Restat 2d of Prop: Landlord & Tenant, § 7.2

Restatement of the Law, Property 2d Landlord & Tenant - Official Text > Rules and Principles > Part 2- Tenant’s Rights > Chapter 7- Nonperformance of Landlord’s Promise

§ 7.2 Landlord's Noncompetition Promise.

[...] the failure of the landlord to perform a promise contained in the lease that he, or someone                                   holding under him, will not use other property in a manner that will compete with a business of                                   the tenant, or of someone holding under the tenant, on the leased property, makes the landlord                               in default under the lease, if he does not cease, or cause to cease, the competing business within a                                     reasonable time after being requested by the tenant to do so. For that default, the tenant may:

(1)  terminate the lease in the manner prescribed in § 10.1 and, if the landlord's promise is                               valid, recover damages to the extent prescribed in § 10.2; or

(2)  continue the lease and, if the landlord's promise is valid, obtain appropriate equitable                         and legal relief including the various remedies prescribed in § 7.1(2).  

 

COMMENTS & ILLUSTRATIONS 

 

[...]   b.  Landlord's noncompetition promise .  The mere presence in a lease of a noncompetition promise by the                           

landlord justifies the conclusion that it is essential that the promise be observed if the tenant is to                                   conduct his business on the leased property profitably. Thus the tenant is given an option to terminate                                 the lease, even if the landlord's promise is invalid, if the competing business does not cease within a                                   reasonable time after a request from the tenant that it cease.

Restatement 2d of Contracts: § 188 Ancillary Restraints on Competition

(1)  A promise to refrain from competition that imposes a restraint that is ancillary to                           an otherwise valid transaction or relationship is unreasonably in restraint of trade if

(a)  the restraint is greater than is needed to protect the promisee's legitimate interest,                         or

(b)  the promisee's need is outweighed by the hardship to the promisor and the likely                           injury to the public.

(2)  Promises imposing restraints that are ancillary to a valid transaction or                     relationship include the following:

(a)  a promise by the seller of a business not to compete with the buyer in such a way as                                     to injure the value of the business sold;

(b)  a promise by an employee or other agent not to compete with his employer or other                               principal;

(c)  a promise by a partner not to compete with the partnership.  

[...]  

Illustrations:  1. A sells his grocery business to B and as part of the agreement promises not to engage in a                                       

business of the same kind within a hundred miles for three years. The business of both A and                                   B extends to a radius of a hundred miles, so that competition anywhere within that radius                               would harm B's business. The restraint is not more extensive than is necessary for B's                             protection. A's promise is not unreasonably in restraint of trade and enforcement is not                           precluded on grounds of public policy.

2. The facts being otherwise as stated in Illustration 1, neither A's nor B's business extends to a                                   radius of a hundred miles. The area fixed is more extensive than is necessary for B's                               protection. A's promise is unreasonably in restraint of trade and is unenforceable on grounds                           of public policy. As to the possibility of refusal to enforce limited to part of the promise, see                                   § 184(2).

3. A sells his grocery business to B and as part of the agreement promises not to engage in                                     business of any kind within the city for three years. The activity proscribed is more                             extensive than is necessary for B's protection. A's promise is unreasonably in restraint of                           trade and is unenforceable on grounds of public policy. As to the possibility of refusal to                               enforce only part of the promise, see § 184(2) 

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Great A. & P. Tea Co. v. Bailey Supreme Court of Pennsylvania

October 4, 1965, Argued ; May 26, 1966, Decided 

No. 131, March Term, 1965

Reporter 421 Pa. 540 *; 220 A.2d 1 **; 1966 Pa. LEXIS 697 ***

Great A. & P. Tea Co., Appellant, v. Bailey

Subsequent History:   Reargument Refused June 23, 1966. 

Prior History: Appeal from decree of Court of Common Pleas of Crawford County, Sept. T.,                           1964, No. 2, in case of The Great Atlantic and Pacific Tea Company, Inc. v. Robert M. Bailey,                                   Elizabeth S. Bailey, South Park Plaza, Inc. et al. 

Disposition:  Decree affirmed. 

Counsel:   George J. Barco, with him Yolanda G. Barco, and Barco and Barco, and Humes and Kiebort , for appellant.

Peter E. Blystone, with him Eckels, Blystone, Fuller & Kinnunen, for appellees.

F. Joseph Thomas , for intervening defendant. 

Judges:  Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Eagen. Mr. Justice Cohen concurs in the result. Dissenting Opinion by Mr. Justice Roberts. Mr. Justice Musmanno and Mr. Justice O'Brien join in this dissenting opinion. 

Opinion by:  EAGEN 

Opinion

 [*542]    This is an action in equity seeking injunctive relief. For the purpose of this appeal, the                                 facts may be briefly summarized as follows:

In 1954, Robert M. Bailey and Elizabeth S., his wife, were the record owners of farm land in                                   Crawford County, Pennsylvania, on which they proposed to develop a shopping center. At that                           time, the tract was   cut in two by a public highway known as U.S. Routes, Nos. 6, 19 and 322.

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On November 23, 1954, the Baileys entered into a written lease with the Great Atlantic and                               Pacific Tea Company, Inc. (A. & P.), whereby a certain specifically described portion of the land                               on the north side of the highway was leased to A. & P. for the operation of a food market in a                                           building to be constructed thereon with accompanying parking facilities.

  The lease, which was duly recorded, contained, inter alia, the following provision with which                             we are here particularly concerned: "If, as and when the Lessors develop the adjoining property                             for business purposes, it is understood that the parking area of 107,524 square feet will be used                                 in common with the parking to be furnished by the Lessors, but at no time shall the ratio of the                                       total parking area to Lessee's floor area be less than five to one. It is further understood and                                   agreed between the Lessors and Lessee hereof that no other supermarket, grocery, meat or                           vegetable market will be permitted to occupy space on the adjacent property owned by the                             Lessors during the term of this lease or the renewals herein granted. The aforementioned                           property shall be known as South Park Avenue Extension, Meadville, Pennsylvania."

 [*543]  On July 1, 1957, Baileys entered into a lease with Quality Markets, Inc. (Quality) for a                                 store building to be constructed on a piece of land abutting the original tract owned by them and                                   located to the north thereof. As of that date, the Baileys did not own this particular land, but                                     

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title thereto (a piece approximately 250 feet wide) was acquired on September 19, 1962, in the                               name of a corporation formed and solely owned by them, known as South Park Plaza, Inc.                               (Plaza). This lease with Quality also contained a restrictive covenant prohibiting occupancy of                         any part of Park Avenue Plaza by any other supermarket except those of Quality and A. & P. 2

On August 31, 1961, Baileys conveyed to Plaza title to the original tract owned by them, which                                 included the land under lease to A. & P. On October 11, 1961, the Baileys assigned their lease                                   with A. & P. to Plaza. On October 12, 1961, this lease was renewed for an additional term of                                     five years, with options to further renew. The restrictive covenant was incorporated therein by                           reference.

On August 27, 1963, Plaza purchased and acquired title to an additional piece of land,                             approximately 250 feet in width, which abutted and was located immediately north of the land                             acquired in September, 1962. On April 13, 1964, Plaza leased a portion of this most recently                               acquired land to Super Duper, Inc. (Super Duper) to be used for the erection and operation of a                                   food market. This lease was subsequently assigned to S. M. Flickinger Company, Inc.

This action followed to enjoin the Baileys and Plaza from permitting the use of the land by Super                                   Duper, or others for a food market. Quality and Super Duper  [*544]  were permitted to                             intervene. After hearing, the chancellor entered an adjudication and decree nisi in favor of the                             Baileys and Plaza, the original defendants. The decree was later made final. A. & P. appealed.

It is the contention of A. & P. that the original tract owned by the Baileys and the additional                                     lands subsequently acquired in the name of Plaza form one integrated shopping center, and that                             the restrictive covenant in its lease precludes the Baileys and Plaza from leasing any portion                             

1 For reasons not pertinent here, this building was never constructed. 2 This is the name under which the shopping center was then known.

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thereof for food market purposes during the term of its lease. On the other hand, the appellees                                 maintain that the land leased to Super Duper, in which neither the Baileys nor Plaza had any                                 interest or title on the dates the A. & P. lease was originally executed and later renewed, is not                                     subject to the restriction.

It is a general rule of contract interpretation that the intention of the parties at the time the                                   contract is entered into governs: Heidt v. Aughenbaugh Coal Co., 406 Pa. 188, 176 A. 2d 400                                 (1962). This same rule also holds true in the interpretation of restrictive covenants: Baederwood,                           Inc. v. Moyer , 370 Pa. 35, 87 A. 2d 246 (1952), and McCandless v. Burns , 377 Pa. 18, 104 A. 2d                                         123 (1954). However, in Pennsylvania, there is an important difference in the rule of                         interpretation as applied to restrictive covenants on the use of land. It is this. Land use                               restrictions are not favored in the law, are strictly construed, and nothing will be deemed a                               violation of such a restriction that is not in plain disregard of its express words: Jones v. Park                                   Lane For Convalescents, 384 Pa. 268, 120 A. 2d 535 (1956); Sandyford Pk. C. Assn. v.                               Lunnemann, 396 Pa. 537, 152 A. 2d 898 (1959); Siciliano v. Misler , 399 Pa. 406, 160 A. 2d 422                                     (1960); and, Witt v. Steinwehr Dev. Corp. , 400 Pa. 609, 162 A. 2d 191 (1960). Also, as stated by                                     Mr. Chief Justice Stern in the first cited case, at 272, in reference to land use restrictions: ". . .                                        [*545]  [T]here are no implied rights arising from a restriction which the courts will recognize;                             that a restriction is not to be extended or enlarged by implication; that every restriction will be                                 construed most strictly against the grantor and every doubt and ambiguity in its language                           resolved in favor of the owner."

It is, therefore, established beyond argument that in order for A. & P. to prevail, the restrictive                                 covenant involved must by its expressed terms clearly indicate that the parties intended it to                             extend to and include after-acquired land. We cannot reach this conclusion. To rule that such is                               included would read into the covenant something that is just not there. It would enlarge and                               extend the restriction by implication which has been proscribed by decisions of this Court for                             many years. Further, even if we assume that an ambiguity exists, it has long been the law that                                   the ambiguity in a restrictive covenant must be construed against the one to be benefited by the                                 restriction. See, Food Fair Stores, Inc. v. Kline, 396 Pa. 397, 152 A. 2d 661 (1959).

In support of its position that the parties intended to include after-required lands within the                             restriction, A. & P. emphasizes two parts of the covenant: the use of the words therein, "if, as and                                     when the lessors develop the adjoining property for business purposes," and, "no other                         supermarket . . . will be permitted to occupy space on the adjacent property owned by the                                 Lessors during the term of this lease or the renewals herein granted." (Our emphasis                           throughout.) It argues that this language lends itself to no other construction but that                           after-acquired lands were intended to be included.

As to the latter portion of the above recited language, A. & P. argues that since the covenant                                   could not possibly extend beyond the term of the lease, or its granted renewals, and the covenant                                 specifically speaks of running  during the term of the lease, or its granted  [*546]  renewals, it                             must mean and deal with all lands owned and acquired during that period. This argument                             overlooks the fact that the parties could have stipulated a shorter period for the restriction to                               remain in force, and that a specific time limitation on the covenant was, therefore, necessary.                             We do not construe it to relate to, or to intend, what A. & P. asserts.

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Nor are we persuaded that the words "adjoining" or "adjacent" connote what A. & P. urges. As                                   3

noted before, at the time its lease was consummated, the Baileys owned land located on the                               southerly side of the highway, and separated thereby from that portion of the tract which                             included the land leased to A. & P. This has since been developed, at least in part, for other                                     business enterprises. It is reasonable to conclude that by the use of the words "adjoining" and                               "adjacent", the parties intended to include this land within the restriction. At the very least, an                               ambiguity exists and, in such a situation, it must be resolved against A. & P. See, Kessler v.                                   Lower Merion Township School District, 346 Pa. 305, 30 A. 2d 117 (1943), and Witt v.                               Steinwehr Dev. Corp. , supra.

  A. & P. also urges that the rule of strict construction applied to land use restrictions should be                                     modified, in view of present day needs and practices affecting land holding and development.                           We find no convincing reason why this long established rule should be modified. If the parties                               intended to include after-acquired land within the restriction, the lease agreement should have                         said so.

It may also be argued that the contract involved should be construed as one in restraint of trade                                   and, therefore, more liberally interpreted than one dealing with a restrictive covenant on land                           use. We cannot comprehend how this would enhance the position of the appellant. Such                           contracts are no more favored in the law than contracts restricting the use of land.

Decree affirmed. Each party to pay own costs. 

Dissent by: ROBERTS 

Dissent

Dissenting Opinion by Mr.   Justice Roberts:

I am unable to agree with the majority's unreasonably narrow construction of the restrictive                           covenant presently in dispute. In my view, the only reasonable construction of the covenant on                             this record is that by the use of the term "adjacent property", appellant, A & P, sought and                                   appellees agreed to bind any land which was assimilated into the shopping center "during the                             term of [A&P's] lease or . . . [its] renewals." The failure of the majority to give effect to this                                       restriction improperly deprives A & P of the benefit of a contractual right for which it bargained                                 and is entitled to have fairly enforced.

The record reveals that in November 1954, defendant-appellees were record owners of certain                         unimproved real estate located in Vernon Township, Crawford County, on which they proposed                         to develop a shopping center. As the first step in this development, they entered into an                               agreement with A & P for the lease of a supermarket to be constructed at the site of the proposed                                       

3  Webster's New International Dictionary (3d ed. 1961), defines "adjacent" as meaning: "Not distant or far off: nearby but not                                       touching".

