Unit 5 WK 5 Homework

Redner’s Markets, Inc. v

Joppatowne G.P. Ltd. Partnership

918 F. Supp. 2d 428 (D. Md. 2013), affirmed 594 Fed. Appx. 798 (4th Cir. 2014)

Case 14.1

The Amish Surge in Stores

Facts

Joppatowne owns and manages the Joppatowne Plaza Shopping Center in Maryland. The departure of a major tenant created a substantial vacancy in the Shop- ping Center. The vacancy attracted the attention of Brian Miller, an entrepreneur who operates a large, successful flea and farmer’s market. Miller was interested in opening a second flea market and farmer’s market at Joppatowne.

On October 21, 2009, Joppatowne entered into a 10-year lease with, JTF, LLC, Miller’s limited liability corporation. JTF leased approximately 108,000 square feet. This space is divided between the flea market (roughly 96,000 square feet) and the Amish Farmer’s Market (roughly 12,000 square feet). The two sections are physically separated by a fence that encloses the Amish Farmer’s Market.

Redner’s is a Pennsylvania corporation that operates about 40 grocery stores, with a location at the Joppatowne Plaza Shopping Center. Redner’s stores sell the type of items typically found in a grocery store or supermarket but at lower prices made possible by the company’s no-frills, food warehouse approach.

Joppatowne and Miller recognized that they were running the risk that the Amish Farmer’s Market would violate the restrictive covenant in Redner’s lease. To address this risk, Joppatowne, in a letter agreement dated October 15, 2009, agreed that “in the event of legal action based on the issue of a breach of the restrictive covenants in the Redner’s Lease,” it would defend and indemnify JTF.

Although the Amish Farmer’s Market is promoted as such, each stall is separately owned and operated. Each has its own trade name and signage. The seven stalls within the enclosure are Dutch Delights, Dutch Pantry Fudge, Kreative Kitchen, Lapp’s Fresh Meat, King’s Cheese & Deli, Beiler’s BBQ, and Beiler’s Baked Goods. The eighth stall, All Fresh Seafood & Produce, is located outside the enclosure.

Redner’s Market filed suit alleging that the lease to JTF (because of the Amish Farmer’s Market) has resulted in a violation of the lease’s restrictive covenant that prohibits competing grocery stores. Joppatowne moved to dismiss the case.

Judicial Opinion

Legg, Senior District Judge The dispute between Redner’s and Joppatowne centers on the meaning of Article XIII of the Lease, headed “Restrictive Covenants.” The Article includes a single section, 13.01, “Landlord’s Restrictive Use Covenant.”

In common parlance, “grocery store” and “food supermarket” have different connotations. Section 13.01(a)(ii)(1) defines the term to include a Super Wal-Mart, a Super Target, or “other big box combo” that includes, as part of its operation, either a “food supermarket or ‘grocery store.’” This definition reflects the fact that large stores, in an effort to be all things to all people, now sell a variety of items that in earlier times would have been found in a specialty store. Big box stores have pharmacies, flower shops, no-appointment medical clinics, and a food section that would dwarf many neighborhood supermarkets.

The Lease reflects the fact that although Redner’s would welcome the power of a big box store to draw people to the shopping center, it wanted to guard itself against a Trojan Horse containing a competitive super- market or grocery store. Neither JTF nor any of the stores or stalls in the Amish Farmer’s Market qualifies as a “big box combo” akin to a Super Wal-Mart or a Super Target.

When applying the Restrictive Covenant, there is logic in viewing the Amish Farmer’s Market as a single retail operation. Physically, the Amish Farmer’s Market is an enclosed area that is fenced off from the Flea Market. Most of the stalls in the Market are run by members of the Amish community, and the Market seeks to convey an overall Amish theme.

Viewed as a whole, the Amish Farmer’s Market has the appearance of a grocery store. A number of the stalls resemble typical grocery store departments. If the Amish Farmer’s Market were viewed as a single retail operation, subsection (4) would apply because the enclosed Market area comprises more than 30,000 square feet. The Court cannot take such an approach, however, because the Restrictive Covenant bases the definitions of “food supermarket or grocery store” on the term “retail operator.” The term “retail operator” can only apply to the individual stall proprietors. The Amish Farmer’s Market is not a legal entity. Each stall is separately managed by a separate proprietor that operates under a separate business license. Each proprietor has a separate cash register or credit card reader.

All Fresh

All Fresh is located outside the Amish Farmer’s Market enclosure. Without intending to demean these businesses, the Court concludes that they are typical seafood and butcher purveyors of the type found in a typical large supermarket.

All Fresh sells fresh and frozen seafood as well as fresh fruits and vegetables. The Court finds that All Fresh is a “seafood shop” within the intendment of section 13.01(a)(i). A seafood shop is no less a seafood shop merely because it also sells fresh produce. Hence, All Fresh violates the Restrictive Covenant in Redner’s Lease.

