defendant renewed the Lease for a five-year renewal term. Under Pennsylvania law, a written contract may be modified by subsequent words or conduct.3 Universal Builders, Inc. v. Moon Motor Lodge, Inc., 244 A.2d 10, 15-16 (Pa. 1968); see also First Nat'l Bank of Pa. v. Lincoln Nat'l Life Ins. Co., 824 F.2d 277, 280 (3d Cir. 1987) (discussing Pennsylvania law).
Such a modification, "if proven by clear, precise and convincing evidence, is valid despite a provision in the original written agreement prohibiting non-written modifications." First Nat'l Bank, 824 F.2d at 280 (citing Nicolella v. Palmer, 248 A.2d 20, 23 (Pa. 1968)). Such a modification is enforceable under at least two theories: (1) an agreement separate from the written contract; and (2) waiver of the written authorization requirement. See Universal Builders, 244 A.2d at 15.
Defendant asserts that Plaintiff's "claims of waiver and modification can only stand with proof that both AFCO and DHL agreed to these modifications in writing." Def.'s Br. at 5. Defendant relies on Hoff Supply Co. v. Allen-Bradley Co., 768 F. Supp. 132, 135 (M.D. Pa. 1991). The court in Hoff Supply relied upon C.I.T. Corp. v. Jonnet, 214 A.2d 620 (Pa. 1965), and held that "oral modifications of contracts which expressly provide that modifications may only be made if in writing are unenforceable under... the common law." Hoff Supply, 768 F. Supp. at 135.
But the Hoff Supply court's reliance upon C.I.T. was misplaced. C.I.T. explicitly acknowledged that a subsequent oral agreement could modify a contract, even if the contract requires all modifications to be in writing. C.I.T., 214 A.2d at 622. C.I.T. simply held that such an oral modification is valid only if the written modification requirement is first waived. Id.
The Pennsylvania Supreme Court later explained in Universal Builders that C.I.T. "is misleading" because it ignored circumstances in which a contractual written modification requirement can be waived. Universal Builders, 244 A.2d at 16. The court explained that the effectiveness of an oral modification "in spite of a contract condition that modifications must be written depends upon whether enforcement of the condition is or is not barred by equitable considerations, not upon the technicality of whether the condition was or was not expressly and separately waived before the non-written modification." Id. Further, the parties' course of conduct in performing the contract may indicate whether the written terms of a contract have been modified. See id. at 15; First Nat'l Bank, 824 F.2d at 281. Thus, contrary to Defendant's assertions, the parties could have modified the Lease agreement even without a written agreement signed by the parties.
Plaintiff alleges that Defendant renewed the Lease under the terms provided in Rider No. 1, even though the parties did not strictly comply with the Lease provisions related to renewal. Defendant is an assignee to the Lease, but Rider No. 1 to the Lease provides that "[t]he renewal option provided for in this Rider No. 1... shall not be applicable to any assignee, subtenant or successor of Tenant." Doc. 17-1 at 54, § 5. Defendant allegedly renewed the Lease after expiration of the original term, but Rider No. 1 provides that the renewal option must be exercised by the tenant "no later than 6 months prior to the expiration of the original term." Id. at 54, §§ 1-2. Defendant allegedly renewed the Lease through a series of e-mails between the parties, but under the Lease, "No amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto." 4 Doc. 17-1 at 37, § 23.16.
Accepting all allegations of the Amended Complaint as true, equitable considerations bar enforcement of the condition that all modifications to the Lease must be "expressed in a writing executed by...
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