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center. The lease agreement contained, inter alia, the covenant here in dispute which provided:                           "It is . . . understood and agreed between the Lessors and Lessee . . . that no other supermarket,                                       grocery, meat or vegetable market will be permitted to occupy space on the adjacent property                             owned by the Lessors during the term of this lease or the renewals herein granted."

Until 1957, appellant's supermarket was the sole mercantile establishment in the development.                       Thereafter, other tenants were obtained and by 1962 the center had expanded to the point that the                                 plot of land owned by appellees at the time the lease with A & P was executed had been fully                                       utilized. Desiring to enlarge the shopping center, appellees purchased two contiguous tracts of                         land lying directly to the north of the center. On April 3, 1964, they executed a lease for a                                     portion of the newly acquired tract of land with Super Duper, Inc., for the operation of a                                 supermarket. It is this lease and the right of appellees to enter into it in light of the restrictive                                     covenant contained in the A & P agreement which is the source of the present litigation.

In urging that the lease entered into by appellees with Super Duper, Inc., was in breach of the                                   1954 agreement of the parties, A & P relies on the covenant contained therein that                             defendant-appellees would not permit a competing supermarket "to occupy space on the adjacent                         property owned by . . . [defendant-appellees] during the term of this lease or the renewals herein                                 granted."

Defendant-appellees, however, contend that the restrictive covenant does not extend to property                       acquired subsequent to the execution of the lease agreement with A & P. It is their position that                                   the term "owned" was inserted following the phrase "adjacent property" in order to embody the                             intention of the parties that the covenant encompass only property held by defendant-appellees at                           the time the lease agreement was executed.

A & P on the other hand, asserts that the term "owned" was employed, not in a restrictive sense,                                     but merely to describe the nature of defendant-appellees' relationship to the property sought to be                             restricted, and, therefore, should be construed to apply to subsequently acquired property in order                           to give effect to the purpose for which the covenant was included.

While the majority recognizes the basic principle that the intention of the parties must govern the                               resolution   of this dispute, it applies a rule of construction which precludes the parties from                               

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establishing their true intent and deprives A & P of the benefit of its bargain with                               defendant-appellees. I am unable to agree with the approach taken by the majority. In my view,                               there is no justification for permitting constructional guides to obscure the realities of modern                           commercial life and to defeat the purposes of economic bargaining.

It should be noted that we are not here faced with a challenge to the validity of the covenant. It is                                         recognized and accepted that such covenants are valid and enforceable in this Commonwealth so                           long as they do not result in an unreasonable restraint of trade. See Hoffman v. Rittenhouse , 413                                 Pa. 587, 198 A. 2d 543 (1964);  Cleaver v. Lenhart, 182 Pa. 285, 37 Atl. 811 (1897). There is no                                       contention or suggestion that the present covenant, even if interpreted as urged by A & P, would                                 

4 The guiding principle of contract interpretation that the intention of the parties governs, Heidt v. Aughenbaugh Coal Co. , 406                                       Pa. 188, 176 A. 2d 400 (1962), is equally applicable to restrictive covenants. Parker v. Hough , 420 Pa. 7, 215 A. 2d 667 (1966);                                               McCandless v. Burns , 377 Pa. 18, 104 A. 2d 123 (1954); Baederwood, Inc. v. Moyer , 370 Pa. 35, 87 A. 2d 246 (1952).

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work such an unreasonable restraint; the present restriction cannot be said to be greater than is                               required for the protection of the one for whose benefit it was imposed or to cause an undue                                   hardship upon the person restricted. See Restatement, Contracts, § 515 (1932); cf. Harris                         Calorific Co. v. Marra , 345 Pa. 464, 29 A. 2d 64 (1942). Thus, the sole issue before this Court is                                       whether the covenant was intended by the parties and should be construed to bind after-acquired                             property adjacent to and made part of the shopping center.

In considering the proper approach to the construction of a restrictive covenant in a commercial                             context,  [*550]  it is increasingly recognized that "parties are entitled to a degree of freedom in                               contracting to protect their own economic interests and that [the] controlled development of a                           given business center may be desirable. . . ." In Cragmere Holding Corp. v. Socony-Mobil Oil                                 

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Co. , 65 N.J. Super. 322, 167 A. 2d 825 (1961), the issue, as here, was the applicability of a                                       restrictive covenant to after-acquired property. In refusing to permit the rule of strict                         construction to defeat the intent of the parties and in holding the covenant applicable to property                               thus acquired, the court stated, "the rule of strict construction is counterbalanced . . . by an                                 evolving principle to the effect that covenants to refrain from competition, or to refrain from                             leasing to a competitor, if sufficiently reasonable in scope to avoid being labeled in restraint of                               trade, will be realistically construed in furtherance of their  obvious purpose." Id. at 326, 167 A.                             2d at 827. (Emphasis supplied.) 6

  [*551]  The approach taken by the court in Cragmere is in line with the weight of modern                                 authority and, I believe, represents a sounder approach to the solution of the instant case than                                 

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the uncritical application of the doctrine of strict construction to defeat the obvious purpose for                             which the covenant was included in the lease agreement between these parties. 8

5 Note, Restrictive Covenants in Shopping Center Leases, 34 N.Y.U. L. Rev. 940 (1959). This note reports that a study by the                                         publication "Chain Store Age" in May of 1958 revealed that 40% of the shopping center leases abstracted contained restrictive                                     covenants. Id. at 940 n.1. 6 In Cragmere , a landlord leased premises for use as a gasoline station, and covenanted (with certain specific exceptions not here                                       relevant) not to lease to a competitor of his tenant within 1000 feet of the leased premises. Approximately a year later, the lessor                                             acquired additional real estate within the proscribed area. The court rejected his contention that the covenant should not be                                     construed to bind after-acquired property, stating that the language of the lease should be read so as to attribute to the parties a                                             rational meaning, consonant with their apparent purpose, and that "the crucial feature of this covenant is its applicability 'during                                     the term of this lease or any renewal or extention thereof.' . . . Defendant [lessee] was seeking and, by virtue of the covenant,                                               obtained protection against competition, direct or indirect, from its landlord." Cragmere Holding Corp. v. Socony-Mobil Oil Co. ,                                 65 N.J. Super. 322, 325, 167 A. 2d 825, 826 (1961). 7 See, e.g., Carter v. Adler, 138 Cal. App. 2d 63, 291 P. 2d 111 (D.Ct. App. 1955); Vaughan v. General Outdoor Advertising Co. ,                                             352 S.W. 2d 562 (Ky. 1961); Slice v. Carozza Properties, Inc., 215 Md. 357, 137 A. 2d 687 (1958); Strates v. Keniry , 231 Mass.                                               426, 121 N.E. 151 (1918); Parker v. Lewis Grocer Co., 153 So. 2d 261 (Miss. 1963); Daitch Crystal Dairies, Inc. v. Neisloss, 16                                             Misc. 2d 504, aff'd, 8 N.Y. 2d 723, 201 N.Y.S. 2d 101, 167 N.E. 2d 643 (1960); Topol v. Smoleroff Development Corp. , 264 App.                                               Div. 164, 34 N.Y.S. 2d 653 (App. Div. 1942); South Buffalo Stores, Inc. v. W. T. Grant Co. , 153 Misc. 76, 274 N.Y.S. 549, aff'd                                                 as modified, 248 App. Div. 668, 289 N.Y.S. 918, aff'd without opinion, 273 N.Y. 660, 8 N.E. 2d 335 1937); Renee Cleaners, Inc.                                             v. Good Deal Super Markets of N.J. Inc., 89 N.J. Super. 186, 214 A. 2d 437 (App. Div. 1965); Cragmere Holding Co. v.                                             Socony-Mobil Oil Co. , 65 N.J. Super. 322, 167 A. 2d 825 (1961); Shaft v. Carey , 107 Wisc. 273, 83 N.W. 288 (1900). 8 The majority relies upon that line of cases requiring restrictions contained in deeds to be strictly construed. These cases are                                       presently inapposite. The historical and logical bases for construing a restrictive covenant contained in a deed strictly against the                                     grantor are not compelling in the construction of a covenant not to compete embodied in a lease agreement. In the latter context,                                           the doctrines developed to preclude unreasonable restraint of trade function to protect against undesirable restrictions on land use                                   by reason of such covenants.

8

In ascertaining the intention of the parties, the terms of the restriction should be interpreted in                               light  [*552]  of the apparent object or purpose of the covenant and the conditions existing at the                                 time the lease agreement was executed. Cf. Parker v. Hough, 420 Pa. 7, 12-13, 215 A. 2d 667,                                   670 (1966); McCandless v. Burns, 377 Pa. 18, 19 104 A. 2d 123, 126 (1954); Baederwood, Inc.                                 v. Moyer, 370 Pa. 35, 40-41, 87 A. 2d 246, 248 (1952).

There is no dispute as to the objective the parties sought to achieve by the inclusion of the                                   restrictive covenant in the lease agreement. A & P sought assurance that its expenditures in                             moving into and promoting a new and untried market area would not be jeopardized by                             competition from another lessee of defendant-appellees. There is nothing in the record to suggest                           that such assurances were not intended to reach after-acquired property assimilated into the                         shopping center.

Although there are no cases directly on point in this Commonwealth, other jurisdictions, in                           determining the applicability of a covenant contained in a shopping center lease to after-acquired                           property made part of a shopping center, have held that the apparent purpose of the parties would                                 be defeated were the covenant not to apply to such property. In Carter v. Adler , 138 Cal. App.                                     2d 63, 291 P. 2d 111 (D. Ct. App. 1955), a case presenting an analogous problem, the court                                   recognized that were the restrictive covenant not to bind after-acquired property incorporated                       into a shopping center, the landlord could by devious means circumvent his obligation to his                             lessee. Thus, although no explicit reference to after-acquired property was contained in the                         covenant between the parties, the restriction was found to extend to such property by                           implication: "A restrictive covenant, such as the grant of the exclusive mercantile rights . . . is                                 not merely ornamental words, inserted to please the eye. It is a living expression of the grantor                                 incorporated in a lease as a  [*553]  consideration for the lessee's faithful performance.                         Concomitant with such a covenant is the implied obligation of the lessor not to cancel the                               covenant or derogate from its force by so using his adjoining property as substantially to impair                               the lessee's enjoyment of the leased premises." Carter v. Adler , supra at 70, 291 P. 2d at 115. 9

  On this record it is clear that the apparent purpose and object of the parties would be defeated                                     were the covenant interpreted not to bind adjacent property acquired by the defendant-lessees                         after the execution of the lease with A & P. The lessee, by means of the restrictive covenant,                                   sought protection against the possibility that defendant-appellees would lease adjacent property                     to a competitor. The majority here permits the defendant-appellees to evade the purpose and                           object of the present covenant by the purchase and incorporation of property into the shopping                             center, thus depriving A & P of the benefit of a contractual right bargained for and relied upon.

The majority also refers to the decisions in Siciliano v. Misler, 399 Pa. 406, 160 A. 2d 422 (1960), and Food Fair Stores, Inc. v.                                                 Kline, 396 Pa. 397, 152 A. 2d 661 (1959), both cases involving the construction of covenants restricting competition. However,                                     the result reached in both cases may be supported under traditional principles of contract interpretation without reference to the                                     doctrine of strict construction. 9 In Carter , the lease agreement contained a covenant that the lessee would have "the exclusive rights on Grocery, Delicatessen,                                     Meats, Produce, Fish and Poultry in Valley Market Town . . . ." The landlord (who had purchased the shopping center from the                                             original owner) acquired a contiguous tract of land for the purpose of expanding the center. In a declaratory judgment, the court                                         held that the covenant bound after-acquired property made part of the shopping center. It should be noted that the restrictive                                       covenant in the present case was also made in reference to a particular commercial development known as "a shopping center."

9

In 1954, when the parties entered into their lease agreement, the site of the present commercial                               center was undeveloped land. A & P abandoned an established location in the nearby town of                               Meadville, and expended large sums of money to move into and to promote this untried market                               area. For approximately two years, it was the only commercial tenant on the site of the present                                 shopping center.

 [*554]  While no definite and precise plan existed at the time the lease was executed, both                               parties envisioned the development of the site as a shopping center. Because of the uncertain                               

10

nature and direction of the future expansion, it is unlikely that either party was concerned with                               the precise status of land ownership when the covenant was given; rather, it is more reasonable                               to infer from the circumstances that their primary interest was in meeting A & P's desire for                                 assurance against competition in the event of future development of the site. It is from just such                                 future development that the present economic threat emanates.

Given the circumstances surrounding the execution of the lease, the subject matter of the                           covenant, and the apparent object and purposes of the parties, I am led to the inevitable                               conclusion that the restriction was intended to preclude defendant-appellees from threatening the                       economic position of A & P by permitting a competitor    to lease adjacent property. Since the                               apparent object of the parties was to prevent this type of competition, it is clear that the point in                                     time at which defendant-appellees acquired the site sought to be leased to a competitor is                             irrelevant; the resulting competition would be equally harmful to the leasehold interest of A & P                               whether such property was owned prior to or acquired after the execution of its lease agreement.                               

 [*555]  Absent evidence which would rebut the inference flowing from the circumstances                         11

here present, I can only conclude that the present covenant binds after-acquired property adjacent                           to and made part of defendant-appellees' shopping center.

  Accordingly, I dissent. 

