Ross Dress For Less, Inc. v. Makarios-Oregon, Llc et al

Motion for Partial Summary Judgment . Oral Argument requested.Expedited Hearing requested.

D. Or.September 6, 2016

PAGE 1 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT Thomas V. Dulcich, OSB #802105 Email: tdulcich@schwabe.com Rebecca Boyette, OSB #135024 Email: rboyette@schwabe.com SCHWABE, WILLIAMSON & WYATT, P.C. 1211 SW 5th Avenue, Suite 1900 Portland, OR 97204 Telephone: 503.222.9981 Facsimile: 503.796.2900 Gregory D. Call (CSB No. 120483) (Pro Hac Vice) Email: gcall@crowell.com Tracy E. Reichmuth (CSB No. 215458) (Pro Hac Vice) Email: treichmuth@crowell.com CROWELL & MORING LLP 275 Battery Street, 23rd Floor San Francisco, CA 94111 Telephone: 415.986.2800 Facsimile: 415.986.2827 Attorneys for Plaintiff Ross Dress For Less, Inc. IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON PORTLAND DIVISION ROSS DRESS FOR LESS, INC., a Delaware corporation, Plaintiff, vs. MAKARIOS-OREGON, LLC, an Oregon limited liability company; and WALKER PLACE, LLC, an Oregon limited liability company, Defendants. Case No. 3:14-cv-01971-SI ORAL ARGUMENT REQUESTED PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING COMPLETION OF END-OF-LEASE WORK PURSUANT TO THE FAILING AND RICHMOND LEASES; MEMORANDUM IN SUPPORT Date: September 26, 2016 Time: 1:30 pm Courtroom: 13B Judge: Hon. Michael H. Simon Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 1 of 18 PAGE 2 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT CERTIFICATE OF COMPLIANCE Pursuant to L.R. 7.1(a), Plaintiff and Counterclaim Defendant Ross Dress For Less, Inc. (“Ross”) certifies that the parties have made a good faith effort through telephonic conferences to resolve this dispute with Defendants and Counterclaimants Makarios-Oregon, LLC (“Makarios”) and Walker Place, LLC (“Walker Place”) (collectively, “Landlords”) and have been unable to do so. MOTION Pursuant to Federal Rule of Civil Procedure 56, Ross respectfully moves this Court for partial summary judgment. Ross seeks the Court’s interpretation of the language of the Leases between the Ross and the Landlords, including a determination that: (1) Pursuant to the Richmond Lease (including Section 16.02) and the Failing Lease (including the “Severance” provisions at pages 3-4), the Landlords have already consented to the end-of-lease work planned by Ross, and no further consent is required. (2) Pursuant to the Richmond Lease (including Section 16.02) and the Failing Lease (including the “Severance” provisions at pages 3-4), Ross may continue to perform such work after September 30, 2016. INTRODUCTION As previewed at the status conference on August 25, 2016, Ross seeks a determination by the Court that (1) Landlords have already consented to the end-of-lease work planned by Ross, and no further consent is required; and (2) pursuant to the express terms of the Richmond Lease and the Failing Lease, Ross may continue to perform such work after September 30, 2016. Ross wants to do the work required under the Leases. Since this Court issued its Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 2 of 18 PAGE 3 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT Findings of Fact and Conclusions of Law (Dkt 213) (the “Order”) regarding Phase I of this litigation, Ross has continued to work towards complying with the Leases as outlined in the Order, including preparing updated plans and submitting those plans for review by the City of Portland. However, after having argued that Ross is solely obligated to do everything required under “triple net” Leases, including maintenance, renovations, and extensive separation work, Landlords now seek to block that work. In particular, Landlords have expressly stated that (1) they will not consent to the work set forth in the plans - despite the fact that the parties have already litigated those issues; and (2) they will not permit Ross to have access to the Richmond and Failing Buildings to complete the work after September 30, despite the fact that the Landlords’ interference both prior to and after the filing of this action has made it impossible to complete the work prior to September 30. The Landlords’ positions are without merit. Ross is entitled to partial summary judgment and a determination of the rights and obligations of the parties based on the unambiguous language of the Leases1: First, Landlords (through their predecessors) have already given consent for Ross to perform such work by entering into the Leases, which require that the work be performed. The Leases themselves constitute Landlords’ express written approval. See, e.g., General Electric Capitol Auto Lease v. Violante, 180 N.J. 24, 848 A.2d 732 (2004). The Landlords may present objections to the City as to City regulations and code requirements, but Ross is not required to 1 This Motion is based on the unambiguous language of the Leases. If the Court concluded as part of its Yogman analysis that the language of the Leases was ambiguous, these issues would likely not be susceptible to summary judgment, and would be resolved at a later date. See Apeldyn Corp. v. Eidos, LLC, 943 F.Supp.2d 1145, at 1150 (D. Or. 2013) (“When a contractual provision is ambiguous, ascertaining its meaning at steps two and three of the Yogman analysis is a question of fact generally not appropriate for summary judgment.”). Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 3 of 18 PAGE 4 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT obtain any additional consent from the Landlords to move forward. If Ross misses the mark with regard to what the Leases require, the Landlords have a remedy - damages in Phase II of the litigation. Second, the Leases permit Ross to perform the work contemplated by Ross’s plans before and/or after September 30, 2016. Both Leases provide that end-of-lease work can be performed promptly after termination of the Leases “for any reason whatsoever.” Both Leases specifically state that the provisions of the Leases regarding separation of the premises “survive the expiration” of the Leases. Moreover, the Leases, by their terms, make clear that “expiration” of the Lease term is one way the lease can “terminate”; expiration is a type of termination. At this time, Ross only seeks a further interpretation and determination from the Court regarding the parties’ rights and obligations pursuant to Section 16.02 of the Richmond Lease and the “Severance” clause of the Failing Lease. These issues are squarely raised by the claims and counterclaims in this action, and, in particular, Ross’s defenses to the Counterclaims. STATEMENT OF UNDISPUTED FACTS Relevant background facts in this case are thoroughly set forth in this Court’s Findings of Fact and Conclusions of Law, issued on June 10, 2016 (Dkt 213) (the “Order”). Of particular importance here: In § 16.02, the 1956 Richmond Lease requires the tenant to render the Richmond Building “an entirely independent and self-sufficient structure.” The Severance Clause of the Failing Lease also requires the tenant to render the Failing Building “entirely independent and self-sufficient.” (Dkt 213-38.) Since the Court issued the Order: Ross submitted plans to the City addressing the work outlined in the Order. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 4 of 18 PAGE 5 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT After the Court issued its Order, Ross took further steps to prepare plans in compliance with the Order. It retained Craig Stockbridge of Portland’s GBD Architects, to assist in this process and to obtain necessary permits from the City of Portland. GBD Architects prepared plans for work that did not require permits (the Non-Permit Plans) as well as two additional sets of plans: Permit Plans #1, and Permit Plans #2. Permit Plans #1 were submitted for permit on August 10, 2016, and showed the scope of work related to concrete masonry walls, cut and supporting of escalator beams, and other work related to staircases in the Failing Building. Permit Plans #2 were submitted for permit on August 18, 2016, and showed the scope of work related to utility separation work, MEP work, and equipment removal in the Richmond and Failing Buildings as well as elevator modernization work in the Richmond Building. (Declaration of Jeffrey Hoban (“Hoban Decl.”) ¶¶ 2-3.) At least one Landlord has taken the position that the City cannot issue permits for the work without its consent, which caused the City to put the plans on administrative hold. On August 15, 2016, Ross’s architect received an e-mail from Matt Weigert of the City of Portland’s Bureau of Development Services (“BDS”) to Mr. Stockbridge, dated August 15, 2016. This e-mail stated that “[w]e have received notification from the owners of 620 SW 5th Ave. that the proposed work has not been authorized. Due to this, both permits will be placed on administrative hold until we receive written authorization from the owners of both properties (600 and 620 SW 5th Ave).” (Hoban Dec. ¶ 4, Ex. A.) On August 17, 2016, Mr. Stockbridge attempted to file Permit Plans #2 with BDS. BDS rejected the attempted submittal. (Hoban Dec. ¶ 5.) By a letter of August 19, 2016, both Landlords stated that the Landlords “do not consent to allow Ross to perform the work set forth in the plans.” (Ex. C at p. 17.) Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 5 of 18 PAGE 6 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT Both Landlords have taken the position that Ross is not entitled to perform any work after September 30, 2016. In their August 19 letter, Landlords also stated that “cooperation is in no way a waiver of the Landlords’ right to possession of the properties on October 1, 2016, and the Landlords in no way consent to allowing Ross to remain in possession of the leased premises beyond September 30, 2016.” (Ex. C at p. 3.) They took the same position at the August 25 status conference before the Court. The City has since agreed to process the plans, but not to issue the permits without consent of the Landlords. On August 17, 2016, Ross’s attorney, Thomas V. Dulcich sent a letter to Tracy P. Reeve, City Attorney, and Tony N. Garcia, Deputy City