Whole Foods Mkt. Grp. v. Wical Ltd.
| Decision Date | 22 October 2019 |
| Docket Number | Civil Action No. 1:17-cv-01079-RCL |
| Parties | WHOLE FOODS MARKET GROUP, INC., Plaintiff, v. WICAL LIMITED PARTNERSHIP, Defendant. |
| Court | U.S. District Court — District of Columbia |
This lawsuit involves a contractual dispute regarding the lease agreement between landlord Wical Limited Partnership ("Wical") and tenant Whole Foods Market Group, Inc. ("Whole Foods"). Plaintiff Whole Foods has moved for partial summary judgment. Defendant Wical has moved for summary judgment on all counts. The Court has subject matter jurisdiction over this case based on diversity under 28 U.S.C. § 1332(a)(1). For the reasons set forth below, the Court finds that it would be inappropriate to grant summary judgment for either party and will therefore deny both motions.
Whole Foods began operating a grocery store at 2323 Wisconsin Ave. NW, Washington, D.C. 20007 more than twenty years ago. Wical owns the property and entered into a lease agreement with Whole Foods on March 10, 1994. Beginning in 2015, Whole Foods started noticing indications that rodents were present in the store. Plaintiff called upon its pest company, Rentokil-Steritch ("Steritech"), to escalate its services. In January of 2017, the D.C. Department of Health inspected the store and found evidence of rodents, so Whole Foods continued working with Steritech to try to eradicate the infestation. The Department of Health's February 8, 2017 inspection found no rodents, but its inspection the following day did show evidence of rodents in the store, so the Department of Health ordered a summary suspension. Whole Foods complied with the closure order and called in pest control services to clean the store and treat the rodent problem. The next day, Whole Foods was able to reopen the store. Following the February 28, 2017 inspection of the insulated drop ceiling in the top level of the underground garage (which lies below the entire sales floor), it became clear that the drop ceiling contained significant rodent activity and harborage and was exacerbating the store's rodent problem. The Department of Health conducted another inspection on March 13, 2017 and found evidence of rodents. Whole Foods closed the store for three days to further investigate and treat the infestation. Its efforts, however, did not fully resolve the store's rodent problem.
Whole Foods decided to demolish the suspended ceiling and the interior of the store and began planning to rebuild and upgrade the interior. Whole Foods met with Wical on March 23, 2017 to discuss the pest problem and rebuilding. Wical allegedly advised Whole Foods that it was in default of the lease because the store would be closed more than sixty days as prohibited by Paragraph 4(G) and offered Whole Foods the opportunity to sign a new lease with higher rent (including a new percentage rent provision) and a twenty-year fixed term. At the time, Whole Foods was one year into its first of four five-year options.
In April of 2017, Whole Foods informed Wical that it would be delayed in re-opening the store as a result of the demolition but asserted that the delayed reopening was excused under the force majeure clause in Paragraph 30(A) of the lease. Wical replied by declaring its belief that Paragraph 30(A) did not apply; it demanded that the store reopen by May 12, 2017 in accordance with the lease's cure provision. Whole Foods did not reopen the store by May 12, 2017, so on May 15, 2017, Wical issued a Notice of Default. Whole Foods cannot rebuild the store without apermit, as the District of Columbia requires the landlord's consent to the proposed plans before it will issue a permit. Whole Foods requested Wical's permission on May 23, 2017. As of this time, Wical has not given its consent.
In order for one party's performance on a contract to be excused, the other party must have committed a material breach. In the District of Columbia, a court must consider the following factors when determining whether a breach was material:
Howard Town Center Developer, LLC v. Howard Univ., 278 F. Supp. 3d 333, 394 (D.D.C. Aug. 14, 2017) (citing Greyhound Lines, Inc. v. Bender, 595 F. Supp. 1209, 1224 (D.D.C. 1984) (quoting Restatement (Second) of Contracts § 241)). As explained below, it would be premature at this stage of the litigation to find that either party has breached the lease, so any determination of materiality must wait until trial. It is, however, still important to remember that a breach alone is insufficient to excuse further performance—that breach must also be material in nature before the other party may refuse to perform.