10 The court below found that all the covenants and conditions of the lease agreements were made in contemplation of the                                       eventual development of the site as a shopping center. 11 It should also be noted that the parties themselves appear to have acted on the premise that the covenant bound the property                                           here involved. In 1956, the defendant-appellees sought to obtain a release from the restriction of the covenant for the purpose of                                         leasing after-acquired adjacent property to Quality Markets, Inc. The release was conditionally obtained, but is presently                               inapplicable since the court below found that the conditions precedent to its effectiveness were not met. While I do not consider                                         these circumstances to be controlling, courts, in order to determine the intent of the parties, may take into account subsequent acts                                         tending to show the construction which the parties themselves placed upon the contract. See Beedy v. Nypano Railroad Co., 250                                       Pa. 51, 95 Atl. 343 (1915).

10

Carousel Snack Bars, Inc. v. Crown Constr. Co. United States Court of Appeals for the Third Circuit

November 6, 1970, Argued ; March 9, 1971, Decided 

No. 18250

Reporter 439 F.2d 280 *; 1971 U.S. App. LEXIS 11451 **

CAROUSEL SNACK BARS OF MINNESOTA, INC., Appellant, v. CROWN CONSTRUCTION COMPANY and Purple Cow of Scranton, Inc.

Judges:    [**1]  Biggs, Van Dusen and Rosenn, Circuit Judges. 

Opinion by:  VAN DUSEN 

Opinion

 [*280]  OPINION OF THE COURT 

VAN DUSEN, Circuit Judge. 

This is an appeal from a judgment of the United                   States District Court for the Middle District of               Pennsylvania determining that the contemplated         use of the premises at Viewmont Mall Shopping               Center by defendant Purple Cow of Scranton, Inc.               (Purple Cow) did not violate the lease agreement               between plaintiff, Carousel Snack Bars of           Minnesota  [*281]  (Carousel), and defendant         Crown Construction Company (Crown), and that           plaintiff Carousel was not entitled to injunctive             relief.   1

Plaintiff Carousel entered into a lease agreement             with Crown on August 30, 1967, concerning a               portion of the covered mall known as the               Viewmont Mall Shopping Center, which is located             partly in Dickson City and partly in Scranton,               

1 Carousel Snack Bars of Minnesota, Inc. v. Crown Construction Co.,                   and Purple Cow of Scranton, Inc., No. 69-146 (M.D.Pa., August 27,                     1969). 

Pennsylvania. Article XXXII of the lease provided             that: 

Article XXXII -- Notwithstanding any other           terms or conditions on this Lease, the parties               hereto agree as follows: * * *  2. Article IX, "Use of Premises," Section 1, is                 modified to the extent of the addition of the                 following provision: 

It is agreed that the tenant shall be sole                 operator in the center of a kiosk, a standup-type                 snack bar, restaurant or food store that has as                 its principal business the sale of such items as                 popcorn, caramel corn, candy floss, soft drinks,             soft ice cream, coffee, hot chocolate, milk,             snow cones, hot dogs, and pastries; other             tenants in other types of stores may sell certain                 of such items but not as their principal               business. It is understood, however, that the             foregoing restrictions shall not prevent any           candy store from handling candy as its             principal item, or any bakery from handling             pastries as its principal item, nor the operation               of a delicatessen so long as it does not sell hot                     dogs ready-to-eat, as its principal or major             item. It is further understood that the foregoing               restriction does not apply to Sears, Roebuck             Company, J. C. Penney Company, Thrift Drug             Company, W. T. Grant and Giant Markets, or               other department stores, junior department         stores, drug stores, variety stores and           supermarkets whose leases permit the handling           of all types of merchandise without limitation,             provided any competing operation by said           businesses would be conducted within their           leased premises. * * *

11

On March 17, 1969, defendant Crown entered into               a written lease agreement with Purple Cow, leasing               to that company a portion of the Mall. Article IX                   of this lease provided that: 

1. The demised premises shall be occupied and               used solely for the purpose of operating a               conventional type of restaurant and a           combination cafeteria with counter and table           facilities.

Carousel had notified Crown by letter dated March               11, 1969, that it considered the proposed Purple               Cow establishment to be in violation of the               exclusive use rights afforded it under Section 2 of                 Article XXXII of its lease. Plaintiff failed to               dissuade Crown and Purple Cow from their plans               and subsequently instituted this action for           injunctive relief. 

Plaintiff claims that Article XXXII of the lease was                 violated by the agreement between defendants           because the contemplated Purple Cow         establishment is a "stand-up type" restaurant and             because  [**4]  the principal business of Purple           Cow will be the sale of products covered by                 Section XXXII. 

The defendants' contract is in violation of the               agreement between plaintiff and Crown if Purple             Cow is both (a) "* * * a kiosk, stand-up type snack                       bar, restaurant or food store," and (b) an               establishment that has "as its principal business the               sale of such items as popcorn, caramel corn, candy                 floss, soft drinks, soft ice cream, coffee, hot               chocolate, milk, snow cones, hot dogs, and pastries.               * * *" If Purple Cow falls within the description of                     neither phrase (a) nor phrase (b) above, or if it can                     be described by only one of the two phrases, then                   its operation does not violate Article XXXII of               Carousel's lease.  [*282]  Only if Purple Cow is an                   

2

operation that can be described by both phrases               "(a)" and "(b)" is Article XXXII violated.             However, we have concluded that the Purple Cow               

2 The district court found that the Purple Cow operation was not                     covered by the wording of phrase (b) and stated that "while there                       may be some similarity in the physical layouts of Carousel and                     Purple Cow, the character of the food business to be carried on by                         each is decidedly dissimilar." 

operation is covered neither by phrase (a) nor               phrase (b) and that, as a consequence, the district                 court judgment must be affirmed since Carousel is               not entitled to injunctive relief. 

  The record supports the conclusion that Purple               Cow is not "* * * a kiosk, stand-up type snack bar,                       restaurant or food store" within the meaning of               Section XXXII. 

Article IX of the contract, entitled "Use of               Premises" is helpful in determining exactly what             was intended by the description, "* * * a kiosk,                   stand-up type snack bar, restaurant or food store."               Article IX provides that "the demised premises             shall be occupied and used solely for the purpose of                   operating a snack bar for the sale of hot dogs,                   popcorn, and soft drinks." 

Article XXXII apparently represents an attempt by             the parties to protect Carousel from the competition               of a snack bar where customers ordinarily order,               receive, and eat their food while on their feet.                 Purple Cow's contemplated restaurant is not such             an operation. The evidence indicates that, although             customers are required to order and pick up their                 food at the counter, they are expected to and will sit                     down while consuming their food. There will be                 

3

seating for 102 people, including 60 chairs located               at 15 tables and 42 single chairs with small trays                   attached located along the walls of the restaurant.                 

4

Carousel, on the other hand, has a 15-foot long                  stand-up eating ledge and only four tables and 16                 chairs. We think a comparison of the menus of                 Carousel and Purple Cow is relevant to a               determination of whether the latter is a stand-up               snack bar. Purple Cow offers a choice of several                 complete meals and their menu is divided into               categories under the headings "Breakfast," "Lunch           & Dinner," "Salads," and "Dessert," indicating an             expectation that patrons will order a complete meal               

3 The president of Purple Cow testified that except for the ice cream,                       the food is eaten on the premises at the York restaurant and the same                           is expected to occur at Scranton. 4 Purple Cow will occupy an area of 3300 square feet. Carousel                     occupies an area of 1000 square feet. Findings of fact Nos. 16, 17,                         in memorandum opinion of district court, supra.

12

which ordinarily would be consumed sitting.           5

Carousel, on the other hand, offers a much less                 complete menu which is not divided into meals and                 which is made up primarily of  [*283]  food               commonly thought of as snacks and often eaten               while standing or walking.   6

5 The parties stipulated to the menus of both establishments. The                   menu of Purple Cow, except for beverages, for its Scranton                   operation, is as follows:  Breakfast:

Juices...15 for orange

Coffee, tea and milk...15 cents

Donuts...10 cents

Danish Pastry...25 cents

Toasted English Muffins...25 cents

Cottage Cheese...35 cents

Fruit Cup...35 cents

Lunch & Dinner Menu

Hamburgers...45 cents

Hog Dogs...35 cents

Pork Roll...35 cents

Grilled Cheese...45 cents

Ham & Cheese...70 cents

Fish Cake...35 cents

Fried Clams...95 cents

French Fries...25 cents

Salads

Tuna...60 cents

Fruit...75 cents

Dessert

Hard Ice Cream

Cones...30 cents

Sundaes...55 cents

Milk Shakes...45 cents

Ice Cream Sodas...40 cents

Pie Ala Mode...50 cents &.25 cents

Variety of Pastries...35 cents

Pies...25 cents

The evidence also indicates that Purple Cow will serve its food on                       paper plates with plastic knives and forks, whereas Carousel                 apparently serves its food on napkins. 6 The menu of Carousel is as follows: 

At best, it is ambiguous whether this is a "stand-up                   type" operation within the meaning of the lease               agreement. Pennsylvania law requires that         restrictive covenants in leases must be construed             strictly and that any ambiguity be resolved against               the party benefitting from the restrictions. Great             Atlantic & Pacific Tea Co. v. Bailey , 421 Pa. 540,                   220 A.2d 1 (1966); see also Siciliano v. Misler, 399                   Pa. 406, 160 A.2d 422 (1960); Sandyford Park               Civic Ass'n v. Lunnemann, 396 Pa. 537, 152 A.2d                 898 (1959); Jones v. Park Lane for Convalescents,               384 Pa. 268, 120 A.2d 535 (1956).  In these               circumstances, it is clear that Carousel has not               borne its burden of proof on this issue. 

Although not necessary to our decision in this case                 in light of our disposition of Carousel's first               argument, we also hold that Purple Cow will not                 have as its principal business the sale of "such                 items" as those enumerated in Article XXXII of the                 

Bar-B-Que...50

Coney Island...40

Hot Dog...30

Rolls...15

Donuts...10

Coffee...10 &.15

Milk...15

Coke...15 &.20 &.30

Root Beer...15 &.20 &.30

Sprite...15 &.20 &.30

Fresca...15 &.20 &.30

Tab...15 &.20 &.30

Tahitian Treat...15 &.20 &.30

Orange...15 &.20 &.30

Carbonated Coke Ice...15 &.20 &.30

Carbonated Orange Ice...15 &.20 &.30

Popcorn....15 &.25 &.35

Butter Corn...30 &.50

Caramel Corn...30 &.50 &.90

Floats...35

Cones....15 &.20

Cotton Candy....15 &.25

13

lease agreement. 

Whether Purple Cow sells the covered products as               its principal business depends on whether the             percentage of Purple Cow's total sales represented             by these items exceeds 50%.   The district court                 

7

properly used the figures from Purple Cow's             "similar" facility in York as a basis for the                 computation. An analysis of these figures             

8

indicates that the items which clearly overlap are               hot dogs, soft drinks, coffee and pastries, all of                 which amount to approximately 30.4% of the total               sales of Purple Cow. Thus, whether or not hard ice                   cream, making up 28.3% of Purple Cow's total               sales, should be considered as an item "such as * *                     * soft ice cream" is critical to a determination of                   whether Purple Cow has as its principal business               the sale of the products covered by Article XXXII. 

Carousel sells only soft ice cream and it is "soft ice                     cream," not "ice cream" that is listed in the                 contract. Purple Cow sells only hard ice cream.               Plaintiff's president testified that the basic           difference between soft ice cream  [*284]  and hard               

7 Cf. Sun Drug Co. v. West Penn Realty Company , 439 Pa. 452, 268                         A.2d 781 (1970). We do not agree with the district court's                     determination that "to attempt to include the sale of such standard                     and related restaurant fare as soft drinks, coffee, hot chocolate or                     milk within the proscription of the covenant would be illogical and                     unrealistic." These drinks were specifically listed in the contract and                   must be included in a computation of the contract items sold by                       Purple Cow. 8 The district court found that the "dollar volume percentage of sales"                     at the York facility is as follows:  Hamburgers-cheeseburgers: 31.2%

Hotdogs, French Fries, Fish and Grilled Sandwiches: 15.1%

(Hot Dogs represent 1/3 of 15.1% figure)

Beverages (soft drinks): 14.6%

Coffee and pastries: 10.8%

Ice Cream

Sundaes: 5.7%

Milk Shakes: 5.9%

Ice Cream Sodas: 3.3%

Ice Cream Cones: 10.5%

Plates of Ice Cream: 2.9%

Finding of fact No. 13, district court opinion, supra . 

or conventional ice cream is their relative amounts               of butter fat and that each state sets a percentage                   figure of butter fat content which must be met                 before a product can be called ice cream, instead of                   soft ice cream or ice milk. See also testimony of the                     president of Purple Cow at N.T. 74-75. The parties                 stipulated that the product sold at Carousel             "contains six percent butter fat, and that by               statutory definition in the Commonwealth of           Pennsylvania this is known as "ice milk" * * *."                   The president of Carousel himself noted that there               is a distinct flavor difference between soft and hard                 ice cream. The district court found that "these                 

9

products are essentially different in composition,           texture and ingredients and cannot be considered as               similar in the circumstances of this case." We               cannot say the trial court's finding of fact is clearly                   erroneous, particularly in light of the Pennsylvania             rule that restrictive covenants are to be construed               strictly with all ambiguities being construed against             the party benefitting from the restriction. See Great               Atlantic & Pacific Tea Co. v. Bailey, supra.               Therefore, we accept the view that hard ice cream                 is not an item "such as * * * soft ice cream" and                           

10

9 Q. They're [soft and hard ice cream] certainly not similar in taste,                       are they? 

A. I'm a vanilla ice cream man, and I know that there's a                         significant difference in vanilla ice cream.  Q. Say like between Breyer's vanilla and the ice cream you                     sell; a distinct difference?  A. Well, say between four and five different suppliers in this                     area. There's a distinct flavor difference. There is a flavor                   difference between soft ice cream mix and those various                 flavors of vanilla that I so dearly love.  Q. There is a total difference when you bite into it, isn't there?  A. There certainly is.

