Heathman Hotel Portland, LLC v. McCormick & Schmick Rest. Corp.

• Court: Court of Appeals of Oregon
• Citation: 284 Or.App. 112,391 P.3d 892
• Docket Number: A157710
• Parties: HEATHMAN HOTEL PORTLAND, LLC, an Oregon limited liability company, Plaintiff-Respondent, v. MCCORMICK & SCHMICK RESTAURANT CORP., a Delaware corporation, Defendant-Appellant.
• Decision Date: 01 March 2017

284 Or.App. 112
391 P.3d 892

HEATHMAN HOTEL PORTLAND, LLC, an Oregon limited liability company, Plaintiff-Respondent,
v.
MCCORMICK & SCHMICK RESTAURANT CORP., a Delaware corporation, Defendant-Appellant.

A157710

Court of Appeals of Oregon.

Argued and submitted September 21, 2015.
March 1, 2017

Kevin H. Kono, Portland, argued the cause for appellant. With him on the briefs were Nicholas A. Kampers and Davis Wright Tremaine LLP.

Robyn Ridler Aoyagi, Portland, argued the cause for respondent. With her on the brief were Edwin C. Perry and Tonkon Torp LLP.

Before Armstrong, Presiding Judge, and Hadlock, Chief Judge, and Egan, Judge.

EGAN, J.

284 Or.App. 113

Defendant, McCormick & Schmick Restaurant Corporation, appeals a judgment for plaintiff, Heathman Hotel Portland, LLC, declaring that defendant had no right to exercise its second option to renew the parties' restaurant lease and a supplemental judgment that awarded attorney fees and costs to plaintiff. Defendant assigns error to the trial court's grant of summary judgment to plaintiff based on the court's conclusion that the terms of the lease between the parties were unambiguous. It also assigns error to the court's award of attorney fees and, alternatively, the amount of the award. We affirm.

We review a trial court's grant of summary judgment to determine whether, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. ORCP 47 C. We review for abuse of discretion whether the amount of a trial court's award of attorney fees was reasonable.

391 P.3d 894

Village at North Pointe Condo. Assn. v. Bloedel Constr. , 278 Or.App. 354, 369, 374 P.3d 978, adh'd to as modified on recons , 281 Or.App. 322, 383 P.3d 409 (2016).

Plaintiff and defendant are parties to a restaurant lease dated September 20, 2000. Under the lease, defendant rented and operated the restaurant in the Heathman Hotel. The initial lease term was 10 years, to end on September 30, 2010. Under Section 2.2 of the lease, defendant had the option to extend the lease for two additional 10-year periods. The following were the terms and conditions of the options in Section 2.2;

"2.2 Renewal Options . Provided that at the time of the exercise of the Options herein granted * * * there exists no Default under this Lease by Tenant * * * and Tenant shall have achieved the Minimum Total Gross Sales set forth below, Tenant shall have and is hereby granted the option (the ‘Option’) to extend the Term for two (2) additional periods of ten (10) years (each an ‘Option Term’ and collectively, the ‘Option Terms') on all of the terms and provisions contained in this Lease, except this Section 2.2. Tenant may exercise the Option by giving Landlord written notice

284 Or.App. 114

thereof not later than one (1) year and not earlier than two (2) years prior to the expiration of Term or the then-current Option Term, as the case may be. In the event any Option is duly exercised, all references to and other provisions of this Lease concerning the Term shall be deemed to refer to the Term as extended by the Option Term. For purposes of the Renewal Options, Tenant must have average Total Gross Sales for the two Lease Years immediately preceding the delivery of its notice of exercise of the first Option of at least $ 6,000,000 and for the two Lease Years immediately preceding the delivery of its notice of exercise of the second Option of at least $ 7,500,000 (the ‘Minimum Total Gross Sales')."

(Underscoring in original.) Each "Lease Year" ran from October 1 to September 30 of the following year.

In 2009, plaintiff and defendant amended the lease (the Amendment), effective September 30, 2009. The relevant recitals of the Amendment¹ are as follows:

"D. Tenant has exercised its option to extend the Lease Term and Landlord and Tenant have agreed the Lease Term will be extended for a period of five years (and not for ten years, as provided in the Lease).^{[2 ]}

"F. Landlord and Tenant agree certain works of improvement will be completed in the Restaurant Premises.

