Ahold v. Millbrook Commons, LLC

• Decision Date: 12 September 2012
• Docket Number: CASE NO. 2:10-cv-1060-MEF
• Parties: KONINKLIJKE AHOLD, N.V., Plaintiff/Counter-Defendant, v. MILLBROOK COMMONS, LLC, et al, Defendants.
• Court: U.S. District Court — Middle District of Alabama

KONINKLIJKE AHOLD, N.V., Plaintiff/Counter-Defendant, v. MILLBROOK COMMONS, LLC, et al, Defendants.

CASE NO. 2:10-cv-1060-MEF

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF ALABAMA NORTHERN DIVISION

Dated: September 12, 2012

[WO - Do Not Publish]

MEMORANDUM OPINION AND ORDER

Non-party Bruno's Supermarkets, Inc. ("Bruno's") commenced a voluntary bankruptcy reorganization proceeding under Chapter 11 of the Bankruptcy Code in February of 2009. This case concerns a Guaranty executed in 2002 by Plaintiff/Counterclaim-Defendant Koninklijke Ahold, N.V. ("Koninklijke Ahold") in favor of Defendant/Counterclaim-Plaintiff Millbrook Commons, LLC ("Millbrook Commons") in which Koninklijke Ahold guaranteed the financial obligations of Bruno's under a 2001 lease Bruno's entered into with Millbrook Commons for a Bruno's supermarket in that location.¹The case now comes before the Court on Koninklijke Ahold's Motion for Summary Judgment (Doc. # 31) and Millbrook Common's Motion for Partial Summary Judgment (Doc. # 34). Having considered the fully-briefed motions, the evidentiary attachments, andthe relevant law, the Court concludes that Koninklijke Ahold's motion is due to be GRANTED in part and DENIED in part and that Millbrook Commons' motion is due to be DENIED, as set forth below.

I. JURISDICTION AND VENUE

Subject matter jurisdiction is exercised pursuant to 28 U.S.C. § 1332 (diversity) and 2201-02 (declaratory judgments). The parties do not contest personal jurisdiction or venue, and there are adequate allegations in support of both.

II. STANDARD OF REVIEW

"Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Greenberg v. BellSouth Telecomms., Inc., 498 F.3d 1258, 1263 (11th Cir. 2007) (citation and internal quotation marks omitted); see also Fed. R. Civ. P. 56(a) ("The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.").

"[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quotation omitted). The movant can meet this burden by presenting evidence showing there is no dispute of material fact, or byshowing the non-moving party has failed to present evidence in support of some element of its case on which it bears the ultimate burden of proof. Id. at 322-23.

If the movant satisfies its evidentiary burden, the non-moving party must then establish, with evidence beyond the pleadings, that a genuine issue material to each of its claims for relief exists. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991); Fed. R. Civ. P. 56(c). What is material is determined by the substantive law applicable to the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Lofton v. Sec'y of the Dep't of Children & Family Servs., 358 F.3d 804, 809 (11th Cir. 2004) ("Only factual disputes that are material under the substantive law governing the case will preclude entry of summary judgment."). Furthermore, "[t]he mere existence of some factual dispute will not defeat summary judgment unless that factual dispute is material to an issue affecting the outcome of the case." McCormick v. City of Ft. Lauderdale, 333 F.3d 1234, 1243 (11th Cir. 2003) (citation and internal quotation marks omitted).

A genuine dispute as to a material fact can be found only "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248; see also Greenberg, 498 F.3d at 1263. However, if the evidence on which the nonmoving party relies "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 242 (citations omitted). Likewise, "[a] mere scintilla of evidence in support of the nonmoving party will not suffice to overcome a motion for summary judgment[,]" Young v. City of Palm Bay, 358 F.3d 859, 860 (11th Cir.2004), and the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Furthermore, a nonmoving party's "conclusory allegations . . . in the absence of supporting evidence, are insufficient to withstand summary judgment." Holifield v. Reno, 115 F.3d 1555, 1564 n.6 (11th Cir. 1997); see also Cordoba v. Dillard's, Inc., 419 F.3d 1169, 1181 (11th Cir. 2005) ("Speculation does not create a genuine issue of fact . . . .") (emphasis in original).

When a nonmovant fails to set forth specific facts supported by appropriate evidence sufficient to establish the existence of an element essential to his case and on which the nonmovant will bear the burden of proof at trial, summary judgment is due to be granted in favor of the moving party. Celotex Corp., 477 U.S. at 323 ("[F]ailure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.").