10 In Reeve v. Hawke, 37 Del.Ch. 25, 136 A.2d 196, 198 (1957), the                         Delaware Chancery Court was faced with a suit by lessee, who                     operated a Tastee-Freez establishment, against the operator of a                 diner. Lessee claimed that the defendant-lessor violated a contract                 between them providing that the lessor would not rent or lease land                       near the Tastee-Freez "for the purposes of conducting a business                   similar to that authorized by the aforesaid Indenture of Lease. The                     diner was erected on land owned by the lessor, was located near the                         Tastee-Freez, and sold hard ice cream. In the initial agreement                   between the diner and the lessor, the diner had reserved the right to                         sell "ice cream or allied products in the regular course of his diner                         business." The court found that the diner's owner reasonably                 assumed that the Tastee-Freez was entitled to be protected solely in                     dispensing Tastee-Freez soft ice cream. In concluding that               

14

that the percentage of ice cream sold by Purple                 Cow should not be included in the computation of                 products sold by Purple Cow which are covered by                 Article XXXII. Since the total of such products               does not reach 50%, Purple Cow has not made the                   sale of the items covered by the contract a                 "principal" part of   its business. 

Carousel has failed to establish either that (a)               Purple Cow is "* * * a kiosk, stand-up type snack                     bar, restaurant, or food store" or that it "has as its                     principal business the sale of such items as               popcorn, caramel corn, candy floss, soft drinks, soft               ice cream, coffee, hot chocolate, milk, snow cones,               hot dogs, and pastries." Consequently, the           judgment of the district court will be affirmed. 

Tastee-Freez was only entitled to protection in the dispensing of soft                     ice cream, the court stated: "There is no doubt in my mind that soft                           ice cream as a foodstuff differs substantially from conventional or                   hard ice cream. Admittedly the two products contain essentially the                   same ingredients, but they are processed to different consistencies at                   different temperatures by different machinery, and they are               dispensed in different fashion. People in the ice cream industry as                     well as the general public look on the two products as separate and                         distinct foodstuffs, a fact which Reeve [Tastee-Freez] concedes." Id.,                 136 A.2d at 201. We note that Purple Cow plans to carry 24 flavors.                           There is no evidence that Carousel will carry more than the two or                         three flavors customarily dispensed by soft ice cream machines. We                   also note the fact that cones at Purple Cow will cost considerably                       more than cones at Carousel. These facts support our belief that the                       two establishments are selling essentially different products. 

15

Gralka v. Isaacson Superior Court of Pennsylvania

December 13, 1988, Argued ; March 31, 1989, Filed 

No. 1621 PITTSBURGH 1987

Reporter 383 Pa. Super. 244 *; 556 A.2d 888 **; 1989 Pa. Super. LEXIS 832 ***

Charles GRALKA and Janet Gralka, his Wife, Appellees, v. Yvette ISAACSON, Trustee of the Greentree Road Shopping Center, Honeybaked Ham Co., a Corporation, Kenneth Isaacson, Managing Agent for the Trustee and as Part Owner of the Greentree Road Shopping Center, Anna M. Abromson, Anthony Papadakis, Kalmaine Graham, Pearl Fine Gross, Jeffrey Isaacson and Yvette Isaacson as Part Owners of the Greentree Road Shopping Center, Yvette Isaacson as Trustee of the Estate of Morris Deakter, Deceased, and as Managing Partner of the Greentree Road Shopping Center and the Greentree Road Shopping Center, a Partnership. Appeal of Yvette ISAACSON, Trustee, Greentree Road Shopping Center, Kenneth Isaacson, Managing Agent for the Trustee and as Part Owner of the Greentree Road Shopping Center, Anna M. Abromson, Anthony Papadakis, Kalmaine Graham, Pearl Fine Gross, Jeffrey Isaacson and Yvette Isaacson as Trustee of the Estate of Morris Deakter, Deceased and as Managing Partner of the Greentree Road Shopping Center, Appellants

Subsequent History:     Reargument Denied May 1, 1989. 

Prior History:  Appeal from the Order entered November 20, 1987 in the Court of Common Pleas of                               Allegheny County, Civil Division, at No. GD 87-18832. 

Disposition:  Finding no support for the trial court's ruling, we reverse. Order reversed. 

Counsel:  Elaine V. Preston, Pittsburgh, for appellants.

Louis C. Long, Pittsburgh, for Gralka, appellees. 

Judges:  Brosky, Del Sole and Johnson, JJ. 

Opinion by:  DEL SOLE 

Opinion

 [*246]   [**889]  This is an appeal from a preliminary injunction which directed the HoneyBaked Ham                             Company to cease and desist from selling any food item from the premises it leased from Appellant,                                 landlord. This injunction was based upon the court's finding that HoneyBaked's lease violated the terms of                               the landlord's existing lease with Appellee. Because no reasonable grounds exist to support the court's                             conclusion that a restrictive covenant was violated, we reverse the trial court's order.

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Gralka v. Isaacson

Where a preliminary injunction has been granted, our scope of review is limited to examining the record                                 to determine whether there were any apparently reasonable grounds for the trial court's action. City of                               Scranton v. Baiderman , 74 Pa.Commw. Ct. 367, 460 A.2d 1199 (1983). The court's decision will be                               interfered with only where there are no grounds to support the decree or the rule of law relied upon was                                       misapplied or palpably erroneous. Willman v. Children's Hospital of Pittsburgh, 505 Pa. 263, 479 A.2d                             452 (1984). A preliminary injunction is properly issued only where there is urgent necessity to avoid                               injury which cannot be compensated for by damages. Independent State Store Union v. Pennsylvania                           Liquor Control Bd., 495 Pa. 145, 432 A.2d 1375 (1981) It should never be awarded except where the                                   plaintiff's rights are clear and unless greater injury will be done by refusing it than by granting it. Id.

In this case the injunction was issued based upon the court's conclusion that a restrictive covenant in the                                   Appellee's lease was violated. Appellee had entered a lease with Appellant, landlord, to rent space in                                [**890]  which to open a store, The Uncommon Market. Article IX of the lease provided a "Use Clause                                   and Restrictions." It permitted the leased premises to be used "for the sale of any and all customary                                   merchandise sold in other Tenant-operated stores." It also offered Appellee the following restriction as                           protection from competition:

Landlord will not lease or sell to, or otherwise permit the occupancy by, any one tenant (or its                                   affiliates) of more  [*247]  than Two hundred (200) square feet of floor area for the sale or display of                                     International Foods . (emphasis added).

Other tenants enjoyed similar protections and a list of these tenants and their protected products was                               attached to the lease. A special agreement was made between Appellee and another Tenant, Pier I                               Imports, permitting the sale of certain items which would otherwise be violative of Appellee's restrictive                             covenant. These items were described in the agreement attached to the lease as "tins of imported cookies,                                 candies, and/or other food items." (emphasis added).

The distinct nature of Appellee's business is described in one remaining section of the lease agreement.                               Section 24 indicates that Appellee will be offering to the public written and photographic material not                               printed in the United States of America. Due to the potential that certain members of the public may find                                     this material to be offensive, a provision for the removal of this material was made. Included in this                                    provision is the following statement: "Both Landlord and Tenant agree that the primary purpose of this                               lease is for a retail store purveying foods from foreign lands ." (emphasis added).

Subsequent to the execution of this lease landlord entered another lease agreement with HoneyBaked                           Ham. HoneyBaked sought to occupy a storeroom for the sale of its specially prepared spiral sliced hams.                                 Customarily 95% of the sales generated from a HoneyBaked Ham store are from these hams which are                                 raised and prepared domestically. The hams are supplied, cooked and smoked by a supplier in South                               Dakota, and the store tops the ham with a glaze and slices it in a spiral fashion.

Appellee filed a complaint in equity seeking to have HoneyBaked cease and desist from continuing its                               planned commercial operations at the shopping center. This relief was sought based upon Appellee's claim                             that by the terms of its lease it enjoyed an exclusive right to sell food products in the shopping center and                                         that HoneyBaked would  [*248]  violate the terms of this exclusivity provision if permitted to operate its                               

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Gralka v. Isaacson

store. In ruling on Appellee's request the court focused on the terms "international foods" which  appear                               in the exclusivity provision of Appellee's lease. The court found that international foods are foods from                               any nation including the United States of America. Thus although the hams were supplied and produced                               domestically, the court found that they were an international food and the sale of such from the                                 HoneyBaked store would violate the exclusive protection afforded Appellee in its lease.

[...]

 [**891]  Turning now to the central issue in this case; the court's interpretation of the term "international                                 foods." As noted the lease granted Appellee's protection in the form of a restriction preventing the                               landlord from leasing premises in the shopping center to another business selling "international foods."                           Although the hams in this case were produced in this country the court found that their sale would violate                                     the terms of this restrictive covenant.

It has been held that nothing will be deemed a violation of a restrictive covenant that is not in plain                                       disregard of its  [*249]  express words. Berger v. Ackerman , 293 Pa.Super. 457, 439 A.2d 200, 203                               (1981). "Moreover, this court cannot enlarge a restriction by implication for the restriction must be                             construed most strictly against the one asserting rights under it." Id.  When construing a restrictive                             covenant contained in a contract it must be recalled that the agreement must be interpreted as a whole with                                     the ordinary meaning of language throughout the country given to the words of the contract. Pines Plaza                                 Bowling, Inc. v. Rossview , 394 Pa. 124, 145 A.2d 672 (1958).

The term "international foods" was found to encompass food products which are produced in the United                               States. Appellee submits that this is an appropriate interpretation in view of the fact that international                               refers to all nations. We do not believe such an interpretation is reasonable or applicable to the provisions                                   of this contract.

Reading the contract in its entirety we find that it permits Appellee to use their retail space for many                                     purposes, but only one use is protected by the restrictive covenant, the sale of "international foods." The                                 contract reveals that these food items are the primary product to be sold at Appellee's store and in Section                                     24 of the lease it is stated that the primary purpose of the lease is to offer for sale "food from foreign                                           lands." These clauses read in conjunction which each other support a finding that the terms "international                                foods" refer to foods carried in Appellee's store which are from countries other than our own. Since the                                   primary purpose of Appellee's business is to sell food from foreign lands, it would follow that it is this                                     competition which Appellee would seek to have eliminated by means of a restrictive covenant. Further                             support for this interpretation can be found in the Rider to the lease which constitutes an agreement                                 between Appellee and its fellow tenant Pier I. Therein it is stated that Pier I's sale of imported cookies,                                     candies, and/or other food items would be within the exclusivity clause granted Appellee in its lease. The                                 reference to imported items is further evidence of an intention to restrict other tenants from carrying                               products which are not produced in this country.

 [*250]  In addition, the interpretation offered by Appellee and made by the trial court is misguided. If the                                   words "international foods" were to protect the competitors from offering for sale any food items from                               any country, the contract could have simply restricted the sale of "food." The inclusion of the word                                 "international" would be unnecessary. We cannot accept the premise that the drafter of this  contract                             

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Gralka v. Isaacson

provision, Appellee, included language with no purpose. A term in a contract should not be treated as                                 mere surplusage. Instead, it appears plain that the parties intended to protect Appellee's store, which                             featured foreign food, from similar competition. By including the term "international foods" the landlord                           was restricted from entering into a lease with another tenant who would likewise offer for sale food items                                   which came from other lands. The landlord's lease with HoneyBaked did not violate these terms.                             HoneyBaked offered for sale domestic hams, not foreign, imported and/or international items. Products                         which are produced in the United States of America are not protected by Appellee's restriction on                               "international foods."

Finding no support for the trial court's ruling, we reverse. Order reversed. 

19

Heroic Hoagie v. Massa Common Pleas Court of Monroe County, Pennsylvania

May 13, 1996, Decided 

no. 926 Civil 1996

Reporter 1996 Pa. Dist. & Cnty. Dec. LEXIS 238 *; 32 Pa. D. & C.4th 359 **

Heroic Hoagie Inc. v. Massa

Counsel:   Joan M. Sullivan , for plaintiff.

Vance E. Meixsell , for defendants Massa and Athens.

Thomas P. Sundmaker , for defendant Kasa's Inc. 

Judges:  O'BRIEN, J. 

Opinion by:  O'BRIEN, J. 

Opinion

 [**360]  O'BRIEN, J., May 13, 1996 --

I. FINDINGS OF FACT

(1) On May 20, 1993, Anthony Massa Jr. and James P. Athens, hereinafter referred to as landlords,                                 entered into a five year lease agreement with Heroic Hoagie Inc., through its president Melissa Masure,                               hereinafter referred to as tenant, for suite 8 of the Regency Plaza on Route 209 in Brodheadsville, Monroe                                   County, Pennsylvania. The lease contained the following pertinent provision:

"ARTICLE 6. RECIPROCAL LIMITATIONS

"Exclusive Business Rights

"6.01 LESSOR will not in any way lease out, operate, or otherwise provide or allow any premises under                                   LESSOR'S control to establish, conduct, or offer the following types of merchandise or services: retail                             food sales or convenience store.

"Tenant's Refraining From Competition

 [**361]  "6.02 LESSEE will not, during the term of this lease, in any way establish or conduct the                                   following business or service: the sale of alcoholic beverages or pizza.

