Sunny Isle Shopping Center v. Xtra Super Food

• Decision Date: 20 December 2002
• Docket Number: No. CIV.1998-154.,CIV.1998-154.
• Citation: 237 F.Supp.2d 606
• Parties: SUNNY ISLE SHOPPING CENTER, INC., a Virgin Islands Corporation, Plaintiff, v. XTRA SUPER FOOD CENTERS, INC., d/b/a Pueblo, a Delaware Corporation, and Kmart Corporation, Defendants.
• Court: U.S. District Court — Virgin Islands

Page 606

237 F.Supp.2d 606

SUNNY ISLE SHOPPING CENTER, INC., a Virgin Islands Corporation, Plaintiff, v. XTRA SUPER FOOD CENTERS, INC., d/b/a Pueblo, a Delaware Corporation, and Kmart Corporation, Defendants.

No. CIV.1998-154.

District Court, Virgin Islands, D. St. Croix.

December 20, 2002.

A. Jeffrey Weiss, St. Thomas, VI, for plaintiff.

John K. Dema, St. Croix, VI, for defendant Pueblo.

Andrew C. Simpson, St. Croix, VI, for defendant Kmart.

MEMORANDUM

MOORE, District Judge.

Defendant Xtra Super Food Centers, Inc. ["defendant" or "Pueblo"] moves to dismiss parts of the complaint of plaintiff Sunny Isle Shopping Center, Inc. ["plaintiff" or "Sunny Isle"] and for summary judgment. Sunny Isle opposes defendant's motion. For the reasons set forth below, I will grant Pueblo's motion to dismiss Count I of Sunny Isle's complaint, but I will deny defendant's motion for summary judgment in regard to Counts II and V.¹ In addition, I will exercise my discretion to modify the scope of the area covered by the restrictive covenant.

I. FACTUAL BACKGROUND

Plaintiff owns and operates the Sunny Isle Shopping Center as well as other commercial properties on St. Croix. Defendant is a successor tenant at the shopping center, where it operates a supermarket. Originally, Sunny Isle entered into a lease with the Grand Union Company ["Grand Union"] on or about October 17, 1969 to operate a supermarket at the shopping center.² The lease negotiated with Grand Union contained a restrictive covenant at paragraph 10, which provided that

[d]uring the term of this lease and any extension thereof the Landlord shall not use nor permit to be used any other part of the shopping center or any other property directly or indirectly owned or controlled by the Landlord within a radius of five miles of the shopping center for the sale of food for consumption off premises, except (1) bakery, kiosks, hamburger stands, and snack bars located within the shopping center .... If this covenant be violated, the Tenant, without liability of forfeiture of its terms, may withhold payment of any or all installments of rent accruing during such violation. The total amount of such rents thus withheld shall be deemed to be liquidated damages ....

On November 30, 1995, Grand Union assigned its lease to Pueblo with the consent of Sunny Isle. That same day the terms of the lease, including paragraph 10, were extended until January 31, 2012.

Some time in 1997, Pueblo learned that Sunny Isle intended to lease space at the shopping center to the Kmart Corporation ["Kmart"].³ Knowing that Kmart traditionally sells groceries and believing that such conduct would violate the terms of its agreement with Sunny Isle, Pueblo notified Sunny Isle of its intent to enforce the restrictive covenant. Notwithstanding this announcement, Sunny Isle proceeded to negotiate a lease of the space to Kmart on December 4, 1997, which permitted Kmart to sell food for consumption off-premises despite Pueblo's exclusive arrangement.⁴

On June 17, 1998, Sunny Isle filed suit in this Court for a declaration that the restrictive covenant violates the subsequently enacted Virgin Islands Antimonopoly Act (Count I), that the restrictive covenant is unenforceable (Count II), that Pueblo has waived any defenses by failing to enforce paragraph 10 before 1998 (Count III), that Pueblo is estopped from enforcing the restrictive covenant because of its failure to object to prior violations of paragraph 10 (Count IV), and that the lease's provision enabling Pueblo to withhold rent is a penalty (Count V). After Kmart began operations in September 1998, Pueblo discovered that Kmart was in fact using its store to sell groceries and began to withhold rent as provided by paragraph 10. Sunny Isle responded on September 10th by filing a notice to evict Pueblo for failure to pay rent. Pueblo immediately sought a temporary restraining order to prevent its eviction, which this Court granted on October 8, 1999. Sunny Isle and Pueblo later stipulated to several extensions of the temporary restraining order through November 15, 2000.

