Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Century III Mall Pa LLC v. Sears Roebuck And Co.

United States District Court, W.D. Pennsylvania

May 10, 2017

CENTURY III MALL PA LLC Plaintiff,
v.
SEARS ROEBUCK AND CO., Defendant.

          MEMORANDUM OPINION ON DEFENDANT'S MOTION TO DISMISS ECF NO. 5

          LISA PUPO LENIHAN United States Magistrate Judge

         I. Summation

         The Motion to Dismiss filed by Defendant Sears Roebuck and Co. (“Sears”), ECF No. 5, will be granted, as the arbitration decision at issue reflects a thorough, specifically-supported and clearly-worded judgment on the commercial contract matters at issue.

         II. Factual and Procedural History

         Plaintiff, Century III Mall PA LLC (“Century III”), as landlord, and Sears, as tenant, entered into a May 29, 1979 lease with a forty (40) year term (i.e., from October, 1980 through October, 2020), pursuant to which Sears constructed and maintained an over 230, 000 square foot “anchor” store as part of the Century III Mall (the “Lease Agreement”). Pursuant to Section 6.1 of the Lease Agreement, Sears was subject to an “operating covenant” requiring that the space be operated as a Sears (for the first fifteen (15) years) or other (for an additional five (5) years) department store. See Amended Complaint, ECF No. 3 at 3-4.

         Section 6.3 of the Lease Agreement, headed “Landlord's Option to Terminate”, sets forth the termination provisions as follows:

6.3(a) provides that if (as it did) Sears elects “to discontinue the operation” of a department store, Century III may (as it did), within sixty (60) days “elect to terminate this Lease and acquire the Sears Building and Improvements as hereinafter set forth”, upon which acquisition the lease automatically terminates. If Century III “elects not to so terminate, Landlord and Tenant” continue to be bound by the lease.
6.3(b) then addresses valuation and potential continued other use of the space by Sears, if Sears elects to cease retail operations during (subparagraph i) or after expiration of (subparagraph ii) the 20-year operating covenant:
(i) if termination of operation shall occur during the period of Tenant's operating covenant, as set forth in Subparagraphs 6.1 (a) and (b), Landlord agrees to pay Tenant, within ninety (90) days after exercising its election to terminate, Tenant's depreciated book value of its Building and Improvements or the appraised fair market value thereof, whichever is greater. Each party shall appoint one (1) appraiser for the purpose of determining the fair market value and in the event they cannot jointly agree upon the value, the arithmetical average of the values submitted by such appraisers shall be deemed to be the fair market value of Tenant's Building and Improvements. . . .; and
(ii) if Tenant shall discontinue the operations of a retail Department Store after the expiration of Tenant's operating covenant . . . and Landlord exercises its option to terminate this Lease, Landlord shall pay Tenant, within ninety (90) days after exercising its election to terminate, the amount of Tenant's depreciated book value or the appraised fair market value of the leasehold improvements made by Tenant, determined as in (1) above, whichever is greater, provided, however, that if Landlord does not elect so to purchase Tenant's Building and Improvements, Tenant may use Tenants' Building for any lawful purpose.
6.3(c) provides that “the depreciated book value of Tenant's Building and Improvements shall be computed on a straight line basis in accordance with Tenant's customary method of computing book value of similar types buildings and improvements” and 6.3(d) provides for the real estate closing to occur within ninety (90) days of Landlord's notice exercising its option to terminate the lease. See ECF No. 6, Ex. A at 2-3.

         Sears elected to cease operation of its retail store by notice to Century III on September 8, 2014. And by reply of November 17, 2014 Century III “elect[ed] to terminate the Lease and acquire the Building and Improvements” in accordance “with Section 6.3(a)” of the Lease Agreement. See ECF No. 6, Ex. A at 1. Sears ceased operations on December 7, 2014 and, as of June 27, 2016, had continued to pay rent and other expenses to Century III. See id. at 1.

         The parties exchanged appraisals, with Sears appraisal at $9, 200, 000 and Century III's at negative $11, 100, 000. The parties, of course, disputed each other's findings and, in accordance with Section 34 of the Lease Agreement (requiring adjudication by a three-member arbitration panel), Sears then sought arbitration through the American Arbitration Association. A tribunal of three (3) highly-credentialed arbitrators was elected (the “Panel”), [1] and hearings were held on June 27, June 28, and August 30, 2016. The evidence included the parties' appraisals[2] and Sears' spreadsheet calculation of depreciated book value of $3, 937, 636, with testimony that it was “calculated on a straight-line basis and in accordance with Sears' customary procedure for similar types of building and improvements” in accordance with the Lease Agreement. See ECF No. 6, Ex. A at 10-11. The Panel issued its 19-page Opinion on November 10, 2016 (the “Opinion”). See ECF No. 6, Ex. A. The Panel found that Plaintiff had unambiguously exercised its option; both appraisers valued an incorrect property interest; even if the Panel looked to the average of the appraisers' values, it would not be the purchase price because the depreciated book value was greater; and Sears had properly established that book value. ECF No. 6, Ex. A. It awarded Sears $3, 937, 636 to be paid by Century III on sale/closure to occur within thirty (30) days of the Opinion. Id. at 19.

         Century III brought this action on December 9, 2016, ECF No. 1, and filed an Amended Complaint on December 16, 2016 (ECF No. 3). Plaintiff seeks vacatur and a stay of enforcement of the Opinion and maintains that the Panel exceeded its authority by rewriting rather than interpreting the terms of the Lease Agreement. See Amended Complaint, ECF No. 3. Plaintiff cites to the Lease Agreement provision that the arbitrators are without power “to change any terms of this Lease or deprive any party of any right provided for herein or modify or extinguish any obligation of either party imposed hereby” and asserts that the Award “cannot be rationally derived from the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.