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Heroic Hoagie v. Massa

"Enforcement of Exclusive and Noncompetitive  Rights

"6.03 It is agreed that either LESSOR or LESSEE may bring an action against the other, or against any                                     third party involved, for injunctive relief by way of enforcement of the above provisions on restricted use                                 of space and competition, after giving of written notice by the party aggrieved under this lease to the other                                     lease party of the alleged violation and allowing seven days' time for such party to take satisfactory action                                   to remedy the breach. In addition to the above rights, after passage of the above seven days' notice, the                                     aggrieved party may elect at any time until actual remedy of the breach to cancel the lease on 30 days'                                       written notice." (See plaintiff's exhibit 1.)

(2) On December 15, 1995, the landlords entered into a lease with Kasa's Inc. through its president,                                 Michael M. Kasapov, hereinafter referred to as new tenant, for suites 1 and 2 of the Regency Plaza. The                                     term of the lease was for an original period of 13 1/2 months with various option provisions extending out                                     to 15 years. The lease with the new tenant contained the following pertinent provision:

"Lessor agrees to allow lessee to sell all items listed on attached menu -- exhibit C and be made part                                       of  [*3]  said lease agreement. Lessor also agrees lessee has option to install hot and cold salad bar, dinners                                   and any items that are not presently served by Heroic Hoagie. There will be no limit on menu except cold                                       hoagies until Heroic Hoagie leaves. Lessor will give lessee first option to add cold hoagies etc. to lessee                                   menu, before passing  [**362]  this option on to a new tenant." (emphasis added) (See defendants' exhibit                               5.)

(3) Although pizza sales comprise more than half of the new tenant's business, the new tenant also offers                                   for sale several retail food items also furnished by the original tenant. (Compare plaintiff's exhibits 3 and                                 5.) Twenty-one percent of the new tenant's food sales are for items already sold by the original tenant.

(4) The original tenant does not sell alcoholic beverages or pizza. The new tenant has applied to obtain a                                     liquor license for its premises.

(5) On January 19, 1996, the original tenant, through its counsel, invoked the provisions of paragraph 6.03                                 of its lease and notified the new tenant of its intention to seek injunctive relief.

(6) The plaintiff has suffered a substantial loss of business income since the new tenant opened its                                 enterprise   which could result in a closing of the original tenant's business.

II. DISCUSSION

The plaintiff's burden to secure a preliminary injunction is to show (1) that the issuance is necessary to                                   prevent immediate and irreparable harm which could not be compensated by damages, (2) that greater                             injury would result from the refusal to issue an injunction than will be caused by its issuance, (3) that it                                       properly restores the status quo which existed before the improper action was taken by the offending                               party, (4) that the determination that the activity sought to be restrained is actionable and, (5) that such an                                     injunction can prevent the wrong. Albee Homes Inc. v. Caddie Homes Inc. , 417 Pa. 177, 207 A.2d 768                                   (1965).

21

Heroic Hoagie v. Massa

 [**363]  In spite of the poor draftsmanship demonstrated by both leases at issue in this proceeding, the                                 intent of the parties in certain respects is clear. It is apparent that the landlords intended the original tenant                                     to have some exclusivity of selling all food items other than pizza and alcoholic beverages in the plaza. It                                     is also clear that the new tenant was aware that there would be some restrictions on the items it could offer                                         so as not to compete with the original tenant's business. Since our Supreme Court has held in                                 Commonwealth v. Rosetta Oil Inc. , 535 Pa. 343, 635 A.2d 139 (1993) that being forced out of business                                   represents irreparable harm, the evidence at hearing establishes the right of the plaintiff to some injunctive                               relief. However, the injunctive relief granted should be tailored to be equitable to both parties. Since the                                 new tenant's operation will include a liquor license and full dinner menu which goes beyond the offerings                                 of the original tenant, that aspect of the business should not be precluded. However, the new tenant should                                   be precluded from selling the items offered by the original tenant's menu.

Restrictive covenants in commercial leases are presumed valid so long as the protection afforded the                             tenant does not cause undue hardship to the restricted party. Great A & P Tea Co. Inc. v. Bailey , 421 Pa.                                         540, 220 A.2d 1 (1966); J.C. Penney Co. v. Giant Eagle Inc., 813 F. Supp. 360 (W.D. Pa. 1992). In the                                         instant case, the plaintiff gave up the right to serve pizza and to obtain a liquor license in exchange for the                                         exclusive right to sell other retail food items   in the Regency Plaza. This bargained-for exchange is                               entitled to protection in a court of equity. While the new tenant clearly has the right to sell pizza and                                       alcoholic beverages (when a liquor license is granted), it should not be permitted  [**364]  to sell, for                                 example, a cheese steak sandwich in direct competition with the original tenant.

III. CONCLUSIONS OF LAW

(1) The caption of this proceeding should be corrected to accurately reflect the identity of the parties as set                                     forth on the documents introduced at hearing.

(2) The lease agreement between the plaintiff original tenant and the landlords contained a valid and                               enforceable restrictive covenant.

(3) The lease between the landlords and the new tenant makes apparent the new tenant's knowledge of the                                   existence of the restrictive covenant in favor of the original tenant.

(4) Injunctive relief is necessary to prevent immediate and irreparable harm and that greater injury would                               result from the refusal to issue an injunction than will be caused by its issuance.

(5) The injunctive relief granted will restore the status quo which existed prior to the commencement of                                 the new business enterprise and relief is tailored to correct [*7]  the wrong.

(6) Since the new tenant testified that 21 percent of its sales constituted items overlapping with the menu                                   of the plaintiff, this category of sales should constitute a proper basis for an injunctive bond.

DECREE

And now, May 13, 1996, following hearing, it is ordered as follows:

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Heroic Hoagie v. Massa

(1) Landlords Anthony Massa Jr. and James P. Athens are enjoined from entering into any further leases                                 for any retail food establishment in the Regency Plaza during  [**365]  the term of their lease with the                                   plaintiff Heroic Hoagie Inc.

(2) New tenant Kasa's Inc. and its president, Michael M. Kasapov, are enjoined from selling any food                                 items described on the menu of the plaintiff Heroic Hoagie Inc. introduced in evidence at hearing as                                 plaintiff's exhibit 5.

(3) In accordance with the provisions of Pa.R.C.P. 1531(b)(1), the plaintiff shall file a bond with the                                 prothonotary of Monroe County in an amount equal to the 21 percent overlap sales during the months of                                   March and April 1996. The new tenant is directed to file of record an affidavit, sworn to by an accountant                                       or other bookkeeping professional, setting forth the amount of such overlap sales. Plaintiff's bond shall be                               filed within five  [*8]  days of the filing of the foregoing affidavit by the new tenant.

(4) All defendants shall bear the costs of these proceedings. Further proceedings shall be in accordance                               with the Pennsylvania Rules of Civil Procedure.

23

Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship  United States District Court for the District of Maryland

January 24, 2013, Decided

Civil No. L-11-1864

Reporter 918 F. Supp. 2d 428 *; 2013 U.S. Dist. LEXIS 10102 **; 84 Fed. R. Serv. 3d (Callaghan) 1052; 2013 WL 276004

REDNER'S MARKETS, INC., Plaintiff v. JOPPATOWNE G.P. LIMITED PARTNERSHIP, Defendant

Subsequent History:  Injunction granted at Redner's Mkts., Inc. v. Joppatowne G.P. Ltd. P'ship, 2013 U.S. Dist. LEXIS 83075 (D. Md., June 13, 2013)

Judgment entered by Redner's Mkts., Inc. v. Joppatowne G.P. Ltd. P'ship, 2013 U.S. Dist. LEXIS 96991 (D. Md., July 11, 2013)

Affirmed by Redner's Mkts., Inc. v. Joppatowne G.P. Ltd. P'ship, 2014 U.S. App. LEXIS 23728 (4th Cir. Md., Dec. 17, 2014)

Counsel:  For Redner's Markets, Inc., Plaintiff: Jason W Hobbes, John J Miravich, Samuel W Cortes, LEAD ATTORNEYS, PRO HAC VICE, Fox Rothschild LLP, Exton, PA; John Breckenridge Smith, LEAD ATTORNEY, Fox Rothschild LLP, Wilmington, DE.

For Joppatowne G.P. Limited Partnership, Defendant: Charles M Kerr, LEAD ATTORNEY, Kerr McDonald LLP, Baltimore, MD.

Judges:  Benson Everett Legg, Senior United States District Judge.

Opinion by:  Benson Everett Legg

Opinion

 [*431]  MEMORANDUM OPINION

I. Introduction

Plaintiff, Redner's Markets, Inc. ("Redner's"), operates a chain of grocery stores, one of which is located                               in the Joppatowne Plaza Shopping Center. In this case, Redner's sues its landlord, Joppatowne G.P.                             Limited Partnership ("Joppatowne"), for breach of a restrictive covenant found in its lease. This Court has                               diversity jurisdiction over the dispute because Redner's and Joppatowne are citizens of different states.                           See 28 U.S.C. § 1332. Following discovery, the case was tried before the Court, sitting non-jury. This                                 Memorandum states the Court's findings of fact and conclusions of law as is required by Federal Rule of                                   Civil Procedure 52. For the reasons stated herein, the Court concludes that Joppatowne has breached the                               

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Restrictive Covenant. Further proceedings are required, however, to determine the full extent of the                           breach and to award relief.

II. The Dispute

Redner's is a Pennsylvania corporation that operates 40 or so grocery stores in Pennsylvania, Maryland,                             and Delaware. Redner's stores sell the type of items that one would typically find in a grocery store or                                     supermarket, but at lower prices made possible by the company's no-frills, food warehouse approach.                           Joppatowne owns and manages the Joppatowne Plaza Shopping Center ("Shopping Center"), which is                         located in Joppatowne, Maryland at the intersection of Maryland Route 40 and Joppa Farm Road.

Following extensive negotiations conducted by real estate experts, Redner's and Joppatowne, on                       November 23, 2005, executed a 61-page, 20-year lease (the "Lease") involving approximately 54,000                         square feet of retail space. On November, 20, 2006, the parties executed an amendment to the Lease that                                   authorized Redner's to build and operate a small gas station on the Shopping Center's parking  [*432]  lot.                                  Both the grocery store and the gas station are currently open for business. 1

The dispute concerns three sections of the Lease: Article XIII (Restrictive Covenants), Article IV (Rent),                             and Article XX (Default by Tenant or Landlord). Briefly stated, Redner's contends that Joppatowne                           violated the Restrictive Covenant by permitting an Amish Farmer's Market (the "Market" or the "Farmer's                             Market") that directly competes with Redner's. Joppatowne denies that the Market is a prohibited use.  

[...] 

III. The Amish Farmer's Market

The departure of a major tenant created a substantial vacancy in the Shopping Center. The vacancy                               attracted the attention of Brian Miller, an entrepreneur who operates a large, successful flea and farmer's                               market in   the North Point Plaza Shopping Center in Dundalk, Maryland. Miller was interested in opening                             a second flea market and farmer's market at Joppatowne.

On October 21, 2009, after negotiations, Joppatowne entered into a 10-year lease with, JTF, LLC ("JTF"),                               a Maryland limited liability corporation that Miller created to do business at the Shopping Center. Miller                                 

2

is JTF's sole employee. All told, JTF leases 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                                 

3

1  The parties agreed that Redner's could not open a convenience store in connection with the gas station. Redner's was permitted to open a                                             small payment booth selling limited incidental items, such as chewing gum and cigarettes. 2 Although the JTF lease was signed on October 21, 2009, the lease term did not begin until March 1, 2010. The initials JTF apparently stand                                                   for Joppatowne Flea Market. 3 As will be discussed infra, Redner's and Joppatowne disagree as to the square footage of the JTF space as a whole and as to the portion                                                   devoted to the Amish Farmer's Market. Redner's contends that the relevant measurements are 109,943 square feet (JTF overall)  and 12,319                                       

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Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

Market. A sign at the entrance clearly designates the area inside the enclosure as the "Amish Farmer's                                 Market."

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 agreed to defend and                               indemnify JTF in the event of a suit. In a letter agreement dated October 15, 2009, Joppatowne 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. Joint Trial Ex. 18.

The Amish Farmer's Market opened on March 17, 2011. This case focuses on eight stalls that Redner's                                 claims violate the Restrictive Covenant. Seven of these  [*433]  stalls are located inside the enclosure.                               

4

Each of the seven is roughly rectangular in shape with counter or display space on the perimeter and                                   working or storage space inside. The enclosure also includes two seating and table areas, as well as a                                     

5

shopping cart pick up  and return area.

The seven stalls inside the enclosure are part of a loosely organized group headed by Menno Beiler, who                                   owns and operates Beiler's BBQ. JTF and Beiler signed an untitled, two paragraph agreement dated                             December 2, 2010. This document reads in pertinent part: "We agree to pay JTF... for 11,500 sq. ft.... for                                     duration of 5 year total period.... Each standholder must have liability insurance JTFLLC as rider." Pl.'s                               Trial Ex. 1. The term "standholder" refers to the proprietors of the seven stalls or stands within the                                   enclosure. The standholders, all of whom are Amish, do not have a written contract among themselves or                                 with Beiler. They have a handshake agreement among themselves to split the rent to JTF according to the                                   square footages of their respective stalls. Each pays one seventh of the rent owed for the commonly shared                                   space within the enclosure. The common space includes everything outside the perimeters of each stall,                             including the aisle space and the seating areas. Beiler collects the rent and pays it to 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. 6

The eighth stall, All Fresh Seafood & Produce ("All Fresh"), is located outside the enclosure. The                               proprietors of All Fresh, John Walters and Mary Roth, are neither Amish nor part of the Beiler group. All                                     Fresh has a separate lease with JTF. Although All Fresh is rectangular in configuration, the rectangle is                                   

7

not enclosed, and customers have access to a number of display areas and coolers located inside.

square feet (the Amish Farmer's Market and All Fresh Seafood & Produce, a stall outside of the enclosure). Joppatowne asserts that the                                           numbers are 104,531 square feet and 12,068 square feet, respectively. Despite this disagreement, the numbers stated above are reasonably                                     accurate. 4 These eight retailers have been referred to variously as vendors, stalls, proprietors, retailers, and stores. The Court will use these terms                                         interchangeably. 5 Depending on their relationship to the wall of the enclosure and to each other, stalls differ as to the number of sides available for display or                                                   counter space. 6 Beiler's BBQ and Beiler's Baked Goods have different owners. 7 It is unclear whether the All Fresh lease is written or oral.