Attorney (with a copy to opposing counsel), requesting that BDS “release the administrative hold on the permit application submitted on August 10th, accept the permit application that Ross attempted to submit earlier today, and proceed forward with the plan review process without further delay.” (Hoban Decl. ¶ 5, Ex. B.) Also on August 17, 2016, Mr. Dulcich and his colleague Rebecca A. Boyette (on behalf of Ross) met with Tony N. Garcia, Deputy City Attorney and, after that meeting, Mr. Garcia (on behalf of the City and BDS) released the administrative hold on Permit Plans #1 and invited submission of Permit Plans #2. In addition, Mr. Garcia also stated that no permits will be issued without consent of the building owners. (Hoban Decl. ¶ 5.) Ross has begun “non-permit” work. Ross has started the scope of work shown in the Non-Permit Plans and is scheduled to complete such work in late September. (Hoban Decl. ¶ 7.) The permit work will not be completed by September 30. Ross has started the scope of work shown in the Non-Permit Plans and is scheduled to complete such work later in September. The permit applications for Permit Plans #1 and Permit Plans #2 were combined into a single permit application by BDS and that permit application is currently moving forward Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 6 of 18 PAGE 7 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT through the review process. BDS has not committed to a specific date for issuance of the permit, but has generally stated the permit application process may take 8 weeks. (Hoban Decl. ¶ 7.) PROCEDURAL STATUS The issues addressed in this Motion are ripe and properly before this Court. Most significantly, they address issues supporting Ross’s affirmative defenses in this matter. In Ross’s original Complaint, Ross sought a declaration regarding its rights and duties with regard to its end-of-lease obligations under Section 16.02 of the Richmond Lease, and the “Severance” clause under the Failing Lease. (Dkt 1 at 21-23.) In particular, Ross sought a declaration that “[t]he Landlords may not withhold consent for the work set forth in the Modified Plans, nor attempt to impose notice requirements on Ross’s work exceeding those required under the terms of the Leases.” Ross further requested “such other and further relief as the Court may deem proper.”2 In response, each Landlord filed counterclaims seeking declaratory relief regarding Ross’s end-of-lease obligations, and asserting claims for anticipatory breach of those obligations. (Dkt 18, 19.) Ross in turn filed answers to those counterclaims asserting affirmative defenses including Landlords’ own breach of contract, waiver, and estoppel. (Dkt 23 at 8-10, Dkt 23 at 8- 10.) Those claims and defenses will be renewed and addressed in Phase II of this litigation, and the relief sought in this motion is directly relevant. For example, if Ross is not required to complete the work by September 30, 2016, that directly bears on Ross’s liability as of September 30. If Landlords refuse to permit the work to go forward or provide access to the Buildings after 2 Throughout its allegations, Ross referenced the timing of the end-of-lease work, and the urgency of Ross’s need for the Court’s guidance, which would allow Ross timely meet its obligations. See, e.g., Dkt. 1 at p. 1. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 7 of 18 PAGE 8 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT September 30, that bears on Ross’s affirmative defenses. At this time, Ross only seeks a further determination regarding what the Leases say about consent of the Landlords and the deadline for completion of the work required under Section 16.02 of the Richmond Lease and the “Severance” clause of the Failing Lease, which is part and parcel of the parties’ claims and defenses in this case. Ross does not ask the Court to order the Landlords to do or refrain from doing anything. After the Court issues its interpretation, Ross believes that the Landlords are unlikely to prevent the work from going forward; if they choose to continue to interfere, then Ross will have established its affirmative defenses. Ross does believe that Landlords’ interference also gives rise to other equitable and legal claims and defenses, but does not believe that those issues must be raised at this time. However, in the event that the Court concludes that the issues raised in this Motion are not properly before the Court in the absence of a further pleading, Ross is filing herewith, on a conditional basis, a motion for leave to file a supplemental pleading. LEGAL ARGUMENT I. AS A MATTER OF LAW, THE LANDLORDS HAVE ALREADY CONSENTED TO THE WORK SET FORTH IN THE PLANS. A. The Leases Themselves Represent the Landlords’ Consent to Perform the Work Set Forth in the Plans. The Landlords have argued that Ross’s end-of-lease work cannot go forward until the Landlords consent to such work, and approve Ross’s Plans. They have also argued that they are entitled to withhold such consent for various (incorrect) reasons. To the contrary, Landlords (through their predecessors) have already given express consent for Ross to perform such work by entering into the Leases. The Leases themselves constitute Landlords’ express written approval. