St. Charles Ventures, L.L.C v. Albertsons, Inc.
| Decision Date | 25 February 2003 |
| Docket Number | No. Civ.A. 02-2839.,Civ.A. 02-2839. |
| Parties | ST. CHARLES VENTURES, L.L.C., v. ALBERTSONS, INC. |
| Court | U.S. District Court — Eastern District of Louisiana |
Randall A. Smith, Owen Bennett St. Amant, Smith & Fawer, LLP, New Orleans, LA, for Plaintiff.
William R. D'Armond, Glenn Michael Farnet, Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, LLP, Baton Rouge, LA, Curtis Allen Hennesy, Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, LLP, New Orleans, LA, for Defendant.
ORDER AND REASONS
Before the Court is a Motion for Summary Judgment (Doc. 4) filed by St. Charles Ventures, L.L.C.("SCV). SCV seeks summary judgment against defendant, Albertson's, Inc. ("Albertson's"),1 on Albertson's counterclaim which seeks rescission of the lease which is the subject of the instant suit. Having reviewed the pleadings, memoranda, exhibits, and the relevant law, the Court finds that such motion must be granted and the counterclaim dismissed.
SCV is a limited liability corporation organized under the laws of the State of Louisiana with its principal place of business in St. Charles Parish; it is engaged in the business of real estate development, in particular grocery store properties, in Louisiana. (Petition, ¶¶ 1 and 4). Albertson's is a corporation organized under the laws of the State of Delaware, authorized to do and doing business in the State of Louisiana, with its principal place of business in Boise, Idaho. (Petition, ¶ 4).2 SCV contends that prior to and through 1997, SCV began the process of purchasing properties located in an area known as Central City in New Orleans. Its intentions were to create an area of property (the "Property") for the development of a grocery store to serve the needs of residents of Central City and surrounding areas. This process was started allegedly at the request of Save-A-Center. (Petition, ¶ 6). On December 12, 1997, SCV was contacted by Bob Rissing, an Albertson's executive, regarding Albertson's developing one of its stores on the Property. Such discussions culminated in SCV and Albertson's entering into a Contract to Lease on April 10, 1998, which contemplated the development of approximately 253,450 square feet of land in Central City into an Albertson's supermarket. (Petition, ¶ 8).
The effort to consolidate the area originally contemplated was allegedly thwarted by certain Save-a-Center representatives who purchased land contained in the original area in order to block the development. SCV contends that it then found a new development parcel, one block away at the corner of Felicity and Carondelet Streets. SCV eventually purchased all of the various titles and structures and development on the new parcel was unanimously approved by the New Orleans City Council in October, 1999. (Petition, ¶ 9).
On or about December 22, 1999, SCV and Albertson's executed a "Shopping Center Lease" (the "Lease"). The Lease provides for Albertson's to pay annual rent to SCV in the amount of $600,000 per year (Lease, § 3.1(i) at p. 3(Exhibit "B" to the Petition)) from the date of the Lease execution to the "Building Transfer Date", a date contemplated in the lease where, following the issuance of a Notice of Completion of the construction of the grocery store, SCV agreed to purchase from Albertson's the building and site improvements for the sum of $2,500,000. After the Building Transfer Date, SCV was to receive $980,000 in annual rent. (Petition, 110). The term of the Primary Term of the lease was to be 25 years. (Petition, H 11). Albertson's agreed to build and operate a grocery store of approximately 68,000 square feet on the leased property. The lease was amended four times. (Albertson's Counterclaim, ¶ 11).
The first amendment on May 26, 2000, essentially extended the deadline to clear all vertical structures from August 1, 2000, to October 10, 2000, as well as the period for Albertson's to pay the annual $600,000.00 in rent. (Petition, ¶ 17-18). The second amendment on June 15, 2000, extended the same deadlines to October 25, 2000. The third amendment on June 1, 2001, made some substantive changes to the lease dealing with the date on which SCV could purchase the building and site improvements and receive rent escalation-that being on or after December 21, 2001 and prior to the issuance of a Notice of Completion. (Petition, ¶ 20).
