Lindner v. Meadow Gold Dairies, Inc.

• Citation: 515 F.Supp.2d 1141
• Decision Date: 11 May 2007
• Docket Number: No. 06-00394 JMS/LEK.,06-00394 JMS/LEK.
• Parties: Jeffrey S. LINDNER, Plaintiff, v. MEADOW GOLD DAIRIES, INC., Defendant, Third-Party Plaintiff, and Counter Defendant, v. Southern Food Group, Inc., Third-Party Defendant and Counter Claimant.
• Court: U.S. District Court — District of Hawaii

515 F.Supp.2d 1141

Jeffrey S. LINDNER, Plaintiff, v. MEADOW GOLD DAIRIES, INC., Defendant, Third-Party Plaintiff, and Counter Defendant, v. Southern Food Group, Inc., Third-Party Defendant and Counter Claimant.

No. 06-00394 JMS/LEK.

United States District Court, D. Hawai`i.

May 11, 2007.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Kenneth R. Kupchak, Mark M. Murakami, Damon Key Leong Kupchak Hastert, Honolulu, HI, for Plaintiff.

Jonathan A. Kobayashi, Kobayashi Sugita & Goda, Honolulu, HI, for Defendant, Third-Party Plaintiff, and Counter Defendant.

Bert T. Kobayashi, Jr., Joseph A. Stewart, Kobayashi Sugita & Goda, Honolulu, HI, Third-Party Plaintiff.

Jerry C. Ling, Cades Schutte, Honolulu, HI, for Third-Party Defendant and Counter Claimant.

ORDER GRANTING IN PART AND DENYING IN PART THIRD-PARTY DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND ORDERING ARBITRATION FOR REMAINING MINIMUM RENT AND PERCENTAGE RENT CLAIMS

J. MICHAEL SEABRIGHT, District Judge.

I. INTRODUCTION

Third-Party Defendant Southern Foods Group, L.P. ("SFG") moves the court for partial summary judgment as to the minimum rent and percentage rent claims asserted in Counts I and II of Plaintiff Jeffrey Lindner's ("Lindner") Complaint and Counts I and II of Defendant and Third-Party Plaintiff Meadow Gold Dairies, Inc.'s ("Meadow Gold") Third-Party Complaint. The court GRANTS IN PART AND DENIES IN PART SFG's Motion for Partial Summary Judgment finding that some, but not all, of the claims for additional minimum and percentage rent are time-barred by Hawaii Revised Statutes ("HRS") 657-1(1). The court GRANTS SFG's Motion to Compel Arbitration as to the remaining additional minimum and percentage rent claims.

II. BACKGROUND

A. Factual Background

Lindner is the fee simple owner of real property in Moloa`a on the island of Kauai ("Property"). Amfac Property Development Corporation ("Amfac") formerly owned the Property. On October 1, 1988, Amfac entered into a lease with Meadow Gold ("Lease") by which Amfac leased a portion of the Property ("Leased Parcel") to Meadow Gold for the purposes of operating a dairy farm. Amfac assigned its interests under the Lease to Lindner effective June 21, 1996.¹

The Lease covered a ten-year period with the Lessee reserving the option to renew for up to three consecutive five-year periods, or a total of up to fifteen years.² The Lessee also had an option to terminate the Lease prior to its expiration by serving written notice and tendering a lump sum cash payment "representing the present value ... of the minimum rent due for the remainder of the term of the Lease, but not more than the present value of five (5) years of rent."³

The Lease required the Lessee to pay two types of rent: (1) minimum rent⁴ which was due in quarterly installments and (2) percentage rent⁵ which was due within 30 days after the end of each calendar year. Under the terms of the Lease, "[i]n the event the parties cannot agree upon the minimum rent and percentage rent for the final three (3) five (5) year renewal terms, or an alternative method of establishing the milk price for calculating gross revenues, the matter shall be submitted to arbitration...."⁶ Lease Art. II § 3.

On May 28, 1997, Meadow Gold exercised its option on all three renewal terms under Article I § 3, thereby extending the Lease until September 30, 2013. See SFG's Mot. for Partial Summ. J. Exs. B & C.⁷ A little over three months later, on September 4, 1997, Meadow Gold assigned its interests and obligations under the Lease to SFG ("1997 Assignment and Assumption Agreement"). See Meadow Gold's Third-Party Compl. Ex. A. Under the 1997 Assignment and Assumption Agreement, SFG agreed to "assume[] all of [Meadow Gold's] obligations under each Lease arising on or after the effective date [September 4, 1997]...." Id. Nonetheless, the Lease provided that "[i]n the event of an assignment ... Lessee shall not be released from any liability or obligations under the Lease, Lessor reserving all of its rights and remedies against Lessee hereunder." Lease Art. IV § (9).

