ATM Forum Louisville KY, LLC v. Lucky's Mkt. Parent Co. (In re Lucky's Mkt. Parent Co.)
| Decision Date | 22 March 2022 |
| Docket Number | 20-10166-JTD,21-488-LPS |
| Parties | In re LUCKY'S MARKET PARENT COMPANY, et al, Debtors. v. LUCKY'S MARKET PARENT COMPANY, Appellee. ATM FORUM LOUISVILLE KY, LLC, Appellant, |
| Court | U.S. District Court — District of Delaware |
Chapter 11 (Jointly Administered)
This appeal arises in the Chapter 11 cases of debtor Lucky's Market Parent Company and certain of its affiliates ("Debtors"). On April 24, 2020, appellant ATM Forum Louisville KY, LLC ("Landlord") filed an application seeking allowance of an administrative expense claim based on its non-residential real property lease with the Debtors. Landlord asserted that the Debtors: (i) violated Bankruptcy Court orders regarding removal of property from the leased premises, (ii) wrongfully converted Landlord's property, (iii) negligently caused damage to Landlord's property, and (iv) breached the terms of the lease prior to rejection. Following evidentiary hearings on November 3, 2020 (AP783-1060) ("11/3/20 Tr.") and January 8, 2021 (AP1061-1329) ("1/8/21 Tr."), the Bankruptcy Court issued its opinion (D.I. 1-1)[1] and order (D.I. 1-2), In re Lucky's Market Parent Co., 2021 WL 1100066 (Bankr. D. Del. Mar. 17, 2021) ("Decision"), denying Landlord's application. Landlord has appealed the Decision.
Debtors operated 39 full-service organic grocery stores in the United States. Debtors leased 37 of the stores and owned the other two. Landlord is a subsidiary of Arciterra Companies, a private real estate company that owns 70-100 shopping centers and other retail properties throughout the country. Relevant to this dispute, Landlord owns certain retail space located at 100-300 Hurstbourne Parkway in Louisville, Kentucky ("Store" or "Premises"). In 2013, Debtors negotiated with Landlord to lease the Premises. (AP578-AP590 ("Larmore Decl.") If 12) On or about July 30, 2013, Landlord and Debtors executed a lease. (AP1390-AP1445) ("Lease")
The parties do not dispute the following findings by the Bankruptcy Court. The Premises had to be significantly modified in order to convert the existing retail space into one that could accommodate a grocery store. See Lucky's Store, 2021 WL 1100066, at *5. At the time the Lease was executed, the Premises did not have any refrigeration components or capabilities, including any in-slab refrigeration pipes, in-wall refrigeration pipes, or rooms for refrigeration. See Id. In addition, there were no exhaust hoods, sinks/handwashing stations, or other items that are necessary to operate a grocery store. See Id. The Lease required Landlord to construct or pay for "Landlord's Work" to alter and improve the Premises, including: (1) new electrical meter/distribution panel; (2) water meter/gas line sufficient to meet tenant's use requirements; (3) sewer lines to meet tenant's code requirement; (4) loading dock to accommodate a 75-foot semi-truck (with 53 foot trailer with truck cab) with doc leveler seals and proper loading platform, the design to be agreed upon by the parties; (5) concrete slab repaired or replaced as needed to provide a clean and level slab ready for floor covering; (6) split-level section of Premises to be removed; and (7) a new facade and vestibule with new entry doors. See Id. at *6.
The Lease also provided that the Debtor would perform "Tenant's Work," defined as "all leasehold improvements, fixtures, equipment, and merchandise required for Tenant to open the Premises for business to the public that is not included in the Landlord's Work." Id. The Lease included a "Tenant Improvement Allowance" of $1, 203, 800, or $40 per square foot, that Landlord was to pay to Debtor in two payments - at the 50% completion mark and the 100% completion mark - conditioned upon receipt of reasonable evidence of completion, such as paid invoices and applicable lien waivers of subcontracted work. Id. at *7.
Under the Lease, Debtors were obligated to maintain, repair, and replace all interior components of the Premises. Debtors were obliged to promptly repair any damage caused by removal of their personal property, with the exception of small holes caused by nails or fasteners.