During the pendency of this suit, Kmart voluntarily agreed to cease selling most of its food products. Upon learning that Kmart had ceased selling a number of the prohibited items, Pueblo began to pay rent again from November of 2000 until August of 2002, at which time it now argues that Kmart has continued to violate the terms of the restrictive covenant by selling snack items and beverages. Sunny Isle disputes Pueblo's interpretation of paragraph 10 of the lease on whether these items violated the prohibition on the sale of foods for consumption off-premises and responded on August 7, 2002, by giving Pueblo another notice to quit the leased premises for failure to pay rent. Pueblo thereafter moved to enforce the October 9, 1999 temporary restraining order halting any eviction. While that motion was pending, Sunny Isle filed an action for forcible entry and detainer in the Territorial Court to evict Pueblo, which Pueblo has removed to this Court. As further proceedings are pending in that separate action, Pueblo's motion to enforce the October 9, 1999 temporary restraining order is not ripe for decision. This Court has diversity jurisdiction under section 22(a) of the Revised Organic Act of 1954⁵ and 28 U.S.C. § 1332.

II. DISCUSSION

A. Sunny Isle Has No Standing to Bring Claims Under the Virgin Islands Antimonopoly Act

Pueblo moves to dismiss Count I of plaintiff's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that Sunny Isle lacks standing to sue under the Virgin Islands Antimonopoly Act, 11 V.I.C. §§ 1501-1518. In considering defendant's motion to dismiss under Rule 12(b)(6), the Court "may dismiss [the] complaint if it appears certain the plaintiff cannot prove any set of facts in support of its claims which would entitle it to relief." See Bostic v. AT & T of the Virgin Islands, 166 F.Supp.2d 350, 354 (D.Vi.2001) (internal quotations omitted); see also Julien v. Committee of Bar Examiners, 34 V.I. 281, 286, 923 F.Supp. 707, 713 (D.Vi.1996); FED. R. CIV. P. 12(b)(6). The Court accepts as true all well-pled factual allegations, drawing all reasonable inferences in the plaintiff's favor. see Bostic, 166 F.Supp.2d at 354; Julien, 34 V.I. at 286-87, 923 F.Supp. at 713.

The viability of Count I centers on whether Sunny Isle has standing to bring an antitrust claim against Pueblo. Pueblo argues that Sunny Isle has no standing because it is not a competitor of Pueblo and, thus, its injury is not the type of injury antitrust laws were designed to prevent. See 11 V.I.C. § 1503(1) ("Every person shall be deemed to have committed a violation of this chapter who shall: Make any contract with, or engage in any combination or conspiracy with, any other person who is, or but for a prior agreement would be, a competitor of such person."); see also Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 113, 107 S.Ct. 484, 93 L.Ed.2d 427 (1996) ("[A] private plaintiff must allege threatened loss or damage `of the type the antitrust laws were designed to prevent and that flows from that which makes defendants' acts unlawful."'). Sunny Isle counters that this competitor requirement is only limited to section 1503(1) and that its injury is covered by section 1503(2), which gives it standing to pursue this antitrust claim. See 11 V.I.C. § 1503(2) ("Every person shall be deemed to have committed a violation of this chapter who shall: By Contract, combination, or conspiracy with one or more other persons unreasonably restrain trade or commerce."). The language of section 1503(2) on its face appears to give Sunny Isle standing to bring this action under section 1507 of the Virgin Islands Antimonopoly Act. See 11 V.I.C. § 1507(2) ("Any person who has been injured in his business or property, or is threatened with such injury, by a violation of section 1503 ... may maintain an action in the District Court for damages, or for an injunction, or both, against any person who has committed such violation."). My inquiry does not end here, however, as I must look to the interpretation of federal antitrust law to see whether federal courts would find that Sunny Isle has standing to sue. See id. § 1518 ("When the language of this chapter is the same or similar to the language of a Federal Antitrust Law, the District Court in constructing this chapter shall follow the construction given to the Federal Law by the Federal Courts."); see also Sea Air Shuttle Corp. v. Virgin Islands Port Auth., 782 F.Supp. 1070, 1077 (D.Vi. 1991) (noting the Virgin Islands Antimonopoly Law "evidences the intention that [it] be applied in a manner consistent with the Sherman Act and other federal antitrust claims."). Therefore, to decide whether Sunny Isle has standing to pursue its territorial antitrust claim, I must determine whether it would have standing to pursue its claim under federal law.

Similar to our section 1507(2), section 4 of the Clayton Act provides authority for a private antitrust cause of action in an antitrust suit. See 15 U.S.C. § 15 ("[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States ...."). Despite this broad language, the "courts have been virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation." Hawaii v. Standard Oil Co., 405 U.S. 251, 263 n. 14, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972) (collecting cases); Angelico v. Lehigh Valley Hosp., Inc., 184 F.3d 268, 274 (3d Cir.1999) ("Antitrust standing, however, is narrower than the statute's wording indicates."). Realizing that a liberal interpretation of section 4 of the Clayton Act

could afford relief to all persons whose injuries are causally related to an...