Omni-Combined W.E., LLC v. 20/20 Communications, Inc.
| Decision Date | 18 May 2012 |
| Docket Number | PB 10-2530 |
| Parties | OMNI-COMBINED W.E., LLC v. 20/20 COMMUNICATIONS, INC. |
| Court | Rhode Island Superior Court |
DECISION
Before the Court is Defendant 20/20 Communications, Inc.'s (20/20 Communications) Motion for Summary Judgment on the Issue of Damages, as well as Plaintiff Omni-Combined W.E LLC's (Omni) Motion for Summary Judgment, both pursuant to Super. R. Civ. P. 56. At the center of this litigation is the disputed termination of a commercial lease between Omni the Landlord, and 20/20 Communications, the Tenant. 20/20 Communications moves the Court to grant summary judgment on the issue of damages, arguing that an acceleration clause contained in the lease is unenforceable by law. In Omni's motion, it requests the Court to grant summary judgment in its favor on its breach of contract claim.
On January 12, 2009, 20/20 Communications entered into a written commercial lease agreement (Lease) with Omni for the rental of office space owned by Omni and located at 220 West Exchange Street, Suite 202, in Providence, Rhode Island. See Pl. Omni-Combined W.E., LLC's Mot. for Summ. J. Against Def 20/20 Communications, Inc. (Pl.'s Mot. for Summ. J.) Ex. 1 (Lease). The Lease set a term of three years, beginning February 1, 2009 and ending January 31, 2012. Id. Pursuant to the Lease, Tenant[1] was to pay monthly rent and additional rent—such as common area expenses, utilities, and other assessments. See id. The rent was due "in equal monthly installments, in advance, on the first day of each calendar month . . . ." Id. at § 1.4. In the event Tenant failed to timely pay rent, the Tenant could be subject to a late charge equal to ten percent (10%) of the total unpaid amount. Id. at § 1.6.
Among its terms, the Lease contained an Early Termination provision, negotiated by the parties to permit the Tenant to terminate the Lease prior to its expiration date under certain conditions. See id. at § 1.3; Jason Gross Affidavit ¶ 2, Jan. 27, 2011. The section provides:
(Lease § 1.3.)
The conditions include written notice accompanied by a check for an amount determined by the number of days remaining in the lease term. See id. Notice, as required by the lease, ". . . shall be hand delivered or sent by certified mail, return receipt requested . . . ." (Lease § 7.2.)
Additionally, although the Tenant has the option of Early Termination if compliant with the set conditions, the Tenant's right to Early Termination becomes "null and void" if there is default under any material term of the Lease. (Lease § 1.3.) One term of the Lease specifically provides that "if Tenant shall abandon or vacate the Leased Premises . . . then . . . Tenant shall be in default of this Lease." (Lease § 6.1(a).) Upon such default, the "Landlord shall then and at any time thereafter be entitled to immediate possession of the Leased Premises . . . ." (Lease § 6.1(b).) Further, the Lease includes a rent acceleration provision, stating:
"Landlord shall immediately be entitled to recover from Tenant, and Tenant shall forthwith pay Landlord as compensation . . . any unpaid rent, or other payments called for hereunder accrued to such date, a sum equal to the amount of all payments called for hereunder to be paid by Tenant for the remainder of the Lease Term." Id.
Further, "[i]n the event of Tenant's default hereunder, Landlord shall be entitled to recover from Tenant the amount of any attorneys' fees, costs, and expenses reasonably incurred by Landlord in enforcing its rights and remedies hereunder." (Lease § 6.3.)
Accordingly, both sections 6.1 and 7.4 provide so-called acceleration clauses, purportedly entitling the Landlord to recover all rent that would be due under the Lease in the event of a breach by the Tenant.
In September or October of 2009, 20/20 Communications attempted to exercise its right to Early Termination of the Lease, to be effective April 1, 2010. (Gross Aff ¶ 4.) 20/20 Communications asked Omni what the actual amount of the termination fee would be, allegedly because 20/20 Communications had difficulty calculating the amount from the formula set forth in the Lease. See id at ¶¶ 5-6; Lease § 1.3. Omni never responded to inform 20/20 Communications how much it owed for the termination fee. (Gross Aff ¶ 9.)
However, 20/20 Communications vacated the premises and discontinued its operations there as of December 21, 2009.[3] See Pl.'s Mot. for Summ. J. Ex. 4 (Def's Resp. to Pl.'s First Req. for Admis.) at ¶ 113, Ex. 5 at ¶ 12. 20/20 Communications ceased making rent or other payments as of March 1, 2010, last paying rent for the month of March. See Dominic Shelzi Affidavit ¶ 11, Jan. 31, 2011.
20/20 Communications cannot prove that it sent notice of Early Termination to Omni by either hand delivery or certified mail, return receipt requested.[4] See Pl.'s Mot. for Summ. J. Ex. 3 (Jason Gross Dep., Aug. 5, 2010) at 34:6-18, 79:16-21. Furthermore, 20/20 admits it never sent notice accompanied by a check for the termination fee. See id at Ex. 4 (Def's Resp. to Pl.'s First Req. for Admis.) at ¶¶ 106-08, Ex. 3 (Gross Dep.) at 30:19-31:20, 60:14-25. It also appears that after vacating the premises but before the expiration of the term of the Lease, 20/20 occupied office space in Quincy, Massachusetts, within a forty-mile radius of the leased premises. See id at Ex. 4 (Def's Resp. to Pl.'s First Req. for Admis.) at ¶¶ 9-10.
On March 9, 2010, Omni sent written notice of default to 20/20 Communications, demanding, among other things, accelerated rent. (Pl.'s Mot. for Summ. J. Ex. 12.) 20/20 Communications has not made any payments to Omni since March, 2010, when Omni declared default and demanded accelerated rent. See Shelzi Aff ¶ 11. Omni filed the instant action on April 28, 2010 for breach of contract and breach of good faith and fair dealing. Omni claims 20/20 Communications breached the Lease by failing to effectively exercise its Early Termination right, and subsequently, defaulted on the Lease by vacating the premises and by failing to pay rent due.
20/20 Communications moved for summary judgment on the issue of damages, claiming the acceleration clause in the Lease is punitive and legally unenforceable. Omni objected to 20/20 Communications' motion, and Omni moved for summary judgment on Count I of its Complaint, alleging 20/20 Communications breached the Lease contract. 20/20 Communications objected to Omni's motion. Hearing was held on the cross-motions for summary judgment and this Court took the matter under advisement.
Summary judgment is proper when "no genuine issue of material fact is evident from the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, and the motion justice finds that the moving party is entitled to prevail as a matter of law." Smiler v. Napolitano, 911 A.2d 1035, 1038 (R.I. 2006) (quoting Rule 56(c)). On consideration of a motion for summary judgment, this Court must draw "all reasonable inferences in the light most favorable to the nonmoving party." Hill v. Nat'l Grid, 11 A.3d 110 113 (R.I. 2011) (quoting Fiorenzano v. Lima, 982 A.2d 585, 589 (R.I. 2009)). However, the burden lies on the nonmoving party to "prove the existence of a disputed issue of material fact by competent evidence, " rather than resting on the pleadings or on mere legal opinions and conclusions. Hill, 11 A.3d at 113. The opposing party has "an affirmative duty to set forth specific facts showing that there is a genuine issue of material fact." Lynch v. Spirit Rent-a-Car, Inc., 965 A.2d 417, 424 (R.I. 2009) (quoting Providence Journal Co. v. Convention Ctr. Auth., 774 A.2d 40, 46 (R.I. 2001).
Where it is concluded "that...
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