III. BACKGROUND

Bruno's and Millbrook Commons entered into a lease in December of 2001, which provided for two ten-year terms, plus four optional terms of five years each. For the first ten years, monthly rent was $29,798.77. It was contemplated that rent would increase to $31,283.28 for the second ten-year period. Importantly, Article XVI of the lease, titled "Default," included a "Tenant Default" provision, which reads, in its entirety:

In the event Tenant should fail to pay any of the monthly installments of Rental reserved herein for a period of more than ten (10) days after the sameshall become due and payable or if Tenant shall fail to keep or shall violate any other condition, stipulation or agreement herein contained, on the part of Tenant to be kept and performed, and if either such failure or violation shall have continued for a period of thirty (30) days after Tenant shall have received written notice as herein stipulated from Landlord to pay such rent or to cure such violation or failure then, in any such event, Landlord at its option, may either (a) terminate this Lease or (b) reenter the Premises by summary proceedings or otherwise expel Tenant and remove all property therefrom and relet the Leased Premises making reasonable and good faith efforts to obtain the best possible rental terms therefor and receive the rent therefrom. But Tenant shall remain liable for the deficiency, if any, between Tenant's rent under this Lease and the price obtained by Landlord on reletting.

(Lease Agreement § 16.01 (Doc. # 31-2).)

Koninklijke Ahold is an international grocery retailer based in Amsterdam, the Netherlands, and it acquired Bruno's in December of 2001.² (Irving Rachstein Decl. ¶ 2 (Doc. # 31-27).) Shortly thereafter, on March 29, 2002, Koninklijke Ahold executed the Guaranty at issue in favor of Millbrook Commons. (Rachstein Decl. ¶ 4.) Under the Guaranty, Koninklijke Ahold agreed to "irrevocably and unconditionally guarantee[ ] the due fulfillment by [Bruno's] of all of [Bruno's'] financial obligations under the Lease, which financial obligations shall include rent and additional rent due Landlord by reason of its performance of unperformed Tenant obligations under this Lease." (Guaranty ¶ 1 (Doc. # 31-3).) The Guaranty further provides that it "shall be construed and enforced in accordance with the laws of the State of Alabama." (Guaranty ¶ 12.)

Issues regarding the lease and Guaranty did not arise until early 2009, when Millbrook Commons and its real estate broker heard "rumblings" that there might be an imminentBruno's bankruptcy. (William B. Clements Dep. 28-29 (Doc. # 31-25).) The rumors proved well-founded, as Bruno's ultimately did file a Chapter 11 petition in the Northern District of Alabama, on February 5, 2009. (Bankruptcy Pet. (Doc. # 31-4).) On February 18, 2009, Bruno's filed a motion with the Bankruptcy Court seeking authority to close the store located at Millbrook Commons (among others), sell all the assets therein, and vacate the premises. (Docs. # 31-5, -6.) That motion was granted by the Bankruptcy Court on March 2, 2009. (Doc. # 31-7.) Pursuant to that order, Bruno's sold all of the fixtures in the premises to Millbrook Commons for $300,000.00. (Doc. # 31-8; Clements Dep. 29, 85-87.)

Three days later, Bruno's filed a rejection motion, pursuant to 11 U.S.C. § 365(a) (stating that "the trustee, subject to the court's approval, may assume or reject any . . . unexpired lease of the debtor"), to reject the Millbrook Commons lease. See also Thompkins v. Lil' Joe Records, Inc., 476 F.3d 1294, 1300 n.8 (11th Cir. 2007) (noting that a debtor-in-possession also has authority to reject under § 365(a) by operation of 11 U.S.C. § 1107(a), which generally authorizes debtors-in-possession to perform the same functions as a trustee). The rejection motion was granted by the Bankruptcy Court on April 10, 2009, which found that the rejection was effective April 8, 2009. (Doc. # 31-10.)

Faced with a rejected lease and a vacant grocery store, Millbrook Commons was eager to find a replacement tenant, as the health of the entire shopping center was at risk. According to Mr. Clements, Millbrook Commons' real estate agent, having an "operating anchor tenant is vital to the health of the shopping center. Not having an operating anchortenant hurts smaller tenants and makes it more difficult for a landlord to rent other space in the shopping center." (Clements Aff. ¶ 6 (Doc. # 35-8).) On the other hand, Stan Huner, who is a co-executor of the Estate of Milton J. Domit, testified that he simply wanted to ...