Plaintiff claims that defendant materially breached the lease in six ways: (i) by claiming that the lease was in default prior to the termination of sixty days; (ii) by demanding a new leasewith higher rent and a longer term; (iii) by refusing to recognize Whole Foods' notice of excused delay under Paragraph 30(A) of the lease; (iv) by issuing an unlawful and pretextual Notice of Default on May 15, 2017; (v) by threatening to terminate the lease; and (vi) by unreasonably withholding its consent to Whole Foods' permit application to the District of Columbia for reconstruction of the interior of the store in violation of Paragraphs 7(A) and 21 of the lease, thus depriving Whole Foods of its use and enjoyment of the property. All six of Whole Foods' allegations rest on the premise that any previous breach on its part is excused under Paragraph 30(A)'s force majeure clause. If any prior material breach on Whole Foods' part is not excused, then any alleged breach on Wical's part is irrelevant.
Whole Foods alleges that it has been harmed by continuing to pay rent despite being unable to use the store. Whole Foods also claims that it has incurred substantial property upkeep costs to maintain the property in its semi-demolished state, as well as the cost of repairs and improvements performed with the understanding that the lease would continue. Additionally, Whole Foods believes that it is entitled to lost profits resulting from Wical's refusal to consent to the permit application as well as damages for the harm to its goodwill and reputation in the community. Finally, Whole Foods seeks repayment of attorneys' fees incurred throughout this litigation.
Defendant, in turn, alleges that plaintiff is actually the one who materially breached the lease. Wical cites six different ways in which it believes Whole Foods breached the lease: (i) by failing to reopen the store after closing it for sixty days; (ii) by failing to keep the store clean and free from pests; (iii) by failing to comply with all laws regarding the cleanliness, safety, and operation of the store; (iv) by failing to provide Wical with any plans prior to demolishing the interior of the store; (v) by failing to perform its maintenance obligations; and (vi) by sublettingthe parking garage to the public without Wical's consent. Wical contends that because of these six material breaches, Wical was no longer required to perform under the lease, was not required to consent to the permit, and is entitled to judgment as a matter of law on all four counts.
Wical's first, second, third, and fifth allegations raise the same question that all of Whole Foods' allegations raise: Was the infestation an "act of God" under the force majeure clause, thereby excusing any breach on Whole Foods' part? As explained below, the Court cannot grant summary judgment on that issue, and those allegations should be determined at trial. Wical's fourth allegation simply cannot be answered until after the question of whether the infestation was an "act of God" is answered; if the infestation had never occurred, there would have been no need to renovate and make either structural or non-structural changes. Therefore, if the infestation was Whole Foods' fault, Whole Foods breached the lease before making any interior changes or requesting Wical's consent for the permit, making any notice of or consent to renovations a non-issue. Therefore, it is improper to rule on Wical's fourth allegation—that Whole Foods failed to provide Wical with any plans prior to demolishing the interior of the store—before ruling on whether the infestation was an "act of God." Similarly, it would be inappropriate to make any determinations at this time about whether Wical violated the lease by withholding its consent for the permit application, as its refusal is irrelevant if Whole Foods had already breached the lease. Therefore, the Court will not discuss Wical's fourth allegation any further. Finally, Whole Foods vehemently disputes Wical's sixth allegation, making summary judgment on that issue inappropriate; this sixth allegation is explored in more detail below.
The Court may only grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact" and that "the movant is entitled to judgment as a matterof law." Fed. R. Civ. P. 56. A material fact is one that "is capable of affecting the outcome of the litigation." Carter v. Urban Serv. Sys. Corp., 324 F. Supp. 3d 19, 28 (D.D.C. 2018). A...
To continue reading
Request your trial