Armstrong Airport Concessions v. K-Squared Rest., LLC

• Decision Date: 28 October 2015
• Docket Number: No. 2015–CA–0375.,2015–CA–0375.
• Citation: 178 So.3d 1094
• Parties: ARMSTRONG AIRPORT CONCESSIONS, A Joint Venture v. K–SQUARED RESTAURANT, LLC, et al.
• Court: Court of Appeal of Louisiana — District of US

178 So.3d 1094

ARMSTRONG AIRPORT CONCESSIONS, A Joint Venture

v.K–SQUARED RESTAURANT, LLC, et al.

No. 2015–CA–0375.

Court of Appeal of Louisiana, Fourth Circuit.

Oct. 28, 2015.

Thomas M. Beh, Gary J. Elkins, ELKINS, P.L.C., New Orleans, LA, for Plaintiff/Appellant.

Jerome J. Pellerin, Attorney at Law, New Orleans, LA, for Defendant/Appellee.

(Court composed of Judge DENNIS R. BAGNERIS, SR., Judge ROSEMARY LEDET, Judge SANDRA C. JENKINS ).

ROSEMARY LEDET, Judge.

This is an eviction proceeding. Armstrong Airport Concessions, A Joint Venture ("Concessionaire"), seeks review of the trial court's judgment denying, in part, the rule for eviction it filed against K–Squared Restaurants, LLC ("K–Squared Popeyes"); K–Squared Restaurants (Subway), LLC ("K–Squared Subway"); Kirksey Enterprises, Inc. ("KEI"); and Karlton Kirksey (collectively the "Defendants"). For the reasons that follow, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On July 8, 1999, the New Orleans Aviation Board (the "Board") and Concessionaire entered into a Master Lease.¹ The Master Lease named Concessionaire as the master concessionaire at the New Orleans International Airport Terminal (the "Terminal") and granted it the right to sublease spaces within the Terminal's designated food and beverage areas. The Master Lease required that Concessionaire operate all restaurant locations in the Terminal for a minimum of twelve hours a day, seven days per week.

On May 1, 2004, Concessionaire entered into a Sublease Agreement with KEI and Mr. Kirksey, individually as owner and guarantor. Under the Sublease, KEI was granted the right to operate two food and beverage locations in the Terminal. The Subleased Facility is described in Section 3 of the Sublease, which provides as follows:

3.1 Description

(a) Concessionaire does hereby grant Operator the right to occupy and use the Subleased Facility (being 1,150 square feet) described in Exhibit A1 in space number ETLF–1, in the East Lobby Food Court at the Airport, with a limited menu upon the terms and conditions herein set forth, with possession to commence on "Subtenant DBO" (as hereinafter defined)² for the sole purpose of operating a Popeyes Chicken and Biscuits concession stand. The authorized menu items and the prices therefor are set forth in Exhibit B1 (the "Authorized Products"). Operator agrees to operate its business in the Subleased Facility in accordance with the terms and conditions set forth herein [the "Popeyes Location"].

(b) Concessionaire does hereby grant Operator the right to occupy and use the Subleased Facility (being 312 square feet) described in Exhibit A2 in space number EBF–4C, in the Mini Food Court, Concourse B at the Airport, with a limited menu upon the terms and conditions herein set forth, with possession to commence on "Subtenant DBO" (as hereinafter defined) for the sole purpose of operating a Subway concession stand. The authorized menu items and the prices therefor are set forth in Exhibit B2 (the "Authorized Products"). Operator agrees to operate its business in the Subleased Facility in accordance with the terms and conditions set forth herein [the "Subway Location"].

Exhibits attached to, and incorporated into, the Sublease show the exact location of each Subleased Facility—the Popeyes Location and the Subway Location. The Sublease defines the rent due to Concessionaire based on a formula that includes two components: the Minimum Annual Guarantee and the Percentage Payment. The Minimum Annual Guarantee is apportioned between the two locations based on the square footage of each location. The Percentage Payment is apportioned between the two locations based on the Gross Concession Revenues derived from the sale of Authorized Products at each location.

The Sublease, similar to the Master Lease, includes a requirement that the Subleased Facility be open a minimum of twelve hours a day, seven days per week. Specifically, the requirement is set forth in Section 7.5, which provides, in part, as follows:

Hours of Operation. Operator shall ensure that its Subleased Facility is open at the minimum twelve (12) consecutive hours each day, seven (7) days each week, including holidays unless otherwise specifically permitted by written consent of Concessionaire and Board from time to time and subject to the request of being open consistent with the departure of all flights including delayed flights in the Terminal.

The Sublease defines the Events of Default as including "Operator abandons or ceases to use the Subleased Facility for three (3) day at any one time." Sublease, Section 15.1(d). Under the Sublease, the remedies for any event of default include "[t]erminate this Agreement without discharging any of the Operator's obligations hereunder and exclude Operator from the Subleased Facility." Sublease, Section 15.2. The Sublease also provides for liquidated damages in the event of default.

