Lenscrafters Inc v. Kehoe

• Decision Date: 15 October 2010
• Docket Number: NO. 28,145,28,145
• Parties: LENSCRAFTERS, INC., an Ohio Corporation, Plaintiff-Appellee/Cross-Appellant, v. DENNIS KEHOE, O. D., Defendant-Appellant/Cross-Appellee.
• Court: Court of Appeals of New Mexico

LENSCRAFTERS, INC., an Ohio Corporation, Plaintiff-Appellee/Cross-Appellant,

v.DENNIS KEHOE, O. D., Defendant-Appellant/Cross-Appellee.

NO. 28, 145

COURT OF APPEALS OF THE STATE OF NEW MEXICO

10/15/2010

This memorandum opinion was not selected for publication in the New Mexico Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version filed by the Court of Appeals and does not include the filing date.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY

Richard J. Knowles, District Judge

Montgomery & Andrews, P. A. Randy E. Bartell Santa Fe, NM John S. Schmidt, III Melissa J. Copeland Williams Mullen Raleigh, NC for Appellee

Bauman, Dow & Leon, P. C. Mark C. Dow John Michael Hughson Albuquerque, NM for Appellant

MEMORANDUM OPINION

SUTIN, Judge.

Dennis Kehoe, O.D., appeals from the district court's grant of summary judgment on his counterclaims in favor of LensCrafters, Inc. LensCrafters cross-appeals from the district court's grant of summary judgment in favor of Kehoe regarding its claim to enforce the non-competition provision in the parties' sublease agreement. We affirm the district court's summary judgment in favor of LensCrafters on Kehoe's counterclaim. We reverse the court's summary judgment in favor of Kehoe on LensCrafters' claim.

BACKGROUND

In 1997 Kehoe, an optometrist, leased space from LensCrafters next to their retail store at Winrock Center in Albuquerque, New Mexico. The parties entered into an initial sublease agreement and continued their relationship through successive sublease agreements until 2001 when their relationship ended. On October 5, 2001, after leaving LensCrafters, Kehoe subleased space next to Pearle Vision (Pearle) at Coronado Center less than a mile from Winrock. On October 12, 2001, LensCrafters sued to enforce the non-competition provision in the parties' sublease agreement. In December 2001, Kehoe filed counterclaims for (1) breach of indemnity and defense agreement, (2) bad faith failure to indemnify and defend, (3) bad faith breach ofcontract, (4) negligence and negligent misrepresentation, (5) tortious interference with business relations, (6) violation of the New Mexico Unfair Practices Act (UPA), NMSA 1978, §§ 57-12-1 to-26 (1967, as amended through 2009), (7) abuse of process, and (8) restraint of trade.

Kehoe moved for partial summary judgment on LensCrafters' breach of contract claim. On July 8, 2003, the district court granted Kehoe's motion, ruling that the sublease agreement was terminated by a letter that LensCrafters sent to Kehoe on May 29, 2001. We refer to this May 29, 2001, letter as "the May 2001 letter." In May and July 2006, five years after the commencement of litigation, Kehoe filed a motion to amend counterclaims and an amended motion to supplement counterclaims. The district court denied Kehoe's amended motion to supplement counterclaims. Several months later, LensCrafters moved for summary judgment on all of Kehoe's counterclaims. In October 2007, the district court dismissed all of Kehoe's counterclaims. These appeals followed.

DISCUSSION

I. Summary Judgment Motions Standard of Review

We review the grant of summary judgment de novo. Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. "Summary judgmentis appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Id. "The movant need only make a prima facie showing that he is entitled to summary judgment. Upon the movant making a prima facie showing, the burden shifts to the party opposing the motion to demonstrate the existence of specific evidentiary facts [that] would require trial on the merits." Roth v. Thompson, 113 N.M. 331, 334-35, 825 P.2d 1241, 1244-45 (1992) (citation omitted); see Fikes v. Furst, 2003-NMSC-033, ¶ 11, 134 N.M. 602, 81 P.3d 545 (stating that once the movant "makes a prima facie case that summary judgment should be granted, the burden shifts to the opponent to show at least a reasonable doubt, rather than a slight doubt, as to the existence of a genuine issue of fact" (internal quotation marks and citation omitted)). We favor resolution on the merits, and, therefore, we view "the evidence in the light most favorable to the party opposing a summary judgment motion and draw[] all inferences in favor of a trial on the merits." Spencer v. Health Force, Inc., 2005-NMSC-002, ¶ 24, 137 N.M. 64, 107 P.3d 504.