From October 1, 1998 (the expiration date of the original ten-year Lease term) to December 31, 2000, Lindner and SFG engaged in rent negotiations to determine the fair market value of the minimum rent.⁸ During this time, SFG continued to pay $13,000 per year (for a total of $29,250), the amount set forth by Article II § 1(a) as minimum rent for the pendency of the original ten year term. Lindner alleges that this amount did not represent the fair market rental value of the Leased Parcel. SFG also continued to make percentage rent payments, but Lindner alleges that such payments were not based on the fair market value of the property as required by Article II § 2. The parties failed to reach an agreement regarding both the minimum rent and the percentage rent for the renewal terms. Neither party submitted the matter to arbitration pursuant to Article II § 3.

B. Procedural Background

Lindner filed suit against Meadow Gold (but not SFG) on July 19, 2006. Count I seeks additional minimum rent based on the fair market value of the Leased Parcel for the period from October 1, 1998 to December 31, 2000 and Count II seeks additional percentage rent from October 1, 1998 to December 31, 2000. Meadow Gold answered Lindner's Complaint on November 16, 2006. On December 1, 2006, Meadow Gold filed a Third-Party Complaint impleading SFG based on the 1997 Assignment and Assumption Agreement. On January 8, 2007, SFG answered Meadow Gold's Third-Party Complaint and filed a Counterclaim against Meadow Gold.

On February 7, 2007, SFG filed a Motion for Partial Summary Judgment as to Counts I and II of Lindner's Complaint and Counts I and II of Meadow Gold's Third-Party Complaint, and, in the alternative, a Motion to Compel Arbitration for any remaining claims for additional minimum or percentage rent. Meadow Gold joined SFG's Motion for Partial Summary Judgment as to Counts I and II of Lindner's Complaint and, in the alternative, to Compel Arbitration. Lindner filed his Opposition on March 22, 2007.⁹ SFG filed its Reply on March 29, 2007. The court heard oral argument from Lindner, Meadow Gold, and SFG on April 9, 2007.

III. STANDARDS OF REVIEW

A. Summary Judgment Standard

A party is entitled to summary judgment where there is no genuine issue of material fact. Fed.R.Civ.P. 56(c). When reviewing a motion for summary judgment, the court construes the evidence — and any dispute regarding the existence of facts — in favor of the party opposing the motion. Snead v. Metro. Prop. & Cas. Ins. Co., 237 F.3d 1080, 1086 (9th Cir. 2001). "One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Thus, summary judgment will be mandated if the nonmoving party "`fails to make a showing sufficient to establish the existence of an element essential to that party's case.'" Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir.1999) (quoting Celotex, 477 U.S. at 322, 106 S.Ct. 2548).

B. Choice of Law in Diversity Cases Brought Under 28 U.S.C. § 1332

The court has diversity jurisdiction over Lindner's claims under 28 U.S.C. § 1332. Under Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), federal courts sitting in diversity cases apply federal procedural rules and substantive state law. "In the absence of controlling state law, a `federal court sitting in diversity must use its own best judgment in predicting how the state's highest court would decide the case.'" Tirona v. State Farm Mut. Auto. Ins. Co., 812 F.Supp. 1083, 1085 (D.Haw.1993) (citations omitted).

IV. ANALYSIS

A. Third — Party Defendant Southern Food Group May Raise a Statute of Limitations Defense to Defeat Plaintiff Lindner's Complaint Under Federal Rule of Civil Procedure 14(a)

Lindner first argues that SFG's Motion for Partial Summary Judgment is procedurally flawed, claiming that under Hawaii law, the statute of limitations defense may be raised only by Meadow Gold. The court rejects Lindner's argument and finds that under Federal Rule of Civil Procedure 14(a), SFG may properly move the court for summary judgment as to Lindner's claims against. Meadow Gold on the basis that Lindner's claims are untimely.

Where a question is directly covered by a Federal Rule of Civil Procedure, a federal court sitting in diversity jurisdiction must apply the terms of the Rule, even if the matter is arguably "substantive" under Erie. See Knievel v, ESPN, 393 F.3d 1068, 1073 (9th Cir.2005) ("[F]ederal courts sitting in diversity must apply the Federal Rules of Civil Procedure."). As the Supreme Court directed,

When a situation is covered by one of the Federal Rules, the question facing the court is a far cry from the typical, relatively unguided Erie Choice: the court has been instructed to apply the Federal Rule, and can refuse to do so only if the Advisory Committee, this Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions.

Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).

The text of Rule 14(a) is "sufficiently broad to control the issue" before the court and as such "covers the point in dispute." See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 26-27, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988); Burlington N. R.R. Co. v. Woods, 480 U.S. 1, 4-5, 107 S.Ct. 967, 94 L.Ed.2d 1 (1987); Walker v. Armco Steel Corp., 446 U.S. 740, 749-50, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980). Under Rule 14(a), a "third-party defendant may assert against the plaintiff any defenses which the third-party plaintiff has to the plaintiff's claim." (Emphasis added.) The rationale underlying Rule 14(a)'s provision is two fold: First, Rule 14(a) helps to reduce the risk of...