On July 21, 2001, Historic Renovations, Inc. announced the redevelopment of the St. Thomas Public Housing site in the Lower Garden District which included the construction of a Super Wal-Mart. (Preservation Resource Center Position Paper on Proposed St. Thomas Redevelopment ProjecVSuper Wal-Mart, September 5, 2001). This project was met with substantial public debate and continued litigation because of the financing and public moneys to be used in its development.
On August 29, 2001, Albertson's received final approval from the City of New Orleans for the building of its grocery store. (Petition, ¶ 22). Albertson's own press release notes that "plans were submitted after eighteen months of research, community surveys and the development of a unique concept to ensure the new store reflects the history and fabric of Central City."' The project was to be put out to bid on September 24, 2001. (Petition, ¶ 22).
On December 21, 2001, SCV placed $2,500,000 in an escrow account allegedly triggering the $980,000.00 a year rent. On February 14, 2002, a Fourth Amendment to the Lease was executed. It gave Albertson's until August 28, 2002, to commence construction of the 65,287 square foot store. SCV alleges that this amendment was requested by Albertson's to permit it to "value engineer" the proposed design of the grocery store, in order to make it more affordable in terms of costs of construction. (Petition, ¶ 24).
On April 18, 2002, the City Council approved a resolution allowing the construction of a Wal-Mart Supercenter Store. Then Mayor Morial approved the measure on April 24, 2002.
A series of letters and notifications between SCV and Albertson's started about April 24, 2002. SCV sought to close its permanent financing for SCVs commitments under the Lease on July 15, 2002. On July 3, 2002, Albertson's sent a letter to SCV, via certified mail, informing SCV that the Lease "has been terminated due to a failure of cause under Louisiana law." (Exhibit K to Motion for Summary Judgment). In that letter, counsel stated:
As you know, Albertson's selected the Premises as a site for a grocery store because it was a site that the Landlord represented to be a market area protected from competition. Albertson's looks for sites that are free from competition because the stores are able to operate profitably and Albertson's capital investment would be protected. In fact, because there were no other competitors in the trade area and it was represented that no competitors could enter the market, Albertson's agreed to pay a premium in rent for the Premises. The Premises are no longer protected from competition. Clearly, the entry of Walmart into the market area surrounding the Premises has destroyed Albertson's motive for leasing the Premises and made it useless for Albertson's to locate and build a profitable store on the Premises. Therefore, there is a failure of cause that vitiates the contract.
Id. In that letter, Albertson's intention of filing a lawsuit to obtain a declaratory judgment rescinding the lease is noted as well.
The instant lawsuit was filed by SCV in Civil District Court for the Parish of Orleans on or about July 16, 2002. In that petition, SCV seeks (1) specific performance, or in the alternative alleges (2) anticipatory breach of contract, (3) bad faith anticipatory breach of contract, (4) detrimental reliance, and (5) violation of the Louisiana Unfair Trade Practices Act. The matter was then removed to this Court based on its diversity jurisdiction on September 16, 2002, Albertson's having been served with the action on August 19, 2002. (Doc. 1, Notice of Removal).
On September 20, 2002, Albertson's filed its Answer and Counterclaim. (Doc. 2) It seeks rescission of the Lease based on (1) failure of cause under La. Civ.Code arts. 1966 and 1967; (2) error of cause under La. Civ.Code arts.1948-1950; and (3) impossibility of performance under La. Civ. Code arts. 1873-1878. It is this counterclaim that SCV seeks to dismiss by summary judgment. The basis of Albertson's claim for rescission is that it entered into the subject contract in the belief of the "improbability of future entry into the market area" (Counterclaim, ¶ VI) (emphasis added) by a competitor such as a Walmart Supercenter. As such, Albertson's maintains that the location was "reasonably insulated" from competition. (Counterclaim, ¶ IV) (emphasis added). Albertson's thus contends that at the time the lease was executed, (Counterclaim, ¶ VIII) (emphasis added). Based on the three Louisiana law doctrines cited above, Albertson's contends that based on its subjective belief with respect to possible competition, it is entitled to rescission of the Lease.
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). "The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate...
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