A. LensCrafters' Claim for Breach of Contract

The district court granted Kehoe's motion for summary judgment, stating that the May 2001 letter "terminated the 1999 [s]ublease [a]greement, superceding any notice given by [Kehoe] and extinguishing any claim LensCrafters may have had toenforce the covenants not to compete." The question before us is whether the district court erred in determining that there were no genuine issues of material fact. The pivotal issue is whether the May 2001 letter was a termination letter or an offer to renew the sublease. LensCrafters asserts that genuine issues of material fact preclude summary judgment because the letter was an offer to renew and not a termination letter as Kehoe argued and the court held. We conclude that the letter was ambiguous and summary judgment was not properly granted because a genuine issue of material fact existed as to whether the letter terminated the sublease agreement or merely constituted an offer to renew.

The contract dispute is essentially over whether the non-compete provision in the sublease agreement continued to be enforceable against Kehoe. In reviewing the parties' actions regarding the sublease agreement that culminated with the May 2001 letter, our primary goal is "to ascertain and give effect to the intentions of the parties." Manuel Lujan Ins., Inc. v. Jordan, 100 N.M. 573, 575, 673 P.2d 1306, 1308 (1983). We are to define the rights of each party under the terms of their contract and then determine de novo whether there was ambiguity regarding the exercise of those rights. Rummel v. St. Paul Surplus Lines Ins. Co., 1997-NMSC-042, ¶ 10, 123 N.M. 767, 945 P.2d 985. "An ambiguity exists in an agreement when the parties' expressions of mutual assent lack clarity." Mark V, Inc. v. Mellekas, 114 N.M. 778, 781, 845 P.2d 1232, 1235 (1993); see Rummel, 1997-NMSC-042, ¶ 10 ("Ambiguity is present where a contract can reasonably and fairly be subject to several different interpretations."). In evaluating whether an ambiguity exists, we consider the language of the document, as well as extrinsic evidence. Rummel, 1997-NMSC-042, ¶ 10.

The enforcement of the non-competition provision depended upon whether the 1999 sublease agreement, which was extended by the parties another year through 2000, was terminated by LensCrafters' May 2001 letter, or whether it was Kehoe who chose not to renew the sublease agreement and therefore terminated the sublease agreement in June 2001. The applicable non-competition provision under Section 17C of the 1999 and 2000 sublease agreements states as follows:

(1) If this Sublease Agreement terminates because of Doctor's default or Doctor's election not to renew under Section 2C of this Sublease Agreement... for one year after this Sublease Agreement terminates Doctor shall [not compete with LensCrafters within a ten-mile radius of the Winrock Center location].

Section 2C of the sublease agreements states:

(1) Provided that Doctor is not in default under this or any other written agreement with LensCrafters, this Sublease Agreement shall be renewed for successive three (3) year terms if Doctor gives LensCrafters written notice at least 120 days prior to the end of the then current term of Doctor's intent to renew; provided, however, such notice shall be superseded if LensCrafters notifies Doctor in writing at least 120 days prior to the end of such term of its intention to terminate this Sublease Agreement at the end of theterm. In the event of such notice from LensCrafters, the Sublease Agreement shall terminate at the end of the term.

(2) Any renewal shall be on LensCrafters' then current form or term of sublease agreement which must be executed by Doctor not less than [sixty] days prior to the end of the expiring term or Doctor will be deemed to have elected not to renew under this Section.

The May 2001 letter accompanying the proposed sublease agreement stated in part:

LensCrafters is offering you a renewal under its new current form of Sublease Agreement. According to our records, the term for your Winrock Center, Albuquerque, NM location expires September 30, 2001. This letter serves as notice of non-renewal of the Sublease Agreement dated October 1, 1999. However, as already mentioned, LensCrafters is offering its new standard Sublease Agreement if you wish to continue the subleasing relationship.

If you wish to continue your relationship with us, please review and sign each of the enclosed Sublease Agreements and this letter, where appropriate....After signature by our corporate representatives, we will return an executed Sublease Agreement to you for your records.

....

ACKNOWLEDGMENT

I acknowledge the September 30, 2001, termination of the Sublease Agreement dated October 1, 1999, by and between Dennis Kehoe, O.D. and LensCrafters, Inc.

Dennis Kehoe, O.D.

The district court determined that the May 2001 letter from LensCrafters terminated the existing sublease agreement under Section 2C(1) and, thus, preventedand superseded any subsequent effort by Kehoe to exercise his intent to renew the sublease. LensCrafters argues that the district court erred in its conclusion because at the very least there exist genuine issues of material fact as to the purpose and effect of the letter, arguing that Kehoe knew that LensCrafters "intended to offer him a renewal" based on the language of the letter and on the...