Lapp’s Fresh Meats

Lapp’s Fresh Meats sells fresh and frozen meats. Lapp’s sells pre-packaged meats and meats that are cut to order. A large sign on the wall behind the counter reads, “Lapp’s Fresh Meats, LLC.” Other messages on the sign include: “Steaks Hamburger Pork Chops,” “Frozen Packages!” and “Fresh Cut!” Based on these facts, the Court finds that Lapp’s Fresh Meats is clearly a “butcher shop” within the intendment of section 13.01(a)(i) of the Lease.

Lapp’s is not an “ethnic or specialty food store” and Ruth’s Grill, the small grill at one end of the meat counter, does not turn Lapp’s into a “restaurant.” Accordingly, Lapp’s Fresh Meats is a use that violates the Restrictive Covenant.

Dutch Pantry Fudge

Dutch Pantry A sells homemade fudge (about 20 different types), chocolate, candy apples, caramel apples,

fudge apples, chocolate covered pretzels, fudge pretzels, and chocolate covered bacon and fruit. Dutch Pantry A does not violate the Restrictive Covenant. The store does not meet the definition of “food super- market or grocery store.” Even if it did, Dutch Pantry A would fall within the safe harbor of section 13.01(b) (ii) as both a “candy store” and a “specialty food store.”

The same analysis applies to Dutch Pantry C, which sells only candy. Dutch Pantry B presents a more difficult question, however. Dutch Pantry B [sells] candy, chips, cheese puffs, snacks, and other “junk food” items that one finds in a typical convenience store. Dutch Pantry B does not run afoul of the Restrictive Covenant. Dutch Pantry B is [not] a “food supermarket or grocery store.” Redner’s seems to be offended most by Dutch Pantry B’s substantial offering of nuts, trail mix, and other “bulk” items often found in a grocery store like Whole Foods. None of these items, however, are listed. The Court must apply the Restrictive Covenant as it is written.

Kreative Kitchen

Kreative Kitchen sells homemade potpies, soups, salads, sandwiches, wraps, and made-to-order subs. The Kreative Kitchen stall is demarked by a sign announcing “Kreative Kitchen: Homemade Pot Pie Soups Salads Subs Deserts.” Kreative Kitchen would fall within the safe harbor applicable to “restaurants of any kind.”

Dutch Delights

Dutch Delights sells funnel cakes, handrolled pretzels, and various types of homemade “logs,” which are made from pretzel dough stuffed with various types of meats, including hot dogs, cheesesteaks, chicken, bacon, ham, and ribs. Dutch Delights also offers ice cream cones. Joppatowne and Redner’s agree that Dutch Delights is a “food court style operation.” As such, it does not violate the Restrictive Covenant.

Beiler’s BBQ

Beiler’s BBQ sells various cuts of fresh, raw chicken, and prepared food, including baked beans, string beans, bread, mushrooms, rotisserie potatoes, and barbequed chicken and ribs. Unlike Lapp’s Fresh Meats, Beiler’s BBQ is not a “butcher shop.” While Beiler’s BBQ sells prepared food in substantial quantities, it cannot be characterized as a “restaurant of any kind.” The portion of Beiler’s operation dedicated to the sale of fresh, uncooked chicken is simply too significant to view the stall as a restaurant. The foods that Beiler’s sells do not claim to be foods characteristic of the Amish. Barbequed and fresh chicken are not the type of unique, high quality, specialized foods associated with a specialty store. [Beiler ’s BBQ violates the Restrictive Covenant.]

Beiler’s Baked Goods

Beiler’s Baked Goods makes and sells homemade pies, cakes, whoopee pies, sticky buns, and pastries. In addition to baked goods, the stall also sells freshly made coffee. Beiler’s area is demarked by a wall sign that reads, “Beiler’s Baked Goods: Coffee & Donuts.” The analysis of Beiler’s Baked Goods tracks that of Beiler’s BBQ. A bakery is not a prohibited use. Even though Beiler’s Baked Goods sells coffee, and customers may eat their pastries at the Market, the primary character of the stall is a bakery not a “restaurant of any kind.” The “ethnic or specialty food store” exception also does not fit. The baked goods do not claim to be characteristic foods of the Amish. Nor are the bakery’s wares the high quality, unique, specialized items of a specialty store. [Beliber’s Baked Goods violates the restrictive covenant.]

King’s Cheese & Deli

King’s Cheese & Deli sells milk and dairy drinks, a variety of cheeses and cheese spreads, pickles, home- made popped rice, eggs, milk and other drinks, cold cuts, deli meats, smoked meats, beef sticks, various canned items and jams. Like Beiler’s Baked Goods and Beiler’s BBQ, King’s does not fit within any of the safe harbors.

Given the wide variety of items it sells, King’s is not an “ethnic or specialty food store.” Nor is King’s a “table service delicatessen,” because it does not “provid[e] at least one-half (1/2) of its leasable floor space, exclusive of office and stock room for tables and chairs.”

The motion to dismiss is denied.