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Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

Redner's also challenges two "Vendor Stalls" located outside the enclosure. Information as to the                           proprietor or proprietors of the two small Vendor Stalls, both of which are located outside the  enclosure,                               is absent from the record. 8

IV. Procedural History

Although the case was originally filed in the United States District Court for the Eastern District of                                 Pennsylvania, it was transferred to this Court on July 7, 2011. Neither side prayed a jury or filed a                                     dispositive motion. Following discovery, the case proceeded directly to a seven-day bench trial. Because                             

9

the Lease, particularly Article XIII, is long and complicated, all agreed that the Court would benefit from                                 a thoroughly developed evidentiary  [*434]  record. 10

[...] 

VI. Analysis of Restrictive Covenant

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                         

11

Use Covenant." Section 13.01 is divided into three subsections. Subsection (a) (Use Covenant) lays out                             the restrictions. Subsection (b) (Exceptions to Use Covenant) lists a number of retail operations that are                                [*440]  expressly "not preclude[d]" by subsection (a). Subsection (c) (Clarification of Exceptions to Use                           Covenant)) refines the exceptions as they relate to the sale of frozen foods and dairy products.

The Lease is a contract. The Court must apply the rules of contract construction when interpreting the                                 Lease and its provisions. Reading the Lease as a whole, the Court first asks whether Article XIII is clear                                     and unambiguous. If so, the Court will interpret the language "as a matter of law."   [...]

Despite the complexity of Article XIII, the Court concludes that its meaning is clear. As an initial matter,                                   Article XIII is in effect. Section 13.01 stipulates that the Restrictive Covenant applies "[d]uring the initial                               Term and any Renewal Term, if any, and so long as Tenant is operating the Demised Premises as a full                                       

8  The Vendor Stalls, which sell convenience store items such as toiletries and dry cereal, are small, roughly 499 square feet and 148 square                                               feet respectively. Because the record is inadequate to decide the matters related to the Vendor Stalls, the Court is referring those matters to a                                               United States Magistrate Judge for a report and recommendation. 9 For a variety of reasons, the seven trial days were not consecutive. 10 In an Order memorializing the pretrial conference, the Court stated that it would "reserve ruling on whether the language of the Restrictive                                           Covenant is ambiguous or not" and would "receive parole evidence, including the relevant iterations of the Restrictive  Covenant." Docket No.                                     56. Interpreting and applying the Lease has required the Court to make legal and factual decisions. 11  The Addendum to this opinion includes a copy of Article XIII.

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Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

service supermarket...." The Lease is in its original Term and Redner's is operating a full service                               supermarket at Joppatowne. Hence, Article XIII applies. 12

Article XIII applies even  though Joppatowne, as Landlord, does not itself operate any of the retail stores                               or stalls that Redner's claims violate the Restrictive Covenant. Section 13.01 provides that Landlord "shall                             not lease to, use, or permit to be used or otherwise allow any portion of the Shopping Center ... to be used                                           [in a prohibited manner]." JTF is a tenant of Joppatowne, and the stores and stalls are operated by JTF's                                     subtenants. Article XIII obligates Joppatowne to take measures, including the filing of suit, to terminate                             any prohibited use. Joppatowne has taken no measures to enforce Article XIII against either JTF or the                                 subtenants.

a. Section 13.01(a): Use Covenant

Section 13.01(a)(i) prohibits four competing uses: "a food supermarket, butcher  [*441]  shop, seafood                         shop, or 'grocery store.' " Two of those terms, butcher shop and seafood shop, are not specifically                                   

13

defined in the Lease. According to Merriam-Webster, a "shop" is a "building or room stocked with                                   14 15

merchandise for sale: store." The secondary definition, focusing on the older word, "shoppe," is "a small                               retail establishment or a department in a large one offering a specified line of goods or services." The                                   dictionary gives as examples "a millinery shop" and "a sandwich shop." The relevant dictionary definition                             of "butcher" is "a person who slaughters animals or dresses their flesh," or "a dealer in meat." "Seafood" is                                     defined as "edible marine fish and shellfish."

We now turn to the other two terms. In common parlance, "grocery store" and "food supermarket" have                                 different connotations. In Great Britain, the noun "greengrocer" connotes a small shop selling fruits and                             vegetables. In the United States, the noun "grocery" retains to a degree the old association with smallness                                 and produce; the produce section in a supermarket is sometimes referred to as the "grocery section."                                 

16

The Lease, however, does not differentiate between a "food supermarket[s]" and a "grocery store." Both                             terms have the exact same definition. Because "food supermarket or grocery store" is a defined term, the                                   

17

Court must use the Lease's definition. A use that might fit the common understanding of these terms is not                                     prohibited unless that use fits within one of the four definitions laid out in section 13.01(a)(ii)(1)-(4). 18

12 Joppatowne contends that Redner's cannot enforce the restrictive covenant because it is in default in paying percentage rent. As is explained                                         in Part V(c) infra, Redner's is not in default because it owes no percentage rent on gasoline sales. 13 The last sentence of subsection 13.01(a)(i) is irrelevant to this controversy. That sentence begins: "Notwithstanding anything herein to the                                     contrary, the restriction on other lands within five (5) miles shall prohibit...." 14 The Court discusses the terms butcher shop and seafood shop in Part VI(b) of this opinion, which deals with the exceptions to the                                             Restrictive Covenant. 15 All of the dictionary definitions in this Opinion are from the most current version of Merriam-Webster, which can be found online at                                           www.merriam-webster.com/dictionary (last visited Jan. 8, 2013). 16 That association has become blurred, however, as the typical small grocery store has morphed into the supermarket. 17  Section 13.01(a)(ii) provides that "[f]or purposes of interpretation, the phrase 'food supermarket or grocery store' means...." 18 When "grocery store" first appears in section 13.01 (a)(i), the term is set apart by internal quotation marks: "food supermarket, butcher                                           shop, seafood shop, or 'grocery store.'" When used in section 13.01(a)(ii), the term "grocery store" is twice set apart by internal quotation                                           

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Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

Turning to the   four definitions of "food supermarket or grocery store," the Court will consider each in its                                 turn. 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. Large pharmacies are apothecaries no longer; they sell toys, cosmetics, DVDs, video                         games, and even auto parts.

 [*442]  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 supermarket or grocery store. Section 13.01(a)(ii)(1) does not apply to the instant case.                             

19

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.

The Court next turns to section 13.01(a)(ii)(2). The first order of business is to address the term "retail                                   operator," which appears in subsections (2), (3), and (4). Each of the three subsections begins, "any retail                                 operator in the Shopping Center whose Gross Floor Area is...." Subsection (2) applies to a retail operator                                 whose Gross Floor Area is 15,000 square feet or less. Subsection (3) applies to a retail operator whose                                   Gross Floor Area is more than 15,000 but less than 30,000 square feet. Subsection (4) applies to a retail                                     operator whose Gross Floor Area is more than 30,000 square feet.

There are only two candidates for the appellation "retail operator:" JTF and JTF's subtenants in the Amish                                 Farmer's Market.  

[...] 

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 from the State of  [*443]  Maryland. Each proprietor has a separate cash register or                                 

20

credit card reader. Each arranges its own labor, pays its own taxes, purchases its own inventory, and                                 operates its stall as it sees fit. A stall cannot have two operators. If the choice is between JTF and the                                         proprietors that actually operate the retail businesses, the choice is obvious.

Because "retail operator" refers to the tenants of the Amish Farmer's Market, only section 13.01(a)(ii)(2)                             applies. Because the subsection is complicated, it bears quoting in full: 21

marks and once without such marks. The Court does not ascribe any interpretive significance to this punctuation; both "food supermarket"                                       and "grocery store" are defined identically in the Restrictive Covenant. 19 As stated, when Redner's signed the Lease, a large space in the shopping center was vacant. 20  Most, if not all, of the stalls are operated by an LLC. 21 Joppatowne argues that it is illogical to apply this subsection to stalls whose  Gross Floor Areas are on the order of 1,000 square feet. The                                               definitions of food supermarket and grocery store were written to cover substantial retail operations rather than small stalls, it maintains.                                       While this argument has appeal, it contradicts the clear and unambiguous language of subsection (2). Had the parties intended to exempt very                                           small retail operators, they could have done so by setting a floor, such as "less than 15,000 square feet but greater than 1,000 square feet."                                                 

29

Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

[A]ny retail operator in the Shopping Center whose Gross Floor Area is 15,000 square feet or less and                                   whose in-store sales areas offering canned foods, fresh-baked bakery items; baking ingredients; fresh                         or frozen meats, and deli items; fresh uncooked fruits and vegetables; ice cream, frozen vegetables                             and frozen prepared foods; milk and milk products, butter, eggs, and cheese; and pet foods that                               exceed, in the aggregate, twenty-five percent (25%) of such retail operator's Gross Floor Area, or....

The Lease fails to define either "Gross Floor Area" or "in-store sales areas." These definitions matter                               because applying this subsection requires three distinct steps for each of the stalls. First, one must                               determine the stall's "Gross Floor Area." Second, for each stall, one must calculate the "in-store sales                               areas" devoted to the enumerated merchandise. Third, for each stall, one must calculate whether its                             "in-store sales areas" exceed, in the aggregate, 25% of the "Gross Floor Area."

The Court cannot accomplish these three steps based on the record as it now exists. Each side hired an                                     architect, but the architects' calculations, which were based on conflicting interpretations of the pertinent                           terms, disagree. The record, therefore, must be developed further. As is explained infra, the Court was                                 

22

able to determine whether or not most of the stalls violate the Restrictive Covenant without undertaking                               the   three-step analysis. With respect to three of the stalls, the Court will refer the case to a United States                                     Magistrate Judge for a Report and Recommendation determining which, if any,  [*444]  fall within the                             definition of a "food supermarket or grocery store" under section 13.01(a)(ii)(2). 23

To guide the Magistrate Judge in this task, the Court makes the following findings as to the terms "Gross                                     Floor Area" and "in-store sales areas." Although there are no dictionary definitions of these terms, their                               meaning can be reasonably determined by applying the facts of this case to the language of the Lease.                                   First, the Court will address "Gross Floor Area." As commonly conceived, a store has perimeter walls that                                 encompass its gross floor area. The vendors in the Amish Farmer's Market operate from stalls that are not                                   bounded by perimeter walls on all four sides. The vendors pay rent based on the square footage of their                                     individual stalls. Except for All Fresh Seafood & Produce, the vendors share rent for the common areas of                                   the Market, such as the main aisles and seating areas. When applying "Gross Floor Area," the Magistrate                                 Judge should use the area of the vendor's individual stall. A stall operator's Gross Floor Area does not                                   include any of the common areas on which he pays rent. 24

The Court next turns to "in-store sales areas." The parties agree that display cases and shelving should be                                   counted. Taking a more expansive view of the term, Redner's would include additional areas such as                               

They did not do so. Moreover, section 13.01(b)(ii) softens the impact of subjecting the stall owners to the complexities of subsection (a)(ii)(2)                                           by specifically permitting, regardless of size, a number of retail uses such as ice cream shops, candy stores, and "restaurants of any kind." 22  For instance, Joppatowne based its square footage calculations on the assumption that section 13.01(a)(ii)(4)(more than 30,000 square feet)                                     applies. Hence, Joppatowne instructed its architect to view the Amish Farmer's Market as a single retail operation. To calculate the "in-store                                         sales areas," the architect excluded the common areas, including the aisles between the stalls where customers walk and browse, and the areas                                           behind the counters where employees stand while waiting on customers. The architect also excluded stalls that Joppatowne considered to be                                       covered by the exceptions to the Restrictive Covenant found in section 13.01(b)(ii). After fine tuning, the architect concluded that the                                       "in-store sales areas" of the stalls in the Amish Farmer's Market did not exceed in the aggregate 6,000 square feet. Even if section                                             13.01(a)(ii)(4) applied, these measurements are over-generous to Joppatowne. 23  The   three stalls are Beiler's BBQ, Beiler's Baked Goods, and King's Cheese & Deli. 24 The floor space of each stall should not be artificially increased by adding common area square footage. Tenants often  pay rent on common                                             areas and amenities (e.g., a lobby or parking lot) that benefit all of the retailers. Paying rent on these areas does not annex them to the                                                   retailer's individual space.

30

Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

counter space used for cash registers and the floor area on opposite sides of a display case where                                   customers and employees stand while discussing merchandise. There is logic in Redner's reading.                         Nevertheless, the Court agrees with Joppatowne's more restrictive interpretation that holds the line at                           spaces within a stall that display merchandise.

Several factors support a narrow reading of the term. First, section 13.01(a)(ii)(2) does not use the term in                                   the abstract, but refers specifically to "in-store sales areas offering" certain enumerated items. The verb                             "offer" means "to present for acceptance or rejection." The only areas in the stalls that actually "present"                                 merchandise to the customers are the display cases, shelves, and racks where the merchandise is on view.                                 