"G. Landlord and Tenant now wish to amend the Lease to evidence the extension of the Term, to modify the length of the remaining Option Term, to add provisions for works of improvement in the Premises and to clarify and make current other provisions of the Lease."

The lease terms were amended in the following ways:

284 Or.App. 115

"Section 2.1. Term. Section 2.1 is amended and replaced with the following:

"2.1 Term. The parties have agreed that the current Term of this Lease is extended to September 30, 2015 (‘Expiration Date’).

"Section 2.2 Renewal Options. Section 2.2 is amended as follows:

"After the extension of the Term in Section 2.1 above, Tenant shall have one remaining Option to extend the Term for an additional period of five (5) years, on the terms and conditions set forth in Section 2.2 (except for the number of Options and length of the Option Term). There are no other options to renew or extend the Lease. Any reference to ‘Option Terms' in

391 P.3d 895

the Lease shall mean the one remaining ‘Option Term,’ as set forth above."

(Underscoring in original.)

The Amendment also provided that "the prevailing party shall be entitled to recover from the other party such sum as the court or arbitrator may adjudge reasonable as attorneys' fees and other costs of litigation at trial, hearing or on appeal of such suit or action."³

In April 2014, plaintiff filed a complaint seeking a declaratory judgment that, under the amended lease, defendant did "not have the right to exercise the second Lease renewal option" and that "the terms of the lease * * * [would] expire September 30, 2015." Plaintiff alleged that defendant could not exercise its option to renew the lease because defendant had already exercised its first option and it had not met the minimum total gross sales by September 2013 that would have allowed it to exercise its second option. Plaintiff asserted that the parties had disagreed as to the effects of the Amendment on the renewal option since 2012. The deadline for defendant to give notice to exercise its renewal option, if it were eligible, would have been September 30, 2014.

284 Or.App. 116

At a hearing on plaintiff's motion for summary judgment, the parties disputed whether the remaining renewal option under the amended lease was the first or second option described in Section 2.2 of the original lease, or if it was neither. They also disputed whether defendant was required to meet any minimum gross sales total to exercise the renewal option. If a minimum gross sales total was required, the parties disagreed about the time period in which the gross sales would be measured, although they stipulated that defendant had averaged less than $ 7.5 million in gross sales for the Lease Years ending in 2012 and 2013.

The trial court framed the issue on summary judgment as "whether there is an ambiguity in the lease so that a trier of fact must decide what the parties intended." The trial court concluded that plaintiff was entitled to a declaratory judgment on summary judgment because the only plausible interpretation of the lease was the interpretation advanced by plaintiff—i.e. , defendant had exercised its first option to extend the lease, the first option term was shortened to five years, and defendant did not meet the requirements to exercise its second renewal option. Accordingly, the trial court declared that defendant did not have the right to exercise its second renewal option and the lease would terminate on September 30, 2015. Plaintiff then petitioned for attorney fees and costs under the terms of the lease.

During the hearing on plaintiff's petition for attorney fees and costs, defendant argued that the trial court should deny or reduce the amount of attorney fees for which plaintiff had petitioned. The trial court concluded that plaintiff was entitled to attorney fees and found that the attorney fees requested were reasonable in light of the factors in ORS 20.075 and the terms of Section 20.9 of the lease. It expressed concern, however, about some of the billing and consequently denied the fees plaintiff had requested for work done on the attorney-fee petition. The trial court awarded plaintiff attorney fees and costs totaling $ 50,395.28.

On appeal, defendant argues that summary judgment was not appropriate because the lease, as amended by

284 Or.App. 117

the Amendment, is ambiguous. Defendant also asserts that the attorney fees should not have been awarded or should have been reduced.

Disputes over the meaning of contract provisions may be disposed of by summary judgment if the provisions are unambiguous. Milne v. Milne Construction Co. , 207 Or.App. 382, 388, 142 P.3d 475 (2006). A contract term is ambiguous if, when examined in the context of the contract as a whole, including the circumstances under which...