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FOX'S FOODS, INC. v. KMART CORP.

August 31, 1994

FOX'S FOODS, INC., Plaintiff
v.
KMART CORPORATION, Defendant



The opinion of the court was delivered by: THOMAS I. VANASKIE

 This Memorandum and accompanying Order address defendant Kmart Corporation's motion for summary judgment, (Dkt. Entry # 34), for which briefing was completed on November 3, 1993. (Dkt Entry 38.) For the following reasons, the motion will be granted in part and denied in part.

 Background

 In March of 1990, plaintiff Fox's Foods, Inc., which owns and operates retail grocery stores, entered into a lease agreement (the "Lease") with a limited partnership, the "CNE-Festival at Prospect Road Limited Partnership." The Lease covered both the construction of a store and its occupancy for a term of twenty (20) years following completion of construction. In February of 1991, the limited partnership assigned the Lease to Kmart. The Fox's food store was to become part of a new shopping center containing a Kmart store and various smaller retail stores.

 Although the Lease originally provided that Kmart, which had responsibility to construct the store shell, would commence construction by April 1, 1991 ("Lease" at § 5.2), Fox's and Kmart changed this deadline to May 22, 1991. (Dkt. Entry # 37 at Ex. "A-8" through "A-11"; Dkt. Entry # 27 at 186-87). A deadline for the completion of construction was expressed in Section 5.6 of the Lease, which, in pertinent part, provided:

 
5.6 Completion of Leased Space. [Kmart] shall use its best efforts to cause the Leased Space to be Substantially Completed on or before June 15, 1992, but in any event shall cause the Leased Space to be Substantially Completed not later than June 15, 1993, subject to delays attributable to force majeure. [Kmart] shall notify [Fox's] if, in [Kmart's] judgment, [Kmart] shall not be able to Substantially Complete the Leased Space in accordance with the foregoing sentence and, in such event, [Fox's] shall, at its election upon notice to [Kmart] given within thirty (30) days thereafter, either extend specified additional time sufficient for [Kmart] to Substantially Complete the Leased Space, or cancel the Lease, in which latter event [Kmart] shall reimburse [Fox's] for the reasonable costs and expenses actually incurred by [Fox's] for the preparation of the Preliminary Plans and the Final Plans and thereafter [Kmart] and [Fox's] shall have no further liability hereunder. *fn1"

 The deposition testimony of Ronald Rozanski, a Kmart project manager, indicates that by May 17, 1991, Fox's had submitted its plans to Kmart. (Dkt. Entry # 23 at 69-70.)

 The revised May 22, 1991 deadline for the commencement of construction passed without Kmart beginning construction of the store. By certified letter dated September 27, 1991, Fox's counsel gave Kmart notice that Fox's considered Kmart in default of its obligations under the Lease. (Dkt. Entry # 37 at "Ex. A-15.") This notice was expressly made pursuant to § 13.3 of the Lease, which, inter alia, provided that "in addition to the remedy of specific performance, [Fox's] shall have all of the remedies and causes of actions now or hereafter provided at law or in equity with respect to [any] default of [Kmart]" in the performance of any of its agreements or covenants under the Lease. (Dkt. Entry # 35, Ex. "A" at p. 40.)

 Both prior to and following the provision of notice of default, Fox's repeatedly inquired concerning Kmart's failure to begin construction. (Dkt. Entry # 27 at 182-90; Dkt. Entry # 37 at Ex. "A-13" through "A-18.") For instance, during a July, 1991 communication, Rozanski indicated that Kmart would provide Fox's with the overdue final construction plans within seven to ten days and that Kmart should commence construction within the next six to eight weeks. (Dkt. Entry # 37 at Ex. "A-14.") During an April, 1992 communication, Rozanski promised the delivery of materials to Fox's required for the construction. (Dkt. Entry # 37 at Ex. "A-16.") During an October, 1992 communication, Rozanski promised counsel for Fox's the delivery of "construction drawings" for the store within a week. (Dkt. Entry # 37 at Ex. "A-18.") *fn2" None of these assurances was honored.