On January 27, 2020 ("Petition Date"), certain Debtors filed voluntary petitions commencing a case for relief under Chapter 11 of the Bankruptcy Code. On the Petition Date, Debtors filed their Motion for Approval of (I) Procedures for Store Closing Sales and (II) Assumption of the Liquidation Consulting Agreement (AP1-50), seeking approval of the store closing procedures ("Store Closing Procedures") and assumption of a liquidation consulting agreement with Great American Global Partners, LLC ("Great American" or "Liquidation Consultant"). On January 28, 2020, the Bankruptcy Court entered an interim order approving the relief sought (AP51-85) ("Store Closing Procedures Order") and on March 3, 2020, it entered a final order (B.D.I. 321).
Paragraph 4 of the Store Closing Procedures Order authorized the Debtors and the Liquidation Consultant "to sell or transfer the movable furniture, fixtures, or other equipment, excluding any and all property of the landlord including all real property improvements located on the Premises (the 'FF&E' and, together with the applicable inventory, the 'Store Closing Assets') located at the Closing Stores, and any such transaction shall be free and clear of all liens, claims, interests, and other encumbrances." (AP66)
Debtors retained Great American to assist with the sale of FF&E for the Store. Peter Wyke oversaw Debtors' liquidation sales on behalf of Great American. (1/8/21 Tr. at 96:5-9; 97:5-7) Great American contracted Dennis Jenkins as the lead liquidation consultant to help oversee Debtors' FF&E liquidation sales. (1/8/21 Tr. at 96:5-9; 97:5-7) Great American contracted Clarissa Mclean as the liquidation consultant to oversee the sale and removal of the FF&E at the Store ("Louisville FF&E").
Chad Renier is CEO of Mechanical Removal & Relocation, LLC ("Buyer" or "Mr. Renier"). (AP525-43 ("Renier Decl.") ¶ 9) Mr. Renier has 18 years of experience in the disconnection, removal, purchase, and resale of FF&E from grocery stores. (1/8/21 Tr. at 162:13-15; Renier Decl. ¶¶ 4-14) Based on photographs and discussions with Ms. Mclean, Buyer determined that a fair bid for the Louisville FF&E was $20, 000 and submitted a bulk bid for the Louisville FF&E. Buyer's bid was the sole bulk bid.
On February 4, 2020, Buyer agreed to purchase the Louisville FF&E from Debtors for the purchase price of $20, 000, evidenced by Invoice #80015 ("Louisville FF&E Invoice").
(AP1498) The Louisville FF&E Invoice provided a non-exclusive list of equipment being sold to Buyer, including:
All removable FF&E to include but not limited to All FF&E located inside the facility, kitchen, bakery, shopping carts, deli equipment, refrigeration equipment, bailer, compactor, POS System, network equipment, server equipment, desktop computers, gondola shelving, butcher equipment, cafe equipment, walk in coolers, refrigeration racks and compressors (Freon to be removed by Lucky's before dismantling).
The Louisville FF&E Invoice also provided a non-exclusive list of FF&E that was excluded from the sale to the Buyer, including:
As of February 12, 2020, most of the FF&E had been staged by Mr. Renier's team for removal, under Ms. Mclean's supervision - but none of it had been removed. (Renier Decl. at ¶ 40) On February 12, 2020, Jeremy Hamilton, Landlord's leasing representative, learned that Buyer was onsite and removing or preparing to remove property. (AP1527-1536 at 5-9; 11/3/20 Tr. at 61:18-62:14) Mr. Hamilton contacted Ms. McLean by phone to ask what property was being removed, but Ms. McLean would not give him any information. (11/3/20 Tr. 63:13-64:7) Also on February 12, 2020, Debtors' counsel left a voicemail for Landlord, stating that "no fixtures were being removed" and Debtors would cause the removal to cease for the day until Landlord's representative could be present to identify disputed items. (AP1541-42)
The parties dispute the events that followed. Sometime between February 12 and 13, 2020, Mr. Hamilton spoke with Ms. McLean and Mr. Renier on the phone, but the timing and content of those conversations is contested. Based on email chains entered into evidence, it appears that Mr. Reiner learned on the afternoon of February 13 that Landlord would have a representative at the Store on Tuesday, February 18 to identify any fixtures that Landlord asserted could not be removed. (AP1516-17) Mr. Renier stated that, based on a conversation with Mr. Hamilton on February 12, Mr. Renier was under the impression that Landlord's representative would be at the Store on Thursday, February 13 to complete the identification of disputed property. (Reiner Decl. ¶ 46) Mr. Hamilton disputes this assertion, maintaining instead that he was not able to make direct contact with any parties until Thursday, February 13, and that in all communications he made it clear a Landlord representative could not arrive until Tuesday, February 18. (11/3/20 Tr. at 128:19-130:24; 132:20-133:9) There...
To continue reading
Request your trial