Additionally, defining "in-store sales areas" restrictively avoids speculation as to what in addition to                           25

display areas the term might include. During trial, the parties debated, stall by stall, whether sinks, prep                                 tables, employee work space, and a host of other areas visible to customers should be counted. Although                                 the term "in-store sales areas" clearly includes the display areas, the Lease offers no guidance for                               including or excluding other areas from this definition.

b. Section 13.01(b): Exceptions to Use Covenant

Determining whether a stall is prohibited under section 13.01(a) does not end the inquiry. A stall that fits                                   the definition of "food supermarket or grocery store" is permitted if it falls within one of the "safe                                   harbors" in section 13.01(b)(ii), "Exceptions to Use Covenant." The exceptions trump the restrictions. If a                             use falls under subsection (b)(ii), it is categorically permitted even if it would otherwise be  [*445]                                prohibited under subsection (a). This result is mandated by the clear, peremptory language chosen by                               

26

the parties. Section 13.01(b)(ii) begins with the injunction, "Notwithstanding anything to the  contrary                       contained herein:" Subsection (b)(ii) begins with an equally peremptory clause: "The use covenant set                           forth in Subsection 13.01(a) above shall not preclude Landlord from leasing space to others or to other                                 occupants of the Shopping Center from using their respective premises, for, among other uses ... ." 27

Next, we turn to the enumerated permitted uses, which are: • a table service delicatessen (i.e., providing at least one-half (1/2) of its leasable floor space exclusive                                 of office and stock room for tables and chairs), • a convenience store, • a candy store, • restaurants of any kind, • a packaged goods store,

25 Manufacturers battle to increase the "shelf space" in a supermarket devoted to their products. 26  Under subsection (b)(i), the Restrictive Covenant applies only so long as Redner's is operating a food supermarket at Joppatowne and "only                                           so long as no Default has occurred and is continuing." Joppatowne maintains that Redner's has defaulted in its obligation to pay percentage                                           rent on sales of gasoline and incidentals (snacks primarily) at small gas station that Redner's opened after the Lease began. As discussed in                                             Part V(c) supra, the Court has rejected this argument. Accordingly, Redner's is not in default under the Lease. 27 The quoted language ends with the words "among other uses." This phrase is somewhat confusing because it suggests that the permitted                                         uses specified in subsection (b)(ii) are examples that fit within a general category of permitted uses. Such a reading would be incorrect.                                           Subsection (b)(ii) does not create a general, broadly defined category of permitted  uses. Either a use falls within one of the enumerated "safe                                           harbors" or it does not. The Court interprets the words "among other uses" to mean that subsection (b)(ii) is not intended to be an all-inclusive                                                 listing of the uses that the lease permits. For example, a tobacco shop would be permitted even though it is not on the safe harbor list.

31

Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

• ice cream shops and/ or ethnic or specialty food stores, 28

• pet stores, • vitamin stores, • dollar stores, • video stores, or • specialty coffee stores. 29

Section 13.01 includes a third subsection, subsection (c), "Clarification of Exceptions to Use Covenant."                           Subsection (c) provides that the exceptions described in subsection (b) cannot be construed to permit a                               tenant to sell "frozen foods or dairy products from an unlimited quantity of coolers, freezers, or cases...."                                 The operative language reads as follows:

... in furtherance thereof, the Landlord covenants that no such occupant shall sell frozen foods or dairy                                 products from more than (12) lineal feet of space in such premises as long as Tenant is operating a                                     food supermarket and/or using the Demised Premises for the sale of food or food products....

Section 13.01(b) raises a number of issues. The first involves subsection (c). What is the outcome if a stall                                     that is not prohibited under section 13.01(a)(ii)(2) has  [*446]  more than twelve lineal feet of freezer                               space devoted to frozen foods or dairy products? Stated otherwise, does subsection (c) operate as a                               separate, overriding restrictive covenant barring any occupant from violating the twelve lineal foot                         limitation? Or, does subsection (c)  apply only to uses that are enumerated in section 13.01(b)(ii)? If the                               former interpretation holds, then an occupant that is neither butcher shop, seafood shop, grocery store, nor                               food supermarket would be prohibited from violating the twelve lineal foot limitation. If the latter                             proposition holds, then the twelve lineal foot limitation would apply only to an occupant that required the                                 safe harbor of subsection (b)(ii) to avoid proscription under subsection (a).

The Court finds that subsection (c) does not create a separate, overriding restrictive covenant. Its title,                               "Clarification of Exceptions to Use Covenant" limits its application to the exceptions. Its text                           straightforwardly links its application to the exceptions: "in furtherance of [subsection (b)], the Landlord                           covenants that...." Anyone reading Article XIII would expect to find all of the use covenants in section                                 13.01(a), "Use Covenant."

The second issue involves the definition of "specialty food stores." This issue has two parts. First,                               Joppatowne contends that butcher shops and seafood shops, although expressly forbidden in subsection                         (a)(i), fall within the safe harbor of subsection (b)(ii) because they are "specialty food stores." This                             argument fails. It would be illogical to read the Lease as permitting in subsection (b) two uses that are                                     expressly disallowed in subsection (a). Moreover, in contract construction, specific terms such as butcher                           shop and seafood shop are presumed to take precedence over more general terms, such as "specialty                               store." See, e.g., Heist v. Eastern Sav. Bank, FSB , 165 Md. App. 144, 884 A.2d 1224, 1228 (Md. Ct. Spec.                                       App. 2005).

28  Ice cream shops fall within the exceptions to the Restrictive Covenant. Nevertheless, sales of ice cream count towards the 25% in-store                                           sales area calculation under subsection 13.01 (a)(ii)(2). 29 Subsection (b)(ii) ends: " ... nor shall it prohibit the uses of other existing tenants of the Shopping Center (and their successors, assigns,                                             subtenants and replacements) ...." This language is not at  issue in this case because the subtenants of the Amish Farmer's Market were not                                           "existing" when the Lease began.

32

Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

Finally, although "specialty store" is not defined in the lease, it has connotations that simply do not apply                                   to a typical butcher or seafood shop. Although with misgivings, the Court turns to the internet for                                   

30

common usage. A good working definition of the term "specialty store" is a small store that specializes in                                   a specific range of merchandise and related items and provides a high level of service and expertise.                                 Wikipedia, Specialty store , http://en.wikipedia.org/wiki/Specialty_store (last visited Jan. 8, 2013). A store                     that exclusively sells cell phones or video games would be considered specialized as would a store that                                 specializes in leather goods, handmade toys, or imported candy. 31

The third issue involves the term "ethnic food stores." According to Merriam-Webster, "ethnic" means "of                             or relating to large groups of people classed according to common racial, national, tribal, religious,                             linguistic, or cultural origin or background." The Amish qualify under this definition because of their                             distinctive shared religion and culture. The more  [*447]  relevant question, which the Court will                             

32

address infra, is whether the Amish have a distinctive ethnic cuisine. An ethnic food store must sell ethnic                                   food. A food store does not become ethnic  just because it is owned and operated by members of an                                     

33

ethnic group. An ethnic food store would not lose that status because it is owned and operated by people                                     of no specific ethnicity. 34

Having addressed Article XIII, the Court will next turn to the stalls and stores that Redner's accuses of                                   violating the restrictive use covenant.

c. The Amish Farmer's Market Stalls

1. All Fresh Seafood & Produce

As mentioned, All Fresh, which is owned and managed by John Walters and Mary Roth, is located outside                                   the Amish Farmer's Market enclosure. The stall, which is laid out in a rectangle, comprises approximately                               1,000 square feet. Depending on how one counts, the stall includes approximately ten display tables,                               

35

cases, and coolers. Customers can move freely among the display areas.

30 Under the right facts, a butcher shop or a seafood shop might qualify as  a "specialty food store." In this case, however, the Court must apply                                                 the term to the stalls in the Market as they existed at trial. 31  The Court recognizes that the term "specialty store" has no precise meaning. That term can only be stretched so far, however. Whatever the                                               outer boundaries of "specialty" may be, "specialty food store" cannot encompass All Fresh and Lapp's Fresh Meats. These stalls make no                                         pretentions towards uniqueness, sophistication, or special expertise. 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. 32  The Amish may share the same racial and national heritage with other Caucasian Americans. The religious and cultural beliefs and                                         practices of people who identify themselves as Amish are not monolithic. Nevertheless, the Amish fit within the definition of an ethnic group                                           as that term is commonly understood. The parties did not seriously dispute this proposition. 33 The adjective "ethnic" modifies "food." 34 A generic hot dog does not become an ethnic food because the people who sell it are members of a particular ethnic group. Thai green curry                                                   does not lose its ethnic status because it is sold by a non-Thai family. 35 The parties' square footage calculations differ slightly.

33

Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

All Fresh sells fresh and frozen seafood as well as fresh fruits and vegetables. A large sign on the back                                       wall states, "'All Fresh' Quality Seafood & Produce." Below it, another large sign states, "Seafood." The                               photographs admitted into evidence show smaller signs stating, "Lobster Tails," "Scallops," "Crab                       Pretzels," and "Sno Crabs." Pl.'s Trial Ex. 17 (Photo Nos. 2412 and 2413). 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. 36

2. Lapp's Fresh Meats

From a stall that comprises approximately 1,000 square feet, Lapp's Fresh Meats  ("Lapp's") sells fresh and                             frozen meats. Lapp's sells pre-packaged meats and meats that are cut to order. The stall is laid out as a                                       rectangle, with a single long refrigerated display case across its face. Laid out in the display case are cuts                                     of meat and meat items such as sausages. Behind the display case is a work area that includes a meat                                       grinder, a sausage stuffer, a band saw, and two slicers. Lapp's employees use this equipment to cut 20 to                                     25-pound sections of beef and pork into retail-sized portions. Upon request, Lapp's will also slice a cut of                                   meat 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!"                               Def.'s Trial Ex. 36 (Photo No. 60).

Based on these facts, the Court finds that Lapp's Fresh Meats is clearly a "butcher shop" within the                                   intendment of  [*448]  section 13.01(a)(i) of the Lease. Lapp's does not fall within the safe harbor of                                   

37

section 13.01(b)(ii); it 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." Def.'s Ex. 36 (Photo Nos. 57-59.                                   

38

Accordingly, Lapp's Fresh Meats is a use that violates the Restrictive Covenant.

3. Dutch Pantry Fudge

Owned and operated by Steve Stoltzfus, Dutch Pantry Fudge ("Dutch Pantry") has three small stalls in the                                 Amish Farmer's Market. Two of the stalls (referred to as Dutch Pantry A and Dutch Pantry B) are located                                     

36 Because All Fresh is prohibited as a seafood shop, the Court need not determine whether its "in-store sales areas" devoted to fresh,                                           uncooked fruits and vegetables exceed 25% of its "Gross Floor Area." 37 The Court rejects Joppatowne's argument that the Lease is ambiguous because it proscribes butcher shops but would permit a limited                                       quantity of "fresh or frozen meats" to be sold. The three pertinent definitions of "food supermarket or grocery store" in sections                                         13.01(a)(ii)(2)-(4) include "fresh or frozen meats" among the enumerated items that count under the 25% "in-store sales area" calculation.                                     The Court finds that the Lease, as applied to Lapp's Fresh Meats, is not ambiguous. Lapp's Fresh Meats deals only in meat, and it meets any                                                   reasonable definition of a butcher shop. 38 Lapp also operates Ruth's Grill, which is a separately signed area at one end of the long meat counter. On the wall behind the counter is a                                                     large menu. Def.'s Trial Ex. 36 (Photo Nos. 57 and 59). Ruth's Grill sells hot foods including breakfast sandwiches, pork chops, side dishes                                             etc. Redner's does not contend that Ruth's Grill violates the Restrictive Covenant. Redner's has never contended that fast food outlets,                                       restaurants, or other places selling prepared food designed to be eaten on the premises or as "take out" violate the  Restrictive Covenant.                                         Moreover, Ruth's Grill falls within the "restaurants of any kind" safe harbor of section 13.01(b)(ii). The fact that Ruth's Grill is a permitted                                             use does not make Lapp's Fresh Meats any less a butcher shop.

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side-by-side in one corner of the enclosure. A large sign that demarks both A and B reads, "Dutch Pantry                                     Fudge: Bulk Foods and Candy." Def.'s Trial Ex. 36 (Photo No. 42). The third stall (Dutch Pantry C) is                                     located across an aisle from the other two. The photos introduced into evidence do not show a separate                                   sign for C except for a small wall sign instructing customers to "Please pay for Candies at Fudge                                   Counter." Def.'s Trial Ex. 36 (Photo No. 44). Because each stall sells different items, the Court will                                 consider each separately.

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. First, none of the items it sells are enumerated                                 in subsection 13.01(a)(ii)(2). Hence, the store does not meet the definition of "food supermarket 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, which comprises roughly 500 square feet, is rectangular in                             configuration. According to Joppatowne's diagram, one side of the rectangle is open, allowing customers                           to walk inside. The interior of the stall includes perimeter and free standing shelving. According to Menno                                 Beiler, the shelves offer candy, snack foods, drinks, and dry bulk foods.

The photos of Dutch Pantry B provide a more detailed (although not exact) picture of the merchandise on                                   offer. Def.'s Trial Ex. 36 (Photo Nos. 42, 55 and 56). Most of the merchandise consists of candy, chips,                                     cheese puffs, snacks, and other "junk food" items that one finds in a typical convenience store. A                                 substantial portion  [*449]  of the shelving displays individual clear plastic containers of what appears to                             be trail mix, nuts, dried fruit, and other healthier snack food. The pictures also show jars containing what                                   appears to be juice, salsa, and pickles. Finally, one shelf includes small sealed bags whose contents are                                 indiscernible.