 Three months later, by letter dated April 9, 1993, Kmart notified Fox's that Kmart would not substantially complete the food store by June 15, 1993, as provided in the Lease. In the same letter, Kmart requested that Fox's exercise the option provided in § 5.6 to give Kmart an extension of time to complete construction or cancel the lease. (Dkt. Entry # 34 at Ex. "C.") By letter dated May 3, 1993, Fox's responded to the demand for an "election" under § 5.6 of the lease by asserting:

 
We wish to point out that the Lease does not provide for the requested election under the present circumstances. K-Mart's obligations under the lease were to (a) commence construction on or before April 1, 1991 (later extended by mutual agreement to May 22, 1991) (Section 5.2); (b) use its "best efforts" to cause the Leased Space to be substantially completed on or before June 15, 1992 and (c) in any event cause the Leased Space to be substantially completed no later than June 15, 1993.
 
To date, K-Mart has failed to commence construction for more than twenty-two months after the extended deadline has passed and has exerted absolutely no efforts to achieve substantial completion on or before June 15, 1992. Although K-Mart's representatives repeatedly assured Fox's that K-Mart would promptly commence construction and use it best efforts to promptly complete construction, K-Mart took no action on this project until Fox's filed suit seeking specific performance and damages in December, 1992. Under these facts, K-Mart does not have any right under the Lease to demand that Fox's make any election.
 
As we have already advised you, Fox's intended to proceed with this store and is in the process of revising plans and specifications so that the project can move forward as expeditiously as possible. K-mart has been provided with an updated floor plan from which its drawings for the exterior of the Leased Space can be revised. We expect K-Mart to proceed promptly toward substantial completion of construction. Based upon the timetable set forth in Mr. Larcey's letter, Fox's will accept delivery of the substantially completed store notwithstanding the fact that K-Mart has failed to meet any of the contractual deadlines for performances thus far. However, Fox's intends to hold K-Mart responsible for all of the damages caused by K-Mart's breaches of the Lease and other actionable conduct. By proceeding in this manner, Fox's waives none of its rights against Kmart, which rights are specifically preserved. (Dkt. Entry # 35 at Ex. "C.")

 On September 13, 1993, Kmart moved for summary judgment, contending that it should be granted summary judgment with regard to Fox's claims of breach of contract, fraudulent misrepresentation, and unjust enrichment. (Dkt. Entry # 34.) *fn3"

 Discussion

 Summary judgment is appropriate if "there is no genuine issue as to any material fact and. . . the moving party is entitled to judgment as a matter of law." F.R.C.P. 56(c). The party moving for summary judgment bears the burden of showing the absence of a genuine issue as to any material fact. Young v. Quinlan, 960 F.2d 351, 357 (3rd Cir. 1992). "Once the moving party has carried the initial burden of showing that no genuine issue of material fact exists, the non-moving party 'must make a showing sufficient to establish the existence of every element essential to his case, based on the affidavits or by the depositions and admissions on file.'" Pastore v. Bell Telephone Co. of Pennsylvania, 24 F.3d 508 (3rd Cir. 1994). All inferences, however, "'should be drawn in the light most favorable to the non-moving party, and where the non-moving party's evidence contradicts the movant's, then the nonmovant's must be taken as true.'" Id., slip op. at 7.

 "The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (emphasis in original). "As to materiality, 'it is the substantive law's identification of which facts are critical and which facts are irrelevant that governs.'" Gabai v. Jacoby, 800 F. Supp. 1149, 1153 (S.D.N.Y. 1992). A dispute is "genuine" only if "there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 242. "In sum, if the court determines that the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Gabai, 800 F. Supp. at 1154.

 Breach of Contract Claims

 Kmart argues that section 5.6 limits "the rights available to Fox's in the event that substantial completion of the food store could not be accomplished within the contemplated time frame." (Def.'s Br. Supp. Summ. J. at 17-18.) As noted above, section 5.6, in pertinent part, provides:

 
[Kmart] shall use its best efforts to cause the Leased Space to be Substantially Completed on or before June 15, 1992, but in any event shall cause the Leased Space to be Substantially Completed not later than June 15, 1993. . . . [Kmart] shall notify [Fox's] if, in [Kmart's] judgment, [Kmart] shall not be able to Substantially Complete the Leased Space in accordance with the foregoing sentence and, in such event, [Fox's] shall, at its election upon notice to [Kmart] given within thirty (30) days thereafter, either extend specified additional time sufficient for [Kmart] to Substantially Complete the Leased Space, or cancel the Lease.

 Kmart contends that, because Fox's did not elect to cancel the lease, but instead, as Kmart argues, exercised its right to extend the date for substantial completion, "any claim for damages at this time has been obviated." (Def.'s Br. Supp. Summ. J. at 19 (citation ...


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