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 8 of 18 PAGE 9 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT A contract represents the parties’ consent to the terms therein. The parties agreed and consented that Ross can and must do the work set forth in the Plans. Not only did the Landlords consent, they specifically demanded Ross to do the work outlined. In the Failing Lease (Hoban Decl. Ex. E at p. 3), the parties provided that the tenant “will at its sole cost and expense do and perform such work” required to separate the two premises as set forth under the terms of the Failing Lease. Likewise, the Richmond Lease, at Section 16.01, required that “Tenant, at the Tenant’s sole cost and expense shall make such alterations” as required to perform the separation work set forth in that Lease. (Hoban Decl. Ex. D at p. § 16.01). Thus, by their terms, the Leases themselves represent Landlords’ consent to the work. See General Electric Capitol Auto Lease v. Violante, 180 N.J.24, 848 A.2d 732 (2004). The court’s opinion in Violante is instructive. In that case, New Jersey law provided that a garage keeper could place a lien on a vehicle only for services performed at the request or with the “consent” of the owner or representative of the owner of the vehicle. The question at issue was whether the owner of the vehicle had given consent to repairs that were requested by the lessee of the vehicle. As the court stated, “the pivotal question thus becomes whether an owner’s consent is present when, pursuant to a provision in a Lease agreement that requires the lessee to repair and maintain the vehicle, the lessee requests a garage keeper’s services.” Id. at 33. The court held that the lease requirement that the lessee perform repairs itself constituted the owner’s consent to such work being performed. As the court held, “by contractually compelling a lessee to maintain the vehicle in good repair, an owner gives its assent to and approval for those services that are necessary for preservation of the vehicle’s value. In such circumstances, the owner must be considered to have ‘consented’ to repairs ordered by the lessee, who similarly must be viewed as the owner’s ‘representative’ under the statutory scheme.” Id. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 9 of 18 PAGE 10 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT Here, as in the Violante case, the Landlords have required the lessee to perform certain work (at the end of the term). As with the lease agreement at issue in Violante, the Landlords’ agreement and assent can only be viewed as consent to perform the work required. Accordingly, Ross has already received Landlord’s express written consent to perform the work contemplated in the plans.3 No further consent is required. B. No Further Consent Is Required Under the Provisions of the Leases. Neither Section 16.02 of the Richmond Lease or the “Severance” provisions of the Failing Lease require the tenant to obtain further consent of the Landlords to perform the work set forth in the Plans. Moreover, no other provision in the Leases requires consent for these plans. For example, Section 9.01 of the Richmond Lease only requires written consent of the Landlord for “alterations which would change the character of said building or buildings, or which would weaken or impair the structural integrity, or lessen the value of said building or buildings.” (Ex. D at § 9.01.) The work set forth in the plans is the work the parties have agreed must be done in order to return the buildings to a separate state, not to change their character or lessen their value. Similarly, the only written approval required under the Failing Lease applies to the tenant’s right to “remodel the premises.” (Ex. E at 5.) Likewise, the Sixth Amendment to the Failing Lease provides Ross with the right to remodel the premises with written approval of the Landlord. (Ex. F at 2.) However, the Sixth Amendment also reaffirms and does not alter the tenant’s obligations under the severance provisions of the Lease. (Id.) Specifically, the Sixth Amendment at Recital D states that the tenant “has assumed the obligations of Lessee 3 In addition, the Landlords filed their own counterclaims in this litigation seeking a declaration that Ross was required to perform the work. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 10 of 18 PAGE 11 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT thereunder, including specifically, but not by way of limitation, the obligation to physically separate and restore the premises at the expiration or upon termination of the Lease, as described in the paragraph entitled Severance on page 3” of the Lease. (Id.) Accordingly, the terms of the Leases and the amendments thereto do not impose additional consent requirements on Ross. C. The Leases Do Not Provide a Basis for Requiring or Withholding Consent. Landlords may argue that the plans presented by Ross do not meet all of Ross’s obligations under the Leases. However, as this Court has repeatedly noted, that is a question for the Court, not the City. If Landlords think Ross is missing the mark with regard to the Leases’ requirements, it can seek damages in Phase II of this litigation. The Court has made clear that the remedy for hypothetical failure to comply with all terms of the Leases would be damages to be awarded in the next phase of trial. In Phase I, the Court considered what the Lease required. Phase II will determine Ross’s compliance and, if appropriate, damages.4 The only potentially legitimate objections that could be made to the City would be those related to whether Ross’s Plans satisfy City regulations and code requirements. Ross recognizes that the Landlords have the right to petition the government regarding such matters. However, such a right is not a basis for demanding that the City not proceed with review and processing of the permit applications in the first place. The purpose of that permit process is for the City to fulfill its own role - to examine the Plans and determine whether the Plans meet regulations and code requirements. That is the very process that Ross has asked the City to undertake. 4 Damages will provide an adequate remedy if Ross does not meet its obligations. Landlords have not asserted any irreparable harm entitling them to injunctive relief, nor have they sought such relief. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 11 of 18 PAGE 12 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT II. Under the Unambiguous Language of the Lease, Ross Is Permitted to Complete the Work Set Forth in the Plans After September 30, 2016. By their plain and unambiguous language, the Leases permit Ross to perform the work contemplated by the Plans before and/or after September 30, 2016. Both Leases provide that end-of-lease work can be performed after termination of the Leases “for any reason whatsoever” - without exception.5 (Ex. D at §16.02; Ex. E at 3.) Both Leases specifically state that the provisions of the Leases regarding separation of the premises “survive the expiration” of the Leases. (Id.) Moreover, the Leases, by their terms, make clear that “expiration” of the Lease term is one way the lease can “terminate”; expiration is a type of termination. A. The Leases Permit Work to Be Completed Either Before or After the End of the Leases’ Term(s). Both Leases expressly and unambiguously provide that end-of-lease work may be done before and/or after the end of the Leases. The Richmond Lease, at Section 16.02, provides that “[t]he Tenant agrees that, prior to the expiration of this lease or, in the event of termination of this lease for any reason whatsoever, promptly after such termination,” the Tenant will perform the work required to separate the Richmond Building from the Failing Building premises. (Ex. D, emphasis added.) Section 16.02 further states that “[t]he provisions of this Section 16.02 shall survive the expiration or any termination of this lease.” In nearly identical provisions, the “Severance” clause of the Failing Lease (Ex. E at 3-4) states that “[t]he Lessee agrees that, prior to the expiration or this lease or, in the event of 5 This position is not contrary to what Ross alleged in its complaint. As set forth in the complaint, time was of the essence in seeking the Court’s guidance, whether Ross ultimately completed the work before or after September 30. The Leases require that work after the expiration of the Leases be performed “promptly” following expiration. Ross’s original intention was to perform the work prior to expiration of the Lease (as Ross has not derived any benefit from delays), but the Landlords’ refusal to “consent” to such work has made it impossible to do so. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 12 of 18 PAGE 13 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT termination of this lease for any reason whatsoever, promptly after such termination,” the Lessee will perform the separation work. (Emphasis added.) Like the Richmond Lease, the Failing Lease provides that “[t]he provisions of this section shall survive the expiration or termination of this Lease.” Thus, by the clear language of the Lease, the tenant may perform work before the expiration date (in this case September 30, 2016) or “promptly after” termination for any reason, including expiration of the Lease term. The relevant provisions expressly continue after September 30, 2016. B. Under the Terms of the Leases, “Expiration” Is a Form of “Termination.” The Leases also unambiguously provide that “expiration” of the Leases - i.e. the end of the Leases’ term(s) - is one way there may be a “termination” of the Leases. As a result, expiration of the Leases is one of the “reasons” that the Leases may terminate “for any reason whatsoever.” (Ex. D at §16.02; Ex. E at 3.) The starting point for understanding the meaning of the terms “expiration” and “termination” is the language of the Leases themselves. See, e.g., Carvel Corporation v. Rait, 117 A.D.2d 485, 503 N.Y.S.2d 406 (1986) (looking to terms of a contract to determine whether “expiration” was a form of “termination”); Naturalawn of America, Inc. v. West Group, LLC, 484 F. Supp. 2d 392 (D. Md. 2007) (same); see also Apeldyn, 943 F. Supp. 2d at 1149 (applying Yogman analysis).6 Here, the words of the Leases are unambiguous: the parties understood and intended that “expiration” was one form of “termination,” while acknowledging that the Leases could be terminated in other ways. 6 The Apeldyn case does not determine the issues presently before the Court because the contracts and issues in Apeldyn were different. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 13 of 18 PAGE 14 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT For example, Section 16.01 of the Richmond Lease provides that the tenant has an obligation to return the Richmond premises in a certain condition “upon the expiration or other termination of this lease. . . .” (Ex. D, emphasis added.) Section 9.03 deals with how certain alterations must be “surrendered with the demised premises at the expiration or other termination of this lease.” (Emphasis added.) Section 6.02 similarly discusses liability for costs of obtaining possession “upon expiration or earlier termination of the demised term. . .” The Failing Lease likewise treats “expiration” as a form of “termination.” In fact, the Lease describes the date of expiration as “the date on which this lease terminates.” (Ex. E at 8.) The fire and casualty provisions provide that In the event the Lessee’s fixtures, furnishings and equipment in the demised premises sustain damage or injury to the extent of $50,000.00 or more by reason of a fire or other casualty occurring within the three years next preceding the date on which this lease terminates, then at lessee’s option to be exercised within 60 days following such casualty, this lease shall cease and terminate as of the date of such casualty. (Id.) Similar to Section 16.01 of the Richmond Lease, Covenant (f) of the Failing Lease also states that the tenant agrees “[t]hat it will at the expiration hereof, or at the earlier termination of this lease surrender the premises” in a certain condition. (Ex. E at 8.) In addition, the fact that each Lease provides that separation work may be performed in the event of termination “for any reason whatsoever” demonstrates that the provisions were meant to be read broadly, and to incorporate any type of termination - including by expiration. C. This Reading Is Consistent with Case Law and the Generally-Understood Meanings of the Terms “Expiration” and “Termination.” Courts that have considered analogous provisions have concluded that “expiration” is a form of “termination.” For example, the Carvel case dealt with a licensing agreement under Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 14 of 18 PAGE 15 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT which the licensee agreed to refrain from competing within a certain area for three years after the “license is terminated for any reason except for Licensor’s breach.” 117 A.D. at 489-90. The agreement provided that the covenant was to survive “termination, abandonment or other cancellation” of the agreement. Id. The court took particular note of language similar to the Lease language in this case, stating that “another clause of the agreement provided that the licensee was to discontinue use of the Carvel name, trademarks and know-how upon ‘expiration or any earlier termination’ of the agreement, and it can be inferred from these words that the parties understood ‘expiration’ to be but a form of ‘termination’.” Id. The court concluded: The foregoing language evinces an understanding by the parties that the covenant would apply in the event of any termination of their agreement (other than one brought about by [the licensor’s] breach). The parties further understood that that language was to include the expiration of the agreement at the end of its stated term. Id. Likewise, in Naturalawn, the defendant argued that provisions of a noncompete agreement should not be enforced because they were only operable in the event of a “termination” of a franchise agreement, and not, defendant argued, an “expiration.” The court rejected this argument, holding: An “expiration” of an agreement is a more specific type of “termination.” The fact that both words appear in other provisions of the Franchise Agreements does not undercut this conclusion. Indeed, the Franchise Agreements provide that the non-compete clause would apply after termination “for any reason.” [Citation omitted.] Clearly, “expiration” is one reason for the “termination” of an agreement. Indeed, as the court held in Naturalawn, the general understanding and meaning of the word “expiration” denotes a type of termination (ending) of something (in particular, a contract). Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 15 of 18 PAGE 16 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT See, e.g., http://www.dictionary.com/browse/expiration?s=t (defining “expiration” as “a coming to an end; termination; close: the expiration of a contract”); http://www.merriam- webster.com/dictionary/expiration (“the fact of coming to an end or the point at which something ends: TERMINATION”); see also Carvel, 117 A.D. at 490 (citing Webster’s New Collegiate Dictionary (1974).) “Expiration” as a form of “termination” is also consistent with general contract law principles: “A contract may be discharged by performance in accordance with its terms; in fact, this is the normal termination of every contract. A contract may also be terminated by the expiration of the time during which it is to remain operative.” 17A Am. Jur. 2d. Contracts § 524. D. The Language of the Separation Provisions Is Not Superfluous Because It Clarifies When Ross May Cease Operations to Perform the Work Required. The Landlords have argued that the fact that the Lease uses both “expiration” and “termination” suggests that they are somehow mutually exclusive.7 As set forth above, these terms are not mutually exclusive, because “expiration” is simply a form of termination. Moreover, the mirror provisions of the Richmond and Failing Leases that specify that the work may be done “prior to the expiration or this lease or, in the event of termination of this lease for any reason whatsoever, promptly after such termination” serve a very important purpose. They clarify that Ross may elect to perform the work prior to the expiration of the Leases’ term(s) (or at least begin that work and continue it after expiration or other termination). Alternately, the tenant can choose to perform work after the termination of the Lease, whether by expiration or for any other reason. This is of particular significance because of the “use” clauses of each 7 This argument ignores the fact that by the terms of the Leases, the separation provisions “survive” both “expiration” and other forms of “termination” of the Lease. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 16 of 18 PAGE 17 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT Lease. Each Lease places limitations and obligations on the tenant with regard to the tenant’s use of the leased premises. At page 8 of the Failing Lease (Ex. E), the tenant covenants that it will “use the leased premises and the adjacent Richmond Building premises at all times during the entire term of this lease for the sale of merchandise. . . .” (Emphasis added.) In addition, under Section 4.01 of the Richmond Lease, the tenant agrees that “it will not use the demised premises, nor will it suffer or permit the same to be used, for any purpose other than mercantile purposes. . . .” Section 13.01 also prohibits the tenant from vacating the premises and leaving it unoccupied and unattended for more than 30 days. Accordingly, the language of Section 16.02 and the Failing Lease “Severance” provision permits Ross to cease operations to at least begin the work set forth in the Plans without running afoul of the use clauses. E. Ross Does Not Require Possession of the Building to Complete the Work. Although not essential to this motion, Ross notes that it does not need possession of the Richmond and Failing premises in order to complete its work in a timely fashion - only access, as contemplated by the Leases themselves. Moreover, the Deeds for the Richmond Building provide for a continuing easement to undertake required work “at” or “after” the tenant ceases to occupy either space. (Tr. Exs 107, 108.) In short, Ross is proceeding diligently. It began to prepare plans in 2013, and continued the work required as soon as it was able to following Phase I of this litigation. Ross simply wants to abide by its obligations under the Leases in performing the work required, and to complete the work after September 30, 2016 as permitted under the Leases.8 If Ross misses the 8 Notably, the Landlords have no evidence that there are any potential deals with future (Continued…) Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 17 of 18 PAGE 18 - PLAINTIFF ROSS DRESS FOR LESS, INC.’S MOTION FOR PARTIAL SUMMARY JUDGMENT RE COMPLETION OF END-OF-LEASE WORK; MEMORANDUM IN SUPPORT mark, the Landlords will have another day in Court as part of Phase II of this trial. DATED: September 6, 2016. SCHWABE, WILLIAMSON & WYATT, P.C. By: Thomas V. Dulcich, OSB #802105 tdulcich@schwabe.com Rebecca Boyette, OSB #135024 rboyette@schwabe.com Telephone: 503.222.9981 Facsimile: 503.796.2900 CROWELL & MORING LLP By: /s/ Tracy E. Reichmuth Gregory D. Call, Pro Hac Vice gcall@crowell.com Tracy E. Reichmuth, Pro Hac Vice treichmuth@crowell.com Telephone: 415.986.2800 Facsimile: 415.986.2827 Of Attorneys for Plaintiff ROSS DRESS FOR LESS, INC., a Delaware corporation tenants in progress. Any potential deal with a new tenant is going to take a several months considering the complexity of the premises and buildings. Any work after September 30 will happen in vacant and unoccupied space, and Ross can perform its work so as to not interfere with efforts to lease the space. Case 3:14-cv-01971-SI Document 219 Filed 09/06/16 Page 18 of 18