As to assignment, the Sublease provides:

17.1 Operator acknowledges that this Agreement is personal in nature on the part of the Operator and, it does not have the right or power under this Agreement to assign, sublet or in any manner transfer this Agreement or any estate or interest hereunder, except with the prior written consent of Concessionaire and the Board, in their sole discretion.

17.2 No such assignment will be approved unless the assignee is: (a) financially and operationally qualified to operate the business; (b) a duly qualified DBE [Disadvantaged Business Entity]; and (c) pre-approved as a successor operator hereunder by the Board and New Orleans City Council.

The Sublease includes a governing law provision, which provides "[t]his Agreement shall be governed and construed pursuant to the laws of the State of Louisiana." Sublease, Section 28.8. On June 28, 2004, the Board approved the Sublease.

On August 1, 2006, Concessionaire, KEI, K–Squared Popeyes, and K–Squared Subway entered into a Bifurcation, Assignment and Assumption Agreement (the "Assignment Agreement"). In the Assignment Agreement, KEI, with Concessionaire's approval, assigned its rights and obligations under the Sublease to K–Squared Popeyes for the Popeyes Location, and to K–Squared Subway for the Subway Location; the pertinent provisions of the Assignment Agreement provide as follows:

Section 2: ASSUMPTION OF OBLIGATION BY ASSIGNEE AND BIFURCATION OF RESPONSIBILITIES

2.1 Assignees [K–Squared Popeyes and K–Squared Subway] hereby assume and agree, jointly and severally to fully perform all of the obligations of the Assignor [KEI] arising under the Sublease Agreement as well as the obligations of the Assignor pursuant to the closing documents entered into by the Assignor with Whitney National Bank including, but not limited to, the Loan Agreement, Promissory Note and Security Agreement (such obligations shall hereinafter be collectively referred to as the "Obligations.")

2.2 As between the Assignees, KSR [K–Squared Popeyes] covenants to pay all expenses (including, but not limited to, all rents and fees) attributable to the occupancy and use of the Popeyes Location and KSR–Subway [K–Squared Subway] covenants to pay all expenses (including, but not limited to, all rents and fees) attributable to the occupancy and use of the Subway Location. However, the foregoing shall not relieve either KSR [K–Squared Popeyes] or KSR–Subway [K–Squared Subway] from their joint and several responsibility to Concessionaire. Default by either party shall be a Default under the Sublease.

The Assignment Agreement further provides that "[t]he Assignor [KEI] and Assignees [K–Squared Popeyes and K–Squared Subway] agree that they shall be jointly and severally liable for the performance of the Obligations under the Sublease." Assignment Agreement, Section 4.

On December 3, 2009, a First Amendment to the Sublease Agreement was perfected. In this agreement, the term "Operator" is collectively defined as K–Squared Popeyes and K–Squared Subway.

On November 30, 2013, K–Squared Popeyes closed the Popeyes restaurant it was operating at the Popeyes Location in the Terminal; since that date, the Popeyes restaurant has remained closed. On both December 5, 2013 and May 29, 2014, Concessionaire issued a notice of default to the Defendants. In the notices of default, Concessionaire averred that the Defendants' cessation of use of the Subleased Facility—the Popeyes Location—for three days at one time constituted a breach of the Sublease Agreement and an event of default. See Sublease, Sections 7.5 and 15.1(d), quoted above. Concessionaire thus demanded the breach and the default be cured. Absent a cure, Concessionaire expressed its intent to terminate the Sublease and to take possession of the entire Subleased Facility—the Subway Location and the Popeyes Location.

On December 6, 2013, Concessionaire filed a Petition for Eviction and Damages for Breach of Lease against the Defendants. This initial petition, however, was dismissed on the Defendants' exception of prematurity. Concessionaire did not seek appellate review of this dismissal. Instead, on June 24, 2014, Concessionaire filed a second Petition for Eviction and Damages for Breach of Lease against the Defendants.

Following a hearing held on January 23, 2015, the trial court granted the eviction as to the Popeyes Location, terminating the Sublease for that location and ordering that KEI vacate that location. The trial court, however, denied Concessionaire's eviction as to the Subway Location. The trial court thus rendered the following judgment:

a) The Rule for Eviction is granted as to that property designated as ETLF1 in the East Food Court of the New Orleans Airport (the "Popeyes Location"), the Sublease Agreement, as amended, is hereby terminated as to the Popeyes Location, and the Defendants are ordered to relinquish possession of the Popeyes Location to Concessionaire within 24 hours of the execution of this Judgment; and

b) The Rule for Eviction is denied in all other respects, including as to that property designated as EBF11

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