The Court finds that Dutch Pantry B does not run afoul of the Restrictive Covenant. The trial record                                   cannot support a finding that Dutch Pantry B is a "food supermarket or grocery store." Few, if any, of the                                       items it sells are among the items enumerated in section 13.01(a)(ii)(2). 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 in subsection (a)(ii)(2). The                               Court must apply the Restrictive Covenant as it is written.

4. Kreative Kitchen

Operated by Jacob and Kay Stoltzfus, Kreative Kitchen sells homemade potpies, soups, salads,                         sandwiches, wraps, and made-to-order subs. The Kreative Kitchen stall (roughly 780 square feet) is                           demarked by a sign announcing "Kreative Kitchen: Homemade Pot Pie · Soups · Salads · Subs · Deserts."                                   Pl.'s Trial Ex. 27 (Photo   No. 458). A large menu board hanging behind the counter lists 17 items on the                                     bill of fare. Def.'s Trial Ex. 36 (Photo Nos. 49 and 52). Menno Beiler testified that about half of the food                                         sold at Kreative Kitchen is carried out and half is eaten in the Market's seating area. Kreative Kitchen does                                     

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not violate the Restrictive Covenant. Even if it were prohibited under subsection (a)(ii)(2), which it is not,                                 Kreative Kitchen would fall within the safe harbor applicable to "restaurants of any kind."

5. Dutch Delights

Owned and operated by Mervin Stoltzfus, 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. Joint Trial Ex. 26 (Photo No.                               2391). Dutch Delights also offers ice cream cones scooped from containers in two small refrigerated cases                               located near the end of its counter. According to Menno Beiler, most of the food prepared by Dutch                                   Delights is consumed at the Amish Farmer's Market. Joppatowne and Redner's agree that Dutch Delights                             is a "food court style operation." As such, it does not violate the Restrictive Covenant.

6. Beiler's BBQ

Operated by Menno Beiler, 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. Although the photo of Beiler's sign is partially obscured, it apparently reads, "Beiler's Bar-B-Que ·                               Pork · Beef · Chicken." Def.'s Trial Ex. 36 (Photo No. 28). Beiler's rectangularly shaped stall comprises                                 roughly 1,050 square feet. The stall is situated between Dutch Delights and Dutch Pantry Fudge, and its                                 counter is flush with theirs. The BBQ's counter is divided into three sections. The middle section includes                                 three cash registers. Def.'s Trial Ex. 36 (Photo No. 32). The end sections consist of display cases. One                                   case is heated and offers prepared food such as barbequed chicken. Def.'s Trial Ex. 36 (Photo No. 31).                                   The other is refrigerated and offers fresh, uncooked chicken. Joint Trial Ex. 26 (Photo No. 2411).

 [*450]  Unlike Lapp's Fresh Meats, Beiler's BBQ is not proscribed by section 13.01(a)(i) as a "butcher                               shop." The stall, therefore, violates the Restrictive Covenant only if it is a "food supermarket or grocery                                 store." Of the items enumerated in section 13.01(a)(ii)(2), only "fresh or frozen meats" applies. The                             pertinent question is whether 25% of the stall's "in-store sales area" is dedicated to the sale of fresh,                                   uncooked chicken. This is a question that the United States Magistrate must decide. If the Magistrate                               Judge determines that Beiler's BBQ is prohibited under subsection (a)(ii)(2), it is not saved by any of the                                   safe harbors in subsection (b)(ii). 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                                   

39

sale of fresh, uncooked chicken is simply too significant to view the stall as a restaurant. Moreover,                                 Beiler's BBQ does not come within the definition of an "ethnic or specialty food store." 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.

7. Beiler's Baked Goods

39  Menno Beiler estimates that about 90% of his profits come from prepared food, not fresh chicken. This fact does not change the outcome; it                                                 is the nature of the operation that counts.

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Beiler's Baked Goods makes   and sells homemade pies, cakes, whoopee pies, sticky buns, and pastries.                             40

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 sign depicts various pastries and cups of                                 coffee. Because Beiler's bakes its wares on site, much of the stall's interior space is taken up by ovens,                                     walk-in freezers, baking prep tables, shelves, and other kitchen equipment. The stall is rectangular in                             shape and open to customers on two sides. Flanking one of the open sides is a detached U-shaped shelving                                     unit. Running the length of the other open side is a long counter containing display cases. Def.'s Trial Ex.                                     36 (Photo Nos. 12-14).

With respect to section 13.01(a), the analysis of Beiler's Baked Goods tracks that of Beiler's BBQ. A                                 bakery is not a prohibited use. "Fresh-baked bakery items," are one of the enumerated items in subsection                                 (a)(ii)(2). Accordingly, the United States Magistrate Judge will determine whether the in-store sales area                           dedicated to these items is 25% of the stall's gross floor area.  Like Beiler's BBQ, Beiler's Baked Goods is                                     not protected by a subsection (b)(ii) safe harbor. 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.

8. King's Cheese & Deli

Operated by Reuben King, King's Cheese & Deli ("King's") sells milk and dairy drinks, a variety of                                 cheeses and cheese spreads, pickles, homemade popped rice, eggs, milk and other drinks, cold cuts, deli                               meats, smoked meats, beef sticks, various canned items and jams. King's Cheese abuts the back wall of                                 Beiler's Baked Goods. Display cases and shelves  [*451]  line three sides of the stall. The interior of the                                   stall houses a large walk-in refrigerator, a large office, and a prep area with sinks and slicers. Two large                                     signs mark the King's Cheese & Deli area. The larger of the two reads, "King's Cheese & Deli Meats."                                     Two arrows direct customers towards "Cheese & Deli Meats" and "Milk, Eggs, Pickles & More." The                               other sign includes the name of the stall and a picture of a cheese wedge, a salami, and a sandwich. Pl.'s                                         Trial Ex. 18 (Photo Nos. 2397 and 2398).

The analysis used for Beiler's Baked Goods and Beiler's BBQ applies to King's as well. The Magistrate                                 Judge will add up the square footage of the in-store sales area dedicated to "milk and milk products,                                   butter, eggs, and cheese," "fresh or frozen meats or deli items," and "canned foods." For purposes of                                 applying the 25% test under subsection (a)(ii)(2), "canned foods" means food that is sealed and preserved                               in either a metal can or a glass jar. "Fresh or frozen meats" is self-explanatory, but would not include                                     jerky, beef sticks, or other cured meats. "Deli items" include cold cuts, sliced cheese, and sliced deli                                 meats. 53 41

40 As mentioned, Beiler's Baked Goods is owned and operated by a relative of Menno Beiler. 4153 Some items may be included under more than one definition.

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Like Beiler's Baked Goods and Beiler's BBQ, King's does not fit within any of the safe harbors recognized                                   in subsection (b)(ii). 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." From the photographs,                               some of the glass jars in King's canned goods section appear to be home-preserved. Arguably, these jars                                 may create an association with rural life in general and with the Amish in particular. When interpreting                                 the Restrictive Covenant, the Court must view the store as a whole. Moreover, the "ethnic food store"                                 exception applies to the store as a whole and not to individual items within the store. When applying                                   subsection (a)(ii)(2), therefore, the Court cannot exempt individual canned foods that may have an ethnic                             association.

VII. Conclusion

Although this opinion decides almost all of the claims and issues, several remain unresolved because                             further fact finding is required. In a separate Order, the Court is referring the unresolved matters to a                                   United States Magistrate Judge for a report and recommendation pursuant to 28 U.S.C. § 636 and Local                                 Rules 301 and 302.

Dated this 24th day of January, 2013.

/s/ Benson Everett Legg

Senior United States District Judge

MEMORANDUM ORDER

In conformity with the findings of fact and conclusions of law in this Court's Memorandum Opinion of                                 even date, it is ORDERED this 24th day of January, 2013:

1. Defendant's Motion to Dismiss All Aspects of Amended Complaint that Relate Directly to                           Non-Parties (Docket No. 127) is DENIED; 2. Defendant's Motion for Leave to File Supplemental Answer to Amended Complaint (Docket No.                           100) is DENIED; 3. Defendant's Motion for Judgment on the Pleadings as to Plaintiff's Prayer for Constructive Trust on                               Defendant's Interest in Premises (Docket No. 40) is DENIED WITHOUT PREJUDICE; 4. Plaintiff's Motion for Preliminary Injunctive Relief and for Leave to Take Expedited Discovery                           (Docket No. 17) is DENIED; and 5. That the Clerk of the Court transmit copies of this Order and accompanying Memorandum Opinion                               to counsel for the parties.

/s/ Benson Everett Legg

Senior United States District Judge

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Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

ADDENDUM

ARTICLE XIII. RESTRICTIVE COVENANTS.

13.01 Landlord's Restrictive Use Covenant .

(a) Use Covenant .

(i) During the Initial Term and any Renewal Term, if any, and so long as Tenant is operating the                                     Demised Premises as a full service supermarket, Landlord hereby covenants that it shall not lease                             to, use, or permit to be used or otherwise allow any portion of the Shopping Center or other lands                                     now or hereafter owned by Landlord (or an affiliate thereof) which are located within five (5)                             mile radius of the Shopping Center (except for those locations, if any, set forth on Exhibit "D"                                 attached hereto and made a part hereof) to be used as a food supermarket, butcher shop, seafood                                 shop, or "grocery store". Notwithstanding anything herein to the contrary, the  [*452]  restriction                         on other lands within five (5) miles shall prohibit only a full service supermarket and not the other                                   restrictions applicable to the Shopping Center.

(ii) For purposes of interpretation, the phrase "food supermarket or grocery store" means: (1) a Super Kmart that includes a food supermarket or "grocery store", a Super Wal-Mart that                               includes a food supermarket or "grocery store", a Super Target that includes a food                           supermarket or "grocery store" or other big box combo that includes a food supermarket or                             "grocery store", or

(2) any retail operator in the Shopping Center whose Gross Floor Area is 15,000 square feet                               or less and whose in-store sales areas offering canned foods, fresh-baked bakery items;                         baking ingredients; fresh or frozen meats and deli items; fresh uncooked fruits and                         vegetables; ice cream, frozen vegetables and frozen prepared foods; milk and milk products,                            butter, eggs and cheese; and pet foods that exceed, in the aggregate, twenty-five percent                           (25%) of such retail operator's Gross Floor Area, or (3) any retail operator in the Shopping Center whose Gross Floor Area is more than 15,000                               but not more than 30,000 square feet and whose in-store sales areas offering canned foods,                             fresh-baked bakery items; baking ingredients; fresh or frozen meats and deli items; fresh                         uncooked fruits and vegetables; ice cream, frozen vegetables and frozen prepared foods; milk                         and milk products, butter, eggs and cheese; and pet foods that exceed, in the aggregate,                             twenty percent (20%) of such retail operator's Gross Floor Area, or (4) any retail operator in the Shopping Center whose Gross Floor Area is more than 30,000                               square feet and whose in-store sales areas offering canned foods, fresh-baked bakery items;                         baking ingredients; fresh or frozen meats and deli items; fresh uncooked fruits and                         vegetables; ice cream, frozen vegetables and frozen prepared foods; milk and milk products,                         

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Redner's Mkts., Inc. v. Joppatowne G.P., Ltd. P’ship 

butter, eggs and cheese; and pet foods that exceed, in the aggregate, six thousand (6,000)                             square feet of such retail operator's Gross Floor Area.

(b) Exceptions to Use Covenant . Notwithstanding anything to the contrary contained herein: (i) The use covenant set forth in Subsection 13.01(a) above shall apply only during such time as                                 Tenant is operating a food supermarket and/or using the Demised Premises for the sale of food or                                 food products and only so long as no Default has occurred and is continuing.

(ii) The use covenant set forth in Subsection 13.01(a) above shall not preclude Landlord from                             leasing space to others or to other occupants of the Shopping Center form using their respective                               premises, for, among other uses, a table service delicatessen (i.e., providing at least one-half (1/2)                             of its leasable floor space, exclusive of office and stock room for tables and chairs), a                               convenience store, a candy store, restaurants of any kind, a packaged goods store, ice cream shops                               and/or ethnic or specialty food stores, pet stores, vitamin stores, dollar stores, video stores or                             specialty coffee stores; nor shall it prohibit the uses of other existing tenants of the  [*453]                                Shopping Center (and their successors, assigns, subtenants and replacements).

(c) Clarification of Exceptions to Use Covenant. The exceptions to the use covenant as set forth in                                 Subsection 13.01(b) above shall not be construed so as to permit any such occupant from selling                             frozen foods or dairy products from an unlimited quantity of coolers, freezers, or cases and, in                               furtherance thereof, the Landlord covenants that no such occupant shall sell frozen foods or dairy                             products from more than twelve (12) lineal feet of space in such premises as long as Tenant is                                   operating a food supermarket and/or using the Demised Premises for the sale of food or food products                                 and only so long as no Default has occurred and is continuing; nor shall it prohibit the uses of other                                       existing tenants of the Shopping Center (and their successors, assigns, subtenants and replacements).

40

Barbecue:  Transitive Verb: -ED/-ING/S  

 

1: to roast or broil on a rack or revolving spit over or before a source of heat (such as 

hot coals) 

2: to cook in a highly seasoned vinegar sauce 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From: Gove, Philip Babcock, and Noah Webster. 2002. Webster's third new 

international dictionary of the English language, unabridged. Springfield, Mass: 

Merriam-Webster.